Washington State Auditor s Office. Accountability Audit Report. Grant County. Report Date November 23, Report No

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1 Accountability Audit Report Report Date November 23, 2005 Report No Issue Date January 6, 2006

2 Washington State Auditor Brian Sonntag January 6, 2006 Board of Commissioners Ephrata, Washington Report on Accountability for Public Resources Please find attached our report on s accountability for public resources and compliance with state laws and regulations and its own policies and procedures. In addition to this work, we also audit the County s financial statements and compliance with federal laws and regulations. The results of that audit will be included in a separately issued audit report. Sincerely, BRIAN SONNTAG,CGFM STATE AUDITOR Insurance Building, P.O. Box Olympia, Washington (360) (866) TDD Relay (800) FAX (360)

3 Table of Contents January 1, 2004 through December 31, 2004 Audit Summary... 1 Description of the County... 2 Audit Areas Examined... 4 Schedule of Audit Findings... 6 Status of Prior Audit Findings... 10

4 Audit Summary January 1, 2004 through December 31, 2004 ABOUT THE AUDIT This report contains the results of our independent accountability audit of. We performed audit procedures to determine whether the County complied with state laws and regulations and its own policies and procedures. We also examined County management s accountability for public resources. Our work focused on specific areas that have potential for abuse and misuse of public resources. Areas examined during the audit were selected using financial transactions from January 1, 2004, through December 31, RESULTS The County complied with state laws and regulations and its own policies and procedures in the areas we examined. Internal controls were adequate to safeguard public assets. However, we identified two conditions significant enough to report as findings: The County did not follow state law for proper approval of claims for payment. The County did not follow state law and its own policies for contracts. We noted also certain issues that we communicated to County management. We appreciate the County s commitment to resolving the issues. RELATED REPORTS We have issued a separate report related to the County s financial statement reporting and compliance with federal program requirements; however, we did not express an opinion on the County s financial statements. We were not able to obtain statements supporting the financial activities of the County for the year ended December 31, 2004, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. The financial report includes a finding related to deficiencies in the County s internal controls and noncompliance with state laws that require the preparation of an annual financial report. CLOSING REMARKS We thank County officials and personnel for their assistance and cooperation during the audit. 1

5 Description of the County January 1, 2004 through December 31, 2004 ABOUT THE COUNTY is located in the middle of Washington and is one of the state s largest counties in terms of geographic size. The County serves a population of approximately 76,221. The County has three elected Commissioners and seven elected offices: Assessor, Auditor, Clerk of the Court, Coroner, Prosecuting Attorney, Sheriff and Treasurer, all of whom monitor and administer County programs. The County operates on a $100 million annual budget. It has approximately 550 employees who provide an array of services including sheriff/law enforcement services, fire prevention, road improvement, judicial administration, health and social services, recreation and general administrative services. The County also operates a sanitary landfill and multiple transfer stations located throughout the County. AUDIT HISTORY We audit the County annually. The past five audits of the County have reported nine findings. During that period, the number of findings has ranged from one in 2001 to three in 2002 and This report contains two findings. The County has made some progress in addressing and resolving weaknesses identified in our past audits. ELECTED OFFICIALS These officials served during the audit period: Board of Commissioners: Chair Other Elected Officials: Assessor Auditor Clerk Prosecuting Attorney Coroner Sheriff Treasurer Superior Court Judges: District Court Judges: LeRoy Allison Deborah Kay Moore Tim Snead Richard Stevens (replaced Tim Snead) Laure Grammer William Varney Kenneth Kunes John Knodell Jerry Jasman Frank DeTrolio Darryl Pheasant John Antosz Ken Jorgensen Evan Sperlin Richard Fitterer Janis Whitener-Moberg 2

6 APPOINTED OFFICIALS Extension Agent Director, Public Works, County Engineer Custodian Juvenile Court Administrator Planning Director, Building Inspector/Fire Marshall Chief Accountant Planning Director Christy Price Derek Pohle Vern Cummings Warren Swanson Dave Nelson Dave Firebaugh Scott Clark ADDRESS County P.O. Box 37 Ephrata, WA (509)

7 Audit Areas Examined January 1, 2004 through December 31, 2004 In keeping with general auditing practices, we do not examine every portion of 's financial activities during each audit. The areas examined were those representing the highest risk of noncompliance, misappropriation or misuse. Other areas are audited on a rotating basis over the course of several years. The following areas of the County were examined during this audit period: ACCOUNTABILITY FOR PUBLIC RESOURCES We evaluated the County s accountability in the following areas: Cash receipting Cash handling procedures Petty cash, change and revolving accounts Billings and account receivables Inventory system Fixed assets Cash disbursements Purchase of goods and services Expenditures, vouchers and credit cards Financial statement preparation and journal entries Payroll We audited the following areas for compliance with certain applicable state and local laws and regulations: Deposit and investment of public funds Use of restricted funds Fiduciary responsibility Required financial schedules Insurance and bonding Budgeting requirements Ethics/conflict of interest laws Open Public Meetings Act Growth Management Act Use of hotel/motel tax revenues Propriety of expenditures Legal and supported payments Certification and approval of expenditures State grants Competitive bidding requirements Competitive bid law compliance Public works contracts Contracts and agreements Contracting for professional services Treasurer s tax billings and collection Timeliness of the Assessor s property valuations and correct tax distribution County Assessor s Office property tax valuations Assessor s Office assessment of new construction Allowable expenditures FEDERAL PROGRAMS We evaluated internal controls and tested compliance with federal program requirements, as applicable, for the County s major federal programs, which are listed in the Federal Summary section of the financial statement and single audit report. 4

8 FINANCIAL AREAS Our opinion on the District s financial statements is provided in a separate report. That report does not include the District s financial statements and other required financial information. As the District has not provided financial statements, we did not examine the financial activity and balances of the District. 5

9 Schedule of Audit Findings January 1, 2004 through December 31, did not adhere to state laws and regulations regarding disbursements. Background Public Works Department maintains accounting records for various public works projects, prepares vendor payment vouchers for the Board of Commissioner s approval and issues warrants following their approval. The Public Works Director audits and certifies the vouchers prior to Commissioners approval. An accountant at the County Auditor s Office scans the vouchers for unusual payments. Commissioners receive a certification from the Director and approve the vouchers for payment. These vouchers are not certified by the County Auditor. State law and the State Auditor s Office require auditing and certification of vouchers by the County Auditor prior to approval by the Board of Commissioners. State law prohibits the County Treasurer from paying vouchers not attested to as certified by the County Auditor. Description of Condition We noted the following: The County Auditor failed to certify payment vouchers prepared by the County Public Works Department prior to the Commissioners approval. Commissioners approved payment vouchers without certification by the County Auditor. The County Treasurer disbursed funds on warrants that were not attested and certified by the County Auditor. Cause of Condition The County Commissioners continue to allow the Public Works Director to audit and certify payment vouchers. Effect of Condition The various failures in the approval process resulted in the County paying for expenditures that were not properly approved and authorized. Without proper controls over payments, the County cannot be assured expenditures are true obligations of the County. Further, the County spent federal funds without following approval procedures required by state law. Recommendation We recommend the County: Establish policies and procedures to ensure claims are being audited, certified and approved in compliance with state law. Ensure that the County Commissioners only approve payment vouchers that have been certified by the County auditing officer. 6

10 Ensure that the County Treasurer only disburse funds for warrants that have been certified by the County Auditor. County s Response understands that the State Auditor finds that the County is out of compliance with disbursement laws and regulations; specifically, the State Auditor finds that the Auditor is not certifying the disbursements from the Public Works Department. The Board of County Commissioners will request that the Auditor review and sign the certification for disbursements from the Public Works Department; the County Auditor has agreed to do so. We appreciate any assistance of the State Auditor s Office which improves the quality of service provides to the citizens of the County. Auditor s Remarks We thank the County for its cooperation during the audit and look forward to working with the County to address the issues noted. Applicable Laws and Regulations RCW states: Duty to audit claims against county. The county auditor shall audit all claims, demands, and accounts against the county which by law are chargeable to the county, except such cost or fee bills as are by law to be examined or approved by some other judicial tribunal or officer. Such claims as it is his duty to audit shall be presented to the board of county commissioners for their examination and allowance. RCW states in part, emphasis added: Requires all claims be audited prior to payment. All claims presented against any county, city, district or other municipal corporation or political subdivision by persons furnishing materials, rendering services or performing labor, or for any other contractual purpose, shall be audited, before payment, by an auditing officer elected or appointed pursuant to statute or, in the absence of statute, an appropriate charter provision, ordinance or resolution of the municipal corporation or political subdivision. Such claims shall be prepared for audit and payment on a form and in the manner prescribed by the state auditor. The form shall provide for the authentication and certification by such auditing officer that the materials have been furnished, the services rendered or the labor performed as described, and that the claim is a just, due and unpaid obligation against the municipal corporation or political subdivision; and no claim shall be paid without such authentication and certification,.... RCW states in part: General duties. The county treasurer: (1) Shall receive all money due the county and disburse it on warrants issued and attested by the county auditor and electronic funds transfer under RCW as attested by the county auditor;.... 7

11 Schedule of Audit Findings January 1, 2004 through December 31, does not have sufficient internal controls over contract monitoring. Description of Condition Our audit of the County found two instances in which it did not adequately monitor the contracting process. During our review of six contracts we noted: Administration of Ground Water Management Area The County participates in the Columbia Basin Ground Water Management Area and is responsible for contracting with its administrator. In January of 2004, the County entered into a $74,360 professional services agreement with an administrator. The contract covered January 2004 to December 2005 and payments were not to exceed $74,360, not including expense reimbursement. Since January 2004, the County has been paying the administrator $5,720 per month in addition to expense reimbursements. Total payments since January 2004 exceeded the contract maximum by $40,040. No contract amendments were done to change the contract terms. Payments to Big Bend Community College Foundation A foundation is a non-profit organization created for a specific purpose of supporting another entity, in this case Big Bend Community College. In January 2002, the County Commissioners adopted a resolution committing $140,000 per year for 20 years to Big Bend Community College Foundation. The Foundation was going to construct a building on College property. The resolution approved annual payments to the Foundation to help pay for the construction of the building, which would be donated to the College after completion. The resolution also approved three additional payments, going back to The Foundation did not build the building, but the County continued making payments. No contract between the Foundation and the County was ever established. Cause of Condition The County s procedures were not sufficient to ensure adequate contract monitoring, or to ensure that contracts were in place. Effect of Condition Because it did not establish adequate monitoring of the contract with the administrator, and payments made on the contract, payments exceeded contract terms. Failure to monitor contract payments can lead to gifts of public funds. Further, failure to monitor the use of funds paid to other entities can lead to their misuse or misappropriation. 8

12 Recommendation The County should follow policies and procedures to ensure compliance with state laws, regulations, and contractual specifications. County s Response The Board of County Commissioners understands the State Auditor s finding. However, the issue is one of a typographical error rather than lack of control over contract monitoring. The existing two year contract is a continuation of earlier contracts with had enumerated maximum annual amounts; unfortunately, the current contract omitted the word annually. The Ground Water Management Area Board had recommended the two year document, and the Board of County Commissioners adopted the new contract with the typographical error. The contracts will be amended to correct the error. Auditor s Remarks We thank the County for its response and will examine this issue during subsequent audits. We are committed to providing any help we can to ensure strong control systems are in place. 9

13 Status of Prior Audit Findings January 1, 2004 through December 31, 2004 This status of findings contained in the prior years audit reports of is provided below: 1. lacked sufficient internal controls over accounting and financial reporting. Report No , dated January 14, 2005 Background The County did not file its annual financial statements timely with the State Auditor s Office as required by state law. The County had significant weaknesses in internal controls over its financial records and financial statement preparation. Because the County did not prepare its annual financial statements, we did not issue an opinion on them. Status The conditions reported in our 2003 audit continue. As a result, we are repeating this finding in our current financial statement and federal single audit report. 2. District Court had inadequate controls over Trust Account funds. Report No , dated October 29, 2004 Background Our audit of the District Court found that the Court Trust and Jury Trust accounts had not been reconciled to DISCIS, manual registers or bank statements. Our review of 2003 bank statements and the 2004 account manual check register found no indication these records had been reconciled. When we noted this issue, the District Court could not provide us with information on the last time the Trust account was reconciled. The Court Administrator did not sufficiently oversee the District Court accounts to ensure that accounting practices such as reconciliation, monitoring and security of assets were followed. Status The County has taken steps to ensure timely reconciliation of the Trust Account funds is performed. The County is obtaining historical bank records in its attempts to reconcile historical transactions. The procedure has not yet been completed. We will not repeat the finding, but will examine records of the process when it is completed. 10

14 3. The Public Works Department s Solid Waste Division s lack of internal controls resulted in a misappropriation of public funds. Report No , dated October 29, 2004 Background We issued findings in 2002 and 2003 to establish internal controls over cash receipting at the Division. Internal control weaknesses allowed misappropriations of public funds to occur and not be detected in a timely manner. As a result, the amount of loss cannot readily be determined, and the County failed to notify the State Auditor s Office of this loss of public funds. Status During our current audit we reviewed the internal controls established since our repeated recommendations were made and we deem them to be sufficient to timely detect loss of public funds. The County no longer gives change at its solid waste stations and has implemented controls to ensure timely deposit of receipts. We deem this issue to be resolved and will examine compliance during this and subsequent audits. 11