Auditor's letter finds multiple control issues for county
By
Brandy Chandler-brandychandler@gmail.com
Steps have been taken to address several areas of deficiency or noncompliance in Highland County government identified by the Ohio Auditor of State's Office for the year ending in December 2010, including a personnel issue, inconsistencies regarding purchase orders and expenditure approval, the timelines in which minutes are prepared, a management system regarding disbursement of grant funds, and a situation in which the county borrowed and later repaid money from a private citizen.
The "management letter" was submitted by the state auditors to the Highland County Board of Commissioners, and was reviewed with the county employees during a department heads luncheon held Nov. 9.
The management letter is in conjunction with the 2010 audit of the financial condition of Highland County, which was released Oct. 11. There were no findings for recovery in the audit, as in the 2009 audit, but there were 10 findings of noncompliance or material weakness.
While the comments contained in the letter were not required to be included in the audit report, "Nevertheless, these comments represent matters for which we believe improvements in compliance or internal controls or operational efficiencies might be achieved. Due to the limited nature of our audit, we have not fully assessed the cost-benefit relationship of implementing these recommendations. However, these comments reflect our continuing desire to assist your government," according to the auditors.
President of the Highland County Board of Commissioners Shane Wilkin said that the comments have been shared with employees.
"That was part of the department heads meeting," Wilkin said. "Yes, we have addressed those issues, such as the procedurals regarding the POs."
Wilkin said that in regard to the minutes, it is an issue with reduced staffing, with the commissioners' office now having only one full-time employee.
There were 20 recommendations listed, and they included some of the following:
• County employees, since 2005, "have been underpaid each year when comparing their paid salaries to those amounts statutorily allowable. Some officials have agreed to pay reductions." To avoid futures liability issues, it was recommended the county receive written approval from the officials who have taken a voluntary pay cut and maintain those approvals in their personnel file.
• The letter noted a matter with the Highland County Coroner's Office in which Coronor Dr. Paul Terrell had hired his wife, Carole, as his secretary, and determined her rate of pay within the budget approved by the commissioners. The matter has since been resolved; and according to the letter, was referred to the Ohio Ethics Commission. An inquiry found that Dr. Terrell's wife is still performing the duties, "but is no longer being compensated."
• The Office of Housing and Community Partnerships require that grantees must "develop a a cash management system to ensure compliance with the 15-day rule related to the prompt disbursements of funds." There were six separate incidents in which funds were held for more than 15 days. "Failure to adhere to compliance regulations could result in reduced funding or questioned costs."
• The Ohio Revised Code has requirements for transfers made from budget subdivisions from the general fund. "Money may be transferred from the general fund to any other fund of the subdivision by resolution of the taxing authority ... with certain exceptions, with the approval of the common pleas court." During the auditing period, the county made 53 transfers, and three of them, totaling $61,602, were made without the approval of the court.
• The county's accounting system "does not integrate the estimated receipts at the legal level of control. This could lead to estimated receipts which exceed actual receipts. Overestimating receipts could lead to the county's over appropriation of funds." It was recommended a review of the estimated and actual receipts be done quarterly, with a comparison approved by the commissioners. "By regularly monitoring its budgetary position throughout the year, the county will be better able to determine when to amend the budget and will be better prepared for making decisions which effect the overall available cash position of the county."
• In 3 percent of the payroll transactions tested, an employee was signing their own payroll. The auditors noted that "provides an opportunity for that employee to falsify their payroll information and possibly include additional hours worked or not record leave time used."
• It was recommended that the county develop and test a disaster recovery plan for financial and clerical records.
• Ten percent of non-payroll expenditures that were tested "did not include indication that goods or services were received. Failure to obtain the approve to pay or notation that goods or services had been received could lead to unauthorized or improper expenditures. Expenditures should have indication of approval to pay or notation that goods or services were received."
• "During 2009, the county borrowed $180,408, from a Children Services board member. During 2010, the board member was repaid the $180,408. It is not standard practice for a governmental entity to borrow money from a private citizen and the fact that he is a board member raises the concern of a possible related party transaction. We recommend that the county avoid borrowing money from a private citizen and be sure to obtain written legal advice whenever an agreement such as this is entered into."
• The Highland County Board of Commissioners minutes "are not prepared and made available on a timely basis." It was recommended that they be prepared and presented to the board in their final format for approval at the following meeting. "The commissioners should also ensure that they are following the open records laws and have minutes available for public inspection when they are requested."[[In-content Ad]]
The "management letter" was submitted by the state auditors to the Highland County Board of Commissioners, and was reviewed with the county employees during a department heads luncheon held Nov. 9.
The management letter is in conjunction with the 2010 audit of the financial condition of Highland County, which was released Oct. 11. There were no findings for recovery in the audit, as in the 2009 audit, but there were 10 findings of noncompliance or material weakness.
While the comments contained in the letter were not required to be included in the audit report, "Nevertheless, these comments represent matters for which we believe improvements in compliance or internal controls or operational efficiencies might be achieved. Due to the limited nature of our audit, we have not fully assessed the cost-benefit relationship of implementing these recommendations. However, these comments reflect our continuing desire to assist your government," according to the auditors.
President of the Highland County Board of Commissioners Shane Wilkin said that the comments have been shared with employees.
"That was part of the department heads meeting," Wilkin said. "Yes, we have addressed those issues, such as the procedurals regarding the POs."
Wilkin said that in regard to the minutes, it is an issue with reduced staffing, with the commissioners' office now having only one full-time employee.
There were 20 recommendations listed, and they included some of the following:
• County employees, since 2005, "have been underpaid each year when comparing their paid salaries to those amounts statutorily allowable. Some officials have agreed to pay reductions." To avoid futures liability issues, it was recommended the county receive written approval from the officials who have taken a voluntary pay cut and maintain those approvals in their personnel file.
• The letter noted a matter with the Highland County Coroner's Office in which Coronor Dr. Paul Terrell had hired his wife, Carole, as his secretary, and determined her rate of pay within the budget approved by the commissioners. The matter has since been resolved; and according to the letter, was referred to the Ohio Ethics Commission. An inquiry found that Dr. Terrell's wife is still performing the duties, "but is no longer being compensated."
• The Office of Housing and Community Partnerships require that grantees must "develop a a cash management system to ensure compliance with the 15-day rule related to the prompt disbursements of funds." There were six separate incidents in which funds were held for more than 15 days. "Failure to adhere to compliance regulations could result in reduced funding or questioned costs."
• The Ohio Revised Code has requirements for transfers made from budget subdivisions from the general fund. "Money may be transferred from the general fund to any other fund of the subdivision by resolution of the taxing authority ... with certain exceptions, with the approval of the common pleas court." During the auditing period, the county made 53 transfers, and three of them, totaling $61,602, were made without the approval of the court.
• The county's accounting system "does not integrate the estimated receipts at the legal level of control. This could lead to estimated receipts which exceed actual receipts. Overestimating receipts could lead to the county's over appropriation of funds." It was recommended a review of the estimated and actual receipts be done quarterly, with a comparison approved by the commissioners. "By regularly monitoring its budgetary position throughout the year, the county will be better able to determine when to amend the budget and will be better prepared for making decisions which effect the overall available cash position of the county."
• In 3 percent of the payroll transactions tested, an employee was signing their own payroll. The auditors noted that "provides an opportunity for that employee to falsify their payroll information and possibly include additional hours worked or not record leave time used."
• It was recommended that the county develop and test a disaster recovery plan for financial and clerical records.
• Ten percent of non-payroll expenditures that were tested "did not include indication that goods or services were received. Failure to obtain the approve to pay or notation that goods or services had been received could lead to unauthorized or improper expenditures. Expenditures should have indication of approval to pay or notation that goods or services were received."
• "During 2009, the county borrowed $180,408, from a Children Services board member. During 2010, the board member was repaid the $180,408. It is not standard practice for a governmental entity to borrow money from a private citizen and the fact that he is a board member raises the concern of a possible related party transaction. We recommend that the county avoid borrowing money from a private citizen and be sure to obtain written legal advice whenever an agreement such as this is entered into."
• The Highland County Board of Commissioners minutes "are not prepared and made available on a timely basis." It was recommended that they be prepared and presented to the board in their final format for approval at the following meeting. "The commissioners should also ensure that they are following the open records laws and have minutes available for public inspection when they are requested."[[In-content Ad]]