Finance problems found in audit

A governmental audit of the McCreary County Fiscal Court and Judge Executive Doug Stephens’ office found 13 issues with finances, dealing mainly with record keeping and payroll.

Auditors from the Auditor of Public Accounts reviewed records from the 2013-2014 budget year and noted several areas of concern, including late payments resulting in interest and penalty payments, as well as inaccurate record keeping in the Judge’s office.

The majority of the findings center around issues within the County Treasurer and County Finance Officer positions. Both of those jobs have since been staffed with new individuals and both departments are operating under the same software system, which was not the case before, Judge Stephens pointed out.

“This audit looked at things as they were more than a year ago,” he stated. “Since then, we have made several internal changes that should address many of the issues the auditors found.”

One specific finding points to the issue noted above: “The former County Treasurer and Finance Officer did not reconcile their financial records.”

Auditors found several checks that were voided by the treasurer, but not recorded as such by the finance office, causing an imbalance in several county funds.

During the course of the review, the Auditors reviewed expenditures and found 50 instances of late charges and penalties on credit cards and payments to the IRS and Kentucky State Treasurer. Those fees totaled more than $3,400, and are in violation of Kentucky Revised Statute 65.140.

Additionally, four of the five insurance bills were found to be paid late, as well as two late payments to the Kentucky State Retirements System resulting in $2,000 in penalties.

Judge Stephens replied that he has implemented a “better process” for payment of outstanding invoices in recent months, which he believes will alleviate many of the issues. He did note that cash flow is a concern and payments are made late at times.

Another finding stated, “the Fiscal Court should improve purchase and procurement procedures.” Auditors noted some invoices not paid within 30 days, two purchases made without a purchase order, two fuel invoices without a purchase order and other instances of incomplete or improperly recorded transactions.

Payroll and leave issues were the center of three separate findings.

Auditors found the payroll revolving account carried an unexplained balance of $4,515 on June 30, 2014, when the account should have a zero balance at the end of each month. The Auditors further noted the account had not been properly reconciled for the entire fiscal year, and outstanding liabilities had not been timely paid.

In Judge Stephens’ response he noted changes in personnel and the Treasurer and Finance Officer now using the same fiscal management software, claiming the issue should be corrected.

The next comment also targeted payroll, the way departments reported different pay periods and the habit of estimating time worked on pay sheets.

Auditors also found one employee had been over paid by $2,007 over 20 pay periods, Fiscal Court approving multiple employees as salaried, with five employees not submitting time sheets, seven employees receiving medical or dental insurance they are not paying for, totaling $290 per month, and taxes being withheld for insurance premiums, which should be pre-taxable.

The Fiscal Court has since standardized the time periods for all County employees, and measures were put in place to ensure all insurance issues are taken care of.

Other issues were found with the leaves and sick time allotted to employees.

One employee was found to take three days of vacation, but not charged for the time. One employee had a negative vacation leave balance of 80 hours, allowing the employee to possibly be paid for hours not worked.

Another employee was scheduled to work, but took vacation time, but still was paid for holiday pay.

Judge Stephens stated in his response that all employees are to follow the administrative code, and the Finance Officer is tasked with overseeing the policy. A change in the position has since been made.

Two findings centered around the USDA Grant fund and the application of the SMART Works Loan Program. The finding disclosed some troubling facts about the outstanding loans the county has made through the program.

Auditors found that 32 loans were made between June 2000 and the end of the 2014 fiscal year, with a total of $1,530,029.

Of those loans, only five have been paid in full.

Eight borrowers have filed bankruptcy, with $318,509 uncollected.

Only seven borrowers made payments in the fiscal year, with 39 payments made totaling $20,746.

Twelve loans showed no payment activity in the fiscal year, with a balance of $388,243.

Loans totaling $199,952 were made to a board member, county employees or relatives of board members.

In all 74 percent of the loans were reported as uncollectable to the USDA.

None of the payments, late payments and non payments are being reported to the credit bureaus.

The County had submitted 14 loans, totaling $536,379 to the County Attorney in January 2015 for legal action.

Judge Stephens’ response points out the troubles the program has had in the past, and the issues his administration has taken to correct them.

“The loan program has plagued my administration since the beginning,” he stated. “Prior to my administration, the program was not managed by the Fiscal Court and therefore not properly audited, so many of these instances were not revealed until audited of recent.

He further stated all new loans are being issued per guidelines and proper documentation is being filed.

To read a full report of the 2013-14 audit of the McCreary County Fiscal Court you can visit our website at www.tmcvoice.com or our Facebook page.