It might be unprecedented, but before the Luther Board of Trustees meets to review the Audit for FY2016, a $10,500 check has been written to pay for it, and the audit itself has been released to the public.
The board was supposed to meet last Thursday to review the audit performed by Russell & Williams CPAs of Oklahoma City. However, the Special Meeting was not posted on FaceBook by the Town 48 hours in advance, forcing the cancellation. In addition, the town attorney could not attend the meeting.
In response, Luther Town candidates and others have been reading the audit, particularly a listing of findings and responses. Click here to read the audit. The findings are summarized here:
2016-1 Lack of Segregation of Duties (Repeat Finding)
CONDITION: During our review of the internal control structure, we noted that several procedures lack the control of having duties segregated. We understand that due to the size of the town and number of personnel, many aspects related to segregation of duties cannot be implemented. CRITERIA: Proper internal control requires a separation of record keeping from the associated assets or a system of management oversight to compensate for the lack of separation. CAUSE OF CONDITION: Limited personnel and the ability of one person to have absolute access. EFFECT OF CONDITION: The Town is subject to embezzlement. RECOMMENDATION: An outside CPA should be hired to help strengthen internal controls. MANAGEMENT RESPONSE: All checks now require three signatures whether there are three signature lines or not. All debit card and/or credit card will require board approval. An outside CPA has been hired to help reconcile matters on a monthly basis so that internal controls can be stronger.
2016-2 Purchases Lack Proper Documentation
CONDITION: During our review of expenses, we noted that several purchases approved by the board lacked proper documentation to validate such expenses. We understand that due to the size of the town and number of personnel, many aspects related to segregation of duties cannot be implemented. However, all invoices must be maintained for a minimum period of 5 years. EFFECT OF CONDITION: Proper auditing procedures could not be performed without reviewing proper invoices related to purchases. The Town/LPWA is not only in violation of state statute but without proper documentation they have subjected themselves to the possibility of embezzlement. RECOMMENDATION: Because the Town has had such a high turn-over in office personnel for several years, it is recommended that the Board implement proper policy and procedures to ensure that all invoices are properly maintained for the required time period. We suggest that the Treasurer review the purchasing records each month to ensure that they are being properly maintained. We also suggest that a copy of the invoice, the individual check stub, and a copy of the signed check be stapled together and maintained in a designated file.
2016-3 Cemetery Revenues
CONDITION: The Town is required to transfer 12.5% of cemetery lots sales into the “Cemetery Care Fund”. This transfer had not been done as of June 30, 2016.RECOMMENDATION: It is recommended that the required 12.5% be transferred into the Cemetery Care checking account as soon as the cemetery plot is sold. Alternatively, each June the Clerk could make one lump transfer into the cemetery checking for its portion of the plot sales. As of June 30, 2016, the Town owes the Cemetery Fund $5,018.78 which has been recorded as a “Due To/From” on the financials. It is recommended that the Town transfer this amount into the Cemetery Fund checking account.
2016-4 LEDA Account Activity Not Documented
CONDITION: During our review of expenses of the LEDA account, we noted that several purchases lacked proper documentation to validate such expenses. We understand that due to the size of the town and number of personnel, many aspects related to segregation of duties cannot be implemented. However, all invoices must be maintained for a minimum period of 5 years. Furthermore, the LEDA account has a debit card which requires no approval by board members before using. CRITERIA: 11 O.S. Sec. 22-131 & 132 requires that purchasing records be properly maintained for a period of 5 years. CAUSE OF CONDITION: LEDA was not properly maintaining invoices for the required time period. EFFECT OF CONDITION: Proper auditing procedures could not be performed without reviewing proper invoices related to purchases. LEDA is not only in violation of state statute but without proper documentation they have subjected themselves to the possibility of embezzlement. RECOMMENDATION: Debit card and/or credit cards should no longer be allowed. Furthermore, all invoices for expenses associated with LEDA should be properly maintained in the Clerks office. MANAGEMENT RESPONSE: The Town Board will look further into this matter.
2016-5 Budget Deadlines
CONDITION: During our review of the budget procedures, the town failed to prepare the required budgets within the required deadlines mandated by state statute. CRITERIA: State statute requires budgets be submitted for all funds to the governing body before the start of the budget year. CAUSE OF CONDITION: The town has not adopted formal budget procedures in regards to the preparation of their annual budget. EFFECT OF CONDITION: The Town was not incompliance with state statute regarding budgets. RECOMMENDATION: The Town should review and adopt budget requirements required by state statute. MANAGEMENT RESPONSE: We understand the need for preparing budget forms before the start of the fiscal year and will strive to prepare budgets according to the required deadlines.
2016-6 Debt Payments
CONDITION: During our review of the financials, it was discovered that only one monthly loan payment had been made to the USDA Rural Development Loan. Page 24 CRITERIA: The loan agreement with the USDA requires monthly payments in the amount of $2,642 be made each month. CAUSE OF CONDITION: The LPWA failed to make the required monthly debt payments EFFECT OF CONDITION: The LPWA was not in compliance with loan agreement. RECOMMENDATION: The LPWA should consider setting this payment up as an automatic draft. MANAGEMENT RESPONSE: We will look into setting this payment up as an automatic draft or take steps to ensure that this does not happen again.
2016-7 Deposits Not Made Daily
CONDITION: During our review of the bank deposits, it was discovered that bank deposits are not being made daily as required by state statute. CRITERIA: 11 O.S. 12-110 and 62 O.S. Sec. 517.3 requires that the treasurer of every public entity shall deposit daily, not later than the immediately next banking day, all funds and monies of whatsoever kind that shall come into the possession of the treasurer by virtue of the office, in one or more financial institutions that have been designated as either state or county depositories, or both, and the acceptance of any such deposit from any such treasurer shall be tantamount to adoption, in relation thereto, of the same privileges and conditions, other than collateral security, as are now provided by law in acceptance of designation as state or county depositories. CAUSE OF CONDITION: The Treasurer has not been making deposits daily. EFFECT OF CONDITION: The Town is not in compliance with state statute. RECOMMENDATION: The Board should implement a policy that if the Treasurer cannot make the deposits daily then another Town official will make sure that the deposits are taken to the bank in the required time period.
2016-8 Treasurer Not Bonded and/or Certified with the County
CONDITION: During our review of the general fund revenue items, it was discovered that the Town has not been receiving their share of Motor Vehicle and Alcohol Beverage Tax from the County. The County has been withholding these taxes because the required form S.A.&I. 127 has not been submitted to the County Clerk/Treasurer. CRITERIA: 11 O.S. 8-105 states that the municipal governing body shall require the municipal treasurer, any officer or employee designated by ordinance to sign municipal warrants or municipal checks, and any other officers and employees as the governing body may designate by ordinance, to give bond for the faithful performance of his duties within ten (10) days after his election or appointment, in such amount and form as the governing body shall prescribe. The municipality shall pay the premiums on such bonds. Furthermore, each year the Town Treasurer is required to submit form S.A.&I. 127 to the County Clerk/Treasurer to certify that they are bonded as required by state statute. CAUSE OF CONDITION: The Treasurer is not bonded and has not submitted the required form to the County. EFFECT OF CONDITION: The County is holding in excess of $28,000 of the Towns funds. Furthermore, the Town is as risk at losing these funds permanently if not remedied soon. RECOMMENDATION: The Board is in the process of resolving this matter.
At the Luther Candidate Forum last week, candidate Paxton Cavin mentioned several of the audit findings, and posted the audit on her campaign website.
After the special meeting was canceled last week, candidate Jenni White questioned the timing of it. “I have sincere concern that by postponing the meeting to publicly announce the results of the audit, Town voters will not be properly educated about the level of accountability and leadership provided by current Board of Trustees candidates,” said White.
“Unfortunately, there are many concerns listed in the audit – mainly $15 thousand dollars of missing funds from LEDA and an accounting system set up to encourage embezzlement – yet for each concern listed by the audit, the answer from the Town to each ‘charge’ is at best vague with very little formal planning provided as to how to prevent continued mismanagement.”
She encouraged each candidate to publish their concerns prior to the election.
It’s possible that a Special Meeting could be scheduled this week. It must be posted 48 hours in advance, correctly.