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(Frankfort - May 18, 2010)
State Auditor Crit Luallen today released the audit of the 2008 financial statement of the former McCreary County Clerk, Jo Kidd. State law requires the Auditor to conduct annual audits of county clerks and sheriffs.
The audit found that the former Clerk’s financial statement presents fairly the revenues, expenditures, and excess fees of the McCreary County Clerk in conformity with the regulatory basis of accounting.
As part of the audit process, the Auditor must comment on non-compliance 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 comments:
The Former County Clerk’s financial records were not accurate or complete. The former County Clerk’s financial records for the 2008 fee account were not accurate. During the course of the audit, the auditor noted the following:
- The former County Clerk’s software did not produce an accurate 4th quarter financial report. The totals per quarterly report did not agree to the former County Clerk’s receipts and disbursements ledgers and did not include lease liabilities. The former McCreary County Clerk, Jo Kidd, responded, “4th quarter was included with year ending report.”
- Additionally, the 4th quarter financial report submitted to the Department for Local Government was not properly reconciled. The summary and reconciliation page show a book balance of $49,108 and a reconciled bank balance of $36,540 for a difference of $12,568. A properly reconciled quarterly financial report will show no difference between book balance and reconciled bank balance.
- All receipts were not deposited intact daily. During January, February, and March of 2008 the former County Clerk used cash revenues to purchase postage. The postage was documented and subtracted from the total revenues on the daily checkout sheet. Unrecorded postage expense was $753. The former McCreary County Clerk, Jo Kidd, responded, “Was changed and daily checks written.”
- No documented evidence was found that accounting records were completely reviewed. Evidence was found that daily checkout sheets were agreed to the receipts ledger and that check stubs were agreed to the disbursements register, but no evidence found that the receipts ledger was agreed to the bank deposits (see bullet e) or that the disbursements register was agreed to the cancelled checks (see bullet f). The former McCreary County Clerk, Jo Kidd, responded, “I reviewed them or Doris did if I did not.”
- The amounts posted to the receipts ledger agreed to the daily checkout sheets but did not agree with amounts deposited into the official’s fee account. A total of $2,091 of receipts deposited during 2008 was not recorded in the ledger. Additionally, a total of $2,189 of receivables collected in 2009 was not recorded in the ledger. The former McCreary County Clerk, Jo Kidd, responded, “These were postage for first 3 months. The check for $2,189 was a receipt from the state to late to post to 2008. It was received after I left office but was duly deposited in 2008 acc.”
- The amounts posted to the disbursements ledger agreed to the check stubs but the check stubs did not agree with the cancelled checks. Auditor made 26 adjustments, totaling $23,471, to account for items recorded in the ledger inaccurately. The former McCreary County Clerk, Jo Kidd, responded, “These were just a matter of being posted in different acc. than the auditors wanted them to be”.
The Auditor’s office replied that the adjustment amount does not include reclassifications. In order to agree the former clerk’s disbursements ledger to the cancelled checks, auditors had to remove postings totaling $23,471.
- The former County Clerk did not accurately report salaries and employer share of social security and retirement. The salaries and benefits reported did not agree to the individual earnings records (W-2). The State Local Finance Officer requires the reporting of salaries at gross and employer share of benefits to be listed separate from the employee withholdings. Additionally, other services (see bullet h) were reported as employee benefits.
- Payments to the outside bookkeeping service were improperly reported as employee benefits. These payments along with payments to the Credit Union for employee withholdings were combined as ‘other payroll’. The former County Clerk had a verbal contract with the service to prepare payroll. Therefore, this expenditure should have been classified as “contract services’ and as noted above (bullet g). The former McCreary County Clerk, Jo Kidd, responded, “This was a misunderstanding in where to post it. We post where we think it should go.”
KRS 68.210 gives the State Local Finance Officer the authority to require A Uniform System of Accounts which includes, but is not limited to, depositing receipts intact, properly and accurately recording receipts and expenditures, expenditures by check only, and monthly bank reconciliation. This deficiency required auditors to expand testing procedures in order to ensure an accurate accounting of all revenues and expenditures. The former County Clerk should have maintained financial records that were in compliance with the Uniform System of Accounts as required by the State Local Finance Officer. The former McCreary County Clerk, Jo Kidd, responded, “For the first 3 months cash receipts were kept for postage after that we wrote checks for postage. This was the way (cash receipts) we had done for 25 years.”
The Former County Clerk lacked adequate internal controls over computerized information. During the review of internal controls over computerized accounting information, auditors noted several significant deficiencies. A back-up of the computerized information was performed only on a periodic basis. The former County Clerk did not have off-site storage of files, systems, programs, and other related documentation. Additionally, the former County Clerk was not knowledgeable on how to operate or access the computerized accounting system. The only employee who was knowledgeable and accessed the computerized accounting system was the part-time bookkeeper. Therefore, the former County Clerk did not have adequate procedures in place if an emergency situation occurred. The former County Clerk should have had an understanding of her accounting system and strengthened internal controls by creating an emergency plan. The former McCreary County Clerk, Jo Kidd, responded, “The files & systems were stored in our vault.”
The Former County Clerk’s Office lacked adequate segregation of duties. This occurs when only one person has control over various elements of a single account, e.g., deposits and payments. The report recognizes that due to the diversity of operations, small size, and budget restrictions, the Clerk has limited options for establishing a segregation of duties. However, the audit provides the Clerk with specific recommendations for improvement of procedures.
The County Clerk’s responsibilities include collecting certain taxes, issuing licenses, maintaining county records and providing other services. The Clerk’s office is funded through statutory fees collected in conjunction with these duties.
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