Findings include improper disbursements, lack of accounting controls over jail commissary fund
By LISA BICKNELL
CV&T News Editor
The fiscal court and the jail were informed of findings for non-compliance with state laws and regulations in the audit released by State Auditor Mike Harmon on Monday. The audit was for the fiscal year ending on June 30, 2016.
The audit resulted in three findings for which the state is asking for corrective action.
The first finding states that the fiscal court did not follow proper procedures for disbursements.
• Ten invoices totaling $677,110 were not paid timely within 30 days; including an invoice for $409,000 that was not paid within 90 days.
• Two trucks, purchased for $39,800, with two checks to the same vendor on the same day were not bid.
• Eighteen checks were not signed by the treasurer, but by another individual that had been given signature authority at the bank, during an extended absence of the treasurer and after her return.
• Six checks totaling $81,400 were not approved by the fiscal court.
• One invoice for $12,500 was not supported by a purchase order approved by the fiscal court.
The auditor’s report stated, “Without purchase orders and invoices with adequate information, there is not proper justification for the reimbursement. All purchase orders should have the approval of the department head and/or county judge/executive (or their designee.)
Also, state law requires all disbursements to be accompanied by a purchase order, within budgeted amounts, and sufficiently documented. It also states that “the county judge/executive shall present all claims to the fiscal court for review prior to payment…”
In most cases, expenditures of more than $20,000 are required to be advertised in the newspaper for bids.
Judge-executive Wallace Taylor said in a separate interview with the newspaper that the first item in the finding which claims that invoices were not paid in a timely manner is the result of a process that happens annually.
When the state informs of how much money is available for road projects, the county has to select which roads to spend it on, (usually 25-30), then they “whittle down that stack.”
Taylor said the county has to wait for the blacktop company to get the work on their schedule. (He said that Hinkle is the only certified company to do blacktopping in this area.) Once the work is done, it must be inspected, approved and receipts provided to the state before the state reimburses funds to pay Hinkle.
“Hinkle understands this,” said Taylor, who added that the process has worked the same the entire time he’s been in office.
He also said that the trucks purchased for $39,800 were paid for at separate times but within the same month; therefore, they were considered by the state as one purchase instead of two, exceeding the $20,000 limit for purchases not bid.
The second finding stated that the fiscal court did not report encumbrances on the fourth quarter financial report as required by the Department for Local Government. The auditor’s summary report stated, “Not reporting encumbrances will reflect inaccurate cash balances and fail to alert management to any possible cash flow issues.”
The county judge’s response to the auditor was that the fiscal court is “working on improving.”
The county treasurer’s response to the auditor was, “This finding has been repeated in prior audit. Fiscal court does have a manual purchase order system in place, head of departments must call in to receive number for each purchase. Fiscal court finances are maintained via [vendor] software which has purchase order with tracking system, however purchase orders are issued manually at this time.”
The third finding said that the jail did not maintain adequate accounting controls over the jail commissary fund. Because the jail receives a significant amount of cash receipts, the report stated, “KRS.68.210 requires the State Local Finance Officer to create a system of uniform accounts for all counties and county officials.”
The report stated that deposits were made “at the jailer’s discretion,” at the middle and end of each month during the fiscal year. Daily deposits are required to be made to a federally insured financial institution.
The report also said the jailer did not prepare and present a financial statement for the commissary account to the county treasurer for fiscal year 2016, and that during the fiscal year, the jail did not reconcile monthly bank statements.
The auditor recommended that the jailer deposit inmate account receipts daily and reconcile bank statements monthly and also prepare a detailed statement at years end to be submitted to the county treasurer.
According to the auditor’s report, the county jailer’s response was, “Commissary money shall be deposited in a more timely manner. Shall give end of year report to treasurer.”
The state’s auditing standards require the auditor’s letter to communicate that the fiscal court did not follow the format of accounting principles generally accepted in the United States of America, although it also said that the fiscal court’s financial statement is “fairly presented in conformity with the with the regulatory basis of accounting, which is an acceptable reporting methodology…followed for 115 of 120 fiscal court audits in Kentucky.”
There were no material weaknesses or any significant deficiencies identified in internal control over financial reporting, and no material weaknesses or significant deficiencies identified with internal control over major programs, according to the summary of auditor’s results.
The complete audit report may be viewed at http://apps.auditor.ky.gov/Public/Audit_Reports/Archive/2016EstillFCaudit.pdf.