Internal accounting controls over financial reporting for Custer County for the years 2014 and 2015 were inadequate, resulting in inaccurate information presented to users of the annual financial reports.
This, according to the South Dakota Department of Legislative Audit, was one of two written findings discovered during a recent audit of the county, the results of which were delivered to the Custer County Commission at its Sept. 1 meeting.
Al Schaefer, auditor-in-charge for the department of legislative audit, presented the report to the commission, saying the above was one of two written findings in the conducted audit. In addition, it is the second consecutive audit in which a similar finding was noted.
Written findings are usually material weaknesses or significant deficiencies in internal controls or material violation of state laws. The county has an option to respond to the written findings, and if it chooses to do so, the response is put in the audit report along with the finding.
The other written finding states the county did not comply with several South Dakota Codified Laws governing the operations of the county.
When discussing the written findings, Schaefer said amounts reported as beginning fund balances on the 2015 statements did not agree with ending fund balances reported on the 2014 statements.
Schaefer said a report for the amount of taxes levied and added, along with the amount of taxes collected and allocated, was not filed with the state, and that the auditor’s office reported the county had $192,000 more in cash than it actually had. Auditor Nancy Christensen said somewhere along the line she had double reported money in the financial statements.
In finding No. 2015-001, 25 significant errors in the county’s annual financial report for the years ended Dec. 31, 2015 and 2014 were noted, with other less significant errors noted in the county’s annual financial report.
“We were able to correct the material reporting errors and therefore have issued an unmodified auditor’s opinion on the financial statements contained in this auditor’s report,” the written comment said. “However, users of the annual financial reports received information of diminished reliability.”
In finding No. 2013-002, it is noted the county did not comply with several South Dakota Codified Laws governing the operations of the county, such as incurring expenditures in excess of the amount specified in the appropriations ordinance.
That written finding also stated the county did not publish some expenditures approved by the commission in the county’s designated newspaper, as required by law. The instances noted where expenditures were not published included, but were not limited to, vouchers for bond payments, treasurer’s checks used to pay General Fund expenditures and other payments for which the board had given prior approval.
State law requires the county auditor shall, at the close of each calendar month, list all cash and cash items in the hands of the county treasurer and at the same time verify the balances in the several bank depositories. The written finding says Christensen was not verifying the balances in said bank depositories. Further, had the county fully complied with the law, it would have become aware of a bank account related to the rental of the Pine Room in the Custer County Courthouse Annex that was not within the control of or reported by the county.
The two written findings were part of seven findings Schaefer reported to the commission, along with over 60 adjustments, many of which were reclassification errors.
There were five oral findings, which do not rise to the level of being a material weakness or significant deficiency, but are important enough to merit attention.
There were also oral comments to the auditor and treasurer, which Schaefer said are not significant enough to be discussed with the county commission, but are given to the auditor and treasurer’s office so they can go back and review what was found and correct procedures. Some of the issues raised in the audit, whether part of a written finding, oral finding or oral comment, were:
• The county approves automatic supplements for reasons not acceptable in state law and one was to the contingency line. In addition, it was noted that the commission approved a transfer of budget from the 911 Communications Fund to the General Fund and Emergency Management Fund when no state laws allow for the transfer of budget amounts other than from the contingency line in the general fund.
• The board accepted other than the low bid on a trailer purchased and the minutes did not reflect why other than the low bid was accepted.
• Treasurer checks are being used to pay some general fund expenditures that are not approved by the board or included in the publication of bills approved. Support included for some of the treasurer checks was not adequate to show why the treasurer check was needed.
• The majority of the county’s ambulance and fire districts are not filing their annual reports as required by state law.
• The county has $4,571.43 of outstanding checks over one year old that have not been remitted to the state treasurer as unclaimed property, as required by state law.
The discussion led to commissioner Travis Bies to call for an executive session to discuss personnel. When the session was over, Christensen said Schaefer has been helpful in helping her learn, saying there “was a lot out there she didn’t know about.”
Schaefer told the commission the depth and time spent on the audit was going to mean the bill the county will receive “will be quite high.”
“So when you get the audit bill, don’t have a heart attack,” he said.