The Herald-News - News Story

State auditors cited 12 areas of concern among Rhea County's records and operating procedures in their audit for the county's fiscal year ending in June 2009.

The most noteworthy discrepancies involved the categorization of fixed assets, lost paper trails and the need for tightened security in regard to confidential documents.

Rhea County Finance Director Billy Graham, who has been in office since February 2009, said the state-required audit was not much different than audits in the past, though disagreements over a few methods and definitions in bookkeeping had been the cause of several negative findings from the state auditors.

The audit listed that capital asset records were not properly maintained, containing inaccurate calculations, inconsistencies and deficiencies in several areas.

Graham maintained that the finance department was working to correct the mistakes and clerical errors, but cited disagreements over what classified as a "fixed asset" as the cause of some of the discrepancies.

A fixed asset is usually defined as tangible property, including land, buildings, machinery, etc., which cannot easily be converted into cash.

"As I get more into the job I'm finding out the way [assets] are set up right now, and if I can change them, I'm going to," said Graham. "I see things differently than the way most people do. Just because something costs an amount of money doesn't necessarily mean it's a fixed asset."

The county is currently looking into the paperwork behind two patrol cars that were deleted from capital asset records. Graham is frustrated that the cars, which have a quickly depreciating value, are even considered a fixed asset.

"We need to take those cars out of fixed assets and put them into inventory," he said. "To me, a building is a fixed asset because it's something that's not going to have a short-term life.
You can remodel a building when it gets old, but you can't do that to a car. After a few years they're worn out and you get rid of them."

Auditors also pointed out a lack of paperwork in several instances.

Graham, who has recently invested in a new inventory system throughout the county, said that many of the "paper trails" required by the audit had to do with purchases or issues years before he became finance director.

"A lot of things involved paper trails where something happened to them four or five years ago," he said. "When it's that long ago, nobody remembers and nobody knows about things like that."

Another issue addressed by auditors was the fact that the finance office allowed non-office employees, including jail trustees, unsupervised access to rooms containing confidential records, such as payroll figures, W-2 forms and arrest reports.

Graham said that the finance department has made procedural changes and will not allow access to the record storage facility to any unauthorized personnel. He went on to explain that the storage room is near the janitorial and office supply room, making it common for people to be in and out of the area often throughout the day. According to Graham, the situation had been that way for the past 13 years without any officials raising concerns, but there is now a combination lock on the storage door and only authorized employees are allowed in the room.

"We took care of it," Graham said.

The audit also highlighted an instance where the Internal Revenue Service fined the county for failing to notify the IRS to withdraw a payroll tax deposit in a timely manner. At the time of the audit, the county was looking at a fine of $33,521 for missing the deadline, but
Graham said the IRS had been misinformed in some of its information and later reduced the fine to $7,200.

Graham said changes have been made in management to avoid tardiness in the future but that late fees were a common problem since employees often had to juggle their own job and the time-consuming requirements of the IRS.

"Right now we're running shorthanded," said Graham. "It was a result of one employee trying to do two jobs, and there's a lot of regulation on how and when you can do things. It's no small job."

Graham hoped that recent changes in the payroll department would alleviate those charges in the future.

Other audited departments faced censure for duties not being divided adequately among the employees, but Graham said it's due to the widespread problem of being short-staffed.

"I feel their pain, being short-staffed as they are," he said. "But you accept that as a fact of life."

Overall, Graham said he was pleased with how the audit resolved.

"We had a really good exit interview," he said. "I addressed some concerns over how things were done and what I'd like to see, and we had a very good conversation. We ended everything on a real high note."

The state audit was performed by Division of County Auditors Devan Flynn and Jeannie Palladini, under Auditing Supervisor Michael Ford.

"We're not an enforcement agency," said Blake Fontenay, director of communications for the auditing company. "We simply report agencies, and it's up to others to try and the problems corrected. It's really the [county commission's] call to take initiative, and if they don't, then a lot of times there's negative publicity. The publicity that results might spur some actions."

Rhea County Finance Committee Chairman Ronnie Raper said that the county is working closely with the state to make sure everything was correct.

"There's going to be mistakes, but they're not here to punish us," said Graham. "There're in here to help us."

Elisabeth Hollingsworth can be reached at elisabeth.hollingsworth@rheaheraldnews.com.