Draft Effingham Audit

7/28/2019 Draft Effingham Audit

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EFFINGHAM COUNTY, GEORGIASchedule of Findings andResponsesFor the Year Ended June 30,2012

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Internal Control Findings2012-01 Bank Balances and Reconciliations

Condition: The bank balance and the resultingbank reconciliationsat June 30,2012 includedanderroneous amount for sales ta x receivable.

Criteria: Internal controls should be in place to determine that the stated bank balances areproperlystated.Cause of Condition: In the year end close-out procedures an accrual was made for sales taxreceivables which was recorded in the cash account instead of the "accounts receivable" account.On the bank reconciliation the amount was included as a reconciling item in "deposits in transit".The reviewof the bank reconciliations by the finance directordid not detect this misstatement.Effect of condition: The failure to detect a significant improper reconciling item could lead tosignificantly misstated financial statements. The effect of this condition was a overstatement ofcash and an understatementof sales tax receivable by a significant amount. Total assets were notmisstated, no t were revenues.

Recommendation: Establish procedures to ensure that bank reconciliations are reviewed andapproved attheappropriate level todetermine that all reconciling items are appropriate.Management response:

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EFFINGHAM COUNTY, GEORGIASchedule ofFindings and ResponsesFor the Year Ended June 30,2012

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2012-02 Review ofclosing entriesCondition: Several closing journal entries related to grant revenue and deferred revenue wererecorded incorrectly, such as deferred grant revenue recorded backwards and recorded to the wrongaccounts .

Criteria: All journal entries should be adequatelydocumentedand properly reviewed to determineclerical accuracy and properrecording.Cause of Condition: It appears the, journal entries were prepared by staff and not adequatelyreviewed for accuracy and completeness. The documentation to support the entry was adequate,however, the recording of the entries was in error.

Effect ofcondition: The failure to properly reviewclosingentries anddetermine completeness andaccuracy could leadto misstated financial statements andthe potential to cover fraud.Recommendation: Enforce the County's policy for a review of all journal entries.

Management response:

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EFFINGHAM COUNTY, GEORGIASchedule ofFindings andResponsesFor the Year Ended June 30,2012

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2012-03 Financial Institution Signature CardsCondition: The CountyAdministrator was included on the signature cards for two accounts, theSeniorCitizens Activities Program andthe Landfillaccount, which were established in the currentfiscal year. It does not appear that the inclusion of the County Administrator on these signaturecardswas known orapprovedby the BoardofCommissioners.Criteria: Internal controls should be in place that require all changes in banking relationships andauthorizations on accounts be approved by the Board ofCommissioners.Cause of Condition: It has been the County's standard operating procedures for the Board ofCommissioners to approve neworclosed accounts as wellasto approve those persons authorized tosign on the County's bank accounts. The acquiring of the signatures on the signature cards wasperformed by theCounty Clerk in her normal duties. It appears theCounty Administrator's namewasaddedto the two accounts without the knowledge orapproval of the Board ofCommissioners.Effect of condition: The inclusion of unauthorized persons on signature cards could result ininappropriate and unauthorized transactions occurring. Additionally, in this particular situation,there appears to be a conflict of interest due to the spousal relationship between the CountyAdministrator and the County Clerk.Recommendation: Enforce the County's policy requiring all authorized signatures to be approvedby the Board of Commissioners. Additionally, periodically require the review of the signaturecards by an independent person for adherence tothe policy.Management response:

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2012-04 Segregation ofDuties - Issuance ofInvoicesCondition: The CountyClerk' office sentout various invoices for fire fees, law library charges and"Supplemental Pages, Images, Graphs, Tabular Matter, and updating Electronic Data BaseSupplement Number 15 to the Code of Ordinances." These invoices were mailed directly from theCounty Clerk's office with emails sentto the finance department of the invoices mailed. At leastone invoice for "Supplemental Pages, Images . . ." was signed by the assistant and requested thatthe payment, made payable to the Board ofCommissioners, beaddressed tothe assistant. Paymentsfor these invoices are generally received by mail or at the receptionist window (which is theassistantCounty Clerk).Criteria: Internal controls should be in place which provide for an adequate segregation of dutiesin which the preparing/mailing of invoices and the receiving of payments for invoices should neverbe performed by the same person.Cause of Condition: At this time, the County Commission has not adopted a revenue cycleprocedures policy. A proper such policy would segregate the duties of preparing invoices andreceiving cash. Upon inquiry of the Finance Director, itwas determined this was done without herknowledge or approval, however, she had become aware of itafter it had happened, and requestedsuch invoicing bethe responsibility of the Finance Department. This request has not been granted.Effect ofcondition: Several risks exist from this condition: 1) The invoice may never be recorded,resulting in understated revenue and understated receivables, 2) unremitted checks and currency tothe finance department for deposit would not be detected due to no receivable (which should havebeen recorded at invoicing) against which to match the receipt, 3) fraud - cash could be received inpayment ofthe invoice, kept by the recipient, and this action never detected due to there being norespective receivable recorded at invoicing to follow up on.Recommendation: Adopt revenue cycle and cash policies that appropriately segregate duties suchthat no one person performs conflicting duties- those that when performed by one person provideopportunities to perpetrate fraud or commit errors with reasonable probability ofnot being detectedor corrected on a timely basis. We have noted that there is a set of "procedures" in place, in thefinance department, that, when followed, provide for proper segregation ofduties. However, these"procedures" are violated when an employee performs duties not allotted to him/her in these duties.This particular violation resulted in improper segregation ofduties. Official adoption of revenuecycle and cash policies outlining the procedures to be performed by each position could preventthese violations from occurring. For persons performing tasks related to financial transactions-specifically collection of cash, billing of customers/taxpayers, recording, authorization of, andreconciliation of transactions- require and provide training, whether in-house through someoneknowledgeable ofsegregation ofduties, or through aclass provided external to the organization, inproper segregation ofduties and the potential pitfalls ofperforming conflicting tasks.Managementresponse:

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EFFINGHAMCOUNTY, GEORGIAScheduleofFindings andResponsesFor the Year Ended June 30,2012

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2012-05 PurchasingpolicyCondition: The purchasing policy does not effectively describe where invoices should gowhenreceived.

Criteria: Internal controls procedures should be in place that dictates the flow of informationthrough the organization, including vendor invoices. These procedures should incorporate anadequate segregation of duties as it relates to purchases and accounts payable.Cause ofCondition: The purchase policy as passed does not include wording that stipulates theflow of purchasing related documents through the organization. Currently, some vendor invoicesaredirected to department heads.Effect ofcondition: Risk of unrecorded liabilities, unauthorized purchases or invoices could beheld by the department head either byneglect or an attempt tomanipulate activity comparisons tobudget.

Recommendation: Revise the purchasing policy to stipulate the flow of purchasing-relateddocuments throughout the organization. Upon initiation ofapurchase request, purchase requisitionshould flow from the department head to the purchasing agent, who processes the purchase bysending the purchase order to the vendor and then sends copies of the purchase order to thedepartment head and accounts payable. The vendor sends the materials to the department and.Ideally, there would be aseparate receiving department independent from all other departments, butthe County does not have such a department. The vendor also sends ALL INVOICES toACCOUNTS PAYABLE. The department prepares a receiving report noting differences, if any,between what was ordered andwhatwas received. The receiving report is then sent to accountspayable who, prior to authorization of payment, reconciles the purchase order it received from thepurchasing agent, the receiving report it received from the receiving department, and the invoice itreceived from th e vendor.


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EFFINGHAM COUNTY, GEORGIAScheduleof Findings and ResponsesFor the Year Ended June 30,2012

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2012-06 Grant Policy ViolationsCondition: There appears to be a pervasive pattern of violationsof the grant policy. The financedirector does not appear to have been either included or involved in important parts of the grantapplication and agreement process for numerous grants.Criteria: The approved County grant policy requires the finance director to receive grantdocumentation at least 3 working days prior to the agenda deadline on which the grant will bepresented to the Board of Commissioners in order to assess the ability of the County to administerthe grant.Cause of Condition: The grant policy of the County was not followed, either intentionally orunintentionally. Because of this violation, on numerous occasions, concerns of the FinanceDirector related to specific grant provisions were not addressed in staff reports or were mentionedin open session by the finance director.

Effect of condition: Risk of involvement in grants for which theCounty cannot administer and ofnoncompliance with grant requirements due to finance not being aware of obligations. Additionalriskof inaccurate grant agreements andMOUs (i.e., describing procedures otherthan those actuallyperformed). We noted correspondence indicating that the finance director had requested access tothese documents when she was made aware of them; however, it appears that such access waseither notgiven orwasgiven AFTERtheagenda had been set.Recommendation: Require all staff performing grant procedures as well as all department headsread the grant policy and possibly sign a statement acknowledging their responsibilities as specifiedinthegrant policy. Specifically for the Board of Commissioners: require that for approval of grantapplications, MOUs, and awards, the signature of the County Administrator and the FinanceDirector accompany the related documents indicating that each has had ample time (per the grantdocument, at least 3 working days) to perform their respective responsibilities pertaining to thedocument. Additionally, require all concerns which would require corrections that were notmadebe includedin a staffreportrelatedto the grant.Management response:

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2012-07 Grant in a RelatedParty TransactionCondition: Grant was proposed, applied for, and initially pursued with a party related to acommissioner with (1) no disclosure to the public when brought up inopensession, (2) doubt astowhether it was disclosed to the other commissioners in executive session, (3) no disclosure with therelated grantor agency, and (4) other essential details such as the potential profit for the relatedparties were never mentioned publicly or in executive session. Furthermore, the relatedcommissioner was present during theexecutive session. Additionally, some essential details inthegrant application appear to bemisleading. It appears that at least one commissioner was unawareof his responsibilities concerning conflicts of interest. The grant policy was also violated if notcompletely ignored. Finally, depending on the interpretation of theGeorgia code and the county'sconflict of interest policy, either may have been violated or would have been violated had thetransaction been completed.

Criteria: Georgia state law emphasizes transparency in transactions and has specific protocol tobe followed when engaging in the sale of real estate to a related party. Transparency concerningthe activity surrounding the grant appears to be absent and or at least severely compromised.Commissioners and management need to be keenly aware of their responsibilities concerningconflicts of interest upon entrance into office and before presented with even the opportunity ortemptation to benefit from the public's business, rather than realizing the responsibilities andconsequences for violating them, whether through ignorance, neglect or outright knowingabandonment, after the opportunity or temptation has been presented. Ensuring transparencyshould be not just an aspect of the commissioner's job, but should be amatter of highest importancein every agenda item. Finally, federal and state grant programs (this appears to be both) requiredisclosure o f conflicts o f interest.

Cause ofCondition: The condition was caused bya failure to follow proper protocol for disclosingconflicts of interest and related parties aswell as theCounty grant policies. Additionally, there wasa lack of due diligence on the part of the administrative staff in identifying the parties involved andcommunicating totheBoard ofCommissioners and the public.

Effect of condition: This allows the potential for transactions with related parties which couldresult in conflict of interest. The events of this particular eventallowedthe abilityof the partywitha conflict of interest to improperly influence the Board's decisions concerning the transaction. Duediligence and proper communication to the Board was not performed by the administrative staff,which results in accusationsof collusion. Finally, this condition results in a lack of transparency onbehalfo f th e Board.

Recommendation: (1) Require that upon admission into office, all commissioners understand theimplications of even the opportunity or temptation to profit from the County's business, that theresponsibility for disclosing conflicts rests on the individual commissioners) in question, and that

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EFFINGHAM COUNTY, GEORGIASchedule ofFindings and ResponsesForthe Year Ended June 30,2012

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any commissioner remove him(her)self from anymeeting during which discussion and/or vote takesplaceconcerning any transaction or party with which (s)he has a conflict of interest. (2) Requirethat administrative staff be vigilant to make every reasonable effort to identify potential relatedparties in the early phases of contract and transaction development so as to assist in protecting thecommissioners in preventing an opportunity or temptation to benefit from the public's business.This could be spelled out in the job description. Realize, however, that the ultimate responsibilityfor declaringrelated parties rests on the related officer or employee. (3) Before the approval of anyitem related to a grant,whether in open or executive session, ensure that the staff reportrelatedtothe recommendation acknowledges receipt of an assessment of the grant from the finance directorrelated to her responsibilities concerning the grant and includes any comments or concernsexpressed therein. Otherwise, require a staff report to be submitted by the finance director inaddition to the county administrator's staff report for all grant items on the agenda. (4) In all grantapplications, whether prepared by the County oron behalfof theCounty, disclose all related partiesinvolved and any other conflicts of interest that may exist. (5) Obtain a legal opinion from acompetent attorney independent in respect to EffinghamCounty, Georgia concerning the properprocedures to be performed concerning related party transactions concerning (a) real estate, (b)personal property, and (c) services performed. (6) Modify the county policyto include languageconforming to the legal opinion obtained or to forbid related party transactions altogether (moretransparent, conforms moreclosely to the State's law concerning itself). (7) InallCounty activity,foster an environment of transparency rather than an environment or appearance of concealingdetails to push through a transactions or for other ulterior motives.


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2012-08 Other Related Party TransactionsCondition: Transactions are being conducted with parties to at least oneof the commissioners. Forthe transactions in question, proper request for proposal was not obtained, nor was proper approvalnoted in t he Board o f Commissioners minutes.

Criteria: County policies and State of Georgia provide certain requirements for transactions withrelated parties.

Cause ofCondition: Related party transactions were entered into, witha lack of understanding orpotentially disregard for County policy and state law.Effect ofcondition: The transactions the related parties was in violation of County policies andpotentially inviolation of state law, case law or opinions of the attorney general.Recommendation: Require all County officials, and key employees to read and represent that theyunderstand theCounty policies and state law as it relates to related party transactions.


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2012-09 Loss ofQualified Local Government StatusCondition: Duringthe current fiscal year, the County lost its QualifiedLocalGovernment (QLG)status associated with its Capital Improvement Element (CBE) and Short Term Works Program(STWP) submitted to the Regional Development Center and approved by the Georgia DepartmentofCommunity Affairs (DCA).Criteria: Policies and procedures should be in place to follow up on all matters that have amaterial affecton the operations of theCounty and adequate information provided to the Board ofCommissioners.

Cause ofCondition: The QLG status was lost due to nothaving officially accepted the CDE thatthe state approved six months prior (in October 2011). Administrative staff communicating withthe Board of Commissioners did not communicate this to the Board. It is apparent, that multipleadministrative personnel throughout theCounty were aware of these circumstances, but these werenot the personnel responsible for communicating with the Board; to do sowould be circumventingprescribed authority.Effect of condition: Loss of QLG status an affect the County's ability to collect impact fees.Additionally, loss of QLG status disqualifies an entity from participating in various programsoffered through the DCA, Georgia Department of Natural Resources, Georgia EnvironmentalFinance Authority and the One Georgia Authority. Management operates on behalfof the board ofCommissioners to run theCounty affairs and is therefore accountable to the Board to inform it ofdetails material to those operations on a timely basis. Included inthat necessary information wouldbethe loss of QLG status and a plan for how to regain the status and prevent such circumstancesfrom recurring.Recommendation: (1) Develop procedures to ensure that all CIE & SWTP submissions arefollowed up on to determine that they were approved on a timely basis and investigate when timegaps are greater than expected. (2) Require administrative staff to inform the Board of allinformation pertinent totheBoard onatimely basis.Management response:

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EFFINGHAM COUNTY, GEORGIAScheduleofFindings andResponsesForthe Year Ended June 30,2012

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2012-10 Contract overagesCondition: The County made payments on invoices to a vendor which included unexplainedcontract overages.

Criteria: Internal control policies should include procedures that require all contract overages tobe approved atthe appropriate level beforeinvoices for these amounts are paid.Cause ofCondition: Invoices for engineering services were presented for payment inexcess of thecontract amount. Invoices were forwarded from the purchasing department to the CountyAdministrator for further review. The Finance department followed up with various spreadsheetanalysis. There is an apparent overrode controls by forcing disbursements for unbudgetedexpenditures (after being informed of theoverages). Itwas apparent theCounty Engineer was notinvolved in the process. Upon inquiry, it was determined that the County Engineer would notapprove because hedid not believe that the construction company had fully performed the servicesthat the County was being billed for. It has been indicated that the payment was made becausethere were under-billings on other contracts, however, the vendor was notrequested to correct andre-bill the invoices.

Effect ofcondition: County purchasing policy was violated, and the County may have (1) paid forservices that it did not receive and/or (2) paid inflated prices for services rendered, and did pay inexcess ofapproved contracts.Recommendation: Require the oversight of construction projects tobe delegated to the appropriateCounty engineer. Additionally, enforce County policies that all contract overages be approved atthe appropriate level. In this case, the overages should have potentially resulted in a contractamendment to be approved by the Board ofCommissioners. Check signers should review checkdocumentation in detail to determine such overages are not occurring. Include procedures in thepurchasing policies to require all contract overages to be presented to the Board ofCommissionersfor approval.Management response:

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EFFINGHAM COUNTY, GEORGIASchedule ofFindingsand ResponsesFor the Year Ended June 30,2012

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2012-11 KeepEffinghamBeautifulCondition: A portion of rebate proceeds from the County recycling program is deposited in theaccount of "Keep Effingham Beautiful", which was set up as an incorporated not-for profitorganization. The organization lost its corporate status and it's not-for-profit status many years ago.The account has been maintained by twoCounty sanitation employees withnooversight from thefinance department. Theaccount isnotincluded intheaccounting records oftheCounty.

Criteria: Procedures should bein place toensure all County funds are properly accounted for.Cause ofCondition: A contract was entered into calling for contract revenues to be remitted to a"non-entity" whose accounts were maintained by two employees of the County. Itwas noted thatthe Finance Director requested an agency agreement with Keep Effingham Beautiful, however theCounty Administrator stated that such an agreement was not necessary since it was an"agency/department" of the County. The entity isnot an "agency/department" of the County.In 2012, one of the Sanitation employees died. Prior to her death, all activity in the amount wascontrolled byher. Subsequent toher death, the County Clerk became involved with the account, atwhich time ten monthly bank statements began to be received by the County Clerk. The employeeremaining in the sanitation department, not involved in the finance department and therefore notaware of proper internal controls as they pertain to the handling of cash accounts assumedresponsibilities ofmaking deposits as they came in and making disbursements via purchasing card,only after seeking the approval ofthe County Clerk. Any reconciliation procedures that take placeare performed by the County Clerk. Statements are not forwarded to finance, and authorization ofdisbursements wasnever directed to the appropriate County personnel.Effect ofcondition: The effect ofthe condition is to create apotential understatement ofrevenues,and an understatement ofexpenses. This condition could also lead to potential misappropriation offunds due to the depositing of funds in accounts maintained by County employees not under thecontrol of the Finance Department.

Recommendation: .Require all cash accounts which handle County funds to be brought under theoversight ofthe Finance Department and subject to the same internal control policies as all othercash accounts and approval guidelines per the purchasing policy. Ensure that employees dealingwith any area ofhandling any aspect ofcash accounts (receipt; custody; recording; reconciliations;disbursement with purchase card, fuel card, travel card, etc.) are properly educated on internalcontrol policy.


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2012-12 KeepEffinghamBeautifulOtherRecycleRevenuesCondition: Sanitation revenues resulting from the sale of materials dropped at the EffinghamCounty Landfill have been deposited inthe "Keep Effingham Beautiful" account.Criteria: Revenues resulting from the sale of recyclable material dropped at Effingham CountyLandfill are restricted to and should be deposited in the Effingham County Sanitation account (adepartment of the County). These revenues are not approved to be remitted to "Keep EffinghamBeautiful".

Cause of Condition: Lack of oversight of the activities of sanitation department employeescharged with the responsibility ofselling recyclable material from the Effingham County Landfill.Effect ofcondition: The effect ofthis condition is the intentional or unintentional conversion ofEffingham County Sanitation revenues for the purpose of funding "Keep Effingham Beautiful" aswell as the understatement of Effingham County Landfill revenues and the potentialmisappropriation of funds.Recommendation: Require stricter oversight ofthe operations of the Sanitation department as itrelates to recyclable products which are sold. Perform procedures, either internally or contracted todetermine the nature and extent of the irregularities surrounding "Keep Effingham Beautiful".Management response:

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EFFINGHAM COUNTY, GEORGIAScheduleofFindings andResponsesFor the Year Ended June 30,2012

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2012-13 SPLOSTExpenditureCondition: SPLOST expenditures were made for a capital project before being approved by theBoardofCommissioners as a SPLOST project.Criteria: Expenditures from SPLOST fund should only be made after the project has beenapprovedby the Board ofCommissioners as a SPLOST project.Cause ofCondition: The construction of the "Goshen Station" was approved by the Board ofCommissioners as a SPLOST project, however, furnishings were not included in the project. Thetotal cost of the furnishings requested to be added to the SPLOST project list was $5,000. Whenpresented to the Board of Commissioners, it was represented that none of the expenditures forfurnishings had yet occurred, when in fact in the prior month approximately $1,100 had beendisbursed. When questioned about the necessary expenditures andthe coordination with a servicedelivery agreement with one of the municipalities, the response was "We'll review the contractbefore we will make any purchases", when if fact purchases had already been made. Although theamount in not a material amount, the statements could be considered misleading to the Board ofCommissioners.

Effect of condition: Internal controls thattheCounty has put in place may be rendered ineffectiveby management override.Recommendation: Establish procedures in purchase policy that require known managementoverride of controls to be reported to persons with appropriate authority to resolve the issue(potentially the Board ofCommissioners).Managementresponse:

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2012-15 Segregation ofDuties - Handling ofVendor InvoiceDiscrepanciesCondition: There appears to be an improper segregation of duties in that the County Clerk andDirector ofCommunity Affairs becameinvolved in the handling of a billingdiscrepancy related towater services.

Criteria: Internal control procedures should be in place that require vendor discrepancies beinvestigatedand reconciledby the accountspayable department.Cause of Condition: As noted previously, the purchase policy does not determine where vendorinvoices should be directed. In this particular instance, the County Clerk and the Director ofCommunity Relations received water theCityof Springfield which appeared to include overbillingson several accounts. It appears that the County Clerk and the Director of Community Relationsassumed responsibilities that were not theirs to assume rather than deferring to the appropriatepersonnel.Effect of condition: Unnecessary time (County cost) spent in improperly performing tasks thatultimately had to be re-performed by the appropriate personnel (finance); circumvented and/orviolated internal controls.

Recommendation: In the area of financial transactions, require functions of staff to be limited tothe their job descriptions, and require that all inquires of vendor invoice discrepancies beinvestigated by the accountspayable department.Managementresponse:

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EFFINGHAM COUNTY, GEORGIAScheduleofFindings and ResponsesFor the Year Ended June 30,2012

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2012-16 FinancialPolicy UpdatesCondition: Based on documentationobtained, the Finance Director has been requestingupdatestovarious policies since 2008. These policies include "internal control policy," financial statementpolicy," "cash management policy," and "project management policy." The Finance Director hasnot been ableto get these policies placedon the County Commission agenda.

Criteria: From time to time policies and procedures should be updated to meet changingenvironments and circumstances. The County has began adopting such policies in the form of aresolution.

Cause ofCondition: Apparent lack of consideration of the importance of updated accounting andinternalcontrol policies.Effect of condition: The effect of this condition indicates a failure to assess the various areas ofrisk related to the various area surrounding internal control and financial reporting. Additionally,this condition could be an indication of the "tone at the top" which could ultimately flow downthrough the organization.Recommendation: Require internal control and various accounting policies and procedures to beperiodically evaluated and updated as necessary. Also require these policies to be reviewed bypersonnel related to the various policies and signed by the personnel indicating that the policieswere received and read.


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2012-17 Improper authorization to begin workCondition: It appears to the Director of Community Relations authorized work to begin on thesprayfield which had only been approved as being partof the Short Term Works Program. Thebeginning of the actual project had not yet been approved or budgeted. Correspondence indicatesthe intent was to use SPLOST funds to cover the expenditures of the project, however, there wasno approval to use SPLOST funds for this project. Additionally, the costs for this project waschargedto general funds public works, which this project is actuallya Sewer expense.Criteria: Internal control procedures should be in place to determine that a project is properlyapproved and budgeted before work on the project begins and if a SPLOST project that the projectis approved by the Board ofCommissioners as a SPLOST project and that adequate funding exists.

Cause ofCondition: It appears that inappropriate assumptions were made as to the approval andfunding of the project.Effectofcondition: The effect of this condition is the potential to expend unbudgeted funds for anunapproved project. If in fact SPLOST funds were disbursed there would be implications of aviolation of State law. Additionally, general fund expenditures are overstated and Sewer fundexpenditures areunderstated.Recommendation: Require that the Directorof Community Relations document the approval of aprojectbefore beginning and that the project is adequatelybudgeted. If the project is intendedto bea SPLOST project, document that the project has been approved by Board of Commissioners as aSPLOST project.Management response:

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2012-18 Inappropriate approvaloftransactionsCondition: From time to time the Director of CommunityRelations performs duties which areoutside of his job description and could result in a conflict or removal of segregation of duties.Included in thesewould be a) investigation of vendor invoicediscrepancies (previously mentioned),and b) authorization of animal control fees refund, involved in Family Connection Grantreimbursementgrantapproval.Criteria: Internal control include procedures forhandling various activities around theCountyandinclude individuals responsible for various functions in order to promote anadequate segregation ofduties. These procedures should be followed and financial related responsibilities should not beperformed by staff persons thatwould cause inaccurate information ofa lapse inthe segregation ofduties.

Cause of Condition: Staff performing duties outside of their job description or outside of normalpoliciesand procedures.Effect of condition: Risk or improper authorization of transactions leading to improper revenueandexpense recognition

Recommendation: Require all transactions and approvals to be performed within the authority ofstandard policiesandprocedures and staff persons job description.


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2012-20 Board ofCommissionersmeeting agendapolicy not consistentlyenforcedCondition: The agenda policy for the meeting of the Board of Commissioners is not consistentlyenforced.Criteria: The County has established a policy for a deadline by which requests for items to beincluded in the agenda must be provided and the submission of the documentation to be included.Itemsthat are submittedafterthis deadline mustbe approved by the Board ofCommissioners to beaddedto the agenda. This policy is not consistentlyenforced.Cause of Condition: The County Clerk, per the normal duties of a county clerk, prepares theagenda of the Board ofCommissioners meetings. The County Administrator, per the normal dutiesofa countyadministrator approves itemsto be puton the agenda. There exists a deadline by whichno documentsareto be put on the agenda. We notedon several occasions that items are addedtothe agenda though the related documents are not submitted until after the deadline; therefore thedeadline is not consistently enforced.Effect of condition: Appearance of partiality of determining agenda items because of theinconsistent treatment of agenda requests. Additionally, appearance of a conflict of interestbetween the CountyClerk (prepares agenda) andthe CountyAdministrator (approves agenda), whois her spouse, by applying pressure to add items to the agenda after the deadline. The mostnoticeable inconsistencies are the adding of grants to the agenda when the grant documents werenot finalizedpriorto the agendadeadline.Recommendation: Require the agenda deadline to be consistentlyapplied.Management response:

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2012-21 Maintenance ofmeetings ofBoard ofCommissionersCondition: The original minutes of the meetings of the Board of Commissioners arenot timelybound properly referenced and securely stored on a timely basis. The minutes have only beenbound through 2009-2010 and the original minutes have numerous references to "minute book page

" with the pagenumber open because the minutes have not been completed and bound.Criteria: The official minutes of the meetings of the Board ofCommissioners should be completedand signed as soon as possible subsequent to the approval of the Board of Commissioners.Additionally, All documents should be properlycross-referenced.

Cause ofCondition: The County Clerk has not had time to complete the binding of the minutes,possibly because of other activities performed unrelated to the traditional duties of the CountyClerk.

Effect of condition: Potential violation of state law requiring adequate recording and storage ofminutes.

Recommendation: Require the minutes of the meetings of the Board of Commissioners to bebound and stored immediately upon approvalby the Board ofCommissioners.

Managementresponse:

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EFFINGHAM COUNTY, GEORGIASchedule ofFindings andResponsesFor th e Year Ended June 30,2012

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2012-22 Proposed lease to Board ofCommissionersCondition: A proposed lease was presented to the Board of Commissioners which failed todisclose all information necessary to makeaninformed decision onthe lease.Criteria: In the presentation of contracts to the Board of Commissioners, management shouldprovide all information necessary for the Commissioners to make an informed and educateddecision onthe contract, especially in the areas of costand liability.Cause ofCondition: The contract inquestion is related toa lease inthe County's name of a parcelof private property to allow a local third party organization touse for a local event. All informationnecessary for theBoard of Commissioners tomake an informed decision was not presented. Onlyafter inquiry of a couple of the Commissioners was the full extent of the cost and exposure of thecontract disclosed. Additionally, it was notmentioned in the discussions that the director of theorganization hosting the event was the spouse of one of thecommissioners.Effect ofcondition: This condition could lead to the County entering into agreements inwhich theCounty may incur costs orliability in excess of their initial intention.Recommendation: Enforce the County's procedures to require a detail analysis of scope of worknecessaryundera contractwith a cost analysis.Management response:

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2012-23 Apparent Conflict ofDuties on StaffCondition: Thereappears to be an apparent conflict of interest related to the duties of theCountyAdministrator and the CountyClerkconcerning theirspousal relationship.Criteria: TheCountypersonnelpolicy includes provisions that prohibit the employment of personsin the samedepartment married. TheCounty should delegate duties to persons whosejudgmentsinthe performance of their duties would not be influenced by the relationships they maintain withstaffthat have authority or perceived authority over them.Cause of Condition: The County Administrator and the County Clerk are married. The maritalrelationship is a violation of County policy and a conflict due to potential pressures to makedecisions that one would otherwise not make to protect a spouse.Effect of condition: The CountyClerk performs manyduties that are not in the normal duties of atraditional County Clerk. Some of these duties have been questioned by other staff of the CountyAdministrator, with no apparent changesmade. Someof thesedutiesperformed do present internalcontrol risk as previously indicated. The County Clerk receives all mail, therefore allcorrespondence related to the Countyand the County Administrator. The conflictpresentedis thatpotentially any negative information received could bewithheld from theBoardof Commissionersor others. Additionally,, complaints or other negative information directed at the County Clerk aredifficult for staff to communicate when a relationship such at this exists. Finally, the personnelpolicycouldbe viewedby employees as applying to somebutnot all.Recommendation: Consider actions necessaryto resolve the conflict ofduties amongstaff.

Managementresponse:

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Tax Commissioner's Office2012-24 Returned ChecksCondition: Returned checks are no t reconciled to a control total.

Criteria: Returned checks which are held for taxpayer payments should be listed and reconciledperiodically as a receivable, especially since returned checks which are not collected atthe end ofthe month may effect the disbursement to a taxing jurisdiction.Cause ofCondition: Failure to maintain a control listof returned checks.Effect of condition: Potential failure to collect a payment and the overpayment taxes and fees totaxing jurisdictions.Recommendation: Require a list of returned checks to be prepared and reconciled monthly to theactualunpaidreturnedchecks.Managementresponse:

2012-25 Final monthly distributions not reconciledto cash balanceCondition: Final monthly distributions are not reconciled to the final monthendcashbalance.Criteria: Generally, all cash maintained by the Tax Commissioners office belongs to one of thevarious taxingjurisdictions. At the end of the monththe total unremitted balance shouldequal thereconciled cash balance.

Cause ofCondition: Failure to reconcile the balance the unremitted balance to the reconciled cashbalance.

Effect ofcondition: This condition could cause incorrect distributions to taxingjurisdictions.

Recommendation: Prior t o th e issuance of the final remittance each month, determine that the totalof the final remittances due is reconciled to the ending cash balance.Management response:

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2012-26 Old Outstanding ChecksCondition: Old outstanding checks (over five years old) have not been remitted to the State ofGeorgia as unclaimed funds.Criteria: State law requires unclaimed funds to be remitted to the state as unclaimed funds.Cause ofCondition: The condition wascaused by anoversight on the part of staff.Effect ofcondition: This condition couldresult in the potential violation of state law.Recommendation: Establish procedures to ensure that state law with respect to unclaimed funds isfol lowed.

Managementresponse:

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Sheri f f s Office2012-27 Lack ofSegregation ofDutiesCondition: There is a lack of segregation of duties surrounding the receipt, disbursing, recording

andreconciling of cash.Criteria: Internal control procedures should bein place to ensure there is a proper segregation ofduties surrounding collecting cash, recording receipts and disbursements, authorizing disbursementsand reconciling accounts.Cause ofCondition: The receptionist at the public window received and records cash tendered; theoffice manager receives, records and deposits cash receipts, records disbursements, reconciles thebank accounts, and can receive cash at the window; the Sherriffor Chief Deputy authorizes andrecordsdisbursements of funds and signs checks.Effect ofcondition: This condition could lead to inappropriate transactions and the risk of potentialfraud or theft.

Recommendation: Establish procedures to segregate the duties of receiving cash, disbursing cash,recording cash and reconciling cash. Segregate duties in such a way that no one person performsany two of the following functions: 1) collects cash, (2) records receipts and disbursements, (3)authorized disbursements, and (4) reconciles accounts.Managementresponse:

2012-28 Cash BondAccount UnderfundedCondition: The cash bond account was underfunded by $17,627.Criteria: The cash bond account should contain a balance at least equal to cash bonds held.Cause ofCondition: When the cash bond account was created less funds were transferred tothenew account that the actual balance of cash bonds held per detail listings.Effect ofcondition: This condition could lead to the overspending of funds in the Sheriffs accountthat should be held fo r cash bonds.

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Recommendation: Transfer funds adequate to providea balance in the cash bonds accountto coverthe totalcashbondsoutstanding. Additionally,reconcile the detail cashbonds listingto the balanceof the cash bonds account on a monthly basis.


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EFFINGHAM COUNTY, GEORGIAScheduleofFindings andResponsesFor the Year Ended June 30,2012

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Jail2012-29 Lack ofSegregation ofDuties

Condition: There is a lack of segregation of duties surrounding the receipt, disbursing, recordingand reconciling of cash.Criteria: Internal control procedures should be in place to ensure there is a proper segregation ofduties surrounding collecting cash, recording receipts and disbursements, authorizing disbursementsand reconciling accounts.Cause ofCondition: The Jail Clerk records cash received into the inmate's account, deposits cashreceipts, authorized and records disbursements, and reconciles the bank account.

Effect ofcondition: This condition could lead to inappropriate transactions and therisk of potentialfraud or theft .Recommendation: Establish procedures to segregate the duties of receiving cash, disbursing cash,recording cash and reconciling cash. Segregate duties in such away that no one person performsany two of the following functions: 1) collects cash, (2) records receipts and disbursements, (3)authorized disbursements, and (4) reconciles accounts.Management response:

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Correctional Institute2012-30 Lack ofSegregation ofDuties

Condition: There is a lack of segregation of duties surrounding the receipt, disbursing, recordingand reconciling of cash.Criteria: Internal control procedures should be in place to ensure there is a proper segregation ofduties surrounding collecting cash, recording receipts anddisbursements, authorizing disbursementsand reconciling accounts.Cause of Condition: The office manager maintains custody of cash, records the receipts in theaccounting system and reconciles the bank account.

Effect ofcondition: This conditioncould leadto inappropriate transactionsand the risk of potentialfraud or theft.

Recommendation: Establish procedures to segregate the duties of receiving cash, disbursing cash,recording cash and reconciling cash. Segregateduties in such a way that no one person performsany two of the following functions: 1) collects cash, (2) records receipts and disbursements, (3)authorized disbursements, and (4) reconciles accounts.Managementresponse:

2012-31 Lack ofsupportfor debit cardpurchasesCondition: There is a lack of authorization for multiple debit card purchases.Criteria: Internal control procedures should be in place to ensure all disbursements, includingdebit card purchase, are properly documented.Cause ofCondition: Failure to have the purchasedocumentation reviewed and signedas approvedby an independent party.

Effect of condition: This condition could lead to inappropriate purchases or errors occurringundetected.

Recommendation: Establish procedures to require all purchases, includingdebit card purchase haveadequate documentation to support the transaction which is attached to the payment and signed asapproved by an appropriate independent person.Management response:

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Probation Off ice2012-32 Lack ofSegregation ofDuties

Condition: There is a lack of segregation of duties surrounding cash receipts and receivables fromprobationers.Criteria: Internal control procedures should be in place to ensure there is a proper segregation ofduties surroundingcollecting cash, recordingreceipts and the maintenance of accounts receivable.CauseofCondition: The clerk in the probation office receives cash, recordsthe receiptof cash andupdates receivables from probationers.Effect ofcondition: This condition could lead to inappropriate transactions andthe riskof potentialfraud or theft .

Recommendation: Establish procedures to segregate the duties of receiving cash and recording cashbetween different persons.Management response:

2012-33 Manual calculationwithout independent verificationCondition: Manual calculations are perform on which payments are made without independentverification.

Criteria: Internal control procedures should be in place to ensure manual calculation arecalculated properly by independentverification.Cause of Condition: The probation office clerk manually calculates and inputs amounts into theprobation software for the portion to be applied to the $41 probation fee that the county keeps andthe $9 per month fee (sometimes multiples of $9 for late payments) thatis remitted to theGCVEF.Effect ofcondition: This condition could result in incorrect allocation and payments.

Recommendation: Establish procedures that required manual calculations of fee allocations to beindependently verified.Management response:

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EFFINGHAMCOUNTY, GEORGIASchedule ofFindings and ResponsesFor the Year Ended June30,2012

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Probate Court

2012-34 Lack ofSegregationofDutiesCondition: There is a lack of segregation of duties surrounding the receipt, disbursing, recordingand reconciling of cash.Criteria: Internal control procedures should bein place to ensure there is a proper segregation ofduties surrounding collecting cash, recording receipts and disbursements, authorizing disbursementsandreconciling accounts.Cause ofCondition: The clerks receive funds, record transactions and count their own drawers.Additionally, one clerk reconciles the passport account for which she is the clerk receiving andrecording the payments. The probate judge makes the deposit, records disbursements signs checksand reconciles cash accounts.

Effect ofcondition: This condition could lead to inappropriate transactions and the risk ofpotentialfraud or theft .

Recommendation: Establish procedures to segregate the duties of receiving cash, disbursing cash,recording cash and reconciling cash. Segregate duties in such away that no one person performsany two of the following functions: 1) collects cash, (2) records receipts and disbursements, (3)authorized disbursements, and (4) reconciles accounts.Management response:

2012-35 Bank ReconciliationCondition: The general cash account of the Probate Court is not being completely reconciled.Criteria: Internal control procedures should be in place to ensure all cash accounts are reconciledandallreconciling items areproperly resolved.Cause ofCondition: Anattempt is made on amonthly basis to reconcile the general cash account,however there have been unreconciled differences of $300 to $2,600. These differences were notfull researched and resolved.

Effectofcondition: Potential for undetected and/oruncorrected errorsor fraud.Recommendation: Establish procedures to ensure all bank accounts are properly reconciled on amonthly basisandall reconciling items are properly resolved.

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SuperiorCourt2012-36 Lack ofSegregation ofDuties

Condition: There is a lack of segregation of duties surrounding the receipt, disbursing, recordingand reconciling ofcash.Criteria: Internal control procedures should be in place to ensure there is a proper segregation ofduties surrounding collecting cash, recording receipts and disbursements, authorizing disbursementsandreconciling accounts.Cause of Condition: The clerks receive funds, and record transactions The Clerk of SuperiorCourt and her assistant count tills, prepare deposits, record disbursements, sigh check and reconcilecash accounts.

Effect ofcondition: This condition could lead to inappropriate transactions and the risk of potentialfraud or theft .

Recommendation: Establish procedures to segregate the duties of receiving cash, disbursing cash,recording cash and reconciling cash. Segregate duties in such away that no one person performsany two of the following functions: 1) collects cash, (2) records receipts and disbursements, (3)authorized disbursements,and (4) reconciles accounts.Management response:

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Draft Effingham Audit

Documents

Transcript of Draft Effingham Audit