Luallen Releases Audit of
Floyd County Fiscal Court

Crit Luallen
Auditor of Public Accounts
209 St. Clair St.
Frankfort, KY 40601

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The audit found that the county’s financial statements, in all material respects, fairly present the county’s assets, liabilities, and equity arising from cash transactions and revenues received and expenditures paid in conformity with the modified cash 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 Fiscal Court lacks adequate segregation of duties over the payroll function. A lack of adequate segregation of duties exists over the payroll function. One individual enters the information necessary to process the payroll into the computer payroll system, prepares the documentation, which includes leave time balances, prepares checks, and reconciles the retirement bank account.

Segregation of duties over payroll functions or implementing compensating controls, when needed because of staff size, is essential for providing protection from asset misappropriation and/or inaccurate financing reporting. Additionally, proper segregation of duties are essential in performing payroll responsibilities.

Because one employee handled all payroll functions and oversight was not provided, the following occurred:

• The County Judge/Executive was overpaid by $7,608.
• The Jailer was overpaid by $7,160.
• Several employees took more than ten (10) consecutive days of sick time without following provisions of the administrative code. The administrative code requires any employee taking more than 80 consecutive sick hours have both a doctor’s excuse and approval of the County Judge/Executive.
• Not all time cards were approved by the supervisor. In several instances an employee would sign their supervisor’s name to the time card and then initial the signature thus in reality signing/approving their own time card.
• Our test of payroll found on at least two occasions employees were paid compensatory time. The administrative code has no provisions which allows compensatory time payments.
• Our test revealed an employee took 230 consecutive hours of annual leave time. The administrative code limits this to no more than 80 consecutive hours without the County Judge/Executive’s approval.

To adequately protect against misappropriation of assets and/or inaccurate financial reporting, the audit recommends the fiscal court separate the duties of the payroll functions to the extent possible. If these duties cannot be segregated due to limited staff or limited budget, then strong oversight should be provided to the employee responsible for these duties. The audit furthers recommend that efforts be made to ensure that payroll provisions in the administrative code be complied with and/or these provisions be updated, changed or eliminated.

The Floyd County Judge/Executive, Robert Marshall, responded, “The County agrees with the above stated recommendations on the segregation of duties and will make the necessary efforts to follow through on these recommendations, including stronger oversight over the applicable employees responsible for those duties. The County also acknowledges the recommendations and in response the County has placed all employees on notice of the administrative code’s policy pertaining to sick leave. Additionally the County has informed each department’s supervisor of the need to obtain a doctor’s excuse from an employee after he/she has used three sick days within a year. The County has also informed all supervisors that the Judge/Executive or Deputy Judge is to sign their time card and that without the signature that said time card shall not be processed.”

The Fiscal Court should maintain proper records for the Public Properties Corporation Fund. The Fiscal Court did not maintain proper records for the Public Properties Corporation - Debt Service Fund (PPC). The County made all bank statements available; however, they did not maintain a receipts and disbursements ledger or prepare a financial statement. The audit recommends the County maintain a receipts and disbursements ledger and prepare a financial statement for the Public Properties Corporation Fund.

The Floyd County Judge/Executive, Robert Marshall, responded, “While the County did provide a financial statement in the quarterly and annual reports; however the County will maintain a receipt and disbursement ledger in the future and will make the necessary efforts to follow through on these recommendations.”

The Fiscal Court should maintain an accurate and complete schedule of capital assets. As of June 30, 2009, the County did not have available a capital assets schedule in any form. In addition, no log or list was maintained for capital assets purchased, disposed of and infrastructure improvements such as road paving and construction or repair of bridges for fiscal year ended June 30, 2009. The audit recommends the County maintain an accurate capital assets listing. This list should include all capital asset purchases, capital road expenditures that include list of roads paved, bridges replaced, as well as any other capital project.

The Floyd County Judge/Executive, Robert Marshall, responded, “The County agrees with this statement and shall have the Road Department and Finance Officer follow this recommendation. The Finance Officer shall periodically review the capital asset list to make sure that this recommendation is being followed as stated.”

The Fiscal Court should follow maximum salary schedules provided by the Department for Local Government. KRS 67.705 and KRS 441.245 states the County Judge/Executive and Jailer shall receive an annual salary pursuant to the salary schedule set by the Department for Local Government. The maximum salary for the County Judge/Executive in calendar year 2008 was $81,070, including training incentives; however, payroll records and reports indicate that the County Judge/Executive received $88,678, which is $7,608 more than the maximum salary amount. The maximum salary for the Jailer in calendar year 2008 was $88,120, including training incentives; however, payroll records and reports indicate the Jailer received $95,279, which is $7,159 more than the maximum salary amount. The audit recommends the county recover these overpayments of salaries and comply with the applicable salary statutes in the future.

The Floyd County Judge/Executive, Robert Marshall, responded, “The County would like to state that the salary amount for both the Judge and Jailer was changed as a result of the comment from the FY 2007-2008 audit performed by the state auditor’s office which stated both the Judge and Jailer had been underpaid. However, the County will make the necessary efforts to assure that the proper effective date is used to calibrate the above stated salaries. Both the Judge and Jailer have agreed to make restitution by reducing the amount of their salary until such time as the amount is repaid to the County.”

Crit Luallen
Auditor of Public Accounts
209 St. Clair St.
Frankfort, KY 40601
WEB: www.auditor.ky.gov/