County audit… finds some discrepancies

Lazaro Aleman
ECB Publishing, Inc.

The county finally got its financial audit report for Fiscal Year 2016/2017 – months behind schedule and mostly bearing good tidings.
“You've got an unqualified opinion,” accountant Chris Johnson, of Carr, Riggs and Ingram, told the Jefferson County Commission on Thursday evening, Feb. 21. “That’s the best possible opinion that you can get. That, in a nutshell, is the overview of the last year.”
This, in fact, has pretty much been Johnson's standard pithy summary of the audit reports for the last several years.
Johnson said that on the whole, the county's financial health was sound. He had to point out, however, that the fund balance was down, he said.
“If it continues to go down, you're going to have to look for more money or cut expenses,” Johnson said. He didn't, however, dwell on the point.
Instead, he proceeded to go through the 278-page document in broad terms, advising the commissioners to read it on their own if they wanted greater detail.
Johnson distinguished between major and non-major funds, underscoring that many of the major funds showed deficits, which accounted for the reduced fund balance. He touched on several of the major funds, noting those that were over-budget.
The transportation fund in particular, he said, had exceeded its budgeted amount by $1.6 million, an over-expenditure that he said had likely resulted from emergency road repairs following Hurricane Michael. Johnson said he recognized that in emergency situations, counties had to expend monies upfront and wait for FEMA to reimburse the money, with the reimbursements often not reflected in the budget until the following fiscal year.
Johnson briefly noted in passing that the capital fund, another of the major funds, had “a lot of cash and no activity,” and that there appeared to be “confusion in the lease of some buildings.”
He moved next to the findings part of the report and conceded that the report contained several of the latter, which indicate conformance or non-conformance with the audit criteria and generally point to procedures or policies that need correcting.
Johnson noted that the Clerk of Court, as the county's financial officer, had the option to rebut or respond to the findings, which he described as self-explanatory. He also offered that had Kirk Reams been serving as clerk during the audited period, “there wouldn't have been as many findings.”
Reams was suspended from office for a little more than a year because of legal troubles.
Johnson said that one of the recommendations that he was making was that the county enlist outside expertise for accounting oversight.
“His staff is limited,” Johnson said of the Clerk of Court's operation. “We recommend that you seek a third-party accounting professional. It's important that you have someone with financial expertise to give guidance to the staff.”
Reams conceded the point, calling the findings the product of a perfect storm of the auditors no longer being allowed to provide pre-audit services to his staff and he (Reams) not being present during much of the time to help organize the audit. He agreed that having an outside professional to assist his staff with the pre-audit was a good idea and one that he had already incorporated, having engaged the services of a Mr. Hamilton.
Commissioner Chairwoman Betsy Barfield said she heartily approved of the move, if bringing in outside expertise would reduce the overall audit expenditures. Barfield expressed heartburn over the $130,000 audit bill.
Going back to the earlier point, Johnson said the reason he could no longer help the staff was because of a change in the law.
“We have to be independent,” he said. “We get audited ourselves, and our peers look at our independence. We've been put in a corner to make sure that we're independent when we do our audits.”
Otherwise, he said, it would put auditors in the position of both recommending changes and judging the outcomes, which created a conflict.
At Barfield's prompting, Johnson addressed another of the findings, an unauthorized $70,000 transfer to the Clerk of Court's office to make up for a budget shortfall.
Johnson noted that the commission set policy by virtue of the monies that it budgeted to the different operations and constitutional offices.
In the clerk's defense, he said, the monies that the latter's office had anticipated generating from fees and other sources hadn't materialized, necessitating the transfer. The problem, he said, was that the office had failed to notify the commission of the transfer, which was at the heart of Barfield's complaint.
“It's upsetting to me when things like this happen,” Barfield said, adding that she wanted more transparency in the future.
Another finding had to do with missing paperwork to justify the expenditures from a $30,000 grant that the mosquito control program received from the Health Department to fight the Zika virus.
“We spent 30 days looking for the Zika money paperwork and didn't find it,” Johnson said.
County Coordinator Parrish Barwick, who oversees the mosquito control program, expressed consternation over the missing documentation.
“It's troubling that the person got all the information and we get the finding and now the documentation is missing,” Barwick said, never identifying the person whom he was referring to.
This prompted Johnson to raise the issue of the need for the centralization of all the county's financial records in the Clerk of Court office, so that auditors could have ready access to the documents when they were needed during audits. Part of the reason for the audit's delay, Johnson said, was that records hadn't always been forwarded to the clerk's office and it had caused him to have to stop the audit process and go in search of the missing documentation.
“All the records should be at the courthouse so that they can be found,” he emphasized. “The clerk is the comptroller. That information should be readily available in the clerk's office.”
Phil Calandra, a retired citizen well versed in audits and financial matters from his previous employments, followed up with his observations on the overall audit and its findings.
Calling himself a victim of many audits in his life, Calandra said he had reviewed five years
worth of the county's audits, and one of the things that stood out for him was that the audits noted many of the same problems year after year.
One of the more common findings, Calandra said, was that systems of internal control weren't in place to ensure the segregation of duties. This, he said, led to situation where the same person ordered, received, and paid for items, a recipe for unaccountability.
The excuse for not correcting the problem, Calandra said, was generally that Jefferson was a poor, rural county with limited resources. But simple things could be done to address the problem, he said, noting that the Property Appraiser and Tax Collector offices had each successfully implemented internal controls to ensure the segregation of duties, despite their limited resources.
In summary, Calandra applauded the hiring of a professional accountant to ensure the timely and accurate recording of all financial information in the clerk's office.
“We're all trying to pull the wagon in the same direction,” Calandra said. “I'm not picking on the Clerk of Court, but these are big things. It's time to put money into the overhaul of the system. You've been lucky for a long time.”