The long-awaited audit of Effingham County’s fiscal year 2013 revealed 13 findings, including not depositing checks and a lack of vigilance on old returned checks.
While the audit showed the county to be in solid financial health, it also recommended tightening up several of the county’s polices. There was also another finding on related-party transactions, which had occurred in the previous audit.
There were four checks that were not deposited in a timely manner, one of them more than $570,000.
“We had several checks from the Georgia Department of Transportation that were over 60 days old when they were deposited,” said county finance director Joanna Wright.
Auditors from Statesboro accounting firm Thigpen, Westerfield, Lanier and Deal recommended making deposits daily for all funds received by the county. Wright said the county concurs with the finding and that is the usual course of action for the county. She added they were trying to handle an automated clearing house deposit and two pieces within one fund.
“So we were holding over $600,000 so we could set up an automatic withdrawal?” asked Commissioner Steve Mason.
“There was some time delay in that,” Wright said. “Part of that was based on other pieces going on and I don’t know that I was necessarily aware of the magnitude of the funds that were being held. When I was aware of that, we took action to make sure those items were deposited.”
Auditors found there were old accounts receivable balances that had not changed in at least two years, including receivables for old returned checks. Auditors said it is unlikely these items will be collected, and some of them have been outstanding for more than five years. While the balances in the accounts do not lead to material misstatements, over time, it could result in an overstatement of county assets. There also is the opportunity for fraud, since these transactions are put in accounts receivable.
The auditors recommended writing off anything that cannot be collected and questioning any unusual transactions and uncollected returned checks. The county has entered into a contract with a collection agency to see which returned checks can be collected and which need to be written off.
The intent, according to management responses, is to write off uncollectible items at the end of fiscal year 2014.
“We have talked about different avenues to try and make those collections,” Wright said.
The total of the returned checks is about $20,000, according to Wright.
Auditors said there were inadequate controls over expenditures, noting that purchase orders weren’t filled out until after a purchase was made, mostly for less than $1,500. When purchase orders are allowed to be completed after the purchase has been made, it creates an atmosphere that the appearance of compliance is more important than proper stewardship, auditors pointed out. Not requiring purchase orders in advance could lead to frivolous spending and abuse.
Wright said the board addressed this last November, putting into place new policies and discussing them with department heads.
“We are trying to get ahead of it a little bit so that when we have a new hire, they understand the importance of those pieces,” she said. “I believe our policy is fine; I think the application of that policy is a different matter. We are trying to get out of this building and go talk to individual departments.”
Commissioners enacted new financial and purchasing policies last November.
“We didn’t put these policies and procedures into place until November and December,” Wright said. “We’re still working on those policies. They may be cited next year until we get our hands around those pieces and make sure everybody is on board and making sure they are working properly. It is an evolving issue.”
There also was a noncompliance with the county’s policy for contracts, with a contract for services not prepared and signed until after the services were provided to the county.
“We went through some of this this time last year,” Wright said.
She said the commissioners have requested administrative, finance and purchasing staff to insure there is a process in place to ensure the contracts are done and renewed before services are rendered.
The purchasing department now is administering all contracts and services, and all incidents were addressed in departmental meetings.
“We have tried to do the same thing in this area,” Wright added. “We are trying to get ahead of that. It is a matter of communication and a matter of education. Many times, a lot of these departments were doing things on their own, instead of going through the purchasing agent.”
Wright said purchasing agent Fiona Charleton and her department have worked feverishly to bring contracts that are being renewed back before the commissioners in advance of the renewal date.
“Both of those findings are very much related, because they have to do with approval after the fact,” Kay Proctor of Thigpen, Westerfield, Lanier and Deal said of the findings on purchases and contracts. “There is not enough control on the back end to get rid of the control on the front end.”
There also were inadequate conflict of interest and related-party controls, after auditors found several related-party transactions in excess of the state limit of $800 per quarter. The purchasing agent was not aware these companies were owned by individuals related to commissioners.
County staff has said that when there are such related-party transactions, the commissioners will be informed in writing and the commissioners’ agenda will include the representation. The purchasing department will compile a list annually of potential related parties.
“We are much more active in making sure those things are known and communicated,” Wright said.
Auditors also had a finding of non-compliance with water and sewer agreements, as impact fees repayments to be made quarterly were not being complied with and no payments to the developer have been made for the agreement.
The county has started to determine which contracts are outstanding and what those requirements were, Wright noted.
“Part of this issue is the fact there are many instances were are not paying cost-recovery fees for that property,” she said, “but for a property that is associated with that particular property or something down the line from that property.”
One of the findings dealt with inadequate control over year-end journal entries, and journal entries in the special purpose local option sales tax fund were posted incorrectly. The auditors found there was inadequate oversight or separation of duties to ensure all accounts are adjusted properly. County staff agreed and recommended having the finance director review and sign off on each account.
“It was an issue from the prior year that we didn’t see and an issue from the current year,” Wright said.
The finding also stemmed from the county’s payments to the cities, which usually are not recorded until year-end.