News Column

Audit cites lack of adjustments totaling more than $1 million

May 2, 2014

By Gary Nelson, Crossville Chronicle, Tenn.

May 02--CROSSVILLE -- The Cumberland County audit committee discussed with state auditors a finding in the county's annual financial report where the county finance director did not make audit adjustments totaling $1,088,513 and $1,127,236 that were required in the General and General Capital Projects funds in order for financial statements to be properly presented at the end of fiscal year 2012-'13.

The committee met last week with state auditors Carl Lowe, Anita Scarlett and Rodney Malin to review the findings in the state audit's Annual Financial Report for Cumberland County.

The first finding in the office of the finance director states, "The General and General Capital Projects Funds required material audit adjustments for proper financial statement presentation."

It was classified under internal control as a "material weakness under government auditing standards."

The finding states, "At June 30, 2013, certain general ledger account balances in the General and General Capital Projects were not materially correct. Audit adjustments totaling $1,088,513 and $1,127,236 were required in the General and General Capital Projects funds, respectively for the financial statements to be materially correct at year-end. Generally accepted accounting principles require Cumberland County to have adequate controls over the maintenance of its accounting records. It is a strong indicator of a material weakness in internal controls if the county has ineffective controls over the maintenance of its accounting records, which are used to prepare the financial statements, including the related notes to the financial statements. We presented audit adjustments to management that they approved and posted to properly present the financial statements in this report."

Auditors recommended the "finance department should have appropriate processes in place to ensure that its general ledgers are materially correct."

Cumberland County Finance Director Nathan Brock's response in the audit report states, "The finding is acknowledged and appropriate action has been taken. The finance director accepts full and total responsibility for this oversight."

Carmin Lynch, 9th District commissioner, asked, "What made up the $1 million?"

Lynch is not on the committee, but attended the meeting.

State auditor Rodney Malin said the purchase of a fire truck at more than $300,000 was set up as a payable and the roofing project on the Cumberland County Jail was $365,000.

"An audit adjustment was given but was not posted until next year," Malin said.

Lynch asked, "Don't we need some kind of internal control to make sure adjustments have been posted or made? Or to report to this committee rather than to wait a year to find out?"

Carl Lowe, audit manager, said, "That's a good point."

Lynch said it should be reported to the audit committee or the county commission once the adjustment has been made.

Other additional findings in the finance department office included "deficiencies in purchasing procedures" and were listed as "internal control significant deficiency under government auditing standards and non-compliance under government auditing standards."

According to the finding, "The county paid an employee of the Cumberland County Emergency Communications District, a component unit of the county, as a contracted service provider to maintain and serve the county's emergency communications equipment ... "

The following deficiencies were reported in the audit report:

"The county did not have a written contract with the individual to document the responsibilities and liabilities of each party. The county did have a proposal from the contractor on file dated Aug. 2, 2008. This proposal was signed by the contractor, described the services to be provided and established the monthly compensation at $1,500 per month. The proposal was not signed by a county official, and the county could not provide us with any documentation that the proposal was approved by the county commission. Beginning July 2012, the contractor's compensation increased to $2,000 per month; however, there was no documentation supporting the increase in compensation to the contractor other than an increase in the county's budget for contracted services."

During the meeting with auditors, Lynch said, "We couldn't produce it. It's a leap of faith to say 'we don't have it.' If the prior county mayor threw it in the trash, or purged it with other records ... Why assume we don't have one?"

Lynch also questioned why it took until now to discover a problem when it hadn't been seen in prior years.

Auditor Anita Scarlett said it was pulled after computer software performed a sampling of records and showed the irregularity.

One finding questioned the legality of a full-time employee of the emergency communications district (E-911 District) saying that employee could be an employee with extended hours and not considered a contract employee.

The same employee who is contracted to work as maintenance person over the emergency communications system is a full-time employee with the E-911 Emergency Communications District.

Brock explained that employee was a contract worker for the county for the communications system before going to work full-time with the E-911 District. He also said the situation has been referred to Cumberland County attorney Randal Boston for his review and opinion of the matter.

Another finding regarding the same employee suggested the position, or purchase, should have been put out for bid since it was in excess of $5,000, pursuant to Tennessee Code Annotated (TCA) 5-21-20.

Brock responded by saying the matter had also been referred to the county's Finance Committee for its consideration for a possible Request For Qualifications (RFQ) bid solicitation.

"The county should have a written contract for services describing the responsibilities and liabilities of each party. The contract should be approved by the county commission if it extends beyond the budgeted fiscal year-end. Management should determine whether this individual qualifies as an employee or contracted service provider in accordance with federal wage and hour guidelines. Competitive bids should be solicited for all purchases exceeding $5,000," the audit report states.

In written response in the audit report, Brock states, "The contract with the individual referenced was approved by the Financial Management Committee on Aug. 6, 2008 and that contract was an attachment to the minutes of the meeting. On April 17, 2012, the budget committee approved an increase in the contractor's compensation that was later adopted by the full county commission. The referenced individual has worked closely with commissioners and other elected officials and attends meetings with all stakeholders on a regular basis. Commissioners and officials had full knowledge that the person referenced had a contractual relationship with the county. It is accurate that the original signed document could not be produced, most likely because of files purged by the former county mayor when he left office. However, terms and conditions of the contract approved by the financial management committee have been adhered to by the county and to my knowledge, the contractor. The county attorney will be asked to formulate a new contract for review and action by the financial management committee and/or county commission."

The committee took no action.

The audit committee also reviewed other findings in the county mayor's office, which will be covered in an additional story in the Chronicle.


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Source: Crossville Chronicle (TN)

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