Harmon releases audit of Lincoln Sheriff’s fee account
Published 10:13 am Thursday, February 6, 2020
Auditor of Public Accounts
FRANKFORT — State Auditor Mike Harmon has released the audit of the 2018 financial statement of Lincoln County Sheriff Curt Folger.
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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.
Auditing standards require the auditor’s letter to communicate whether the sheriff’s financial statement presents fairly the receipts, disbursements and excess fees of the office in accordance with accounting principles generally accepted in the United States of America.
The Lincoln County Sheriff’s financial statement did not follow this format. However, the sheriff’s financial statement is fairly presented in conformity with the regulatory basis of accounting, which is an acceptable reporting methodology. This reporting methodology is followed for all 120 sheriff audits in Kentucky.
As part of the audit process, the auditor must comment on noncompliance with laws, regulations, contracts and grants. The auditor must also comment on material weaknesses involving the internal control over financial operations and reporting.
In his report, Harmon noted one area of noncompliance, saying that the “Lincoln County Sheriff’s Office lacks adequate segregation of duties over receipts, disbursements and reconciliations.”
“This is a repeat finding that was included in the prior year audit report as Finding 2017-001,” Harmon wrote. “Our review of internal control procedures indicates the sheriff’s bookkeeper opens mail, collects payments from customers, prepares deposits, writes and signs checks, post transactions to the receipts and disbursements ledgers, prepares monthly and quarterly reports and prepares account reconciliations.”
Harmon recognized that the sheriff’s office has implemented some compensating controls to remedy the situation, however, he said they are not sufficient to offset the lack of segregation of duties.
According to Sheriff Curt Folger, the sheriff’s office has a limited number of employees that prevents the segregation of duties over most accounting functions of the office.
Harmon noted that the lack of adequate segregation of duties or documentation of strong oversight increases the risk of undetected errors. The lack of oversight could result in undetected misappropriation of assets and inaccurate financial reporting to external agencies, such as the Department for Local Government.
“A proper segregation of duties over the accounting and reporting functions is essential for providing protection from undetected errors occurring,” Harmon said. “Additionally, proper segregated duties protects employees in the normal course of performing their daily responsibilities. When staff size is limited, it may be necessary to implement and document compensating controls to achieve an acceptable level of protection for both the office and the individual employees.”
The auditor’s office recommended Folger separate the duties involved in receiving cash, preparing deposits, writing checks, posting to ledgers, preparing monthly bank reconciliations, and comparing financial reports to ledgers. If this is not feasible due to a limited budget, additional cross-checking procedures should be implemented and documented by the individual performing the review procedure.
In his response to the audit, Folger said, “We have implemented some compensating controls, however, due to the size of the office, we will not be able to sufficiently segregate duties.”
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.
The audit report can be found on the auditor’s website.