Frankfort, KY State Auditor Mike Harmon released the audit of the sheriff’s settlement-2019 taxes for McCreary County Sheriff Randy Waters. State law requires the auditor to annually audit the accounts of each county sheriff. In compliance with this law, the auditor issues two sheriff’s reports each year: one reporting on the audit of the sheriff’s tax account, and the other reporting on the audit of the fee account used to operate the office.
The audit found the sheriff’s financial statement fairly presents the taxes charged, credited, and paid for the period May 1, 2019 through May 15, 2020 in conformity with the regulatory basis of accounting.
As part of the audit process, the auditor must comment on noncompliance with laws, regulations, contracts, and grants. The auditor must also comment on material weaknesses involving the internal control over financial operations and reporting.
The audit contains the following comment:
The McCreary County Sheriff’s Office does not have adequate segregation of duties: This is a repeat finding and was included in the prior year audit report as Finding 2018-001. A lack of adequate segregation of duties existed over all accounting functions. The sheriff’s bookkeeper opens incoming mail, collects tax payments, prepares deposits, prepares daily tax collection journals, prepares monthly tax reports, prepares tax disbursements, and signs those disbursements.
According to the sheriff, a limited budget placed restrictions on the number of employees that could have been hired. However, when faced with limited number of staff, strong compensating controls should have been in place to offset the lack of segregation of duties. A lack of segregation of duties or strong compensating controls could have resulted in undetected misappropriation of assets and inaccurate financial reporting to external agencies such as the Department of Revenue and other taxing districts.
A segregation of duties over various accounting functions, such as collection of taxes, preparation of monthly reports, and preparation of tax disbursements to the districts or the implementation of compensating controls because the number of staff is limited, is essential for providing protection from asset misappropriation and inaccurate financial reporting. Additionally, proper segregation of duties protects employees in the normal course of performing their daily responsibilities.
We recommend the sheriff separate the duties involving the opening of mail, collecting and depositing of cash, preparation of the monthly tax reports, and preparation of tax disbursements. If this is not feasible due to lack of staff, then strong oversight over these areas should occur and involve an employee that wasn’t currently performing any of those functions. Additionally, the sheriff could provide this oversight and show evidence of the oversight by initialing the appropriate source documents. For example, the sheriff could compare the daily checkout sheet to the receipts ledger and bank deposit slip then initial the checkout, deposit slip, and ledger. Also, the sheriff could compare the disbursement checks to the districts to the disbursements ledger and to the monthly report then initial the ledger and monthly report when he signs the checks.
County Sheriff’s Response: The official did not provide a response.
The sheriff’s responsibilities include collecting property taxes, providing law enforcement and performing services for the county fiscal court and courts of justice. The sheriff’s office is funded through statutory commissions and fees collected in conjunction with these duties.