The Nebraska auditor of Public Accounts released results of Holt County’s annual audit in late September.
The report covers July 2019 through June 2020 and includes numerous areas of concern for internal control that were listed in a letter sent to the county board of supervisors Sept. 25.
The report is a matter of public record and is posted on the APA’s website.
Deann Haeffner, APA assistant deputy auditor, noted in the letter that the report is “critical in nature” as it addresses areas noted for improvement and does not include observations on any strong features of the county.
Auditors made corrective recommendations regarding each issue identified and noted when like issues had been included on previous audits. County officials’ responses are included following each matter. Haeffner indicated where no response is included, the county officials declined to respond.
Matters involving internal control over financial reporting and other operational matters identified in the report include:
Holt County Overall
*For the county overall, the auditors found various county offices lacked a segregation of duties, a situation that is continuing from previous year’s audit. They recommended officials should be aware of the inherent risks associated with improper segregation of accounting functions and should develop mitigating controls to reduce the risk of errors or fraud associated with the improper segregation of accounting functions.
County response: “The county has discussed the finding but must consider the cost of adequate segregation of duties when determining the use of tax money.”
*An account held by a third-party administrator of health insurance claims, contained a balance of $307,440 on June 30. Meritain Health was authorized to withdraw from the county fund without prior approval of the board of supervisors. Amounts deposited to the account were subjective and not based on amounts of claims paid, nor to keep an established reserve balance.
A similar finding was included in the prior audit. Auditors recommend the county board implement procedures to ensure all funds held outside of the custody and care of the county treasurer are authorized as petty cash funds that are maintained at the authorized amount and a periodic reconciliation is performed.
County clerk response: The Meritain Health Insurance account is reviewed weekly in our office.
*The county board appropriately bid a road patching project, awarding a contract to Ten Point Construction in May 2019 for $742,305. Three claims were approved in connection with this project for a total of $770,238, $27,933 more than the awarded amount. No change order was presented to the board and no refund was given for the overpayment.
A similar finding was included in the prior audit. Auditors recommend procedures to ensure all payments on contracts comply either with the awarded bid amount or a formal change order approved by the board.
*Four claims paid from the county’s Visitor Promotion and Improvement Fund for various grants had no supporting documentation received to ensure the funds were spent appropriately.
In addition, two claims were paid from the Visitor Promotion and Improvement Fund without supporting documentation to support the amount paid or how the funds were spent. Holt County pays 20% of the lodging taxes received to the O’Neill Chamber of Commerce. However, the county could not provide an agreement to support these payments or how the funds would be used. Holt County pays the Holt County Economic Development Agency 42% of the agency’s budget. The county could not provide documentation to support the amount paid or how the funds were spent.
Auditors recommend procedures to ensure grant awards are supported by documentation that shows whether those funds were spent appropriately.
*Expenditures paid out of six functions of the General Fund exceeded the adopted county budget. The county clerk coded expenditures previously budgeted in the miscellaneous function of the General Fund to six separate functions, causing expenditures in the functions to exceed the adopted budget. Over expended budget functions include personnel costs, $1,889,707 over budget; juvenile court, $56,193; counsel and jury costs, $122,991; economic development, $27,931; district probation office, $48,010; and highway department, $147,806.
A similar finding was included in the prior audit, when five budget functions were impacted.
County response: We have separate functions for these and they are accounted for in the Miscellaneous Fund. In the past these have been budgeted for in aggregate under Miscellaneous General. Moving forward, they are split out as requested.
*The distribution of 5% gross in-lieu from the Nebraska Public Power District was not calculated correctly, due to exclusion of one school district and one airport authority from the calculation.
A similar finding was included in the prior audit. Auditors recommend the treasurer implement procedures to ensure gross in-lieu distributions are calculated correctly and corrections made for erroneous distributions.
Clerk of the District Court
*The district court had not adequately reviewed monthly financial reports, including case balances, non-case receipts and overdue case accounts. For one non-case receipt totaling $100, a rebate received in October 2007 was still held. It was subsequently remitted to the county treasurer Aug. 12, after it was questioned during the audit.
As of Aug. 7, the overdue case balance report showed a total amount owed of $49,924 on criminal cases. Of this total, three cases, totaling $1,088, were flagged for suspension. Six overdue balances, totaling $4,654, did not have timely action taken, two cases had no activity taken since prior to 2008, three cases that had payments by defendants cease in September 2017 had no action taken and one case had no action after a defendant was committed until August 2014.
A similar finding was included in the prior audit. Auditors recommend ongoing review of monthly reports and resolution of balances in a complete, accurate and timely manner.
*A $225 petty cash fund maintained by the clerk of the district court was not recorded in the court’s Justice accounting system. A log of expenses and reimbursements was not maintained for the entire fiscal year, with $219 in expenses expended after March 10 not recorded.
Auditors recommend procedures to ensure petty cash is maintained at the authorized amount and all cash balances held are reflected accurately in the financial records of the office.
*Service fees totaling $1,600 were not remitted to the county treasurer.
*Sales tax collected, totaling $75, had not been remitted to the county treasurer for inclusion in the payment to the State of Nebraska. Of this amount, $20 was collected prior to the fiscal year. The last remittance was made in November 2019.
*Miscellaneous fees collected, totaling $965, had not been remitted to the county treasurer. Records indicated the balance had been received during the prior fiscal year.
*Commissions on commissary items, totaling $7,560, had not been remitted to the county treasurer. This amount was subsequently remitted to the treasurer July 7. However, due to failure to complete monthly bank and asset-to-liability reconciliations, the remittance caused the bank account to have a negative balance of $186.
*Funds received for commissary commissions, in the amount of $3,339, were not remitted to the county treasurer. Instead, they were used to purchase phone cards, newspaper, magazine and cable subscriptions and postage.
Nebraska statute requires all money received by the county, from whatever source, to be deposited with the county treasurer and paid out only on warrants issued by the county board. A similar finding was included in the prior audit.
*Book balance and list of outstanding checks was not maintained for one of four bank accounts maintained by the sheriff.
*Accurate monthly bank reconciliations were not performed for any of the four bank accounts. When attempting bank reconciliations, auditors noted a $426 unknown short in one account and a $186 unknown long in another.
*Monthly reconciliations were not performed, resulting in longs of $3,894 and $573 in two bank accounts. For one of these accounts, the sheriff attempted to remit the long to the treasurer. However, due to the lack of reconciliation, this attempt caused the bank to have a negative balance of $408 in February.
*Deposits to one account were not timely. A $1,000 bond, received April 29 and remitted to the Polk County Court on the same day, was not deposited until May 28.
*Auditors noted during a cash count July 15, seven checks, totaling $195, were not restrictively endorsed.
A similar finding was included in the prior audit. Auditors recommend the sheriff ensure performance of regular bank and asset-to-liability reconciliations; review all funds held and remit excess funds to the appropriate parties; and restrictively endorse all checks immediately when received.
*An accurate log of expenses and reimbursements were not maintained on a $250 petty cash fund. Missing records included a $101 claim received in December 2019; three expenses totaling $77; and two expenses, totaling $17, that were not reimbursed and appeared to be duplicate entries.
*A petty cash reimbursement contained four receipts, totaling $109, that were not claimed within 90 days, as required by state statute.
Auditors recommend the sheriff implement procedures to ensure petty cash is maintained at the authorized amount and claims submitted for reimbursement in a timely manner.
*Petty cash was not reconciled to the authorized $1,000. A reconciled bank balance showed $622 in outstanding expenses that needed to be claimed for reimbursement. However, the amount could not be verified to specific expenses recorded on the check register or identified by the county official.
*An accurate check register was not maintained. Auditors noted three unrecorded withdrawals, totaling $438; a flat $700 reimbursement with no supporting documentation; $771 in checks that had no receipts provided to the county board.
*A postage receipt for $48, dated Oct. 21, 2019, was not claimed until Feb. 14, 29 days after statutory deadline.
*A receipt was included in the petty cash record for $255 annual post box rental, but was not paid through the petty cash account, nor recorded in the register. The Oct.18, 2019, receipt was not claimed until Feb. 14, 26 days after the statutory deadline.
* Four deposits, totaling $255, were not reimbursements from the county. The office could not provide information regarding the payor.
A similar finding was included in the prior audit. Auditors recommend the county attorney implement procedures to ensure all petty cash funds are maintained at the amount authorized by the county board; funds are reconciled periodically to the authorized amount; reimbursement requests are supported by adequate documentation; and reimbursement requests are submitted timely.
*Accurate monthly bank reconciliations were not performed for three bank accounts maintained by the county attorney. A book balance and list of outstanding checks was not maintained.
*A long of $395 in one account, identified during the prior audit, had not been rectified.
*Receipts were not issued to support $4,380 of restitution and diversion funds collected and deposited.
A similar finding was included in the prior audit. Auditors recommend monthly fund-balancing procedures; that the county attorney review all funds held, remitting excess funds to the appropriate parties; and implement procedures to ensure receipts are issued for all funds collected at the time such funds are obtained by the office.
*Diversion fees received by the county attorney were not remitted to the county treasurer. Instead, the funds were used to make purchases. A $500 check was written to the SNARE Drug Task Force in January.
A similar finding was included in the prior audit. Auditors recommend implementing procedures to ensure all funds received are remitted to the treasurer and all purchases and expenditures are made through the claims process for inclusion in the budget.
Holt County is the account holder of a bank account for North Central Problem-Solving Court. NCPSC is governed by the Nebraska Supreme Court Committee on Problem-Solving Courts, under the direction of the Nebraska Supreme Court and includes programs established for the treatment of problems related to substance use, mental health, individuals reentering the community from incarceration and domestic violence. NSPSC covers Blaine, Brown, Boyd, Cherry, Custer, Garfield, Greeley, Holt, Howard, Keya Paha, Loup, Rock, Sherman, Valley and Wheeler counties.
Auditors noted, “The county had taken responsibility for the collection and disbursement of participant fees; however, the county board did not approve or otherwise supervise any payments out of this account. In fact, the majority of payments out of this account were made through debit card transactions. Additionally, all funds received by NCPSC are receipted by the district courts located in each county, and there is no central system or database to track receipts. Therefore, we were unable to verify the funds deposited into the bank account, totaling $24,639, during the fiscal year, of which $7,762 came from the county for reimbursement of probation expenses… NCPSC could not provide any policies or other documentation to support the appropriate use of the funds from this account. During the fiscal year, NCPSC paid $26,415 out of this bank account…NSPSC appears to be using the bank account to pay for District 8 Probation costs, which are then reimbursed by the county; however, District 8 Probation does not appear to have the authority to use the NSPSC funds for this purpose, and none of these expenses should be paid through this account. While some of the expenses are reimbursed, any taxes paid were not reimbursed by the county and were still paid by NSPSC funds.
“The county reimbursed $7,762 of expenses through the bank account for District 8 expenses; however, we noted that $18,320 of expenses through the account were not related to NCPSC, leaving $10,557 of non-NCPSC expenses paid with participant fees.”