State Auditor Mike Harmon has released the audit of the sheriff’s settlement–2015 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 on the audit of the sheriff’s tax account, and the other reporting on the audit of the fee account used to operate the office.

Auditing standards require the auditor’s letter to communicate whether the sheriff’s settlement presents fairly the taxes charged, credited and paid in accordance with accounting principles generally accepted in the United States of America. 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 in all 120 sheriff settlements in Kentucky.

The sheriff’s financial statement fairly presents the taxes charged, credited and paid, for the period, April 26, 2015 through April 15, 2016 in conformity with the regulatory 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 internal control over financial operations and reporting.

The audit contains the following comment:

The sheriff’s office lacks an adequate segregation of duties. A lack of adequate segregation of duties existed over all accounting functions. During our review of internal controls, we noted 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 should be in place to offset the lack of segregation of duties.

The lack of oversight could have resulted in undetected misappropriation of assets and inaccurate financial reporting to external agencies such as the Department of Revenue and other taxing districts.

A segregation of duties over various account functions, such as opening mail, collecting cash, preparing bank deposits, preparing monthly reports or the implementation of compensating controls, when needed because of the number of staff is limited, it is essential for providing protection from asset misappropriation and 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 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 that is not feasible, due to a limited number of staff, stronger oversight over those areas could occur and involve an 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: The sheriff’s office employs two clerks which is the maximum allowable for the amount of funds.

The sheriff’s responsibilities include collecting property taxes, providing law enforcement, and performing services to 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.

The Auditor of Public Accounts ensures that public resources are protected, accurately valued, properly accounted for, and effectively employed to raise the quality of life of Kentuckians.

Call 1-800-KY-ALERT or visit our website to report suspected waste and abuse.