Edmonson County Treasurer and Finance Officer Replaced Since Audit Period
State Auditor Mike Harmon has released the audit of the financial statement of the Edmonson County Fiscal Court for the fiscal year ended June 30, 2017. State law requires annual audits of county fiscal courts and auditing standards require the auditor’s letter to communicate whether the financial statement presents fairly the receipts, disbursements, and changes in fund balances of the Edmonson County Fiscal Court in accordance with accounting principles generally accepted in the United States of America.
"The fiscal court’s financial statement did not follow this format," said a statement from Auditor Harmon's office. "However, the fiscal court’s financial statement is fairly presented in conformity with the regulatory basis of accounting, which is an acceptable reporting methodology. This reporting methodology is followed for 115 of 120 fiscal court audits in Kentucky. As part of the audit process, the auditor must comment on noncompliance with laws, regulations, contracts, and grants. The auditor must also comment on material weaknesses involving internal control over financial operations and reporting. The audit contains the following violations, which also have following responses (italicized) from the Edmonson County Judge Executive's Office:
1.) 2017-001- The Edmonson County Fiscal Court lacks segregation of duties over cash, receipts, disbursements, capital assets and reconciliations.
We have restructured our office and have a new Treasurer and Finance Officer that were not employed by the County during the timeframe of this audit. Our office has implemented multiple changes in regards to this violation. Our Treasurer and Finance Officer work together as a team in all aspects of our office now, communicating on all topics with both sets of eyes on all paperwork. The Treasurer and Finance Officer both check one another’s work, with one another initialing or signing off on respected paperwork. All cash and receipts are submitted to the Treasurer with her writing up deposits, when doing this she makes copies of receipts, checks and any supporting documentation to be filed with deposit slip for bank reconciliation. Next step is for Finance Officer to verify deposit amounts and initial, she then takes deposits to bank, once she returns both Treasurer and Finance Officer initial the bank deposit slip. Treasurer then records deposit into accounting software program. Treasurer prints off monthly report for Judge Executive to review, this report shows all receipts and dollar amounts along with what Cash Receipt Account was coded to; including a detailed description of the cash or check (receipts). This report will also be furnished to the Fiscal Court on a quarterly basis for the Fiscal Court to acknowledge.
Disbursements: Finance Officer receives invoices, and prepares for approval by Fiscal Court. Once she has matched invoice to PO, and prepared a Payables Sheet, she also assigns the appropriation code. After Finance Officer has completed these steps, the Treasurer then reviews her work, verifying dollar amounts, PO information, Payables Sheet, appropriation code, List of Bills and supporting documentation for payment. After Treasurer verifies all disbursements are correct, the disbursements are presented to Fiscal Court for approval. Once approval is granted by Fiscal Court, Treasurer enters the invoices into accounting software program for payment. Once checks have been printed, Judge Executive and Treasurer match all checks and invoices then they sign all checks. After signature process, Treasurer makes a copy of all checks. Checks and disbursements are returned to Finance Officer who then will verify and confirm checks and invoices match, then she mails them out to vendors.
Capital Assets: Treasurer created a new Excel Spreadsheet with full description of Capital Assets and updates as needed. When there is new information to be added-Finance Officer will provide Treasurer with the invoice/documentation to keep on file and to use for updating the spreadsheet.
Judge Executive is provided updated information as it occurs.
a.) Bank Reconciliations: all bank statements are reconciled on a monthly basis by Treasurer. Once they have been reconciled Treasurer prints Treasurer’s Monthly Settlement Report to verify that the account balances are the same from the bank statement versus the settlement report. Treasurer, Finance Officer, and Judge Executive all verify dollar amounts and initial bank statements and settlement report. Bank Accounts balances are reviewed on a daily basis by Treasurer and Judge Executive.
b.) Payroll Reconciliations: Treasurer reconciles payroll report and balances to payroll reconciliation sheet, P.O. and checks. Treasurer and Judge Executive verify amounts are balanced and properly reconciled, then they both initial the reports and sign the checks that are prepared for the Payroll Revolving Account. Finance Officer then deposits the checks into Payroll Revolving Account after verifying the dollar amounts on checks match the payroll report, the PO, and the payroll reconciliation sheet.
2.) 2017-002- The Edmonson County Fiscal Court did not accurately report financial information:
All bank account balances are reviewed on a daily basis, all financial information is recorded on a strict reporting system and provided to Fiscal Court on a monthly, quarterly and annually basis. All disbursements and receipts are recorded on a daily basis or as they are processed, with both Treasurer and Finance Officer reviewing all receipts and disbursements. All financial reporting is done in a timely manner with Judge Executive reviewing, and copies provided to Fiscal Court.
3.) 2017-003- The Edmonson County Fiscal Court did not perform accurate bank reconciliations:
All bank accounts are being reconciled on a monthly basis and being reconciled to the Treasurer’s Monthly Settlement Report with Treasurer, Finance Officer and Judge Executive reviewing to ensure everything has balanced correctly. Treasurer’s Monthly Settlement Report is being presented to Fiscal Court on a monthly basis for their approval.
4.) 2017-004- The Edmonson County Fiscal Court did not properly reconcile the payroll revolving account:
The payroll account is being reconciled on a monthly basis by the Treasurer with Judge Executive and Finance Officer reviewing upon completion. Payroll Revolving account is being reconciled to the Treasurer’s Monthly Settlement Report and provided to Fiscal Court on monthly basis for approval.
5.) 2017-005 – The Edmonson County Fiscal Court lacks adequate controls over payroll.
Effective January 1, 2018 our payroll was outsourced to the company Payroll Solutions, located in Lexington, KY. They process our payroll and tax liabilities. We still maintain and track all the time and enter it in their software program online, see our involvement below.
Time cards are turned in to the Treasurer, she looks over time cards for any errors or discrepancies. Finance Officer enters the hours from the time cards on to an Excel Spreadsheet, she then checks her work, after she reviews her data entry she turns it in to the Treasurer. Treasurer enters hours into payroll software program. Upon completion, Treasurer prints the Payroll Pre-Process Register. Treasurer reviews the register to verify that the hours on the Excel spreadsheet match what she has entered. Treasurer initials. Finance Officer then reviews the Pre Process Register report for any errors. Finance Officer initials. Treasurer then notifies Payroll Solutions that all hours have been entered and they can proceed with processing payroll on their end. Once Payroll Solutions has completed processing payroll, Treasurer prints off all necessary payroll reports for the file for that specific pay period. When reports are printed Treasurer reviews all reports. Treasurer, Finance Officer and Judge Executive are all involved in payroll process, as far as what is handled in our office.
6.) 2017-006- The Edmonson County Fiscal Court did not properly reconcile retirement reports with payroll reports.
Retirement reports are being reconciled by the Treasurer on a monthly basis prior to being submitted for payment with Finance Officer and Judge Executive reviewing. Retirement reports are reconciled the same way as bank reconciliations, to verify that retirement report matches the payroll report.
7.) 2017-007-The Edmonson County Fiscal Court did not pay tax liabilities timely resulting in penalties and interest.
All tax liabilities are now being processed and paid by the payroll company that has been outsourced to process our payroll. They assume all liabilities for reporting and payment. The Treasurer verifies the reporting amounts every pay period for accuracy.
8.) 2017-008 – The Edmonson County Fiscal Court did not properly withhold employees’ share of insurance.
An internal detailed audit was conducted and completed by the current Treasurer in February 2018 to ensure that all employees were having the correct amount of voluntary insurance amounts withheld from their paychecks. This was corrected and included having affected employees paying back the amount that was not properly withheld from their paychecks. The Treasurer reconciles and verifies the benefit amounts per pay period for accuracy.
9. 2017 -009 – The Edmonson County Fiscal Court was not in compliance with their Section 218 Social Security Agreement.
All employees are in compliance and having the correct amount of Social Security withheld from their wages.
10.) 2017-010- The Edmonson County Fiscal Court did not have adequate internal controls over disbursements.
Finance Officer receives invoices, and prepares for approval by Fiscal Court. Once she has matched invoice to PO, and prepared a Payables Sheet, she also assigns the appropriation code. After Finance Officer has completed these steps, the Treasurer then reviews her work, verifying dollar amounts, PO information, Payables Sheet, appropriation code, List of Bills and supporting documentation for payment. After Treasurer verifies all disbursements are correct, the disbursements are presented to Fiscal Court for approval. Once approval is granted by Fiscal Court, Treasurer enters the invoices into accounting software program for payment. Once checks have been printed, Judge Executive and Treasurer match all checks and invoices then they sign all checks. After signature process, Treasurer makes a copy of all checks. Checks and disbursements are returned to Finance Officer who then will verify and confirm checks and invoices match, then she mails them out to vendors.
11.) 2017-011 – The Edmonson County Fiscal Court did not maintain complete and accurate capital asset schedules in compliance with regulatory requirements.
An updated Capital Assets Schedule is kept on Treasurer’s desktop and in a binder. The report is updated on an as needed basis. Copies of invoices are turned in to Treasurer from Finance Officer and kept on file. The current Treasurer went through all Capital Assets after her appointment and updated this report to reflect any necessary changes and all reports were submitted to DLG at the end of Fiscal Year 2018 as required.
You can download the full audit below: