Inadequate internal controls were cited numerous times in the recently-released Rogers County audit findings.
State Auditor Cindy Byrd’s office issued the report on Oct. 25, reflecting findings from the audit of the fiscal year ending June 30, 2017.
Inadequate internal controls and noncompliance over estimate of needs
In the general fund, the county’s budgeted appropriations exceeded the county’s budgeted revenues and cash balances by $42,928.
Further, the auditor reports that, “Actual miscellaneous revenues and expenditures were overstated $912,247 due to the county issuing $912,247 in purchase orders and warrants from other county funds to the general fund to correct errors in apportionments and disbursements.”
All three county commissioners replied to this finding saying they will work with elected officials to implement policies and procedures to ensure the estimate of needs will be prepared in accordance with the state statute moving forward.
Inadequate county-wide controls
First, the findings noted inadequate county-wide controls saying: “Through the process of gaining an understanding of the county’s internal control structure, it was noted that county-wide controls regarding control environment, risk assessment, information and communication, and monitoring have not been designed.”
Why this matters?
The auditor said, “Without an adequate system of county wide controls, there is greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds.”
In response to this finding, all three county commissioners said they are implementing policies and procedures to ensure the financial statements accurately reflect the county’s financial position. Further, the commissioners said, “Rogers County will continue to develop procedures and implement internal controls to ensure compliance with all federal requirements” and will “work towards assessing and identifying risks to design written county-wide controls.”
Inadequate internal controls over presentation of financial statements
“The county is responsible for preparing their annual financial statements and applicable footnotes,” according to the auditor’s report. “However, this required information was not submitted to and received by OSAI until Feb. 26, 2018, approximately eight months after the June 30, 2017 fiscal year end.”
Once the statements were received, the auditor determined financial statements were misstated for a few reasons:
• County funds and transfers were not accurately classified resulting in apportionments being overstated $31,125 and disbursements being overstated $210,857.
• The county issued purchase orders and warrants totaling $1,100,133 between county funds further overstating both disbursements and apportionments. Due to the complexity of these transactions only the county’s general fund’s apportionments and disbursements were adjusted by $912,247 each; resulting in $187,886 in unadjusted misstatements.
Records show that these errors resulted in cash receipts being overstated by $946,372 and cash disbursements being overstated by $701,390.
The findings show that these errors were caused by a lack of policies and procedures ensuring financial statements were accurately presented.
Again, county commissioners responded in saying they are implementing policies and procedures to ensure the financial statements accurately reflect the county’s financial position and are submitted to the state auditor in a timely manner.
Inadequate internal controls and noncompliance over disbursement
The county issued 167 purchase orders and warrants totaling $1,100,133 between county funds.
“The purchase orders and warrants were issued to reimburse one county fund for another county fund’s actual expenditures, to transfer funds from one fund to another, or correct apportionment errors,” according to the reported findings.
A lack of policies and procedures “ensuring purchase orders are not issued for the purpose of transferring funds or to correct errors” was cited as the cause of the problem. The solution? Adherence to state purchasing guidelines that stipulate purchase orders and warrants should not be issued for transfer between funds or to correct errors.
County commissioners responded in saying they have created policies to ensure disbursements comply with state statutes.
Schedule of expenditures of federal awards
The audit found that the county’s federal expenditures were understated by $44,045.
It was found that the county’s actual expenditures for flood control projects were $35,281 and the county reported $26,241; actual expenditures for payments in lieu of taxes were $80,979 and the county reported $9,386; actual expenditures for highway planning and construction were $0 and the county reported $37,941; and actual expenditures for state and community highway safety were $1,755 and the county reported $0.
In total the Schedule of Expenditures of Federal Awards was understated by $44,045.
In response, commissioners said they would be implementing a standard operation procedure in order to be compliant with federal requirements for SEFA reporting.
“Rogers County elected officials and department heads will be responsible for accurate accounting and reporting of all federal awards,” they said.
Inadequate internal controls and noncompliance over inmate trust fund checking account and sheriff commissary fund
When it came to a review of the inmate trust fund checking account, the auditor cited several weaknesses:
• One employee is responsible for accessing and balancing the lockbox collections, preparing the deposit slip, taking the deposit to the bank, updating inmates’ account balances with credits and deductions, performing monthly bank reconciliations and calculating the amount of sales tax owed to the state tax commission. Additionally, this one employee is also the direct contact for the booking system vendor and is denoted as an official check signer in this checking account.
• There is no indication of independent monitoring or review of the bookkeeping functions of this checking account.
• Bank reconciliations are not signed by the preparer and have no indication of being reviewed and approved by someone other than the preparer.
• Individual inmate balances are not reconciled back to the Inmate Trust Ledger balance.
• Receipts are not clearly marked for the purpose of the inmate trust fund.
• Checks issued from the Inmate Trust Fund checking account are not always signed by an authorized signer. Additionally, the county sheriff’s name is sometimes signed by someone other than the county sheriff.
• Access to the Inmate Trust Fund checking account check stock is not limited during business hours.
• And expenditures are made from the Inmate Trust Fund checking account for purposes other than statutorily allowed. “Forty-six checks, totaling $15,068 were issued to sheriff’s restitution for costs related to damages made to the jail by inmates and any balances on inmate’s accounts from previous stays. There were no court orders associated with these restitution payments.”
It was also cited that the sheriff’s office does not file an annual report for the sheriff’s commissary fund with the county commissioners by Jan. 15 each year.
Again it was a lack of policies and procedures for proper administration of the Inmate Trust Fund account that was cited as the cause of the problem.
County officials all said appropriate policies and procedures would be put in place.