Luallen Releases Audit of See the audit report for Full Details |
Crit Luallen |
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(Frankfort - August 6, 2008)
State Auditor Crit Luallen today released the audit of the Sheriff’s Settlement - 2006 Taxes for Laurel County Sheriff, Fred Yaden, for the period January 1, 2007 through June 5, 2007. 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 fairly presents the taxes charged, credited and paid, for the period January 1, 2007 through June 5, 2007, in conformity with the modified cash 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 require the depository institution to pledge or provide additional collateral of $369,226 and enter into a valid written agreement to protect deposits. On February 7, 2007, $369,226 of the Sheriff’s deposits of public funds were uninsured and unsecured. In addition, the Sheriff’s written agreement with the financial institution was not approved by the board of directors of the depository institution or its loan committee. According to KRS 66.480(1)(d) and KRS 41.240(4), financial institutions maintaining deposits of public funds are required to pledge securities or provide surety bonds as collateral to secure these deposits if the amounts on deposit exceed the $100,000 amount of insurance coverage provided by the Federal Deposit Insurance Corporation (FDIC). The Sheriff should require the depository institution to pledge or provide collateral in an amount sufficient to secure deposits of public funds at all times. In addition, the Sheriff should ensure his written agreement with the depository institution is approved by the board of directors or its loan committee. According to federal law, 12 U.S.C.A. § 1823(e), in order to be recognized as valid by the FDIC, this agreement, should be (a) in writing, (b) approved by the board of directors of the depository institution or its loan committee, which approval must be reflected in the minutes of the board or committee, and (c) an official record of the depository institution. The Laurel County Sheriff, Fred Yaden, responded, “I agree and did not realize that dropped below the safe amount. I knew we had the agreement between us and the bank in writing but did not realize the Board of Directors had not approved and put it in the minutes of the meeting.” The Sheriff’s office lacks an adequate segregation of duties. During the review of internal controls, auditors noted control deficiencies as defined by professional auditing standards in that the same individual performed almost all accounting functions relating to the collection of 2006 taxes (i.e. cash collections, reconciliations, and reporting processes). No compensating controls were noted to offset these control deficiencies. Therefore, these control deficiencies, in the aggregate, result in a lack of an adequate segregation of duties, which is considered to be a significant deficiency and a material weakness. While it may not be practical to segregate duties because of the small size of the office and budget restrictions, the Sheriff should establish compensating controls to address the lack of an adequate segregation of duties. The Sheriff could implement the following compensating controls to offset this internal control weakness:
The Laurel County Sheriff, Fred Yaden, responded, “We have made change for the 2007 tax year to improve in this area.” 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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