County Audit released
By Greg Bird
The annual audit of the McCreary County Fiscal Court was released by Auditor Mike Harmon last week. Like with previous audits, most of the findings were repeats of concerns raised in previous audits that had not been corrected since the last report.
The audit covers the 2018-2019 fiscal year – the last six months of former Judge Executive Doug Stephens’ administration, and the first six months of Judge Jimmie Greene’s new administration.
Judge Greene said he has reviewed the audit and has reached out to officials at the Auditor of Public Accounts office with questions over some of the items included on the report as they have been addressed previously and no longer pertain to the current administration.
He noted many of the findings are related to issues prior to his administration, and he has taken steps to correct them so they should not be return issues during the next audit.
The audit, performed every year, is used to examine the county’s financial statement in order to find weaknesses, errors or potential fraud in how funds are handled.
In the latest report the auditors found eight instances of non-compliance, with seven of the issues being repeat findings from previous audit reports.
One of the items in the audit Judge Greene questions is the finding that the fiscal court did not have sufficient monitoring or internal controls over the revolving loan program.
He noted the previous problems with the program, as had been cited in earlier audit reports, have been addressed. The auditors referenced the refinancing of some of the loans in previous years that were included in last year’s report. Former Judge Stephens had stated previously the decision to refinance was discussed and approved by the USDA, but did not attain the approval in writing and the USDA official granting the approval was now retired.
The auditors did note the fiscal court did not submit a required report to the USDA during the last fiscal year regarding the loan program.
Judge Greene noted the Fiscal Court has revamped the loan program with new and stricter requirements and is also pursuing legal action against delinquent loans.
The only non-repeat finding in the latest audit concerned an incorrect debt statement on the fourth-quarter financial report, as of June 30, 2019. The statement, which summarizes all county government debt, listed $1,188,140 in liabilities and $48,741 in interest. In reality the debt was much less, with only $518,968 in actual debt and $24,339 in interest.
The discrepancy was reportedly due to County Treasurer Geraldine Laxton relying on computer software to compile the data, but not verifying the balances were reduced after a payment was made. A large payment on a bond issue by the Administrative Office of the Courts (for the 1999 courthouse remodel) was not factored in to the debt schedule – resulting in the inaccurate information.
The other findings were carry-overs of previous findings, and Judge Greene has indicated many of the issues arose from the previous administration and have been addressed and should be rectified by the next audit report.
Auditors questioned interfund transfers made prior to approval by the Fiscal Court. In the fiscal year a total of 61 transfers were made, with approval for each only occurring after the transfer. The reasoning for the transfers was to avoid late fees and penalties on bill payments. Judge Greene commented on the finding, noting the Treasurer has initiated doing anticipated transfers from the Fiscal Court to avoid unapproved transfers.
One finding noted the payroll revolving account not being properly reconciled at the end of the fiscal year. Auditors found the payroll account had an unexplained balance of $382 at the end of the year. Also, three times during the previous fiscal year the account was overdrawn, indicating a lack of oversight.
A new payroll account was opened in 2018 and should have corrected the issue the response from the Judge Executive noted.
Another repeat finding concerned internal controls on payroll, stating some employees had errors in their timesheets, with no supervisor approval. Four transport officers had timesheets listing hours worked, but no supervisor approval was included.
Again, auditors stated magistrates and constable receive heath insurance, but no evidence was found to justify the county paying the benefits as no timesheets were recorded for those positions. Those positions are elected, and as such do not require timesheets.
Finding number three noted proper purchase and procurement procedures were not in place. Auditors tested 69 invoices from the fiscal year, finding 48 without purchase orders associated, five with purchase orders dated after the receipt of the product or service, two with canceled checks with only one signature, five without receipts, one without approval from the Fiscal Court.
Judge Greene noted in his response that his administration had instituted new procedures to eliminate such occurrences.
Auditors found the fiscal court did not have sufficient internal control over credit card disbursements, noting three charges were based on a receipt with no itemized listing, 28 charges not supported with a purchase order, one item purchased with a purchase order dated after the receipt of the product and three statements were paid late – resulting in $117 in penalties.
Judge Greene responded that his administration has switched to an online account to alleviate the issues.
Auditors also found a repeat finding that the Fiscal Court did not adequately segregate accounting duties – a common finding for small county governments. It has been noted that in order to completely satisfy the requirements, a fiscal court would have to employ several people – something that is not fiscally possible to do.
The full audit can be found online at www.auditor.ky.gov.