‘SYSTEM ISSUES’: Audit finds ‘significant weaknesses’ in county financial procedures and controls

A state audit found “material weaknesses” and “systemic issues” in the Bartholomew County government’s financial procedures and controls for administering federal funds, including instances in which officials failed to failed to accurately report expenses, document purchases, and, in one case, verify whether a vendor was prohibited from receiving federal dollars before awarding a contract.

The audit, filed Aug. 18 by the Indiana State Board of Accounts, found that the county’s procurement policy “did not comply with applicable state laws and regulations” and that county officials had not designed or implemented effective internal controls to ensure compliance with the rules. designed to protect federal taxpayers’ money from fraud, waste and abuse by contractors.

Specifically, the audit detailed a series of errors in the information county officials provided to state auditors — some of which led to an understatement of a COVID-19 relief fund’s spending. $1.89 million, a child support enforcement program of $519,263, highway planning and construction program expenses of $390,879, among other errors.

The audit also points to a $155,000 contract that county officials awarded to a vendor “without full and open competition.”

“There were no details of the county’s sourcing history or rationale for limiting competition,” the audit said. “Further, the county failed to verify that the vendor was not suspended or debarred, or otherwise debarred or disqualified from participating in federal programs prior to entering into the contract.”

Additionally, the audit cites four purchases under $1,000 that county officials verbally agreed to without documenting “procurement history, including rationale for method of supply, vendor selection, and price basis”.

Indiana State Board of Accounts officials said the audit found no evidence of missing or misappropriated funds or questionable transactions. The audit has now been filed with the Federal Audit Clearinghouse, officials said.

Bartholomew County Auditor Pia O’Connor did not respond to questions about the audit, the specific transactions mentioned in the report and the steps the county has taken to correct the issues. O’Connor said his office is preparing to respond later this week.

Bartholomew County Treasurer Barb Hackman was traveling out of the country and was unable to comment by the press deadline.

Corrective action

The auditor’s office submitted two corrective action plans to the Indiana State Board of Accounts in response to the audit in which O’Connor stated, “I agree with the findings (of audit) as set out.” In addition, plans say his office “continues to work with other county departments to improve the grant process” and “commissioners to improve the process for administering” the COVID-19 relief funds the county has. received.

“This includes, but is not limited to, internal controls and procurement and suspension and debarment processes,” the auditor’s office states in one of the corrective action plans.

The plans, however, did not provide further details on the specific actions county officials would take. It’s also unclear when the auditor’s office expects to complete the action plans, as officials said the expected completion date was “ongoing to complete.”

Bartholomew County Council Chairman Greg Duke said he was aware of the audit’s findings and planned to speak with O’Connor about the issues documented in the report, adding that he had contacted several audit agencies. state to gather more information “to find out what the other counties are.” do, what are the best practices and where we might be lacking.

“(The County Auditor and Treasurer) are elected officials, so they have the right to act within their own duties,” Duke said. “…But I recognize the fact that this is all taxpayer funds, whether it comes from a federal or state grant (grant) or our local levy. The council is eager to know what is going on.

Past Audit

Some “systemic issues” have been uncovered in the past, according to Bartholomew County audits conducted in previous years.

Last year, a similar state audit covering the 2020 calendar year found “several deficiencies” in the county auditor’s internal control system over financial transactions and reporting, which “allowed inaccuracies or material irregularities from being detected”.

Some of the “shortcomings” included the misclassification of financial transfers and the use of journal entries to record transactions without always including “sufficient supporting documentation or evidence of review, and these transactions were not approved by the county auditor as fiscal agent or, if applicable, the board of directors. county commissioners. Other issues were related to the County Auditor’s software not being shut down in a timely manner at the end of each month, resulting in “backdating of transactions.”

The auditor’s office also failed to report any financial activity related to the county’s road garage project in 2019 to its general ledger and to state auditors, resulting in its cash balance being understated. initial of $5.96 million, disbursements of $4.2 million, receipts of $915,554 and ending cash balance of $2.66 million, according to the 2020 audit.

Additionally, county officials did not have a system in place to accurately report spending of federal funds, leading to understating COVID-19 relief fund spending by $2.8 million. and child support enforcement grant expenditures of $439,800, while overestimating highway planning and construction expenditures. of $1.69 million.

“Lack of internal controls and non-compliance were systemic issues throughout the audit period,” the 2020 audit states.

The 2020 audit also found “several deficiencies” in the county treasurer’s office, including issues with the office’s bank reconciliation process, with transactions being released once the reconciliation is complete. However, no supporting documentation was presented to the auditors for these transactions or whether the bank reconciliation was adjusted for the changes, the audit said.

State auditors also pointed to problems with the treasurer’s cash book, finding that his “closing balance and the next day’s opening balance did not agree” for two days they reviewed and that there was no clear audit trail of supporting documents for the amounts displayed. to the cash book, including adjustments and corrections, or a “process for monitoring or reviewing routine transactions or corrections and/or adjustments recorded in the cash book”.

In addition, the treasurer’s cashbook did not match the county auditor’s fund register. “As of December 31, 2020, the audited bank reconciliation indicated that the total cash and investments per cash book was short by $201,586,” the 2020 audit states.

The Treasurer’s Office has submitted a corrective action plan to resolve the issues, including, among other things, procedures for documenting all adjustments and corrections to bank reconciliations, ensuring that ending balances and opening balances agree and review all transactions.

The Treasurer’s Office said it expects the plan to be implemented by December 31, 2021. It is unclear to what extent the plan has been implemented by that date, although the state audit later in 2021 did not identify these same issues in the treasurer’s office.

Beth Kelley, assistant state examiner for the Indiana State Board of Accounts, said many of the errors found in Bartholomew County during the 2021 audit were common across the state. , particularly the reporting guidelines for COVID-19 relief funds, which she said “can be a bit confusing. The number of errors her office finds during audits” varies from county to county. “, but “I don’t think in Bartholomew County anything is really excessive.”

“They’re big enough to notify the federal government, but they’re common in counties, cities, and towns,” Kelley said.

James V. Hayes