Annual OSAI county audit shows some areas of concern

An annual audit on McClain County business during 2021 by Oklahoma State Auditor and Inspector (OSAI) Cindy Byrd’s office was returned with some recommendations for putting into place internal controls on a federal program involving a coronavirus relief fund, and internal controls on the Court Clerk’s collection and disbursement processes, as well as changes to the processes used by the Sheriff’s Office inmate trust fund checking account and  commissary fund.

The audit cited the lack of internal controls over the court clerk’s collection and disbursement processes, and the noncompliance with the inmate trust fund checking account and the commissary fund as repeat findings from the OSAI’s 2020 annual audit. The audits also included statements from the County Commissioners, the Court Clerk, and the Sheriff on how they intend to correct the internal controls.

County Commissioners recommendations

The Coronavirus Relief Fund is a federal grant which is passed through by the Oklahoma Office of Management and Enterprise Services and the Oklahoma Department of Emergency Management. While the audit did not question costs associated with the grant, it noted that guidance provided through the program had not been followed for  complying with grant requirements.

“County-wide controls regarding control environment, risk assessment, information and communication, and monitoring have not been designed,” states the audit, adding that policies and procedures have not been designed and implemented to ensure the County complies with grant requirements.

The audit noted that this condition could result in noncompliance to grant requirements and loss of federal funds to the County. The State Auditor and Inspector’s office recommended to the County that it should understand the requirements for the program and implement a system of internal control procedures to ensure compliance with the grant requirements.

The idea of the standards is to have a foundation for internal control which provides the discipline and structure to help the County achieve its objectives with the grant. The County would then assess their risks to help achieve its objectives while developing appropriate risk responses. The County would have a system in place to provide quality information which can be used by the personnel involved to communicate and use to support the internal control system, and they would continually monitor and assess the quality of performance over time and resolve the findings of audits and other reviews.

As noted, the  audit provides county management with the ability to provide a response.

County Commissioner chairman Terry Daniel states, “McClain County will strive to implement policies and procedures regarding control environment, risk assessment, information and communication, and monitoring to ensure the County is in compliance with grant requirements.”

The audit noted a condition in the Court Clerk’s office, citing that the office does not have adequate segregation of duties to ensure that individual’s duties are done so in a manner that would not allow one individual to control both the recording function and the procedures in processing a transaction.

OSAI states there are conditions with the receipting process and with the court fund disbursement process.

In receipting, one employee has the ability to issue receipts, balance the cash drawer, prepare deposits, and take deposits to the County Treasurer. As well, no one other than the preparer reviews or approves voided receipts, and a mail log is not being performed or maintained, the OSAI states.

McClain County Court Clerk recommendations

In the Court Clerk’s Court Fund disbursement process, only one employee prepares claims, verifies the claim for accuracy, prints vouchers, signs vouchers, takes vouchers to be registered with the County Treasurer, distributes vouchers, reconciles reports with the County Treasurer, and prepares the Quarterly Court Fund Reports.

OSAI states that these policies and procedures have not been designed and implemented to adequately segregate the duties of the receipting and disbursement process, and the result could be unrecorded transactions, misstated financial reports, undetected errors, or misappropriations of funds.

OSAI recommends separating key functions of both of these processes. The audit states that if this is not possible due to limited personnel, their recommendation is to implement other controls to mitigate the risk involved with the concentration of duties. This would include separating key processes and/or critical functions of the office and having management review and approve accounting functions.

In response to the audit, Court Clerk Kristel Gray writes, “To help our lack of segregation of duties, I plan to put the following into policy: Deposit reports will be reviewed by two employees. Voided receipts will be reviewed and initialed by an employee other than the preparer. We do not have adequate staff to be able to run daily operations and prepare a mail log. Court Fund vouchers will be printed by the Court Clerk and reviewed and signed by the First Deputy.”

McClain County Sheriff’s Office recommendations

One other finding by the OSAI audit was for lack of internal controls and noncompliance over the inmate trust fund checking account and the sheriff commissary fund. This was also noted on the audit as a repeat finding.

The OSAI notes that the duties are not properly segregated, and one employee has the ability to collect money, issue receipts, post to inmates’ accounts, prepare deposits, take deposits to the bank, issue checks, and perform reconciliation. The audit notes that deposits to the inmate trust fund checking account are not made daily, and the inmate ledger balances are not reconciled to the bank statement. Also, there is no policy or procedure in place for unclaimed inmate funds, and the inmate trust fund checking account is not kept in a secure location.

The audit states that the Sheriff’s office does not have contracts with their commissary or inmate phone card vendor that have been approved by the Board of County Commissioners. Also, an annual commissary report is filed, but the ending balance doesn’t reconcile to the treasurer’s ending balance.

The OSAI states that without proper accounting and safeguarding of the Inmate Trust Fund checking account, there is an increased risk of misappropriation of funds.

The OSAI had several recommendations which included establishing procedures for receipting, depositing and reconciliation, as well as expenditure processes. They state that deposits should be made daily, and the ledger balances should be reconciled to the bank statements each month. OSAI further states that inmate trust fund checks should be kept in a secure location.

For the Sheriff Commissary Fund, they state that all contracts should be renewed and approved by the County Commissioners annually, and the Commissary report to the County Commissioners should agree to the Treasurer.

In response, Sheriff Landy Offolter writes, “The McClain County Sheriff’s office will take steps to separate key functions of receipting, depositing, reconciliation, and expenditures in the Inmate Trust Fund Checking Account. This will include requiring two signatures on receipts. One of the Administrative Assistants will do the deposits and the other will do reconciliations and expenditures.

“All monies collected will be deposited each day. The Inmate Trust funds will be maintained in a manner that reflects each inmate’s deposits, disbursements, and account balances. The inmate balances are being reconciled to the bank statement each month.”

He states, “We are in the process of coming up with procedures to address unclaimed Inmate Trust Fund monies. This will include trying to contact inmates that have been released and failed to contact the Sheriff’s office to claim their money. Additionally, we will develop procedures to adhere to the process for unclaimed funds prescribed in state statute. This may take a while to implement.”

Offolter added, “Inmate Trust Fund checks are being stored in a locked cabinet.”

The OSAI’s annual audit was conducted on county business ending June 30, 2021, and was conducted “for the purpose of forming an opinion on the total of all county funds on the financial statement.”