Marion County’s audit report reveals accounting problems

Marion County Council members learned Thursday night that the county has a budget surplus, but auditing deficiencies.
Charles Jones and Brenda Jackson of Kenneth Cobb & Company presented their external au-dit findings to council members regarding the 2007-08 financial budget.

“Overall, countywide you did come under what you had budgeted,” Jones said, adding that after six years of a declining fund balance, the county saw a positive change during the year. The ap-proximately $16 million figure for net assets represents a half of percent increase, he said.
Jones reported that the county ended fiscal year 2008 with a general fund balance of $1.2 million, or 29 days of working capital. Total revenue was up seven percent, while expenditures were down six percent in comparison to prior years, he said.

According to the audit, however, there are 11 control deficiencies found in the county’s internal control over financial reporting. Of that, six were determined by auditors to be material weak-nesses.
Deficiencies are classified as a control deficiency, which exists when the design or operation of a budget control does not allow management or employees to prevent or detect misstatements in a timely manner; a significant deficiency, which is a control deficiency or a combination of control deficiencies that adversely affects the county’s ability to initiate, authorize, record, process or report financial data reliably in accordance with generally accepted accounting principles; and a material weakness, which is a significant deficiency or combination of significant deficiencies that result “in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by Marion County’s internal control.“

Four control deficiencies pertained to major federal award programs.
County Administrator Tim Harper said the county’s purchasing policy is almost 30 years old and needs some revisions. 

“Purchase orders are really just your best estimates,” Jackson said, adding that laying out proper steps should be part of the policy if changes were to be made. Council member Milton Troy II asked auditors if it would be possible to set a timetable to make the corrections and if disciplinary action should or could be taken if the problems persist.
“These are elected officials’ problems,” Harper responded, adding some of the deficiencies were made by staff not under his control.
Council member Alan Floyd asked if there was a policy to deal with departments who came in over budget. Harper said he hasn’t seen that policy. 
County funds
The county has two major funds, the general fund and the capital projects fund. Approximately 45.2 percent of the county’s revenues come from taxes and 9.6 percent from restricted grants, state and federal aid and contributions and 30.6 percent from fees for services, the audit report said.

The largest county expense is public safety. The county spent $6,889,100 in that department. The county spent $4.8 million on general government, $1.1 million on transportation, $691,000 on hu-man services, $688,512 on culture and recreation, $843,434 in community development; nearly $1.6 in physical environment; and $227,000 in interest and other charges.
The audit cited the bleak economic picture in Marion County and said it “took a turn for the worse during the past year.“ The audit also highlighted several potential expansions and new industries and projects in the county in the coming year as a remedy to its financial picture.

The report said the audit does not provide a legal determination on Marion County’s compliance with generally accepted auditing standards of its financial record keeping, but “The management of Marion County is responsible for establishing and maintaining effective internal control over compliance…“ and no instances of noncompliance were disclosed during the audit.
Because of its small staff size, the report said, the county does not have segregation of duties. “The ideal internal control system would not allow one person to perform a transaction from beginning to end,“ the report said.

Auditors recommended that the council and management continue to use supervisory reviews and monitoring of financial statements and budget reports and to segregate duties where it is cost beneficial to do so.
Auditors also said they noted that funds were not deposited in accordance with the county’s cash management policy and recommended that county funds be deposited as the policy says. The policy is that funds be deposited daily, unless the funds on hand are less than $200.
Deficient accounting practices
During the tests of purchasing procedures, the audit revealed that in 53 of 172 tested in-stances, the purchase order was not prepared or was made after the purchase. The effect of that deficiency is that county funds may be obligated without approval of management.

According to the audit, Harper has sent a memo to each department reminding them of the pol-icy.
During the fiscal year 2007-08, several accounts were significantly over budget, and not in accor-dance to the approved annual budget. Auditors recommended a more thorough monitoring of the budget.
There were instances in which complete and accurate bank reconciliations were not prepared from some county bank accounts and the auditors said it does not appear that the county has a centralized overall monitoring of the consolidated general ledger. Auditors recommended the county have someone monitoring the ledger regularly.
Council is to discuss hiring additional staff to do so.

The audit revealed that the County does not prepare its annual financial statements but that county staff works with the auditor in the preparation and review. Auditors said internal con-trols should be in place to prove “reasonable assurance that financial statements are free of ma-terial misstatements and that the independent auditor is not part of the control system.“
Auditors said the county needs to better supervise bank reconciliations and journal entries. Also, more timely reporting of monthly statements to the State Treasurer’s office and more “for-mal signed agreements” are needed. Four of the 12 monthly reports to the state were not on time. The County Administrator will work with Council to make sure all agreements are approved and signed, the report said.

The report went on to say that there was no evidence on file that grant sub-recipients were moni-tored to ensure that they complied with the grant requirements and that several grants received by the county did not have documentation available for review.
There were several lease agreements the county entered into, the report said, for which there is no evidence of bids. Also, there was not sufficient documentation of approval of employee pay raises other than the county-wide raise.
Harper became county administrator in October 2007, replacing Pete Rogers. Rogers is now the Mullins City Administrator.
In other matters
Harper informed council members of an April 30 joint meeting between county and municipal administrations.  This will be the second such meeting for the year.
County Attorney Charles McLain reported to council that Datwyler, a Marion-county indus-try, made a request for reconveyance of all equipment. Council requested that McLain review the agreement and give a legal opinion at the next scheduled meeting. The company is reportedly removing its equipment to another facility.

In recent weeks, Council has discussed a business entity and its property upkeep. John Case spoke to council members regarding the issues related to his salvage business. 
“I didn’t check the zoning,” he said, apologizing as he addressed cleaning up the grounds around his business in the former Raytex property he purchased. Owner of an independent salvage business, automobiles are being dismantled inside the 400,000 square foot facility, but Case ex-plained as the facility underwent renovations, the number of cars began to pile up outside the building.
Case requested an extension of 90 days to clean up the property. McLain informed Case that the proper step would be a meeting with the Marion County Zoning Board and code enforcer. 
Over budget
The following Marion County departments were over budget for the 2007-08 year according to the county’s audit report released Thursday.
Public Safety expenditures were higher than expected because of central dispatch telephone maintenance expenditures and salaries that were over budget in the sheriff’s department, elec-tions office and the EMS. 
Environmental and professional services and waste disposal services were over budget. 
Several departments were over budget in their fuel line item due to the extremely high gaso-line prices. 
Professional services fees were over budget because of expenses with the Moss Marine contract regarding the Logistics Center Project and because of attorney fees necessary with the McNair Law Firm regarding a contract dispute with the landfill managers. 

Postage was over in the Tax Collector’s account due to account mailings going out early. 
Building rent in public buildings line was more than budgeted because of renting additional space for the county administration. 
The supply line item in public buildings was over due to an increase in the cost of janitorial sup-plies and because uniforms were not budgeted. 
The professional services cost in the magistrate’s budget was more because of software upgrades required by the state. 
The jail and the prison camp cost of groceries caused an overage in each of those budgets, along with a one-time invoice of over $12,000 for an inmate’s medical care. 
The airport was over budget because of the cost of aviation fuel and a new computer required for the airport system. But by selling aviation fuel at that site, the airport was able to make money. Environmental services were over in repairs and maintenance, also due to a required software upgrade.