January 23, 2024
By: Dwayne Page
The state has released its audit report on the basic financial statements of DeKalb County as of and for the year ended June 30, 2023.
According to the state comptroller’s office, “our audit resulted in five findings (3 in the Office of Road Supervisor and 2 in the Office of Director of Schools) and recommendations, which we have reviewed with DeKalb County Management. Each department has responded and cited planned corrective actions”.
To see the full annual financial report visit:
https://comptroller.tn.gov/content/dam/cot/la/documents/county/2023/FY23DekalbAFR.pdf
The detailed findings, recommendations, and management’s responses are included in the Single Audit section of this report below:
FINDINGS BY OFFICE
The following are summaries of the audit findings:
Office of Road Supervisor
FINDING: The Highway/Public Works Fund required material audit adjustments for proper financial statement presentation.
“At June 30, 2023, certain revenue and expenditure account balances reflected in the accounting records of the Highway/Public Works Fund were not materially correct, and audit adjustments totaling $1,112,428 were required for the financial statements to be materially correct at year-end. During the year examined, highway department personnel posted five separate journal entries that erroneously reduced revenue and expenditures that had been posted to record the transactions of a state-aid bridge project. The effect of these entries was to eliminate all transactions of the bridge project and understate both revenues and expenditures in the fund financial statements by $1,112,428. Generally accepted accounting principles require the highway department to have adequate internal controls over the maintenance of its accounting records. Material audit adjustments were required because the department’s financial reporting system did not prevent, detect, or correct potential misstatements in the accounting records. It is a strong indicator of a material weakness in internal controls if the county has ineffective controls over the maintenance of its accounting records, which are used to prepare the financial statements, including the related notes to the financial statements. This deficiency is the result of a lack of management oversight. We presented audit adjustments to management that they approved and posted to properly present the financial statements in this report”.
RECOMMENDATION:
“The highway department should have appropriate processes in place to ensure its accounting records and subsequent financial statements are materially correct.
MANAGEMENT’S RESPONSE – ROAD SUPERVISOR: “ I concur with this finding.”
PLANNED CORRECTIVE ACTION: “We will properly post revenue and expenditures from this point forward”
FINDING: Expenditures exceeded appropriations.
“Expenditures exceeded appropriations in the Capital Outlay major appropriation category (the legal level of control) of the Highway/Public Works Fund by $273,970. Section 5-9-401, Tennessee Code Annotated, states that “All funds from whatever source derived, including, but not limited to, taxes, county aid funds, federal funds, and fines, that are to be used in the operation and respective programs for the various departments, commissions, institutions, boards, offices, and agencies of county governments shall be appropriated to such use by the county legislative bodies.”
RECOMMENDATION: “ Expenditures should be held within appropriations approved by the county commission.
MANAGEMENT’S RESPONSE – ROAD SUPERVISOR: “I concur with this finding”.
PLANNED CORRECTIVE ACTION: “We will do budget amendment from now on”
FINDING: The office had deficiencies in the administration of accrued leave records.
“Our examination revealed the following deficiencies related to the administration of accrued leave records. These deficiencies exist due to a lack of management oversight and the failure to comply with state statute”.
“A. Accrued leave records for the highway department contained numerous errors. Beginning balances did not always agree with the prior period ending balances. In some instances, records indicated that employees used leave amounts that were in excess of what was accrued, and in other instances, employees had no earned time recorded when it appeared that they likely should have. The failure to make accurate calculations and maintain accurate balances weakens internal control over the payroll process and increases the risks of improper payments”.
“B. Subsidiary accrued leave accounting records were not closed and available for audit by August 31, 2022, as required by Section 9-2-102, Tennessee Code Annotated. This statute provides that records should be available for audit no later than two months after the close of the June 30 fiscal year-end. The accounting records for the department’s accrued leave were made available to auditors on September 8, 2023. The failure to maintain accounting records on a current basis diminishes the usefulness of the financial records as a management tool, results in the loss of accounting controls, and increases the risk that errors will not be discovered and corrected in a timely manner.
RECOMMENDATION: Balances of accrued leave should be properly recorded in compliance with local policy and regularly reviewed for accuracy, and any noted errors should be corrected promptly. Management should close its subsidiary accrued leave accounting records and have those records available for audit by the following August 31”.
MANAGEMENT’S RESPONSE – ROAD SUPERVISOR: “ I concur with this finding”
PLANNED CORRECTIVE ACTION: “We will get help from CTAS cleaning this up”
Office of Director of Schools
FINDING: The school department violated state statues in the administration of a stadium bleachers construction project.
During the year, the school department completed a stadium bleachers construction project totaling $585,410. Our examination revealed violations of state statutes in the administration of this project”.
“A. The department did not employ a registered architect or engineer to design plans, specifications, or estimates for the project. Section 62-2-107, Tennessee Code Annotated (TCA), requires a registered architect or engineer to be employed whenever construction projects are estimated to exceed $50,000”.
“B. Competitive bids were not solicited for some of the construction materials used for the project. Purchasing procedures for the county are governed by a private act which requires competitive bids to be solicited through newspaper advertisement on all purchases exceeding $10,000. The school department purchased the materials for the bleachers through Sourcewell, a national purchasing cooperative. Section 12-3-1205, TCA, allows governments to make purchases through cooperatives; however, Section 12-3-1205(b)(4)(B), TCA, specifically prohibits the purchase of certain items, including construction materials, through cooperative agreements”.
RECOMMENDATION: “The school department should follow state statutes governing all construction projects and the purchases of construction materials”.
MANAGEMENT’S RESPONSE – DIRECTOR OF SCHOOLS: “I disagree with this finding.
AUDITOR’S COMMENT: “ The Director of Schools states above that he disagrees with the finding and includes a comment in the corrective action plan that he thought they could use purchasing cooperatives. As pointed out in the finding, Section 12-3-1205, TCA, allows governments to make purchases through cooperatives; however, Section 12-3-1205(b)(4)(B), TCA, specifically prohibits the purchase of certain items, including construction materials, through cooperative agreements.
PLANNED CORRECTIVE ACTION: “We will bid future construction projects”
FINDING: Amounts withheld from contractor payments were not deposited into an escrow account
“The school department did not deposit amounts withheld from contractor payments into an escrow account related to a construction contract for the installation of HVAC systems at various school gyms totaling $1,193,733. Section 66-34-104, Tennessee Code Annotated, requires that funds withheld from contractor payments be deposited into an escrow account with a third-party for contracts of $500,000 or more. This deficiency is the result of a lack of management oversight and could result in the loss of interest earnings for the contractor”.
RECOMMENDATION: “Amounts withheld from contractor payments on contracts of $500,000 or more should be deposited into an escrow account in compliance with state statute”.
MANAGEMENT’S RESPONSE – DIRECTOR OF SCHOOLS: “I concur with this finding”
PLANNED CORRECTIVE ACTION: “When we have big projects, money will be placed in the proper ESCROW account”