An annual state audit of the DeKalb County government has resulted in ten findings with apparently no major deficiencies or problem areas being identified.
The Tennessee Department of Treasury’s Division of Local Government Audit last week released the Annual Financial Report of DeKalb County for the year ended June 30, 2014.
A few of the ten findings in the audit are recurring and have been cited in previous years audit reports. Detailed findings, recommendations, and management’s response are included in the Single Audit section of this report
(CLICK THE LINK BELOW TO VIEW DEKALB COUNTY AUDIT REPORT. READ FINDINGS ON PAGES 169-176)http://comptroller.tn.gov/repository/CA/2014/DeKalbAFR.pdf
The following are summaries of the audit findings and recommendations:
*Office of County Mayor (prior administration):
The Solid Waste Disposal Fund had a deficit in unrestricted net position. The Solid Waste Disposal Fund had a deficit of $2.8 million in unrestricted net position. This resulted from the recognition of a liability totaling $6.6 million in the financial statements for costs associated with closing the county’s landfill and monitoring the landfill for 30 years after its closure. The county intends to fund this liability on a pay-as-you-go basis. Generally accepted accounting principles and state statutes require that such costs be reflected in the financial statements. County officials should develop and implement a plan that would fund the deficit in unrestricted net position.
It is not the first time the county has been “written up” for this. It has become an annual finding of the state. The county is expected to provide financial assurance of a funding mechanism for performing post-closure corrective action at a closed solid waste landfill that may cause some type of contamination in the future. According to the state, the county is $2.8 million short of meeting that obligation, which could come to as much as $6.6 million over the next 30 years.
*Office of Road Supervisor (prior administration):
The office did not maintain adequate controls over consumable assets. The office did not maintain inventory records of consumable assets, such as fuel and tile. Generally accepted accounting principles require accountability of all consumable assets. The failure to maintain adequate records of consumable assets weakens controls over these assets and increases the risk of inventory loss. Furthermore, personnel independent of maintaining the inventory should periodically verify these records.
*Office of the Director of Schools:
Material audit adjustments were required for proper financial statement presentation. At June 30, 2014, certain general ledger account balances in the Education Capital Projects Fund were not materially correct, and audit adjustments totaling $409,427 were required for the Financial statements to be materially correct at year-end. Generally accepted accounting principles require the DeKalb County School Department to have adequate internal controls over the maintenance of its accounting records. This deficiency was the result of a lack of management oversight. The School Department should have appropriate processes in place to ensure that its general ledgers are materially correct.
*Office of the Director of Schools:
The School Federal Projects Fund had a cash overdraft of $26,060 at June 30. 2014. This cash overdraft resulted from the issuance of checks exceeding cash on deposit with the county trustee. The cash overdraft was liquidated subsequent to June 30, 2014. In the Management Response from the Office of Director of Schools, “We currently have an $80,000 reserve in federal projects to cover any cash overdrafts. This unfortunately was not enough to cover our accounts receivable at year-end since the reimbursement request dated May 30 for the Twenty First Century Community Learning Centers was not received until July 7, 2014, along with our other June requests. Had we received this request of $35,753 in June, we would have had sufficient funds to cover the cash overdrafts”.
*Office of Director of Schools:
The office processed and distributed payroll checks inappropriately. The School Department processed and distributed payroll checks to 12-month support staff on the fifth day of each month for that month’s salary, in effect paying these employees for work that had not yet been performed. If an employee were to leave service prior to the end of the month, the School Department would have to attempt to recover the overpayment of wages. This deficiency is the result of a Board of Education policy dictating the pay date for these employees. School officials should not issue payroll checks to employees before they earn the compensation.
*Office of Trustee:
The trustee did not require a depository to adequately collateralize funds. During the year, deposits exceeded FDIC coverage and collateral securities pledged by $1.2 million; however funds were adequately secured at June 30, 2014. The Trustee should require all depositories to pledge sufficient securities to protect county funds exceeding FDIC coverage as required by state statute.
In response to WJLE, Trustee Sean Driver explained that this finding was the result of a timing issue involving the merger of two banks and in trying to determine with whom the pledges were to be secured after the merger. When the Trustee’s office made this determination the issue was properly addressed and should not reoccur in the future.
*Office of Circuit, General Sessions, and Juvenile Courts Clerk:
Execution of docket trial balances for Circuit and General Sessions Courts did not reconcile with general ledger accounts by $6,679 and $2,937, respectively. Therefore we were unable to determine if the clerk had complied with provisions of the Unclaimed Property Act. The statute provides that any funds held by the courts for more than one year and unclaimed by the owner are considered abandoned. TCA (state law) further requires these funds to be reported and paid to the state Treasurer’s Office.
*Offices of Circuit, General Sessions, and Juvenile Courts Clerk and Register of Deeds:
Multiple employees operated from the same cash drawer. Good internal controls dictate that each employee have their own cash drawer, start the day with a standard fixed amount of cash, and remove all but that beginning amount at the end of the day. This amount should be verified to the employee’s receipts at the end of each day. Failure to adhere to this control regimen greatly increases the risk that a cash shortage may not be detected in a timely manner. Furthermore, in the event of a cash shortage, the official would not be able to determine who was responsible for the shortage because multiple employees were working from one cash drawer. Officials should assign each employee their own cash drawer.
*Offices of Road Supervisor, Trustee, Register of Deeds, and Sheriff:
Duties were not segregated adequately. Officials and employees responsible for maintaining the accounting records in these offices were also involved in receipting, depositing, and/or disbursing funds. Accounting standards provide that internal controls be designed to give reasonable assurance of the reliability of financial reporting and of the effectiveness and efficiency of operations. Officials should segregate duties to the extent possible using available resources
*DeKalb County Commission:
The County Commission’s Audit Committee is not a functioning committee. DeKalb County participates in the Three Star Program through the Tennessee Department of Economic and Community Development to assist the county’s community development efforts in competing for jobs and attracting industry. One of the requirements of the Three Star Program is that the county must create and maintain an Audit Committee. DeKalb County created an Audit Committee on May 11, 2011 as provided by TCA (state law); however there are minutes from only one meeting on July 30, 2013, to document that Audit Committee has met or conducted business. Without a functioning Audit Committee, the County Commission does not have independent and objective reviews of the financial reporting process, internal controls, the audit function, and monitoring management’s plans to address various risks. The County Commission’s Audit Committee should be a functioning committee, maintain minutes of its meetings, and annually present a written committee report detailing how it discharged its duties and any committee recommendations to the full County Commission.
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