The Reporter covers Miller, Morgan and Camden County in Central Missouri's Lake of the Ozarks and is published once per week on Wednesdays.
Published August 2, 2017
State releases financial audit of Morgan County
MORGAN COUNTY – A state audit of the county finances for two years has been released by the Missouri State Auditor’s office and reveals several areas that need improvement.
An audit of the county was released last month but the financial section was released as a separate audit.
“The Office of the State Auditor is responsible under Section 29.230, RSMo, for auditing certain operations of Morgan County, and issues a separate report on that audit. In addition, the Office of the State Auditor has contracted for an audit of the county's financial statements for the 2 years ended December 31, 2016, through the state Office of Administration, Division of Purchasing and Materials Management,” State Auditor Nicole Galloway said in her introductory letter.
The audit was performed by McBride, Lock & Associates, LLC, Certified Public Accountants.
In the Findings and Recommendations section, the audit revealed “Significant Internal Control Deficiencies.”
Internal Controls Over Credit and Fuel Card Usage
“Condition: During our audit, we noted that the County’s internal controls over the use of its Visa credit cards, Walmart Community cards, and fuel cards were inadequate. During the audit period, there were five Visa credit cards issued and over a dozen Walmart Community cards, and access to these cards was not centrally controlled as the employees who were issued cards carried them with them at all times.
“Having a large number of credit cards issued without controls over access to the cards greatly increases the risk of inappropriate use or loss of the cards. During 2017, the County Commission has taken steps to reduce the number of cards outstanding. Three Walmart Community cards that had been issued could not be located when the Commission was in the process of collecting the outstanding cards.
“There are now only three Walmart Community cards issued to County employees (Sheriff, Jail Administrator, and 911 supervisor) and one Visa credit card which is kept in a locked drawer in the Commissioner’s office. Advance approval is now required before using one of the Walmart credit cards.”
The report also stated that the County Commission has taken steps to improve controls over fuel card usage by employees of the Sheriff’s office.
The new cards issued in 2017 require card users to enter the vehicle mileage and a unique vehicle PIN number to be entered at the pump, allowing the Sheriff and 911 supervisor to compare fuel expenditures to actual miles driven.
The auditor’s recommendation: “We recommend that the County continue to take steps to ensure that proper controls are in place to prevent inappropriate use of County credit cards through physical control of the cards and requiring proper approvals prior to use.”
The county responded that the problem has been taken care of.
“County’s Response: In addition to improved controls over fuel cards, all remaining County issued credit cards have been turned into the County Commission and distributed upon request and approval of purchases.”
Accounting for Transfers
“Condition: The financial statements of the County as presented in the annual budget documents present transfers between funds. The recorded transfers out did not equal the recorded transfers in for either 2016 or 2015. This was the result of transfers out misclassified as expenditures and transfers in misclassified as revenues. In most instances, one side of the transfer would be booked to a “miscellaneous” revenue or expense account resulting in an imbalance between transfers in and out. This has the effect of overstating expenditures and revenues as recorded in the annual budget documents. All transfers out must be accompanied by a corresponding transfer in. The financial statements included in this report have been adjusted so that transfers in and out between funds are equal as of December 31, 2016 and 2015.”
The auditor recommended that all transfers are properly reported and in balance and that the “transfers out always be accompanied by an equal transfer in and that the transfers be clearly identified in the accounting system and on the annual budget.”
The county accepted the recommendation and said they will make the necessary changes.
The report did list several items of non-compliance by the county.
“Condition: Actual expenditures exceeded budgeted expenditures for eight funds in 2015 and five funds in 2016…RSMo 50.740 prohibits expenditures in excess of the approved budgets. Budgetary controls are significant to the proper management and custodianship of county funds. Compliance with statutory requirements related to budgets will improve controls over county funds and help maintain the integrity of the budget process.
“Recommendation: We recommend the County strictly adhere to the authorized spending limits as documented in the adopted County budget or follow the appropriate procedures to amend the budget.”
The county responded by stating that they began amending the budget in 2016 and will continue to monitor spending limits and adhere to budget limits or amend as required.
Competitive Purchasing Procedures
“Condition: During our audit, we noted two instances where the County purchased goods or services in excess of $4,500 but no documentation of bidding or other competitive purchasing procedures could be provided. In 2015, the County purchased a piece of equipment for the Recorder’s office for $11,217. In 2016, the County purchased services for painting at the Justice Center for a total of $8,966. In both cases, no documentation of bidding could be provided. RSMo 50.660 states that, ‘All contracts and purchases shall be let to the lowest and best bidder after due opportunity for competition...except that the advertising is not required in case of contracts or purchases involving an expenditure of less than six thousand dollars. It is not necessary to obtain bids on any purchase in the amount of four thousand five hundred dollars or less made from any one person, firm or corporation during any period of ninety days....’ RSMO 50.783.1 states that, ‘The county
commission may waive the requirement of competitive bids or proposals for supplies when the commission has determined in writing and entered into the commission minutes that there is only a single feasible source for the supplies.’
They recommended that the county solicit bids in accordance with state law. The county admitted in it’s response that it had messed up.
“Morgan County recognizes that it failed to obtain bids on two separate occasions. While we feel only one single feasible source was available for the supplies, we did not attempt to solicit bids. Corrective action has been taken in the County Commission office to ensure that this will not happen in future purchases and that Morgan County follows the required bidding process as set forth in RSMo 50.783.1.”
The report did give advice on steps that could be taken to insure better internal controls.
Payroll Process Controls
“During our audit, we became aware of seven employees who were paid $2,571 through the accounts payable process rather than through payroll checks in February and March 2017. Beginning January 1, 2017, the County switched to an outsourced payroll company which implemented an electronic fingerprint timeclock. The County experienced issues relating to this new process which resulted in some employees being underpaid for the month of January. Warrant requests were initiated by the County Clerk and the employees were paid through the accounts payable process rather than paying the supplemental amounts through the usual payroll processing procedures. We recommend that the County ensure that all employee compensation payments are run through the payroll process to ensure the accuracy of calculations for employee pay, payroll taxes, and deductions and to ensure that federal and state recordkeeping and reporting related to payroll are accurate.”
At the end of the report the auditor listed several problems that were discovered in the past financial audit covering the period of December 31, 2012 and 2011. Not all of the problems found at that time were resolved.
“1. The County’s budget documents for the year ended December 31, 2012 and 2011 materially misstated the various receipt classifications in various county funds.
“Status: Resolved. Although there were several reclassifications made in preparing the financial statements in this report, most of them were related to transfers.
“2. The financial statements of the County as represented in the annual budget document do not present the proper amount of transfers between the county funds.
Status: Not resolved.
“3. The County did not exercise adequate budgetary control over several funds during the audit period. Expenditures were approved for payment that exceeded the approved budget. The County did not prepare a budget for the County Law Enforcement Restitution Fund for the year ended December 31, 2011. Several errors were noted in the budgets for the Drug Task Force, Drug Task Force Supplemental and Senior Services Tax Board Funds.
Status: Partially resolved.
The Missouri State Auditor has no authority to enforce any of its findings and can only recommend. Any tax entity audited by the state auditor’s office is not required to follow any of the recommendations but most of them do.
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