Sequatchie Audit 2013

7/22/2019 Sequatchie Audit 2013

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Sequatchie County, TennesseeSchedule of Audit Findings Not CorrectedJune 30, 2013GovernmentAuditingStandardsrequireauditorstoreportthestatusofuncorrectedfindingsfromprioraudits.PresentedbelowarefindingsfromtheAnnualFinancialReportforSequatchieCounty,Tennessee,fortheyearendedJune30,2012,whichhavenotbeencorrected.OFFICE OF COUNTY EXECUTIVEFinding PageNumber Number Subject12.02(A) 151 TheGeneralDebtServiceFundsactual

beginningfundbalancedifferedfromtheestimatedbeginningfundbalancepresentedtotheCountyCommission

12.03(A,B) 151 Deficiencieswerenotedrelatedtocreditcardpurchases

OFFICE OF HIGHWAY SUPERVISORFinding PageNumber Number Subject12.05 153 TheHighway/PublicWorksFundsactualfund

balanceexceededtheestimatedbeginningfundbalancebyamaterialamount

OFFICES OF CLERK AND MASTER AND SHERIFFFinding PageNumber Number Subject12.06 154 Multipleemployeesoperatedfromthesamecash

drawerOFFICE OF SHERIFFFinding PageNumber Number Subject12.08 155 Theofficedidnotdepositsomefundswithin

threedaysofcollection

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OFFICES OF HIGHWAY SUPERVISOR, CLERK AND MASTER, AND SHERIFFFinding PageNumber Number Subject12.09 156 Dutieswerenotsegregatedadequately



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SEQUATCHIECOUNTY,TENNESSEESCHEDULEOFFINDINGSANDQUESTIONEDCOSTS

FortheYearEndedJune30,2013

PARTI,SUMMARYOFAUDITORSRESULTS1. OurreportonthefinancialstatementsofSequatchieCountyisunmodified.2. TheauditofthefinancialstatementsofSequatchieCountydisclosedsignificant

deficienciesininternalcontrol.Fiveofthesedeficiencieswereconsideredtobematerialweaknesses.

3. TheauditdisclosednoinstancesofnoncompliancethatwerematerialtothefinancialstatementsofSequatchieCounty.

4. Theauditdisclosednosignificantdeficienciesininternalcontrolovermajorprograms.

5. Anunmodifiedopinionwasissuedoncomplianceformajorprograms.6. TheauditrevealednofindingsthatarerequiredtobereportedunderSection510(a)

ofOMBCircularA-133.7. TheChildNutritionCluster:SchoolBreakfastProgram,NationalSchoolLunchProgram,andSummerFoodServiceProgramforChildren(CFDANos.10.553,

10.555,and10.559);theTitleIGrantstoLocalEducationalAgencies(CFDANo.84.010);theSchoolImprovementGrantsCluster:SchoolImprovementGrantsandSchoolImprovementGrants,RecoveryAct(CFDANos.84.377and84.388);andtheStateFiscalStabilization Fund(SFSF)Race-to-the-TopIncentiveGrants,RecoveryAct(CFDANo.84.395)weredeterminedtobemajorprograms.

8. A$300,000thresholdwasusedtodistinguishbetweenTypeAandTypeBfederalprograms.

9. SequatchieCountydidnotqualifyasalow-riskauditee.



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PARTII,FINDINGSRELATINGTOTHEFINANCIALSTATEMENTSFindingsandrecommendations,asaresultofourexamination,arepresentedbelow.Wereviewedthesefindingsandrecommendationswithmanagementtoprovideanopportunityfortheirresponse.Thecountyexecutiveprovidedwrittenresponsesoncertainfindings,

whichareparaphrasedinthisreport.Othermanagementofficialsdidnotprovideresponsesforinclusioninthisreport.

OFFICE OF COUNTY EXECUTIVEFINDING 2013-001 THEGENERAL,AMBULANCESERVICE,AND

GENERALCAPITALPROJECTSFUNDSREQUIREDMATERIALAUDITADJUSTMENTSFORPROPERFINANCIALSTATEMENTPRESENTATION(InternalControlMaterialWeaknessUnderGovernmentAuditingStandards)

AtJune30,2013,certaingeneralledgeraccountbalancesintheGeneral,AmbulanceService,andGeneralCapitalProjectsfundswerenotmateriallycorrect.Auditadjustmentstotaling$340,810(GeneralFund),$1,591,182(AmbulanceServiceFund),and$258,893(GeneralCapitalProjectsFund)wererequiredforthefinancialstatementstobemateriallycorrectatyear-end.GenerallyacceptedaccountingprinciplesrequireSequatchieCountytohaveadequatecontrolsoverthemaintenanceofitsaccountingrecords.Materialauditadjustmentswererequiredbecausethecountysfinancialreportingsystemdidnotprevent,detect,orcorrectpotentialmisstatements intheaccountingrecords.Itisastrongindicatorofamaterialweaknessininternalcontrolsifthecountyhasineffectivecontrolsoverthemaintenanceofitsaccountingrecords,whichareusedtopreparethefinancialstatements,includingtherelatednotestothefinancialstatements.Thesedeficienciesaretheresultofalackofmanagementoversight.Wepresentedauditadjustmentstomanagementthattheyapprovedandpostedtoproperlypresentthefinancialstatementsinthisreport.RECOMMENDATIONSequatchieCountyshouldhaveappropriateprocessesinplacetoensurethatitsgeneralledgersaremateriallycorrect.MANAGEMENTSRESPONSE COUNTY EXECUTIVEIconcur.

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FINDING 2013-002 THEOFFICEHADDEFICIENCIESINBUDGETOPERATIONS(A.InternalControlMaterialWeaknessUnderGovernmentAuditingStandards;B.SignificantDeficiencyUnderGovernmentAuditingStandards;C.,D.,andE.NoncomplianceUnderGovernmentAuditingStandards)

Ourexaminationrevealedthefollowingdeficienciesinbudgetoperations:A. TheGeneralDebtServiceFundsactualbeginningfundbalanceat

July1, 2012,waslessthantheestimatedbeginningfundbalancepresentedtotheCountyCommissionby$125,299.SoundbusinesspracticesdictatethatrealisticestimatesofthebeginningfundbalanceshouldbepresentedtotheCountyCommissionduringthebudgetprocess.ThisdeficiencyisduetomanagementsfailuretoproperlyestimatetheactualendingfundbalanceforJune30,2012,andresultedinmateriallyoverstatingtheestimated

beginningfundbalance.Also,managementfailedtocorrectthisdeficiencynotedintheprior-yearauditreport.

B. Duringtheyear,budgetamendmentswerepostedtotheGeneral($96,784)andAmbulanceService($7,666)fundsthatwerenotapprovedbytheCountyCommission.Thesebudgetamendmentshavenotbeenrecognizedinthefinancialstatementsofthisreport.

C. AmbulanceServiceFundexpendituresexceededtotalappropriationsapprovedbytheCountyCommissionby$7,854.

D. Expendituresexceededappropriations approvedbytheCountyCommissioninthefollowingGeneralandSolidWaste/Sanitationfundsmajorappropriationcategories(thelegallevelofcontrol):

AmountFund Major Appropriation Category OverspentGeneral CountyBuildings $ 4,048" Jail 34,217" OtherCharges 534" TransfersOut 2,000SolidWaste/SanitationSanitationEducation

Information 806E. Themedicalpersonnelsalaryline-itemintheAmbulanceServiceFund

exceededappropriationsapprovedbytheCountyCommissionby$27,450.ThebudgetresolutionapprovedbytheCountyCommissionstatesthatthesalary,wages,orenumerationofeachofficial,employee,oragentofthecountywillnotexceedappropriations thataccompanythisresolution.Therefore,thesalariesthatexceededline-itemappropriationswereexpendituresnotapprovedbytheCountyCommission.



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Section5-9-401,TennesseeCodeAnnotated,statesthatAllfundsfromwhateversourcederived,including,butnotlimitedtotaxes,countyaidfunds,federalfunds,andfines,thataretobeusedintheoperationandrespectiveprogramsofthevariousdepartments,commissions,institutions,boards,officesandagenciesofcountygovernmentsshallbeappropriatedtosuchusebythecountylegislativebodies.ThesedeficienciesexistbecausemanagementfailedtoholdspendingwithinlimitsauthorizedbytheCountyCommission,

whichresultedinunauthorizedexpenditures.RECOMMENDATIONEstimatesofthebeginningfundbalanceshouldbemadeonamorerealisticbasistoprovidecountyofficialswithaccurateinformationtobasefundingdecisions.Theestimated

beginningfundbalanceshouldbeamendedduringtheyearwhenitbecomesapparentthattheoriginalestimatevariesfromtheactualfundbalancebyamaterialamount.BudgetamendmentsshouldbesubmittedtotheCountyCommissionfortheirapproval.Furthermore,countyofficialsshouldensurethatexpendituresareheldwithinappropriationsapprovedbytheCountyCommission.MANAGEMENTSRESPONSE COUNTY EXECUTIVE

AllbudgetdeficiencieswerefixedbyexecutiveorderandapprovedbytheCountyCommission,includingthepayrollfortheAmbulanceServiceFund.Otherwise,Iconcur.AUDITORSCOMMENTOnlybudgetamendmentsapprovedbytheCountyCommissiononorbeforeJune30,2013,canberecognizedinthefinancialstatementsofthisreport.

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FINDING 2013-003 FUNDSWERETRANSFERREDFROMTHEGENERALFUNDTOTHESOLIDWASTE/SANITATIONFUNDWITHOUTCOUNTYCOMMISSIONAPPROVAL(NoncomplianceUnderGovernmentAuditingStandards)

TheGeneralFundtransferred$6,000totheSolidWaste/SanitationFundwithouttheCountyCommissionsapproval.Accordingtocountyofficials,thesefundsweretransferredtotheSolidWaste/SanitationFundtocoverpayrolldisbursementsbeforepropertytax collectionsstartedcominginfortheyear.Section5-9-401,TennesseeCodeAnnotated,providesthatAllfundsfromwhateversourcederived,including,butnotlimitedtotaxes,countyaidfunds,federalfunds,andfines,thataretobeusedintheoperationandrespectiveprogramsofthevariousdepartments,commissions,institutions,boards,offices,andagenciesofcountygovernmentsshallbeappropriatedtosuchusebythecountylegislativebodies.Thisdeficiencywasduetoalackofmanagementoversight.RECOMMENDATION

AlltransfersbetweenfundsshouldbeapprovedbytheCountyCommission.



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MANAGEMENTSRESPONSE COUNTY EXECUTIVEThetransferwasmadefromthetransfers-outlineitem,whichwasapprovedbytheCountyCommission.AUDITORSCOMMENTThecountysoriginalbudgetincludedatransferof$90,000fromtheGeneralFundtothe

AmbulanceServiceFund.TherewasnotransferbudgetedfortheSolidWaste/SanitationFundinthecountysoriginalbudget.Also,therewasnobudgetamendmentsubsequentlyapprovedbytheCountyCommissionforatransfertotheSolidWaste/SanitationFund.

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FINDING 2013-004 REQUESTSFORREIMBURSEMENTONACONSTRUCTIONGRANTWERENOTSUBMITTEDTIMELY(InternalControlMaterialWeaknessUnderGovernmentAuditingStandards)

Thecountywasawardedafederalgrantforawater lineconstructionproject.FromNovember8,2012,throughJune27,2013,thecountypaidvendors$61,600forthewaterlineproject.However,thecountydidnotsubmitareimbursementrequestforgrantfundsuntilJuly23,2013,whentheauditorbeganquestioningthegrantreimbursements.

Wealsonotedvariousdisbursementstotaling$2,180forthewaterlineprojectfromOctober27,2011,throughMay3,2012,thatwerenotincludedonanyofthereimbursement requestssubmittedtothegrantoragency.Thesedeficienciesaretheresultofalackofmanagementoversightandcouldresultinalossofgrantrevenues.RECOMMENDATIONGrantrequestsforreimbursementshouldbemadetothegrantoragencytimely.MANAGEMENTSRESPONSE COUNTY EXECUTIVEIconcur.

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FINDING 2013-005 CAPITALPROJECTSFUNDSWERENOTDISBURSEDINCOMPLIANCEWITHCOUNTYCOMMISSIONRESOLUTIONS(NoncomplianceUnderGovernmentAuditingStandards)

Intheprioryear,theCountyCommissiontransferred$100,000totheGeneralCapitalProjectsFundforindustrialdevelopment(AntebellumProject).OnJuly1, 2012,$28,401ofthesefundsremainedintheGeneralCapitalProjectsFund.Duringthecurrentyear,thecountydidnotexpendanyfundsrelatedtotheindustrialparkproject.However,thefunds

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weredisbursedforlandfillexpendituresrelatedtotheBledsoe/SequatchieCountyLandfillandforthewater lineprojectnotedinFinding2013-004.Thisdeficiencywasduetoalackofmanagementoversight.RECOMMENDATIONCapitalprojectsfundsshouldbedisbursedincompliancewithCountyCommissionresolutions.MANAGEMENTSRESPONSE COUNTY EXECUTIVEFromnowon,wewillsetupcostcentersintheCapitalProjectsFundstokeepprojectsseparate.

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FINDING 2013-006 THEOFFICEHADDEFICIENCIESRELATEDTOCREDITCARDDISBURSEMENTS(A.andB.InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards;C.NoncomplianceUnderGovernmentAuditingStandards)

Becauseofdeficienciesrelatedtocreditcarddisbursementsintheprior-yearaudit,weexaminedallcreditcarddisbursementsforthecurrentyear.Duringourexamination,wenotedthefollowingdeficienciesrelatedtocreditcarddisbursements,whichweretheresultofthefailureofmanagementtocorrectthedeficienciesnotedintheprior-yearauditreport.

A. Wenoted13 creditcarddisbursementswithoutadequatedocumentationtosupportthecharges.Chargesforpurchasessuchastravelandsoftwarewerepaidwithoutdetailedinvoicestodocumentthegoodsandorservicespurchased.Withoutadequatesupportingdocumentation, wecannotdetermineifthedisbursementswereforthebenefitofthecounty.

B. Purchaseorderswerenotissuedforeightcreditcardpurchases.Purchaseordersarenecessarytocontrolwhohaspurchasingauthorityfortheofficeandtodocumentpurchasingcommitments.Thefailuretoissuepurchaseordersincreasestherisksofunauthorizedpurchases.

C. Aspartofthetravelexpenditureschargedtothecreditcard,wenotedeightdisbursementsforrestaurantswithinthecounty.Wealsonotedthatthere

weremealchargesforindividualswhowerenotcountyemployees.Thecountystravelpolicyrequiresdetaileddocumentationformealreimbursementsanddoesnotprovidefortravelreimbursementsforanyoneotherthanacountyemployeeontravelstatus(out-of-towntravel).



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RECOMMENDATIONCreditcardpurchasesshouldbesupportedwithadequatedocumentation.Purchaseordersshouldbeissuedinallapplicableinstances.Travelexpendituresshouldonlybepaidincompliancewiththecountystravelpolicy.MANAGEMENTSRESPONSE COUNTY EXECUTIVEIconcur.

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FINDING 2013-007 CONSTABLESWEREALLOWEDTOPURCHASEFUELUTILIZINGTHECOUNTYSTAX-EXEMPTSTATUS(NoncomplianceUnderGovernmentAuditingStandards)

Constableswereallowedtopurchasetax-exemptfuelfortheirprivatevehiclesusingfuelcardsissuedtothecounty.Attheendofeachmonth,theconstablesweregivenalistoffuelchargedtothecountysaccount,andtheconstablesreimbursedthecountyforthefuel.Duringtheyear,thecountyreceivedreimbursementsof$2,044fromtheconstables.OnDecember12, 2008,thestateAttorneyGeneralopined(OpinionNo.08-186)thatgovernmentalentitiescouldnotusetheirgovernmentalexemptiontopurchasefuelforuseinnon-governmentvehicles.RECOMMENDATIONThecountyshouldnotallowconstablestousethecountystax-exemptstatustopurchasefuelfortheirprivatevehicles.MANAGEMENTSRESPONSE COUNTY EXECUTIVEThisdeficiencyhasbeenfixed.Fuelcardshavebeentakenbackfromallconstables.

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FINDING 2013-008 NUMEROUSMISCLASSIFICATIONSWERENOTEDINTHEACCOUNTINGRECORDS(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

Ourauditdisclosedthefollowingmisclassificationsintheaccountingrecords:A. Duringtheperiodunderexamination,wenotedrevenuesandexpendituresin

boththeGeneralandtheGeneralCapitalProjectsfundsrelatedtoasinglewaterlineconstructionprojectinsteadofbeingreportedonlyinonefund.Inordertodetermineifthegrantproceedsforthisprojectagreedwiththerelatedexpenditures,allrevenuesandexpendituresforthewaterlineprojectarereportedintheGeneralCapitalProjectsFundinthefinancialstatementsofthisreport.



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B. Aspartofouranalysisofthewaterlinegrantdisbursements,wenotedexpendituresof$95,535chargedtocountybuildingsandadministrationof

justiceprojects.C. Expendituresof$5,588forlandfillpaymentstotheBledsoe/Sequatchie

LandfillwerepostedtothecountybuildingsintheGeneralCapitalProjectsFund.

Wepresentedauditadjustmentstomanagementthattheyapprovedandpostedforthemisclassificationsnotedduringourexaminationtoproperlypresentdisbursementsinthefinancialstatementsofthisreport.Thesedeficienciesweretheresultofalackofmanagementoversight.RECOMMENDATION

AlltransactionsshouldbepostedtothecorrectfundandproperlyclassifiedintheaccountingrecordsusingthecurrentCountyUniformChartofAccounts.MANAGEMENTSRESPONSE COUNTY EXECUTIVEIconcur.

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OFFICE OF HIGHWAY SUPERVISORFINDING 2013-009 THEHIGHWAY/PUBLICWORKSFUNDREQUIRED

MATERIALAUDITADJUSTMENTSFORPROPERFINANCIALSTATEMENTPRESENTATION(InternalControlMaterialWeaknessUnderGovernmentAuditingStandards)

AtJune30,2013,certaingeneralledgeraccountbalancesintheHighway/PublicWorksFundwerenotmateriallycorrect.Auditadjustmentstotaling$84,489wererequiredforthefinancialstatementstobemateriallycorrectatyear-end.GenerallyacceptedaccountingprinciplesrequiretheHighwayDepartmenttohaveadequatecontrolsoverthemaintenanceofitsaccountingrecords.Materialauditadjustmentswererequiredbecausethedepartmentsfinancialreportingsystemdidnotprevent,detect,orcorrectpotentialmisstatementsintheaccountingrecords.Itisastrongindicatorofamaterialweaknessininternalcontrolsifthedepartmenthasineffectivecontrolsoverthemaintenanceofitsaccountingrecords,whichareusedtopreparethefinancialstatements,includingtherelatednotestothefinancialstatements. Thisdeficiencyistheresultofmanagementsfailuretocorrectthefindingnotedintheprior-yearauditreport.Wepresentedauditadjustmentstomanagementthattheyapprovedandpostedtoproperlypresentthefinancialstatementsinthisreport.



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RECOMMENDATIONTheHighwayDepartmentshouldhaveappropriateprocessesinplacetoensurethatitsgeneralledgersaremateriallycorrect.

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FINDING 2013-010 THEACTUALFUNDBALANCEEXCEEDEDTHEESTIMATEDBEGINNINGFUNDBALANCEBYAMATERIALAMOUNT(InternalControlMaterialWeaknessUnderGovernmentAuditingStandards)

TheHighway/PublicWorksFundsactualbeginningfundbalanceatJuly1, 2012,exceededtheestimatedbeginningfundbalancepresentedtotheCountyCommissionby$121,498.Soundbusinesspracticesdictatethatrealisticestimatesofbeginningfundbalancesshould

bepresentedtotheCountyCommissionduringthebudgetprocess.ThisdeficiencyisduetomanagementsfailuretoproperlyestimatetheactualendingfundbalanceforJune30,2012,andresultedinmateriallyunderstatingtheestimatedbeginningfund

balance.RECOMMENDATIONEstimatesofthebeginningfundbalanceshouldbemadeonamorerealisticbasistoprovidecountyofficialswithaccurateinformationtobasefundingdecisions.Theestimated

beginningfundbalanceshouldbeamendedduringtheyearwhenitbecomesapparentthattheoriginalestimatevariesfromtheactualbyamaterialamount.

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FINDING 2013-011 DEFICIENCIESWERENOTEDINTHEADMINISTRATIONOFPAYROLLDEDUCTIONSANDBENEFITS(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

TheHighwayDepartmentpaysaportionoftheemployeesretirementand100percentofthehealthandlifeinsurancebenefitsforindividuals.Theemployeespay100percentofthepremiumsfordental,vision,disability,cancer,andaccidentinsuranceandthefamilyportionofhealthinsurancebenefits.Wenotedthefollowingdeficienciesrelatedtothedeductionsandexpendituresforthesebenefitsandpremiums:

A. Generalledgerpayrollliabilityaccountswerenotreconciledwithsubsidiarypayrollrecordsandpayments.Asaresult,unidentifiedbalancesaccumulatedintheliabilityaccountsforseveralpayrolldeductions,andexpendituresforemployeebenefitsweremisstated.Soundbusinesspracticesdictatethatpayrollliabilityaccountsshouldbereconciledwithbillingsmonthly.Thefailuretoregularlyreconcilepayrollliabilityaccountsisa

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significantdeficiencythatincreasestheriskthaterrorswillnotbediscoveredandcorrectedinatimelymanner.

B. FourchecksissuedtotheTennesseeConsolidatedRetirementSystemtotaling$20,107weremisclassifiedbetweentheemployeepayrollliabilityaccountsandthecountysexpenditureaccountsforretirementduringthe

year.TheneteffectofthesemisclassificationsoverstatedtheHighwayDepartmentsexpendituresforretirement.Inaddition,twojournalentriestotaling$20,360werepostedtothefundequityaccountatyear-endtoclearthebalanceinthepayrollliabilityaccountforretirementinsteadofidentifyingandcorrectingthepostingerrorsthatcreatedthebalance.

C. Thepremiumsforhealthinsurancearepostedtothepayrollliabilityaccountbythesoftwarespayrollapplicationaseachpayrollisprocessed.Duringtheyear,fourdisbursementsforhealthinsurancetotaling$16,754weremisclassifiedtotheHighwayDepartmentsexpenditureaccountforhealthinsurancepremiumsratherthanthepayrollliabilityaccount,whichoverstated

the

departments

expenditures

for

health

insurance.

D. Employeespay100percentofthepremiumsfordental,vision,disability,

cancer,andaccidentinsurance.Duringtheyear,amountswerewithheldfromtheemployeespayrollchecksfortheseinsurancesandpostedtopayrollliabilityaccounts;however,15 disbursementsforthesepayrolldeductionstotaling$4,205werepostedtotheHighwayDepartmentsexpenditureaccountsratherthanthepayrollliabilityaccountforhealthinsurance.ThesemisclassificationsoverstatedtheHighwayDepartmentsexpendituresforemployeehealthinsurance.

E. TheHighwayDepartmentpays100percentofthelifeinsurancepremiumsfor

its

employees;

however,

during

the

year

seven

disbursements

for

life

insurancepremiumstotaling$2,159werepostedtopayrolldeductionaccountsratherthantheexpenditureaccounts.ThesemisclassificationsunderstatedtheHighwayDepartmentsexpendituresforemployeeinsurance.

F. Duetotheerrorsnotedabove,weexaminedtheearningsrecordsforall21 employeesattheHighwayDepartment.Wenotedpayrolldeductionerrorsforfiveemployeesincludingdeductionsthatdidnotagreewiththeemployeesinsurancepremiumsandoneemployeewhohadapayrolldeductionfordentalinsurancebutwasneverincludedonthedentalinsurancepolicy.

Theabove-noted

misclassifications

were

presented

to

management,

and

management

approvedreclassificationsforproperpresentationinthefinancialstatementsofthisreport.Thesedeficienciesexistduetoalackofmanagementoversight.RECOMMENDATIONGeneralledgerpayrollliabilityaccountsandbenefitsshouldbereconciledmonthlywithpayrollreportsandinvoices,andanyerrorsdiscoveredshouldbecorrectedpromptly.

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OFFICE OF TRUSTEEFINDING 2013-012 USERNAMESANDPASSWORDSWERESHAREDBY

EMPLOYEES(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

Althoughmostemployeeshadbeenassignedauniqueusernameandpasswordforaccessingtheofficesaccountingsoftware,twoemployeesoftheofficesharedausernameandpassword.Ifinappropriateactivityweretooccur,theemployeeresponsibleforthisactivitywouldnotbeeasilyidentifiedbecausetheseemployeessharedthisuseraccount.Soundbusinesspracticesdictatethateachtransactionbeidentifiedtotheindividualcreatingthetransaction.ThisdeficiencywastheresultofalackofmanagementoversightandwascorrectedinMarch2013.RECOMMENDATIONEachemployeeshouldbeassignedausernameandpasswordandshouldaccesstheapplicationusinghisorheruniqueusernameandpasswordtoensurethattransactionsareproperlyidentifiedtothatemployee.Usernamesandpasswordsshouldremainconfidentialandshouldnotbesharedamongemployees.

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OFFICE OF COUNTY CLERKFINDING 2013-013 USERNAMESANDPASSWORDSWERESHAREDBY

EMPLOYEES(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

Althougheachemployeehadbeenassignedauniqueusernameandpasswordforaccessingtheofficesaccountingsoftware,thisinformationwassharedwithotheremployees.Employeesalsoprocessedtransactionsusingotheruserslogins.Ifinappropriateactivity

weretooccur,theemployeeresponsibleforthisactivitywouldnotbeeasilyidentifiedbecauseemployeeshadaccesstoeachothersusernameandpassword.Soundbusinesspracticesdictatethateachtransactionbeidentifiedtotheindividualcreatingthetransaction.ThisdeficiencywastheresultofalackofmanagementoversightandwascorrectedinMarch2013.RECOMMENDATIONEachemployeeshouldcontinuetoaccesstheapplicationusinghisorheruniqueusernameandpasswordtoensurethattransactionsareproperlyidentifiedtothatemployee.Usernamesandpasswordsshouldremainconfidentialandshouldnotbesharedamongemployees.

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OFFICES OF CLERK AND MASTER AND SHERIFFFINDING 2013-014 MULTIPLEEMPLOYEESOPERATEDFROMTHESAME

CASHDRAWER(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

MultipleemployeesoperatedfromthesamecashdrawerintheOfficesofClerkandMasterandSheriff.Goodinternalcontrolsdictatethateachemployeehavetheirowncashdrawer,startthedaywithastandardfixedamountofcash,andremoveallbutthatbeginningamountattheendoftheday.Thisamountshouldbeverifiedtothatemployeesreceiptsattheendofeachday.Failuretoadheretothiscontrolregimengreatlyincreasestheriskthatacashshortagemaynotbedetectedinatimelymanner.Furthermore,intheeventofacashshortage,theofficialwouldnotbeabletodeterminewhowasresponsiblefortheshortagebecausemultipleemployeeswereworkingfromonecashdrawer.Thisdeficiencyhasbeenamanagementdecisionbytheofficialresultinginalossofcontroloverassets,andexistsbecausemanagementfailedtocorrectthefindingnotedintheprior-yearauditreport.RECOMMENDATIONOfficialsshouldassigneachemployeetheirowncashdrawer.

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OFFICE OF SHERIFFFINDING 2013-015 INMATEPHONECARDSWEREMISSINGFROMTHE

SHERIFFSDEPARTMENT(NoncomplianceUnderGovernmentAuditingStandards)

InAugust 2012,theSheriffsDepartmentcontractedwithavendortosellphonecardstoinmatesatthejailthroughakioskmachine.ThecontractrequiredtheSheriffsDepartmenttopurchasethephonecardsfromavendorforone-halfofthefacevalueofthecard,loadthecardsintothemachine,andwithdrawthecollectionsfromthemachine.CollectionsfromthekioskwerethendepositedintotheSheriffsDepartmentbankaccount.Inadditiontotheproceedsfromthecardsales,theSheriffsDepartmentalsoreceivedacommissioncheckfromthevendor.OnFebruary5,2013,anemployeeattheSheriffsDepartmentfiledafraudreportingformwiththeComptrollersOfficereportingthatthere

weremissingphonecards.Wenotedthefollowingdeficiencies:A. Therewereatotalof152phonecardswithafacevalueof$2,520that

couldnotbeaccountedforintheSheriffsDepartmentduringtheperiodSeptember2012,throughFebruary2013.Ofthe152missingphonecards,52hadafacevalueof$10eachand100hadafacevalueof$20.ThesecardswerepurchasedbytheSheriffsDepartmentfor$1,260.Ofthe152missingcards,onlysevenhadnotbeenactivatedaccordingtoinformationprovidedbythephonecardvendor.



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B. TheSheriffsDepartmenthadnotproperlyreconciledthephonecardsales.ASheriffsDepartmentemployeedidmaintainarecordofthecardssold;however,thisrecordwasnotproperlyreconciledwiththecardspurchasedandonhand.

C. Phonecardswerenotadequatelysecuredwhentheywerenotinthemachine.Instead,phonecardsweremaintainedinanunlockeddeskdrawerinthebookkeepersoffice.Wealsoobservedthatthebookkeepersofficewasnotalwayslockedwhileunoccupied.

D. Thephonecardkioskhadamotorizedcounterthatallowedmultiplecardstobedisbursedforonepayment.Inordertocountcards,thekiosksmotorcouldbeswitchedtoacountmodethatwouldrunanentirestackofcardsthroughthemachine.Ifthismotorwasnotresettothevendormodebeforethemachinewasclosed,allofthecardsinthatvendorslotwouldbedisbursedforasinglecashtransaction.

Thisfindinghasbeenreviewedwiththedistrictattorney.RECOMMENDATIONTheSheriffsDepartmentshouldtakestepstorecoverthecosts($1,260)ofthemissingphonecards.Phonecardsalesshouldbereconciledwiththecardspurchasedandonhandonaregularbasis,andanydifferencesshouldbeinvestigated.Phonecardsthatarenotinthekioskshouldbeadequatelysecureduntiltheyareneeded,andtheSheriffsDepartmentshouldimplementcontrolstomakesurethatthekioskisonlydisbursingonecardpertransaction.

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FINDING 2013-016 THEOFFICEDIDNOTDEPOSITSOMEFUNDSWITHINTHREEDAYSOFCOLLECTION(NoncomplianceUnderGovernmentAuditingStandards)

AspartofourauditproceduresforobtainingreasonableassurancethatfundsweredepositedtothebankaccountwithinthreedaysofcollectionasrequiredbySection5-8-207,TennesseeCodeAnnotated,wejudgmentallyselectedthreedepositsencompassing26receiptstoreconcilereceiptswithdeposits.TheSheriffsDepartmentdidnotdepositthreeofthe26receiptsexaminedtotheofficebankaccountwithinthreedaysofcollection.Thesefundsweredepositedtothebankaccountfromfivetoeightdaysaftercollection.Thisdeficiencyexistsbecausemanagementfailedtocorrectthefindingnotedintheprior-yearauditreport.Thefailuretodepositfundscurrentlyincreasestherisksoffraudandabuse.RECOMMENDATIONThesheriffshouldensurethatallfundsaredepositedtotheofficebankaccountwithinthreedaysofcollectionasrequiredbystatestatute.

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OFFICES OF HIGHWAY SUPERVISOR, CLERK AND MASTER, AND SHERIFFFINDING 2013-017 DUTIESWERENOTSEGREGATEDADEQUATELY

(InternalControlSignificantDeficiencyUnderGovernmentAuditingStandards)

DutieswerenotsegregatedadequatelyamongtheofficialsandemployeesintheOfficesofHighwaySupervisor,ClerkandMaster,andSheriff.Theofficialsandemployeesresponsibleformaintainingaccountingrecordswerealsoinvolvedinreceipting,depositing,and/ordisbursingfunds.Accountingstandardsprovidethatinternalcontrolsbedesignedtoprovidereasonableassuranceofthereliabilityinfinancialreportingandoftheeffectivenessandefficiencyofoperations.Thislackofsegregationofdutiesistheresultofmanagementsdecisionsbasedontheavailabilityoffinancialresourcesandisasignificantdeficiencyininternalcontrolsthatincreasestheriskofunauthorizedtransactions.Also,thisdeficiencyexistsbecausemanagementfailedtocorrectthefindingnotedintheprior-yearauditreport.RECOMMENDATIONOfficialsshouldsegregatedutiestotheextentpossibleusingavailableresources.

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BEST PRACTICESEQUATCHIECOUNTYSHOULDADOPTACENTRALSYSTEM

OFACCOUNTING,BUDGETING,ANDPURCHASINGSequatchieCountydoesnothaveacentralsystemofaccounting,budgeting,andpurchasing.Soundbusinesspracticesdictatethatestablishingacentralsystemwouldsignificantlyimproveinternalcontrolsovertheaccounting,budgeting,andpurchasingprocesses.Theabsenceofacentralsystemofaccounting,budgeting,andpurchasinghas

beenamanagementdecisionbytheCountyCommissionresultingindecentralizationandsomeduplicationofeffort.TheDivisionofLocalGovernmentAuditstronglybelievesthattheadoptionofacentralsystemofaccounting,budgeting,andpurchasingisabestpracticethatwouldsignificantlyimproveaccountabilityandthequalityofservicesprovidedtothecitizensofSequatchieCounty.Therefore,werecommendtheadoptionoftheCountyFinancialManagementSystemof1981oraprivateact,whichwouldprovideforacentralsystemofaccounting,budgeting,andpurchasingcoveringallcountydepartments.

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Documents

Sequatchie Audit 2013