Judge Phillips is relieved by audit findings

Six deficient areas noted, but none considered major

By JANIE SLAVEN<br>Record Staff Writer

WHITLEY CITY — County officials received the audit for McCreary County Fiscal Court 2008-2009 financial statements last Tuesday and were generally pleased with the results.

“I’m as pleased as can be,” Judge-Executive Blaine Phillips said as he announced the audit’s arrival during the January fiscal court meeting.

Judge Phillips has said in the past that it is nearly impossible to achieve an audit that is completely free of non-compliance issues. In keeping with that precedent, the accounting firm of Christian, Sturgeon & Associates noted six deficiencies, two of which are required to be reported under Government Auditing Standards:



1. The jailer did not report annually to the county treasurer on the jail canteen account.

During the fiscal year ended June 30, 2009, the jailer did not report annually to the county treasurer on the commissary account as required by KRS 441.135 (2) which states the jailer shall keep books of accounts of all receipts and disbursements from the commissary account and shall annually report to county treasurer on the commissary account. The audit recommends the jailer comply with KRS 441.135 (2).

The McCreary County management responded, “We will begin to do this for FY 2010.”



2. The County did not pay retirement on qualified part-time employees.

Any county employee who averages one hundred (100) hours or more per month is required to participate in Kentucky’s County Employees Retirement System (CERS) pursuant to KRS 61.565. A review of the non-full-time hourly employees identified eight employees eligible but not in the retirement system. More specifically, four employees worked in the Ambulance Service, five employees worked in the Detention Center, and one employee worked in the Sheriffs Office.

The liability for the unpaid contributions total $22,507, with $16,424 representing the County’s portion for year ended June 30, 2009 and prior years of $53,193, with $36,254 representing the County’s portion.

The audit recommends all part-time employees average hours be checked monthly and require participation and coverage in the CERS as required. The audit further recommends the proper authorities be contacted to correct this issue.

The McCreary County management responded, “In July, 2009 this matter has been corrected. The Fiscal Court will address the issue of arrearages.”

The other deficiencies were as follows:



3. The Fiscal Court should pay invoices within thirty days.

During the testing of debt service payments auditors noted eight invoices were paid late. KRS 65.140 requires all bills for goods and services to be paid within thirty (30) working days of receipt of a vendors invoice except when payment is delayed because the purchaser has made a written disapproval of improper performances or improper invoicing by the vendor. The audit recommends the County comply with KRS 65.140 by paying for all goods and services within 30 working days. This is an improvement over prior years, but is an area that continues to need attention.

The McCreary County management responded, “Fiscal Court exercises a great deal of effort in complying with the requirement of paying within thirty days. This will always be an issue for some invoices due to the timing of meetings.”



4. Lack of segregation of duties over the jail canteen account.

The bookkeeper of the jail canteen is responsible for making deposits, writing and signing checks and financial reporting. This creates a weakness in internal controls. The audit recommends that the jailer consider costs verses benefits of implementing stronger internal controls related to the jail canteen fund.

The McCreary County management responded, “The jailer does not feel that it would be cost beneficial to hire additional employees.”



5. The Stearns Historical Area Development Authority should implement compensating internal controls.

Due to the small size of the Stearns Historical Area Development Authority (SHADA), a proper segregation of duties may not be possible; therefore, the audit recommends SHADA implement the following compensating or alternative internal controls:

• As required by the ordinance and as an additional control, SHADA’s Secretary/Treasurer shall execute an official bond to be set and approved by SHADA.

• As required by the ordinance and as an additional control, SHADA’s Secretary/Treasurer should transmit, at least once annually, a detailed report of all activities of SHADA to the Fiscal Court for their review.

The McCreary County management responded, “This matter will be corrected.”



6. The bank accounts of the Tourism Commission are not reconciled and cash receipts and disbursements are not recorded.

During the testing of the Tourism Commission auditors noted that bank reconciliations were not being prepared nor were receipts and disbursements being recorded. Strong internal controls require that bank accounts are reconciled and a general ledger be prepared. The audit recommends that a bonded individual perform these functions.

The McCreary County management responded, “Blaine Phillips will review this matter with the Tourist Commission and take corrective action.”

The audit found that the county’s financial statements fairly present the county’s assets, liabilities, and equity arising from cash transactions and revenues received and expenditures paid in conformity with the modified cash basis of accounting.

In terms of financial health, McCreary County Fiscal Court had $8,380,698 in net assets as of June 30, 2009, of which $2,607,244 were unrestricted. The county owes a total of $4,836,351 with $352,015 debt principal due within the next year.

Kentucky law requires an annual audit of all county governments.

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