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Spencer County Clerk Judy Puckett must pay back $64,717 for undeposited receipts, disallowed expenditures and personal non-sufficient fund checks, according to the 2010 audit report released by Crit Luallen, Kentucky’s auditor of public accounts, last week.
State law requires the auditor to conduct annual audits of county clerks and sheriffs.
The audit opinion on the clerk’s financial statement was qualified because auditors were unable to obtain sufficient supporting documentation to determine the complete amount of cash receipts collected during the year, according to a news release from the auditor’s office.
“This is a serious issue,” Luallen told The Spencer Magnet on Thursday.
Luallen’s office has referred the report to Kentucky’s attorney general.
Asked, in general, what the basis is for referring an audit to the attorney general, Luallen said her office does not have any law enforcement authority.
“But we have a very close working relationship with law enforcement, including the attorney general,” she said. “When there is an audit that points to possible criminal wrongdoing, we refer it to the attorney general to determine whether or not there should be further investigation.”
Luallen said that from her own experience, the time frame for each audit to be reviewed depends on its seriousness and the caseload of the attorney general.
Referring an audit report to the attorney general is not common, Luallen said.
“Most of our public officials are working hard every day to do the right thing,” she said, estimating she has made “a handful” of referrals during her eight years in office.
“It raises serious concerns,” she said. “We want to be sure that it gets a thorough review at another level.”
The audit report listed five comments and recommendations to the county clerk:
1. The county clerk should expend public funds for allowable purposes only.
“During the test of expenditures and payroll, auditors noted $13,048 in expenditures that are not considered allowable expenses of a county clerk’s office,” the report reads. “These expenditures were not reasonable, not necessary for the function of the office, personal in nature, and/or were not supported by adequate documentation.”
Listed for insufficient documentation are:
$6,454.70 in overtime paid to deputies not recorded on timesheets;
$1,825 in contract labor paid to family members with no supporting documentation;
$300 in contract labor paid with no supporting documentation; and
$1,813.90 in checks written to the county clerk with no supporting documentation.
Listed as unnecessary expenditures are:
$275 for Sam’s Club memberships for deputies;
$94.77 sales tax paid;
$458.67 book donation to school;
$1,760 for lump sum checks written to deputies for working elections; and
$65.39 for food on Election Day.
The audit recommends that the clerk keep proper documentation to support all expenditures and to make sure all expenditures are necessary.
Calls from The Spencer Magnet to the Spencer County Clerk’s office for Puckett were not returned by press time, but the audit report lists the clerk’s response to each recommendation.
Puckett’s response, as it appears in the audit, was “Individuals are paid for service in which are conducted here in our office. Contracts we had. All receipts were put in the document folder, time worked time paid. To help a child read is a small token for anyone.”
2. The county clerk should have deposited all receipts into the fee bank account.
“During receipts testing, auditors noted certain fees were manually added to the certificate of registrations and were not recorded in the receipts ledger nor deposited,” the report reads. “The handwritten fees consisted of additional charges that were added to the vehicle registration cost such as notary fees, insurance fax fees, and sheriff inspection fees.”
According to office staff, sheriff inspection fees were turned over to the sheriff’s office while other unrecorded fees were collected, then placed in an envelope from which staff members were allowed to use cash to purchase lunch, the report says.
“Auditors tested one day a month for calendar year 2010 and found a total of $527 in handwritten notary fees, insurance fax fees, and sheriff inspection fees that were not recorded in the clerk’s receipts ledger system nor deposited into the bank account,” the report reads. “The total cash credit for calendar year 2010 that auditors were able to identify was $23,573.”
This total was reflected on the clerk’s financial statement. However, the report says that because deputy clerks did not always record the fees in the clerk’s accounting system or consistently write them on the certificates of registration, not all fees are shown as cash credits on customer receipts.
“Therefore, the total fees not recorded or deposited for calendar year 2010 could be more than the amount reported on the financial statement,” the report says.
After researching this practice further, auditors found a cash credit of $26,030 in the calendar year 2009.
Puckett’s response was, “Fees in office purchase cleaning supplies and small office supplies. Sheriff inspection fees have always been collected in our office since they started charging for the fee. All monies collected was turned over to the Sheriff Office.”
3. The county clerk should not cash personal checks and should turn all non-sufficient fund checks over to the county attorney.
The clerk’s office cashed $11,461 worth of personal checks in 2010 and $6,687 worth of personal checks in 2009.
In 2010, the audit notes that one of the checks cashed was from a family member of the county clerk. That $150 check bounced, but was never re-deposited or turned over to the county attorney for collection.
“Upon further investigation into prior years, auditors found personal checks belonging to the county clerk that were cashed in the office, returned for non-sufficient funds, and were never re-deposited nor turned over to the county attorney,” the report says.
Between 2007 and 2008, the clerk’s office cashed $2,725 worth of checks from the clerk herself, which were deemed non-sufficient funds.
“The lack of effective internal controls over receipts led to the commingling of public and private funds which is prohibited by statute,” the report says.
Puckett’s response was, “This office is audited every year. We have cashed checks here in this office, but just not mine. I was not made aware of these items mention.”
4. The county clerk should eliminate the $35,962 deficit in the 2010 fee account.
Puckett is recommended to personally pay back $35,962.
The deficit in the official fee account is due to $23,573 in unrecorded and undeposited receipts, and $13,048 in disallowed expenditures, the report says.
The remainder ($658) of that total ($36,621) is to come from $508 the clerk should collect from the county attorney for non-sufficient fund checks and $150 from the family member who cashed a check that was returned as non-sufficient.
Puckett’s response was, “Error was made. Due to lightning hitting our office and damaged all equipment, we were done for 1 week for repairs. Our office paid for all equipment replaced and the labor in which was not in our budget. When all bills was turned in, when the insurance claim was sent to the Counties Insurance Company some of our bills was unaccounted for and was only paid for bills submitted.”
5. The county clerk should improve daily receipt checkout procedures.
“The audit recommends the clerk make the following changes to improve controls over receipts and to comply with KRS 68.210 –
•Total deposit per the daily checkout sheet should agree to the register recap printed from the accounting system,
•All registers be accounted for on the summary recap from the accounting system,
•All cash receipts be deposited and recorded daily,
•All daily checkout sheets be completed,
•Cash overage/shortage variances should be documented, investigated and explained,
•Daily checkout sheets be initialed by preparer,
•Yellow receipt register tapes should be attached to daily checkout sheet, and
•Transactions should be entered into the computer system immediately and customers issued a receipt along with their copy of the certificate of registration.”
Puckett’s response was, “Some of these things can be done and some cannot.”
The auditor’s office replied that all recommendations above should be attainable by the clerk’s office.
Not the first time
Spencer County Judge-Executive Bill Karrer, who took office in January, pointed out that the county clerk’s last “clean” audit came in for the calendar year 2005.
Some similar issues in the clerk’s audit started showing up in the calendar year 2006. On that year’s audit report, auditors noted the county clerk had a deficit in her official account fee – that deficit was $70,708 (nearly twice the 2010 deficit).
The clerk did not respond to this comment in the audit.
The audit also states that the deficit was “caused by a significant decrease in fees and commissions from the prior year and an increase in operating expenditures.”
However, revenues in 2006 actually exceeded revenues in 2005 by $87,833.
Karrer pointed to minutes from a fiscal court meeting in January 2007, which reveal the court at that time voted to move $71,000 into the Clerk Support Program account to cover that year’s deficit.
However, the report for the first quarter of the clerk’s fiscal year in 2007 does not show that the $71,000 was ever accepted into the clerk’s budget.
Also, in 2006, the audit report recommended that the clerk should expend public funds for allowable purposes only.
“Test procedures conducted during the audit identified a total of $451 in expenditures for candy and snacks that are not considered allowable,” the 2006 audit reads.
At that time, Puckett’s response was, “Understandable will no longer do this.”
More disallowed expenditures – $1,851 worth – were found on the 2007 audit report.
The breakdown from that year is as follows:
•Candy and snacks, $327
•Sam’s Club memberships, $245
Puckett’s response on the audit report was, “I was always under the understanding that ‘Vote and Be Counted’ was allowed for advertising of our voter registration trying to get people to register.”
The auditor replied, “The expenditures in question were made as donations to ballpark signs and school programs. Adding the words, ‘Vote and be counted,’ does not constitute voter registration educational materials or advertisement and does not render these donations allowable.”
The disallowed expenditures continued, at a smaller rate – $425, in 2008.
This time, for Sam’s Club memberships ($210) and advertising ($215).
The Sam’s Club memberships continued and were reported in 2009, as well.
The cost was listed at $245, prompting auditors to comment, “This amount covered seven memberships at $35 each. It would be reasonable to see one membership for the Spencer County Clerk’s office to buy office supplies, etc. … Therefore, the additional six memberships, totaling $210, would not be necessary.”
Auditor Luallen referred the Spencer County Clerk’s 2010 audit report to the attorney general’s office.
Allison Martin, spokesperson for the attorney general’s office, said there is no set time frame that the office operates under to review referred audits because “each audit presents its own issues.”
Judge-Executive Karrer and County Attorney Ruth Hollan said aside from the civil suit currently going on between the county and the county clerk’s office in a continued effort to make the clerk’s office a fee-pooling office – about which they could not currently comment – the county is waiting to hear if anything comes down from the attorney general.
Without Puckett’s cooperation to make her office a fee-pooling office, the only authority the fiscal court has is to set the total limit of compensation for the deputy clerks.
The court cannot even set how much each deputy is paid or who is hired in the office, Hollan said.
The fiscal court set the maximum total salary for deputies at $253,044 in April. That number includes full-time salaries and wages, overtime wages, part-time salaries and wages, vacation and sick leave, health insurance, and employer match SS/retirement.
Salaries reported to the fiscal court, however, exceed that limit.
Karrer said the latest numbers indicate the clerk has already paid her deputies at least 74 percent of the amount allowed and could reach 100 percent some time in November, leaving more than a month in the clerk’s fiscal year.