Luallen Releases Audit of See the audit report for Full Details |
Crit Luallen |
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(Frankfort - August 18, 2008)
State Auditor Crit Luallen today released the audit of the 2007 financial statement of the Greenup County Sheriff, Keith Cooper. State law requires the Auditor to annually audit the accounts of each county sheriff. In compliance with this law, the Auditor issues two sheriff’s reports each year: one reporting on the audit of the sheriff’s tax account and the other reporting on the audit of the fee account used to operate the office.
The audit found that the Sheriff’s financial statement presents fairly the revenues, expenditures, and excess fees of the Greenup County Sheriff in conformity with the regulatory basis of accounting. As part of the audit process, the Auditor must comment on non-compliance with laws, regulations, contracts and grants. The Auditor must also comment on material weaknesses involving the internal control over financial operations and reporting. The audit contains the following comments: The Sheriff should withhold retirement from all employees who meet the criteria established in KRS 78.510. It was noted in the test of payroll that an employee did not have retirement withheld from his gross wages. This deputy works under a 175-day contract working 8 hours a day at the county high school, all of which indicates full-time status. However, it is auditors understanding that the employee is classified as a part-time deputy of the Sheriff’s office, and therefore should not have retirement withheld. Due to a lack of timesheets or written contract, it cannot be determined whether the employee should be a part-time or a full-time employee; however, based on the criteria established under KRS 78.510, this employee should have retirement withheld from his gross wages. The audit recommends the Sheriff comply with KRS 78.510 by withholding retirement from all employees who meet the requirements of the above statute. The Greenup County Sheriff, Keith Cooper, responded, “This is being resolved right now.” The Sheriff should maintain time records for all employees. Timesheets were not maintained for employees of the Sheriff. KRS 337.320 states that every employer shall keep record of the hours worked each day and each week by each employee. Timesheets should be kept for payroll verification and as a record of leave time used. The employee and the appropriate supervisor should sign all timesheets. The audit recommends the Sheriff maintain time records properly for all employees. The Greenup County Sheriff, Keith Cooper, responded, “We do and always have kept timesheets, they have been updated at your request.” The Sheriff did not maintain proper supporting documentation for $3,600 of contract labor expenditures. Auditors noted the Sheriff retained a contractor without having a written agreement describing the scope of the services to be performed. This document should be reviewed by the fiscal court and documented in the fiscal court minutes. The contractor was paid $3,600 and given a form 1099 Misc. for income tax reporting purposes for the year under audit. Without documentation as to the nature of services rendered, applicability of state law cannot be ascertained. In order for the contractor to be paid, an invoice detailing the services provided on a monthly basis should be maintained and monitored to ensure the safeguarding of assets. The audit recommends the Sheriff obtain a written agreement from the contractor and require the contractor to submit monthly invoices for services performed. The Greenup County Sheriff, Keith Cooper, responded, “This is the same issue we have taken up before. I will have my CPA write yet another letter. We will receive bills from now on.” The following letter was provided by the Sheriff and written by the above referenced CPA: June 3, 2008 ___________________ Re: Keith Cooper, Greenup County Sheriff Dear ___________: I am in receipt of your Exit Conference Addendum dated May 30, 2008 concerning the independent contracts that Keith has helping serve papers. We had already applied the 20 point test to these individuals and determined they were not employees and have treated them as such. We issued 1099’s accordingly. The following are some of the issues we used in determining their status based on the 20 point test: Individuals are not sworn deputies and have no powers thereof. As a safe harbor, we have treated them as independent contractors from inception, dating back to 1977 and issued 1099’s accordingly. Yours truly, Terry R. Fyffe, CPA, ABV The Auditor’s Office replied that the official’s response does not address the report comment. The Sheriff should require contractors to submit detailed invoices for the services provided and supporting documentation for the time and expenses incurred for the services to ensure the appropriateness of the expenditures. Additionally, the Sheriff should contact federal and state agencies for guidance in the determination and documentation of independent contractors. The Sheriff’s office lacks adequate segregation of duties. All office staff collects receipts including the bookkeeper. The bookkeeper prepares daily checkouts and posts to the receipts ledger. The bookkeeper prepares the bank reconciliations and agrees bank balances to the ledgers. The Sheriff’s bookkeeper prepares, posts and mails all checks for disbursements. Good internal controls dictate the same employee should not handle, record and reconcile receipts. However, the lack of adequate segregation of duties is hereby noted as a significant deficiency pursuant to professional auditing standards. The Auditors office believes this significant deficiency as described above is not a material weakness. The Sheriff could strengthen controls by reviewing the deposit, and compare it to the daily checkout sheet and receipts ledger. This procedure needs to be documented by the Sheriff initialing either the checkout sheet, receipts ledger, or deposit slip. Also, all checks could be signed by two people, with one being the official. The Greenup County Sheriff, Keith Cooper, responded, “This is inconceivable and impossible.” The Sheriff’s responsibilities include collecting property taxes, providing law enforcement and performing services for the county fiscal court and courts of justice. The Sheriff’s office is funded through statutory commissions and fees collected in conjunction with these duties. |
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