State Auditor Adam Edelen has released the audit of the sheriff’s settlement–2014 taxes for Clinton County Sheriff Jim Guffey. State law requires the auditor to annually audit the accounts of each county sheriff. In compliance with this law, the auditor issues two sheriff’s reports each year: one reporting the audit of the sheriff’s tax account and the other reporting the audit of the fee account used to operate the office.

Recent changes in auditing require the auditor’s letter to communicate whether the sheriff’s settlement presents fairly the taxes charged, credited and paid of the Clinton County Sheriff in accordance with generally accepted accounting principals in the United States. The sheriff’s settlement is prepared on the regulatory basis, which is described in the auditor’s opinion letter.

Regulatory basis reporting for the sheriff’s settlement is an acceptable reporting methodology, and this reporting methodology is followed for all 120 sheriff settlements in Kentucky.

The audit found that the sheriff’s final settlement fairly presents taxes charged, credited and paid, for the period of January 1, 2015 through April 15, 2015 in conformity with the modified cash basis of accounting.

As part of the audit process, the auditor must comment on non-compliance with laws, regulations, contracts and grants. The auditor must also comment on material weaknesses involving the internal control over financial operations and reporting.

The audit contains the following comment:

The Sheriff’s office lacks adequate segregation of duties over accounting functions. A lack of adequate segregation of duties existed over all accounting functions. The Sheriff’s bookkeeper opens incoming mail, collects tax payments, prepares deposits, prepares daily tax collection journals, and prepares monthly tax reports.

A limited budget placed restrictions on the number of employees the Sheriff could hire. When faced with a limited number of staff, strong compensating controls could be in place to offset the lack of segregation of duties.

Lack of oversight could have resulted in misappropriation of assets and/or inaccurate financial reporting to external agencies such as the Department of Revenue and other taxing districts, which could occur but go undetected.

A segregation of duties over various accounting functions, such as opening mail, collecting cash, preparing bank deposits, preparing monthly reports or the implementation of compensating controls, when needed because the number of staff is limited, is essential for providing protection from asset misappropriation and/or inaccurate financial reporting. Additionally, proper segregation of duties protects employees in the normal course of performing their daily responsibilities.

To adequately protect against misappropriation of assets and/or inaccurate financial reporting, the Sheriff could separate the duties involving the opening of mail, collecting and depositing of cash and preparation of the monthly tax reports. If due to a limited number of staff, that is not feasible, strong oversight over these areas could occur and involve and employee that isn’t currently performing any of those functions. Additionally, the Sheriff could provide this oversight and document it on the appropriate source documents.

Sheriff’s response: Was updated daily of the account funds but was unaware they required initialing. Will start initialing paperwork/reports on a daily basis to eliminate this for the next audit.

The sheriff’s responsibilities include collecting property taxes, providing law enforcement and performing services for the county fiscal court and courts of justice. The sheriff’s office is funded through statutory commissions and fees collected in conjunction with these duties.

The audit report can be found on the auditor’s website.