Clark Co. Audit Questions Practices

 Clark Co. Audit Questions Practices

By Mike Scott

Missouri State Auditor Susan Montee issued her audit report for Clark County last week, for the two years ending December 31, 2006. The State Auditor is required to conduct audits once every four years in counties, such as Clark, that do not have a county auditor. In addition a financial audit, the statutory audit covers additional areas of county operations, as well as the elected county officials, as required by the Missouri Constitution.

In her “Yellow Sheet” summary, Montee noted several areas needing improvement, including the county’s General Revenue Fund and 1/2 cent Sales Tax-Jail Operations Fund, the county’s budgetary practices, as well as controls and procedures in the Sheriff’s Department, Associate Circuit Court, Drug Court, and Circuit Clerk’s offices. Montee also questioned the Prosecuting Attorney’s reducing traffic tickets by requiring the defendants to make a “donation” to the Clark County Youth Fund.

Montee details these and other concerns in the Management Advisory Report (MAR) section of the audit.

Editor’s Note: The MAR is 31 pages in length, and we have summarized some areas. Because of its length, our report on the audit will continue in the July 16 issue of The Media.

Financial Condition
The General Revenue Fund and the 1/2 Cent Sales Tax-Jail Operations Fund remain in poor financial condition,” the report reads.
“While receipts and generally increased, the county’s spending has also increased. Spending has been greater the receipts due in part to settling two lawsuits, one in 2005 and the other in 2007, totalling approximately $40,000 involving former Sheriff’s Department deputies. The Sheriff’s Department in the past received numerous grants to assist in funding operations; however, as the grants ended, the operations did not decrease in the same manner. Also, raises were granted to elected officials beginning in 2003.
The County Commission indicated they expect the ½ Cent Sales Tax-Jail Operations Fund to have a positive cash balance within three years by reducing expenditures. One way the commission has done this is to reduce the number of Sheriff’s deputies from nine to three over the past several years. The 2008 budget estimates a negative cash balance of $(9,745) for this fund; however, this increase appears to be mainly due to increased revenue expectations (including an additional $50,000 from the General Revenue Fund). In 2007, the county began purchasing meals for inmates instead of preparing them at the jail in an attempt to reduce costs; however, the county could not provide documentation showing what kind of cost savings was expected.

RECOMMENDATION
WE RECOMMEND the County Commission closely monitor the county’s financial condition and take necessary steps to improve the financial condition of the General Revenue Fund and the ½ Cent Sales Tax-Jail Operations/Law Enforcement Fund. The County Commission should perform long term planning and take advantage of opportunities to maximize revenues and offset costs as allowed by state law.

AUDITEE’S RESPONSE
The County Commission and County Clerk indicated: We have been monitoring the financial condition closely and will continue to monitor and take steps to improve the financial condition.

County Procedures
The county’s procedures for tax additions and abatements, annual published financial statements, and recording actions taken during commission meetings are in need of improvement. In addition, the County Treasurer does not properly follow up on old outstanding checks, many county officials do not file monthly fee reports with the County Clerk, the Assessor has not obtained bond coverage, and the county has not adopted a policy regarding access to public records.
In this section, the audit cites several concerns including:
A- Controls over property tax additions and abatements are not adequate. Changes are made without the approval of the County Commission.
B-The annual Financial Statement did not included financial activity of many of the county’s funds.
C-Commission minutes do not always included sufficient detail of matters discussed or actions taken, as required by Missouri’s Sunshine Law.
D-Procedures have not been established to routinely follow-up on outstanding checks.
E-Only the Circuit Clerk.Ex Officio Recorded of Deeds and the County Treasurer file monthly reports of fees collected.
F-The Assessor has not obtained bond coverage as required by state law.
G-The county does not have a formal policy regarding access to public records. The County Clerk indicated she charges 25 cents per page for copies of county records; however, the county has no documentation showing how this rate complies with state law.

RECOMMENDATION
WE RECOMMEND the County Commission:
A. Develop procedures to ensure any changes to the property tax system are properly approved and monitored.
B. Ensure all required financial information for all county funds is properly reported in the published financial statements.
C. Ensure the minutes list bid details when approving bids, including sole source providers and emergency situations, document any discussion, and show all motions in detail.
D. And County Treasurer establish procedures to routinely follow up and reissue old outstanding checks. If the payees cannot be located, these monies should be disposed of in accordance with state law.
E. Require all county officials to file monthly reports of fees as required by state law.
F. Ensure adequate bond coverage is obtained for all county employees and officials with access to monies.
G. Develop a formal policy regarding procedures to obtain public access to, or copies of public county records and maintain documentation to support the fees charged.

AUDITEE’S RESPONSE
The County Commission, County Clerk and Treasurer indicated:
A. This recommendation has already been implemented.
B. We will attempt to implement this recommendation.
C, D&F. These recommendations will be implemented.
E. The Treasurer will request these reports from the various officials.
G. We will try to work on this recommendation.

Budgetary Practices
The county’s budgetary practices are in need of improvement. The following problems were noted:
A-Actual disbursements exceeded budgeted amounts for General Revenue in 2006. Actual disbursements exceeded budgeted amounts for the ½ Cent Sales Tax-Jail Operations Fund in 2006 and 2005, with the budgeted amount being exceeded by more than 10 percent in 2005.
B-The commission budgeted a deficit fund balance of ($9,745), ($34,327), and ($92,675) for the ½ Cent Sales Tax-Jail Operations Fund for the years ended december 31, 2008, 2007, and 2006, respectively. In addition, the approved budget documents did not adequately project the anticipated balances of most funds for the two years ended December 31, 2006. The budgets indicate a zero balance for most funds at year end; however, several of these funds often end with a significant balance.
Counties are not authorized to have deficit fund balances. Sections 50.610 and 50.740, RSMo, require balanced budgets, and Article VI, Section 26(a) of the Missouri Constitution prohibits deficit budgeting.
C-Budgets were not prepared for seven funds in 2006 and eight funds in 2007.
D-Administrative service fee transfers from Special Road and Bridge Fund to General Revenue were excessive.

RECOMMENDATION
WE RECOMMEND the County Commission:
A. Review budget to actual reports carefully and refrain from approving disbursements which exceed budgeted amounts. If valid reasons necessitate excess disbursements, the original budget should be formally amended and filed with the State Auditor’s Office.
B. Discontinue deficit budgeting and ensure a more reasonable estimate of each fund’s year end balance is presented on the budget document.
C. Ensure an annual budget is prepared for all county funds.
D. Base administrative transfers on actual or reasonable budgeted expenditures of the Special Road and Bridge Fund.
AUDITEE’S RESPONSE
The County Commission and County Clerk indicated:
A. Budget amendments are for unexpected expenses, not just because additional monies are needed. We are trying to work on keeping within the budget.
B. It is more efficient to budget to spend all of the funds to avoid budget amendments. We are working to get the ½ Cent Sales Tax- Jail Operation Fund under control and will then be able to cease deficit budgeting.
C. We will try to obtain budgets from the officials.
D. We will try to establish a more reasonable budget in the future.

Payroll and Personnel Procedures
The County Clerk does not maintain centralized time sheets and leave records for employees of the Sheriff’s Department. Some time sheets are not signed by employees and their supervisors. Also, the county does not have a written policy for overtime and compensatory time.
A-Centralized records of time sheets, vacation leave, sick leave or compensatory time earned, taken, or accumulated by employees of the Sheriff’s Department are not maintained by the County Clerk. The Sheriff maintains these records for his department and sends the County Clerk a report of time worked for all employees.
B-Some time sheets are not signed by employees and their supervisors.
C-The county has not adopted an official personnel manual which details policies and procedures for county employees. Instead, many of the county policies are included in the county commission meeting minutes when approved and according to the commission, copies of the minutes containing these policies are given to all county employees.
RECOMMENDATION
WE RECOMMEND the County Commission:
A. Ensure the County Clerk maintains centralized time sheet and leave records for all county employees.
B. Ensure all time sheets are signed by both the employee and the employee’s supervisor.
C. Develop a personnel policies and procedures manual which includes job descriptions and ensure it is distributed to all employees and establish a written overtime and compensatory time policy that is in compliance with the FLSA.
AUDITEE’S RESPONSE
The County Commission and County Clerk indicated:
A. We have requested these records, however the Sheriff indicated he was satisfied with the current procedures.
B. This recommendation has been implemented.
C. We will look into this recommendation.

Disbursements
The county did not always enter into written agreements, including a depository agreement with its local depository bank. In addition, uniform allowances for Sheriff’s Department employees were not included as compensation on their W-2 forms and Form 1099-MISC was not completed for individuals that provided services for the county.
A-The county does not have a current written depository agreement with its local depository bank. The most recent depository agreement was dated 2001.
B-Annual uniform allowances are paid to Sheriff’s Department deputies. Internal Revenue Service (IRS) Regulations 1.62(h) and 31.3401(a)-4(b) specifically require employee business expenses not accounted for by the employer to be considered gross income and payroll taxes to be withheld from the undocumented payments. Therefore, these allowances should be considered gross income to the employees. Alternatively, the County Commission could require employees to submit documentation of actual uniform expenses as they are incurred.
C-The County Commission and Drug Court personnel do not have procedures in place to identify payments which require Forms 1099-MISC to be filed with the IRS.
RECOMMENDATION
WE RECOMMEND the County Commission:
A. Enter into written contracts in compliance with state law and ensure that contracts contain adequate details and protections for the county.
B. Require the Sheriff’s Department employees to submit reports of uniform expenses or report these allowances as other income on the employees’ W-2 forms.
C. And Associate Circuit Judge establish a procedure to evaluate payments and identify those requiring Form 1999-MISC to be filed with the IRS.
AUDITEE’S RESPONSE
The County Commission and County Clerk indicated:
A. We will implement this recommendation.
B. We will begin putting these on the W-2′s.
C. We will try to do better with this recommendation.
The Associate Circuit Judge indicated:
C. We have implemented the 1099 process for any future contracts. In the future, it should not be necessary for this because our funds are obtained from the state drug court commission and all invoices are processed with OSCA through Certificate of Compliances.

Capital Assets
Records and procedures to account for county and Drug Court property are not adequate and no written policies regarding the accounting and use of assets have been established. The County Commission or its designee is responsible for maintaining a complete detailed record of county property.
RECOMMENDATION
WE RECOMMEND the County Commission establish a written policy related to the handling and accounting for capital assets. In addition to providing guidance on accounting and record keeping, the policy could include necessary definitions, address important dates, and any other concerns associated with county property. Also, inventories and inspections should be performed by each county official, court, and the County Clerk. In addition, property tags should be affixed to capital assets.
AUDITEE’S RESPONSE
The County Commission indicated:
We will try to implement this recommendation.
Computer Controls
Computer systems and data are vulnerable to unauthorized use, modification or destruction. Password, backup procedures, and computer security systems are not adequate in some county offices.
A-Access to computer systems and data is not adequately restricted to only authorized users. The County Treasurer and the County Collector do not have user IDs or passwords in place.
B-The County Clerk and County Treasurer do not prepare backups of financial and other data to prevent loss of information and to ensure that all essential information and computer systems can be recovered following a disaster or computer failure.
C-A security system is not in place in the Assessor’s office to detect or prevent incorrect log-on attempts.
RECOMMENDATION
WE RECOMMEND the County Commission:
A. Work with the County Clerk, the County Treasurer, the County Collector, and the Assessor to require passwords for all employees which are confidential and periodically changed to prevent unauthorized access to the county’s computer systems and data.
B. Work with the County Clerk and the County Treasurer to ensure data is backed up on a regular basis, ensure data is stored at a secure off-site location, and develop appropriate backup and restoration procedures.
C Work with the Assessor to implement a security system to detect and report incorrect log-on attempts after a certain number of tries and work with the County Clerk, the County Treasurer, and the County Collector to require their systems to shutdown after a certain period of inactivity.

AUDITEE’S RESPONSE
The County Commission and County Clerk indicated:
A&C. We will look into these recommendations.
B. We have begun looking into this recommendation.
The County Collector indicated:
A&C. These recommendations have already been implemented.
The Assessor indicated:
A. I have already implemented this recommendation.
C. I will discuss this recommendation with our computer programmers.

In the next issue of The Media, we will report on the audit’s findings on Accounting Controls and Procedures in the Sheriff’s Department, Inmate Commissary, Associate Court, Circuit Clerk, Drug Court, and the Ex Officio Recorder of Deeds offices, as well as the Prosecuting Attorney’s reducing traffic tickets by requiring a donation to the Clark County Youth Fund.

The entire report is available online.
Visit www.nemonews.net, and click the link to the State Auditor’s website.