Legislative audits of county raised plenty of red flags
By Roy Ockert Jr.
Jan. 12, 2013
When the senior audit manager for the accounting firm hired by the Craighead County Quorum Court to review county payroll problems reported back to the justices last week, she advised that state audits had been raising red flags since 2003 and advised that someone should pay more attention.
Indeed, the county’s financial problems, as shown by state audits, go back even further than that and involve more than management of payroll by the county clerk’s office. Matters came to a head last year when the Quorum Court learned that the county had a liability of some $330,000 to the Internal Revenue Service.
It shouldn’t have been a surprise.
As a result of the revelations, County Clerk Nancy Nelms, who had held the position since 1999, suddenly had a general election challenger was soundly defeated. Thus, Kade Holliday, at age 24 and a recent college graduate, is the new county clerk.
What the auditor, Tammy Honeycutt of Goad and Co., a Jonesboro accounting firm, said bears repeating:
“Legislative Audit had been raising red flags regarding the internal control policies and procedures in the county clerk's office since 2003. ... It appears that no one has been holding the county clerk responsible for those findings, so I want to make sure that in the future when you receive those Legislative Audit reports, that someone is looking at those. There should be some accountability for what they're trying to tell you. ... But the Quorum Court should have some responsibilities for that.”
Part of the problem is that each county elective office is a separate department, and the office-holders are not accountable to the chief executive, who we call a county judge. Only the Quorum Court really has any authority over the separate departments, and that is mostly limited to appropriations.
Public scrutiny by other elected and appointed officials, the Quorum Court, the press and others interested in county government is the best check-and-balance. In this case we all failed until the problem reached a crisis stage.
The Division of Legislative Audit provides an invaluable tool by regularly auditing state and local agencies and producing a detailed report for each. Those reports are easily accessible at the division’s Web site, www.arklegaudit.gov.
They are complex and don’t make for exciting reading, which is why as an editor I always had trouble getting reporters to look at them. Instead, too often they accepted the interpretations of public officials. But what public official is going to tell you he or she got a bad audit?
No doubt, Quorum Court members don’t like to read audit reports either, and yet help is readily available.
Annual Craighead County audits, dating back to 1999, are available. The 1999 audit, dated March 19, 2001, raised a red flag about settlement of Circuit Court fines, penalties and costs in the sheriff’s office. That issue was raised again in the 2000 audit, issued a little more than a year later. It also included this note:
“The county clerk failed to accurately account for outstanding warrants which resulted in errors on the outstanding warrant list in the amounts of $128,786 for the General Fund and $287,741 for the Road Fund. Inadequate staff understanding of the reconciliation process was the major cause of these errors. ...”
The 2001 audit repeated those notations but warned of other potential problems, including: “The Quorum Court appropriated salaries for individual deputy positions in the County Clerk’s Office. The county clerk did not pay salaries in accordance with this appropriation but allocated the total salaries in a manner that was determined by the county clerk.”
The auditor also noted that the county was assessed payroll tax penalties totaling $4,171 because the clerk’s office had failed to remit withholdings to the IRS on a timely basis. This was reported on April 2, 2003, and yet the same problem would come up time after time.
In 2002 the audit disclosed that miscalculations by the clerk’s office resulted in an over-settlement to the County General Fund of $368,250. The problems with sheriff’s office settlements continued.
In 2002 the audit warned that the clerk’s failure to reconcile the appropriation journal “could result in the Quorum Court relying on inaccurate information for financial decision-making.”
Still, no one was paying attention.
The same red flags were raised in the 2004 audit. In 2005 the audit pointed out additional problems in the accounting practices of the clerk, sheriff, collector and treasurer. Bank reconciliations were not prepared, it said, and deposits were not made on a timely basis for the county’s fee account.
The same notes were made in the 2006 audit for the clerk’s office, but most problems in the other offices had been corrected.
In 2009 the auditor noted that IRS reporting forms for the first and second quarters were not provided for review and that variances were found in the reports for the third and fourth quarters. State payroll withholding taxes totaling $31,530 for two months and federal taxes totaling $10,000 had not been remitted by Jan. 31, 2010.
The 2010 audit was the cleanest of any in this series, and that was the only one for which I found evidence in a Sun article about a Quorum Court discussion.
Then came the 2011 audit, which disclosed numerous problems resulting in an IRS bill of $288,264 for taxes, penalties and interest for 2003-09.
The 2012 report should be coming out in March or April. We should all read it.
Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by e-mail at royo@suddenlink.net.