The State Auditor’s report identified some concerns regarding Isanti County’s 2011 audit.
Juli Mader from the Office of the State Auditor presented the Isanti County Board of Commissioners at the meeting July 18 with the county’s 2011 audit report of the financial statements of government activities and major funds.
The purpose of the audit is to express opinions about whether the financial statements prepared by management with the county’s oversight are fairly presented in conformity with accounting principles accepted in the United States, according to the Office of the State Auditor.
Overall, all significant transactions were recognized in the financial statements in the proper period, the report stated. The statement disclosures were neutral, consistent and clear, and no misstatements were identified. The state auditor’s office had no difficulties dealing with management in completing the audit.
Segregation of duties
According to the report, several of the county’s departments that collect fees lack proper segregation of duties.
“A good system of internal control provides for an adequate segregation of duties so that no one individual handles a transaction from its inception to completion,” the report stated.
Offices in the county that do not have sufficient segregation of duties include highway, sheriff and public health. These departments generally have one staff person who is responsible for billing, collecting, recording and depositing receipts, as well as reconciling bank accounts.
“Inadequate segregation of duties could adversely affect the county’s ability to detect misstatements,” the report stated. “Due to the limited number of office personnel within the county, segregation of the accounting functions necessary to ensure adequate internal accounting control is not possible. This is not unusual in operations the size of Isanti County. However, the county’s management should constantly be aware of this condition and realize that the concentration of duties and responsibilities in a limited number of individuals is not desirable from an accounting point of view.”
The state auditor understands that the county does not have the funds needed to hire additional qualified accounting staff in order to segregate duties in every department, but recommends the county’s elected officials and management be aware of the lack of segregation of accounting functions and implement oversight procedures to ensure the internal control policies and procedures are being implemented.
Monitoring internal controls/accounting policies and procedures
The auditor’s report also noted that an inquiry of county management found that significant internal controls of its accounting system have not been documented, and the county lacks written policies and procedures, including risk assessment and monitoring procedures.
“Without formal policies and procedures including risk assessment and monitoring procedures, the county increases its risk of fraud,” the report stated.
The county has begun to develop formal policies that will include these procedures, but due to limited time and resources, the county hasn’t been able to complete the project.
The state auditor recommended that the county continue to implement procedures to document internal controls in its accounting system, and that a formal plan be developed that calls for assessing and monitoring the significant internal controls on a regular basis, no less than annually.
During the review of the sheriff and jail departments, numerous internal control weaknesses related to cash handling procedures were noted, but new procedures have now been implemented by the departments.
Other points of discussion:
As part of the audit, the state auditor took a sample of expense reimbursements and credit card transactions to verify policies were followed.
During the testing, they noted that one out of five Wright Express card transactions included the purchase of a non-fuel item that was not supported with a detailed receipt. Original itemized receipts should be retained to determine the date, time and items purchased, the report stated.
Odometer readings are not required for Wright Express gas transactions. Active monitoring of fuel purchases is important and should include reviewing all fuel purchases for each officer and vehicle at least monthly, as well as calculating fuel consumption for each vehicle, the report stated.
A monthly review of fuel purchases may “disclose that public funds were used to fuel private vehicles. Requiring odometer reading and monitoring usage may deter abuse by the users,” the report stated.
Additionally, two out of eight employee expense reimbursement claims tested were submitted at the end of the year for mileage throughout the entire year. To ensure expenditures are being paid and reduce the risk of error, the Office of the State Auditor recommended the policy be changed to require claims for reimbursement be submitted at least monthly.
In other action, the board:
• Approved a resolution in support of a change in the affidavit of candidacy. Currently, candidates filing for local office must maintain residence in the district for at least 30 days, but the board feels “a serious candidate should gain residency significantly before this date.” The board is requesting the Association of Minnesota Counties (AMC) Legislative Committee to add the issue to their 2013 legislative platform.