February 28, 2006 The 2003 county audit: what a difference an auditor makes

In previous posts, we have looked at the 2002 audit where the county spent $923,000 more than it took in and the 2001 audit that required two blog postings because it is a pretty outrageous financial "record" that provides large volumes of false or misleading financial data about county spending.

Somebody probably should have asked for a refund of the $28,000 that was paid for (wasted on?) the 2001 audit! (See 2001 audit posts of Jan. 4 and Jan. 21).

The 2003 audit that we discuss today is unique--primarily because it was the first audit in recent history performed by someone outside Hamblen County.

I am proud to have had the honor to be the driving force in leading the county commission to hire the state auditors instead of local, private auditors to perform the county audit in 2003, 2004, 2005, and beyond.

I wanted the state to perform the Hamblen County audit for three important reasons:

1. EXPERIENCE. State auditors are more experienced in performing county audits. They know what to look for, and that is a major reason that almost all counties use the state auditors.

2. INDEPENDENCE. I hoped that the actual audit personnel would be more independent since they were less likely to live in Hamblen County and have direct ties with Finance Personnel or local elected officials.

3. SAVINGS. The state charged about $13,000 for the same audit that the local auditors were charging $31,000 for, so I knew there would be a savings of $18,000 by having the state auditors come in.

The first audit by the state auditors proved that the county saved money ($18,000 in SAVINGS) plus the new auditors provided a better audit. The state auditors have tons of EXPERIENCE in performing county audits because they work on county audits throughout East Tennessee almost all year long instead of just performing one county audit each year. In addition, the state auditors, despite some local ties, are more INDEPENDENT than the local auditors were.

How much better was the state-performed audit? Well, the state auditors pointed out problems and violations of state law that had been overlooked, ignored, or missed year after year in previous audits. Most of the violations that the state auditors found were violations that had been occurring (unreported) for years.

Example: There was only one finding in the 2002 audit (the last one performed by the local, private auditors). There were 29 findings in the 2003 audit (the first one performed by state auditors). And, sad to say, some of those 29 separate findings had 4-5 sub-findings.

Almost half (13) of the 29 findings were connected to two offices--the Sheriff's Office (Otto Purkey) and the Office of the County Mayor (David Purkey, Otto's brother). Click here on 2003 audit findings to see the complete list from the audit document.

The Sheriff's Office (Otto Purkey) had 6 findings.
A cash shortage of $14,326.40. Deficiencies and poor record-keeping. Jail receipts unaccounted for. Serious accounting weaknesses for prisoner's funds and personal effects, and weaknesses in controls over cash collections.

The County Mayor's Office (David Purkey) had 7 findings with many sub-findings.
Purchasing deficiencies were noted because there was essentially no purchasing system with blank purchase orders just handed out to departments with no control.
The county's general ledger was not properly maintained or reconciled monthly. Receivables and payables were not accurately reflected.
The state chart of accounts (that is mentioned in the county's financial management contract) was not used as required by law.
There were deficiencies in controls over travel and credit card use.
There were deficiencies in budgeting procedures--where the Mayor did not present a budget to county commission for the drug control fund or the Special Revenue Fund (despite the fact that state law requires this) and where the Mayor expended money from those funds without appropriation or approval of county commission.
In other instances, transfers of appropriations/money were made without the required approval of county commission. This, too, was a violation of state law.
Expenditures and encumbrances (amounts owed at the end of the fiscal year) exceeded the amounts that had been approved by county commission in amounts ranging from $737 to $296,264 in several categories of the General Fund. This, too, was a violation of state law.
There was a fund deficit in the garbage fund of $205,578.
The Capital Improvement (Capital Projects Fund) had a cash overdraft of $34,737.

The Director of Schools had 2 findings:

The Trustee had 3 findings.

The County Court Clerk had 3 findings.

Circuit and General Sessions Court Clerk had 2 findings.

Clerk & Master had 3 findings.

Register's of Deed Office had 1 finding.

Other Findings: 2

More to come on the 2003 audit as the county starts to round the corner.

The county got a "wake-up call" to accountability with the 2003 audit. Most office holders quickly and gladly adjusted to the higher standards and are to be saluted for their work and efforts.

A few office holders who heard the accountability trumpet blaring reacted with silence or fits of uncontrolled rage punctuated by repeated, red-faced public outbursts.