State Auditor lists 13 findings concerning Pulaski Government finances

Oct. 13—Pulaski County Government has received its July 2021-June 2022 audit from the Kentucky Auditor's Office, showing 13 findings ranging from improperly preparing budgets to not bidding out work in the construction of the new Coroner's Office.

"I want to make it clear that this was before I took office," stated current Judge-Executive Marshall Todd. "This audit went up to the June of 2022, six months before I came in."

As such, the audit covers time in which former Judge-Executive Steve Kelley was in office.

Todd said the majority of the issues were caused by a matter of some sloppy bookkeeping, before I got there, but I think we're going to be fine moving forward.

"We've hired other people. We've got a new finance officer in place who's watching it very closely," Todd said.

He added that the problems came from multiple sources, not from just one person.

The next audit county government will see — coming out later — spans the last six months of Kelley's term and the first six months of Todd's, so Todd said he expected that some of the same issues might show up in the next audit.

"We have got measures in place right now that will hopefully correct nearly all of those. We'll probably get hit a couple of times in the future, but we are in the process of putting procedures in place that make things work," Todd said.

"... With 12 findings we're hoping to get it down to two or three in the next audit," he said, with an eye on getting it down to zero findings in a couple of years.

As the current judge-executive, Todd was in charge of responding to the auditor's findings, so all county responses came from him and currently-employed county officials.

The findings were as follows:

1. The Pulaski County Fiscal Court lacks adequate segregation of duties over cash, receipts, and reconciliations. The Auditor's Office noted that this was a repeat finding from the previous year. "The lack of segregation of duties increases the risk of misappropriation of assets, errors, and inaccurate financial reporting," the office reported.

Todd's response: PCFC (Pulaski County Fiscal Court) added an additional person to the finance office. The Finance Officer will receive all monies and log receipts. This will be verified by another person in the office. Another person deposits all monies.

2. The Pulaski County Fiscal Court lacks adequate controls over occupational tax receipts. This also was a repeat finding from the year before. "The occupational tax employees have the ability to change amounts collected in the software program, the ability to waive interest and penalty without approval, and failed to compare actual tax returns to the amount posted. This has caused a material deficiency," the Auditor's Office stated.

Todd's response: "The software company will limit editing privileges to the program administrator. The finance officer will verify the data and make deposits."

3. The Pulaski County Fiscal Court's budget was not prepared or reviewed properly. This, too, was a repeat finding from the previous year.

According to the Auditor's Office, because the budget was not prepared properly:

* Several line-item accounts exceed the budgeted amounts on the fourth quarter report.

* Road fund expenditures exceed total budgeted amounts by $214,110.

* Road fund new debt totaling $566,803 was not budgeted.

* Budget amendments on the fourth quarter financial report were not reported correctly.

American Relief Plan fund included a budgeted amount that was not listed on the original budget or documented in a budget amendment. This amount totaled $4,497,003.

Todd's response: "Pulaski County Fiscal Court will ensure that all line items and funds are properly budgeted. The budget will be reviewed monthly by management and department heads and be sure a P.O. is issued or expenditure is paid. All transfers or amendments will be prepared and reported properly on all quarterly reports."

4. The jail fund has a deficit fund balance of $5,045. The auditor's office stated this was because the jail fund was not properly monitored.

Todd's and Jailer Anthony McCollum's response: "To resolve this issue, increased emphasis will be placed on appropriate communication between the treasurer and the jailer/office manager via updated monthly general ledgers."

5. Pulaski County Fiscal Court did not correctly record interfund transfers. For example, funds regarding American Rescue Plan Act (ARPA) monies being transferred between budget accounts (General Fund, Road Fund, etc.) were not documented.

Todd's response: "All cash fund transfers between funds will be approved by fiscal court prior to the transfer being made."

6. The Pulaski County Fiscal Court did not have strong internal controls over disbursements. This was another repeat finding from the prior year. The Auditor's office noted several exceptions, including two disbursements totaling $335,032 did not have supporting documentation; four invoices totaling $561,183 were recorded in the wrong line item; a late payment resulting in $1,294 in late charges; and 14 invoices for the construction of a new coroner's office were posted to the wrong line item as Courthouse renovations, totaling $187,447.

Todd's response: "New procedures will be implemented to ensure that the purchase order process is initiated prior to purchases being made and invoices are returned in a timely fashion for approval by fiscal court."

7. The Pulaski County Fiscal Court did not properly disclose debt information on the quarterly financial report. This was another repeat finding and meant that four debt obligations were omitted from the quarterly report, while two other were reported incorrectly.

"As a result, the quarterly materially understated principal debt obligations by $12,050,916 and interest by $1,178,798," the Auditor's Office stated.

Todd's response: "New accounting procedures ensure that all debt has been properly listed on quarterly reports."

8. The Pulaski County Fiscal Court did not maintain proper records for the public properties corporation fund and general obligation bond funds. This was another repeat finding.

"The fiscal court did not maintain receipt and disbursement ledgers, did not prepare monthly bank reconciliations, and did not prepare financial statements for the PPC (public properties corporation) and the general obligation bond funds," the Auditor's Office stated. "The county treasurer stated she did not maintain the records because they do not go on her quarterly financial report. As a result of not maintaining proper records, the county was unaware if funds were used properly which could lead to the financial statement being materially inaccurate."

A total of $1.92 million of PPC fund receipts and $1.92 PPC disbursements had to be adjusted.

Todd's response: "Fiscal court will prepare and maintain ledgers for receipts and disbursements of the PPC and general obligation bond funds. Monthly bank reconciliations will be prepared for all funds. Additionally, fiscal court will prepare year end financial statements for the funds to ensure compliance with DLG requirements."

9. The Pulaski County Detention Center did not prepare daily check-out sheets for all revenue received. This was another repeat finding, and the Auditor's Office stated that the jailer was not aware all receipts should be documented and accounted for on daily checkout sheets.

Todd's and McCollum's response: "The Jailer has initiated, and is monitoring, daily checkout sheets for all monies received in commissary and inmate accounts. These documents are reviewed in house by the office manager/Jailer/designee."

10. The Pulaski County Detention Center did not have strong internal controls over disbursements. This was another repeat finding and meant that "supporting documentation was not maintained, and appropriate and proper procedures were not followed."

Todd's and McCollum's response: "The Jailer is implementing stronger internal controls to eliminate these deficiencies making sure invoices are accounted for and paid within the prescribed time. This coincides with personnel changes in the business office of the Jail."

11. The Pulaski County Fiscal Court did not follow proper procurement procedures for purchases over $20,000. According to the Auditor's Office, Fiscal Court paid:

* $22,964 for bath house plumbing at a park.

* $59,090 for a general contractor for the construction of the coroner's office.

* $21,780 for equipment rental for the construction of the coroner's office.

* $27,001 for building supplies for the construction of the coroner's office.

Expenditures of more than $20,000 are required to be bid out, according the Fiscal Court's own Administrative Code.

Todd's response: "Department managers have been trained by finance personnel on correct purchasing procedures related to Model Procurement. Pulaski Fiscal Court has adopted a Model Procurement limit of $30,000."

12. The Pulaski County Fiscal Court did not properly budget and include all debt activity in the financial statement.

"The Pulaski County Fiscal Court's fourth quarter financial report did not include financing proceeds and the disbursement for the purchase of four road trucks in the amount of $566,823," the Auditor's Office stated.

This caused the county's finances to be understated by $566.823. When adjusted, it showed the capital project line item in the road fund to be over budget by $412,660.

Todd's response: "This was an oversight which will be remedied by ensuring the DLG financial statement presentation requirements are followed."

13. The Pulaski County Fiscal Court capital asset listing had material misstatements. "The Pulaski County Fiscal Court's schedule of capital assets beginning balances did not agree to the prior year audit report schedule of capital assets ending balances from June 30, 2021 by $19,000,555," the Auditor's Office stated. "This was due to not comparing the schedule from Fiscal Year 2021 to the current year fiscal year ending June 30, 2022 prior to presenting to the auditors. Management agreed to make the corrections to the schedule."

Todd's response: "Since we now have additional personnel in the finance department the duty to review correctness of information will be assigned to a specific persons. Material mistakes will be remedied on future documents."

The full audit report is expected to be released on the State Auditor's website in the coming days.

Carla Slavey can be reached at cslavey@somerset-kentucky.com