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State Auditor Adam Edelen has released the audit of the financial statements of the Owen County Fiscal Court for the fiscal year ended June 30, 2011.
The audit found the county’s financial statements, in all material respects, fairly presented the county’s assets arising from cash transactions and revenues received and expenditures paid 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 also comments on material weaknesses involving the internal control over financial operations and reporting.
The county should improve its capital assets management and reporting procedures, the auditor concluded in the report.
During testing of capital assets, the auditor determined that the county has no official policy on conducting inventory counts.
The auditor determined the deputy judge-executive tracks inventory for vehicle and equipment, based on what she is told throughout the year from department heads. Then, she notifies the insurance company for any additions and deletions. She is also aware of what is purchased because she maintains the expenditures ledger.
The auditor tested capital assets which resulted in the following issues:
• Vehicles and equipment were tracked on an inventory list by the deputy judge-executive along with documentation of communication to the insurance company to add and remove items from their policy for coverage. Of this reporting, several inconsistencies were noted.
For example, one vehicle that was removed from county insurance in 2011 was not on the list of vehicles provided by the county, or on the prior year list.
Second, a piece of road equipment was noted as “deleted” from the inventory list, but was not documented as removed from insurance.
Finally, several voting machines were donated in 2011 per the fiscal court minutes review, but this transaction was not evidenced on the inventory list, nor was it evidenced that they were removed from insurance.
Several categories of capital assets are not tracked or managed by the county, which include: land purchases and sales, construction in progress, land improvements, and infrastructure.
The auditor said all of these assets should be tracked on a schedule, itemizing each item with a historical cost, salvage value, useful life, number of year owned, depreciation calculations (when applicable) and calculated net asset book values. Infrastructure should be tracked by road or project to indicate if it is a new road or a repaving project with related depreciation information and net asset book values.
When capital assets are not reported accurately, the risk of misappropriation due to financial reporting errors or theft increase.
The auditor recommends that the county implement procedures begin to schedule inventory to be done by all departments on a yearly basis, which would be documented by each department supervisor and reviewed by the county judge-executive or other senior management.
The auditor also recommends the county implement procedures to begin tracking all capital assets including historical costs, salvage, values, useful lives, number of years owned, depreciation, accumulated depreciation and net asset book values.
In a final recommendation, the auditor recommends the county implement procedures to clearly document each item added to or deleted from the capital asset listing, and proof that insurance company has been notified to add or delete the item for the county’s coverage.
According to the a press release from Edelen, Owen County Judge-executive Carolyn Keith said when she became judge-executive in September 2008, there was no inventory list of any kind. Since 2008, the deputy judge-executive has compiled an inventory of all property.
When a new purchase is made, an email is sent to the Kentucky Association of Counties to add the new piece of property along with a description, a serial number if available and cost. KACo replies when the item has been added to the insurance. A copy of both emails is placed in the insurance files. The same procedure is followed when deleting a piece of property.
According to Keith’s response, the deputy judge-executive relies on the other elected officials or department heads to inventory their department, but the deputy judge-executive will personally inventory every department by the end of this 2012.
In regards to capital assets, Keith responded by saying the deputy judge-executive has not seen a list of capital assets other than what is on the insurance list from KACo, but the office will start tracking all items mentioned.