State says county books lacking info

The report for the Whitman County financial statement audit for 2012 was not flattering for the county auditor’s office.

State auditors presented their findings to the county commissioners Monday with County Auditor Eunice Coker along with other county officials present.

Although a significant number of findings about the county’s financial statements were discussed, state auditors found nothing wrong with county’s handling of federal fund awards.

After the report, Coker had little to say.

“We’re in a better spot now,” she said. “We’re starting fresh now.”

The state report was released to county commissioners earlier, but the report said commissioners could not release the information until Monday.

The state auditor’s report about the county’s financial statements said that they were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Standard & Poor’s dropped its credit rating for the county earlier after citing failure of the county to complete a financial report. Lack of a state audit opinion isn’t expected to help the county’s standing with the credit firm.

The county’s official response said the county auditor’s office is in the process of cleaning out old, misused and incorrect funds and accounts in the system. They are also utilizing the state auditor’s office training classes and other opportunities to train and educate staff.

The state report also said there were uncorrected statements in the audited financial statements such as some investments at fair market value instead of actual cost resulting in an over reporting of ending cash and investments of $30,000.

The report stated that the county initially over-reported revenues and expenditures by $7 million of claims-clearing fund activity.

The report also stated that when comparing bank activity to amounts recorded in the financial statements, the county was unable to identify the cause for $34 million in under-reported revenues and $30 million in under-reported expenditures.

Notes indicated the county held investments of $4.7 million more than total cash and investments reported in the financial statements and a final approved budget of $1.3 million more than approved by the commissioners in budget ordinances.

The state audit identified deficiencies in internal controls that represent weaknesses within the county auditor’s office.

“Our audit identified deficiencies in internal controls that adversely affected the county’s ability to produce reliable financial statements,” the report said.

Prior audits identified weaknesses in the financial state preparation process that were reported to management. The county was unable to prepare materially accurate financial statements for fiscal years 2004 through 2007. State audits identified internal control deficiencies for fiscal years 2008 through 2011. The report said although the county has made some improvements to its control systems, many concerns have not been addressed.

The report highlighted weaknesses in the county auditor’s department such as:

• Departments responsible for preparing the financial information for the annual report do not effectively communicate and collaborate to ensure the report is accurate and complete.

• Although improvement was noted, the county still lacks procedures to ensure monthly bank reconciliations are completed in a timely manner and discrepancies between the bank and accounting records are researched and resolved.

• The county lacks written policies outlining the expectations for journal entry authorization, documentation and review.

• The county does not have controls in place to ensure its financial transactions are accurately recorded in accordance with state requirements.

• Personnel responsible for recording financial transactions and compiling the county’s financial statements, notes and required supplemental schedules do not fully understand the accounting software used and how the recording of cash transactions and journal vouchers impacts the accuracy of the accounting records.

• The county’s internal control process for the review of the completed annual report is not effective. The process did not identify material errors and inconsistencies in the compiled financial information.

The state report also said the monthly bank reconciliation process was delayed up to four months. The February 2012 bank reconciliation identified a $102,000 discrepancy that was not corrected until the year-end bank reconciliations process.

The county recorded between $400,000 and $900,000 in month-end bank transfers each month. Delays in the reconciliation process postpone the recording of these amounts and prolong inaccuracies in the accounting records.

The report also highlights that significant journal entries did not contain enough documentation to support the purpose and accuracy of the entries. The accounting software allows entries to be posted to future periods. Corrections of identified errors were not posted to the accounting records for more than five months.

State auditors continue to recommend:

• Ensure departments responsible for financial statement preparation collaborate to produce accurate accounting records and financial reports.

• Complete timely bank reconciliations for all bank accounts and reconcile and record all bank activity in the accounting records.

• Establish and follow written policies and procedures on the expectations and responsibilities related to the authorization, documentation and review of journal entries.

• Establish policies and expectations regarding the timeliness and accuracy of recording and reconciled financial activity in the accounting system.

• Provide adequate training, tools and resources to staff responsible for reporting fiscal information to users dependent on the county’s processes.

• Ensure the prescribed controls and resources to prepare and review the financial statements and schedules result in accurate reporting.