October 28, 2005 State Auditors-They Have Reduced Our Audit Costs and Helped Us Improve Financial Procedures

One of my key campaign promises in the May 2002 primary election was to have state auditors come in and perform Hamblen County's required annual audit. After taking office, I introduced, and the commission approved, a resolution to enter into a 3-year contract with the state auditors.

Many positives have resulted from Hamblen County's switch from local private auditors to state auditors in October 2002. It seems that all the commissioners now recognize this, and Commission recently unanimously approved entering into another 3-year audit contract with the state for 2006-2008.

This change has had many benefits:

#1 Lower audit costs. The private auditors had charged the county $31,000/year for the required state audit. The state auditors, whose fee is based on the county's population, currently charge around $14,000/year. As a result, the county has saved a total of over $51,000 in audit charges for the past 3 audits (03,04, and 05).

#2 Improved audit procedures. Besides getting a new set of eyes to examine the county's books, which is always good in itself, there is a tremendous benefit in having "specialists" in county audits perform the Hamblen County audit.

The state auditors, who regularly perform county audits in Hamblen County and in other counties as well, are often aware of where financial problem areas are. They also are very aware of the many state laws that apply to county finances.

By the way, use of the term "state auditors" does not mean that these auditors live in Nashville. Generally, the auditors who perform the required audit of the county's books actually live somewhere in the East Tennessee area, and some may even live in Hamblen County. They work under the direction of the Regional Office of the State Comptroller in Knoxville.

#3 Improved accountability in the handling of county funds. The first audit (2003) by the new auditors was a real wake-up call. Hamblen County ended up with more findings and problem areas (29) than any other county in the state.

The flip side of all these findings is that the county was made aware of many specific weaknesses in financial controls that had not been pointed out before.

Some of the 29 findings in the first audit (2003) included:

1. Violations of state law where expenditures of up to $296,264 were made without the required appropriation by county commission and where transfers of appropriations were made without approval by county commission.
2. An overdraft of $34,737 in the Capital Projects Fund.
3. No central purchasing to control and keep purchases within budgeted amounts.
4. Deficiencies in controls over travel and credit card use.

The second audit by the state (2004) resulted in 15 findings.

Some were new findings: 1. A debt payment of $76,615 was paid twice (but we got the money back); 2. An interest payment of $45,236 was made by mistake out of the special debt service fund (we had gotten all but $408 back from the City of Morristown according to the audit); 3. Money was switched around--without the required approval of county commission-- from the general fund ($89,986) and general debt service fund ($274,730) to the capital projects fund to "restore" those accounts to the original appropriations of commission because, according to County Mayor David Purkey, payments had somehow been made in error out of these funds over the past several years.

There were also some repeat findings: 1. Deficiencies in purchasing. 2. Deficiencies in travel and credit card use. 3. Unauthorized expenditures and spending money that was not appropriated through county commission.

The state auditors are currently working on the 2005 audit for the fiscal year that ended 6/30/05.

Coming...A look at past audits. What I found, what audits tell you, and what they don't tell you!