(49) Section 129.06, Florida Statutes, states that upon
the final adoption of the budget, the budget so adopted shall regulate the expenditures of
the county and shall not be exceeded. Section 129.07, Florida Statutes, provides that it
is unlawful for the board of county commissioners to expend or to contract for the
expenditure in any fiscal year more than the amount budgeted in each fund’s budget
(i.e., the legal level of budgetary control is the fund level). Furthermore, Section
129.09, Florida Statutes, provides that a clerk of the circuit court, acting as county
auditor, who signs a warrant for payment of a claim or bill in excess of the expenditure
authorized by law or ordinance shall be personally liable for such amount.
(50) For the 1996-97 fiscal year, actual expenditures and other financing uses exceeded
budgeted expenditures and other financing uses ($306,511 and $495,050, respectively) by
$5,153 and $208,725 for the Public Safety 911 and Municipal Service Benefit Unit
(MSBU)
Driftwood Estates Special Revenue Funds, respectively. In addition, according to the
BCC-recorded budget for the 1997-98 fiscal year, actual expenditures exceeded budgeted
expenditures ($82,216) by $148,050 for the MSBU Driftwood Estates Special Revenue Fund as
of the time of our review in July 1998. These budget overexpenditures may have resulted
from deficiencies in the budget amendment procedures as discussed below.
(51) We recommend that the BCC and Clerk implement procedures to preclude the
occurrence of expenditures in excess of budgetary authority.
(52) The Chairman, in his written response to this finding, indicated that the
amount shown as expended in excess of appropriated amounts for the 1997-98 fiscal year was
the result of a clerical error in posting expenditures. As indicated in the finding, this
overexpenditure was noted at the time of our review in July 1998, and we acknowledge that
such errors can occur and affect interim budget-to-actual comparisons. Notwithstanding,
the BCC’s budgetary controls for monitoring expenditures should include procedures
for timely correcting any errors that may result in an inaccurate portrayal of budget
status.
Budget Amendments
(53) Our review of the actions taken by the County to amend the 1996-97 and 1997-98
fiscal years budgets disclosed deficiencies in the BCC’s budget amendment procedures.
These deficiencies diminished the effectiveness of the budget as a means of controlling
expenditures within available resources.
(54) Section 129.06(2), Florida Statutes, states that the board of county commissioners
at any time within a fiscal year may amend a budget for that year. Circumstances under
which the BCC may make such amendments, and the types of amendments permitted, are
prescribed in Sections 129.06(2)(a) through (f) and 129.06(3), Florida Statutes. Our
review of the actions taken by the County to amend the 1996-97 and 1997-98 fiscal years
budgets disclosed the following deficiencies in the BCC’s budget amendment
procedures:
· For the 1996-97 fiscal year budget, the BCC approved three budget amendments
totaling $148,969 in October and November of 1997, after the fiscal year-end. One
amendment for $10,000 was to reflect unanticipated revenues and the other two totaling
$138,969 were intradepartmental expenditure adjustments. Although the actual expenditures
for the funds amended would not have exceeded budgeted expenditures even if the amendments
had not been made, amendment of the budget after the fiscal year-end is contrary to
Section 129.06(2), Florida Statutes.
· Four interdepartmental expenditure amendments totaling $64,782 and two
interdepartmental expenditure amendments totaling $79,192 were made for the 1996-97 and
1997-98 fiscal years budgets, respectively, without BCC approval. All four 1996-97 fiscal
year amendments were approved by the BCC Chairman; however, there was no evidence of full
BCC approval.
· Five interdepartmental expenditure amendments totaling $275,014 for the 1996-97
fiscal year budget and one interdepartmental expenditure amendment for $5,400 for the
1997-98 fiscal year budget were not entered into the budget system timely relative to the
BCC’s approval. These amendments were recorded in the accounting records from one to
seven months after BCC approval. In the absence of timely recording of budget amendments
into the budgeting system, the County risks actual expenditures exceeding budgeted
expenditures (see paragraph 50).
· For two interdepartmental expenditure amendments totaling $81,199 and one
interdepartmental expenditure amendment for $123,624 for the 1996-97 and 1997-98 fiscal
years budgets, respectively, the BCC’s approval was not specific as to the purpose,
amount, or funding source of the amendment. Such elements are essential to the approval of
a budget amendment to ensure that proper action is taken to record the budget amendment as
approved by the BCC.
(55) We recommend that the BCC implement appropriate budgeting procedures to monitor
budgeted revenues and expenditures to ensure that budget amendments are prepared,
approved, and recorded in a timely manner and in compliance with Section 129.06(2),
Florida Statutes.
Budgetary Controls – Clerk of the Circuit Court Budget Requirements
(56) Contrary to Section 218.35(2)(a), Florida Statutes, the Clerk did not file the
Clerk’s budget relating to the State courts system with the State Courts
Administrator for the 1996-97 and 1997-98 fiscal years.
(57) Unless otherwise established by a resolution of the board of county commissioners
adopted pursuant to Section 145.022(1), Florida Statutes, and the concurrence of the
clerk, a clerk of the circuit court operates as a " county fee officer" in
carrying out the duties of clerk of the circuit court and of the board of county
commissioners, and as a " budget officer" in carrying out the duties of clerk of
the county court. The BCC adopted Resolution No. 93-16, which stipulates that the Clerk of
the Circuit Court of Walton County shall operate off of a fee system and fines authorized
by Florida Statutes.
(58) As a " county fee officer," the Clerk of the Circuit Court is required
by Section 218.35, Florida Statutes, to establish an annual budget for the Clerk’s
Office, which shall clearly reflect the revenues available to the Office and the functions
for which money is to be expended. As a " budget officer" with respect to the
Clerk’s duties as clerk of the county court, the Clerk deposits all revenues received
in connection with such duties to the appropriate BCC accounts, and the BCC appropriates
moneys to the Clerk’s office to pay the operational expenses related to the county
court function. The Clerk, functioning as clerk of the circuit and county courts and as
clerk of the BCC is required to prepare the budget in two parts: (1) a budget relating to
the State courts system, including recording, which is to be filed with the State Courts
Administrator and the BCC and (2) a budget relating to the requirements of the Clerk as
clerk of the BCC, county auditor, and custodian or treasurer of all county funds and other
county-related duties.
(59) Both the Clerk’s budget relating to the State courts system and budget
relating to the Clerk’s duties as clerk of the BCC were filed with the BCC for the
1996-97 and 1997-98 fiscal years. However, according to the State Courts
Administrator’s Office, the Clerk’s State courts system budget was not, contrary
to Section 218.35(2)(a), Florida Statutes, filed with the State Courts Administrator for
either of those fiscal years. We recommend that the Clerk file the 1998-99 fiscal year
State courts system budget with the State Courts Administrator and obtain clarification as
to whether prior fiscal year budgets should be filed as well.
(60) The Clerk’s accounting records did not, in some instances, accurately reflect
the Clerk’s budget.
(61) Our audit disclosed the following deficiencies in the Clerk’s procedures for
recording the approved budget, resulting in an unbalanced budget in the accounting records
for the Clerk’s funds:
· For the 1996-97 fiscal year budget, an entry was made to the Clerk’s accounting
records to increase budgeted expenditures by $24,615 for the Clerk of County Courts fund
without a corresponding entry to increase estimated revenues. There was no documented
basis for this entry, nor was it of record approved by the BCC. As a result, the
Clerk’s accounting records did not accurately reflect the amount appropriated for
expenditures for this fund.
· For the 1997-98 fiscal year budget, as of the time of our review in July 1998, the
Clerk’s accounting records did not reflect a budgeted amount for revenues in any of
the Clerk’s three funds (Clerk of County Courts, Clerk of Circuit Courts, and County
Comptroller).
(62) We recommend that the Clerk modify procedures as appropriate to ensure the proper
recording of the budget as approved by the BCC to ensure compliance with applicable laws.
Budget Reporting Requirements
(63) Contrary to Section 218.36, Florida Statutes, for the 1996-97 fiscal year, the
Clerk did not remit excess fees to the BCC in a timely manner and did not provide the BCC
with a detailed report of expenses. Contrary to Section 218.36(3), Florida Statutes, the
BCC did not notify the Governor of the Clerk’s noncompliance.
(64) Section 218.36(1), Florida Statutes, states that each county officer who receives
any expenses or compensation in fees, commissions or other remuneration collected by that
county officer, shall keep a complete record of such funds and shall make an annual report
to the board of county commissioners within 31 days of the close of his or her fiscal
year. On or before the date for filing the annual report, each county officer shall pay
into the county general fund all excess funds remaining in the county officer’s
budget at the end of the fiscal year. On the 32nd day following the close of
the fiscal year, the board of county commissioners shall notify the Governor of the
failure of any county officer to comply with the provisions of Section 218.36, Florida
Statutes.
(65) Contrary to Section 218.36(2), Florida Statutes, for the 1996-97 fiscal year, the
Clerk did not remit excess fees to the BCC until March 13, 1998, 164 days after the close
of the fiscal year-end, at which time he remitted $175,446.88 of excess moneys to the BCC.
The remittance was not accompanied by a detailed report showing how the amount was derived
or an explanation as to the reason for the untimeliness of the remittance; however, the
untimely bank reconciliations as discussed in paragraph 69 may have contributed to the
delay. Furthermore, the Clerk did not comply with Section 218.36(1), Florida Statutes,
which requires that the Clerk, as a fee officer, provide the BCC with a detailed report
specifying the purposes, character, and amounts of all official expenses, and the BCC,
contrary to Section 218.36(3), Florida Statutes, did not notify the Governor of the
Clerk’s noncompliance with Section 218.36, Florida Statutes.
(66) We recommend that the Clerk provide the BCC with the required report and give
appropriate attention to the budget requirements as specified by law to ensure future
compliance. The BCC should take appropriate action to ensure compliance with Section
218.36(3), Florida Statutes.
Cash in Bank Bank Reconciliations
(67) Our review of the Clerk’s bank reconciliation procedures disclosed that bank
accounts were not promptly reconciled during and subsequent to the 1996-97 fiscal year. In
the event of a loss of cash, failure to reconcile bank accounts could result in a failure
to detect and recover the loss.
(68) An essential element of internal control over assets entrusted to a governmental
organization is the periodic comparison of such assets actually determined to be on hand
with the recorded accountability for the assets. Because of the susceptibility of cash to
loss, this is particularly important for cash on deposit with banking institutions.
Accountability for such deposits is accomplished by the preparation of bank
reconciliations as soon as possible after the receipt of monthly bank statements showing
the amounts in the accounts according to the records of the banks. The Clerk was
responsible for the reconciliation of all bank accounts of the BCC and the Clerk. At
September 30, 1997, the Clerk maintained 49 bank accounts (excluding investment accounts)
into which public funds of the Clerk and the BCC were deposited. The total cash held on
deposit in these accounts (excluding accounts maintained by component units of the BCC) at
September 30, 1997, was $7,135,810 and $1,358,775 for the BCC and the Clerk, respectively.
(69) Our review of the Clerk’s bank reconciliation procedures disclosed that bank
accounts of both the BCC and the Clerk were not promptly reconciled during and subsequent
to the audit period. At the time of our review in June 1998, 21 of the BCC’s and
Clerk’s bank accounts had not been reconciled to the accounting system general ledger
since September 1997. Although the Clerk had performed a " bank statement
reconciliation," this function did not encompass a reconciliation to the general
ledger. Such reconciliations were mere recomputations of the bank statements and did not
provide the control feature of reconciling the bank’s cash balance to the recorded
accountability. Two of the accounts not reconciled were the pooled cash bank accounts for
both the BCC and the Clerk (which are used for the primary operations of the two offices)
that held cash balances at May 31, 1998, of $9,958 (with an additional $13,459,000 being
held in overnight repurchase agreements) and $105,008 (with an additional $1,157,000 being
held in overnight repurchase agreements), respectively, and had monthly check
disbursements of $2,899,342 and $31,506, respectively, per the bank statements.
(70) To assure that accountability is maintained for cash on deposit with banks, we
recommend that proper bank reconciliations be performed immediately upon receipt of the
bank statements.
Check Writing
(71) Our audit tests disclosed deficiencies in the accountability for checks issued by
the Clerk to disburse BCC funds. These deficiencies increase the possibility of
unauthorized disbursements.
(72) In addition to establishing adequate internal controls over the issuance of checks
by means of separation of duties (see paragraph 39), other controls should be implemented,
including the use of printed prenumbered checks, the use of such checks in sequential
order, and prohibition of signing checks in advance. Our audit tests disclosed the
following deficiencies in the accountability for checks issued by the Clerk to disburse
BCC funds:
· Eighteen checks totaling $2,991,457 were issued using counter checks that did not
contain a preprinted check number or bank account name on the checks.
· Twenty-seven checks totaling $711,380 were issued that did contain a preprinted
check number; however, a manually printed check number (different from the preprinted
check number) was marked on the check (for 15 of the checks the preprinted check number
had been manually marked through on the check). On the bank statement the preprinted check
number was referenced, but in the accounting records the manually printed check number was
entered for the expenditure.
· Several checks were used out of sequence. For example, checks numbered 53099 through
53409 were issued in October 1997, with the exception of checks numbered 53125 and 53390
through 53392, which were issued in September 1997.
· We observed one check that had been signed in advance by the BCC Chairman prior to
being made payable to a specific vendor at the time of the signature (the check was not
completed as to date, amount, payee, and purpose).
(73) The above-noted control deficiencies over check writing, together with the lack of
timely bank reconciliations discussed in paragraph 69, increases the possibility of
unauthorized disbursements. To assure proper accountability over disbursements, we
recommend that prenumbered checks be used to make all disbursements and that proper
accountability over such checks, including sequential use, be maintained.
Stale-Dated Checks
(74) Contrary to Sections 717.117 and 717.119, Florida Statutes, checks written by the
Clerk that had been outstanding for over a year and constituting unclaimed property as
defined by Sections 717.113 and 717.115, Florida Statutes, had not been reported or
remitted to the Florida Department of Banking and Finance.
(75) Sections 717.113 and 717.115, Florida Statutes, state that all intangible property
and unpaid wages, including wages represented by unpresented payroll checks, owing in the
ordinary course of the holder’s business that have remained unclaimed by the owner
for more than one year after becoming payable are presumed abandoned. Furthermore,
Sections 717.117 and 717.119, Florida Statutes, require that any person holding abandoned
property shall report such property to the Florida Department of Banking and Financing
(FDBF) by May 1 of each year for the previous calendar year and simultaneously deliver
such property to the FDBF.
(76) Our review of the Clerk’s accounting records disclosed that as of May 22,
1998, payroll and other expenditure checks for the BCC and the Clerk totaling $11,951.94
and $4,878.40, respectively, had been outstanding in excess of one year. These included
payroll and other expenditure checks for the BCC and the Clerk totaling $7,982.86 and
$2,309.65, respectively, that had been outstanding in excess of one year as of December
31, 1997, and were required to be reported and remitted to the FDBF as of May 1, 1998.
Contrary to the above-noted law, these unclaimed outstanding checks, which constitute
unclaimed property as contemplated by Chapter 717, Florida Statutes, had not been reported
or remitted to the FDBF as of the time of our review in July 1998. Subsequent to our
review, the Clerk on August 28, 1998, remitted $1,117.50 of the $2,309.65 to the
FDBF. We
recommend that the BCC and the Clerk take appropriate action to file the required report
and deliver any remaining unclaimed moneys to the FDBF.
Electronic Transfers of Funds
(77) Deficiencies in the Clerk’s procedures over electronic transfers of moneys
limited management’s assurance that electronic funds transfers were properly
authorized, processed, and documented.
(78) Section 136.06(3), Florida Statutes, authorizes the County to transfer funds from
one depository to another depository or institution by electronic, telephonic, or other
means. The Clerk used electronic funds transfers to move moneys to and/or from two bank
accounts to and/or from the United States Department of Treasury, Florida Department of
Revenue, and the Florida State Board of Administration (SBA). For example, transfers to
and from the SBA accounts for the period October 1, 1996, through April 30, 1998, totaled
$8,574,600. Our review of controls established for electronic transfers of money disclosed
the following deficiencies regarding transfers to and from the SBA:
· The Clerk entered into written agreements with the SBA and one of the banks.
Although the other bank provided us with a copy of an agreement stating its policies
regarding electronic funds transfers, the agreement was not signed by representatives of
the Clerk and the bank. In addition, the agreement did not specify the location and
accounts where funds could be transferred, amounts that could be transferred, and the
employees authorized to make the transfers and to make changes in locations where funds
could be transferred. Good internal control over electronic fund transfers requires the
use of written agreements with each financial institution that moneys are to be
transferred to or from. Such agreements should specify the location and accounts to which
transfers can be made, amounts that can be transferred, and the employees authorized to
make such transfers and to make changes in locations where funds can be transferred.
· The funds transfer agreement for one bank specified two employees who were
authorized to transmit funds; however, both employees have been reassigned to other
positions and are no longer responsible for transmitting funds. Additionally, one employee
who was only authorized to transmit funds held with the SBA was reassigned to another
position and is no longer responsible for transmitting funds. Appropriate changes to
effect such reassignments had not been made to the funds transfer agreements as of the
time of our review in July 1998.
· The Clerk had not established procedures requiring complete documentation for each
electronic transfer of moneys. Our test of nine transfers to and from SBA accounts
totaling $8,574,600 disclosed that, in each instance, the documentation did not include a
transaction reference number and the purpose of the transfer. In five instances,
appropriate authorization was not evident and, in one instance, the location (i.e., bank
and account) of the transfer was not disclosed, although we were able to verify that the
funds were transmitted to an authorized bank account.
(79) Although our audit did not disclose any transfers for unauthorized purposes, the
above deficiencies limit management’s assurance that electronic funds transfers were
properly authorized, processed, and documented. We recommend that the Clerk adopt policies
and procedures requiring electronic funds transfer agreements for all bank accounts to and
from which electronic transfers can be made. Such agreements should specify the
responsibilities of the Clerk and the banks and specify the location and accounts where
funds can be transferred, amounts that can be transferred, and persons authorized to make
transfers and changes in locations where funds can be transferred. The policies and
procedures should also address the documentation necessary to support each transaction. We
also recommend that the Clerk review all electronic funds transfer agreements and ensure
that they are updated to indicate employees currently authorized to make transfers.
Investments (Interest Earnings)
(80) Section 28.33, Florida Statutes, assigns responsibility to the Clerk for
estimating the financial needs of the BCC and investing any excess moneys in designated
depository banks in interest-bearing certificates or in any direct obligations of the
United States. Also, Section 28.33, Florida Statutes, specifies procedures for making
investments and for distributing investment income. Sections 125.31, 218.415, and 219.075,
Florida Statutes, also provide limitations on the authorized types of investments for
County funds. At September 30, 1997, reported investments of the BCC and the Clerk totaled
approximately $23,910,052 and $23,339, respectively, excluding component units.
Investments of BCC moneys consisted of pooled investments with the Florida State Board of
Administration, the Florida Counties Investment Trust Fund, and deferred compensation
mutual funds. Investments of Clerk moneys consisted of deferred compensation mutual funds.
Investment Plan
(81) The BCC’s and the Clerk’s investment policy does not address all of the
requirements of Section 218.415, Florida Statutes, and, contrary to the investment plan,
the Clerk or designee did not prepare an investment report. In addition, performance
measures were not developed, contrary to Section 218.415(3), Florida Statutes.
(82) Section 218.415, Florida Statutes, requires that investment activity of a unit of
local government must be consistent with a written investment plan adopted by the
governing body or investment activity must be conducted in accordance with alternative
investment guidelines as set forth in Section 218.415(15), Florida Statutes. The BCC and
the Clerk adopted an investment policy on July 30, 1996, which does not, in some
instances, comply with the requirements of Section 218.415, Florida Statutes.
Specifically, the investment plan did not:
· Prohibit or limit reverse repurchase agreements to transactions where the proceeds
are intended to provide liquidity and for which the County has sufficient resources and
expertise (Section 218.415(5), Florida Statutes).
· State that the investment portfolio will be structured in such a manner as to
provide sufficient liquidity to pay obligations as they come due (Section 218.415(6),
Florida Statutes).
· Establish limits on portfolio issuers (Section 218.415(7), Florida Statutes).
· Require that internal controls and procedures be reviewed by the independent auditor
as part of the periodic financial audit (Section 218.415(13), Florida Statutes).
(83) Further, although the investment plan required preparation of an investment
report, no such investment report was provided for our review. Additionally, contrary to
Section 218.415(3), Florida Statutes, the BCC and the Clerk did not develop performance
measures appropriate for the nature and size of the public funds being invested. We
recommend that the investment policy be revised to comply with all of the investment
policy requirements set forth in Section 218.415, Florida Statutes, and to provide for
performance measures as required by Section 218.415(3), Florida Statutes. Additionally,
the Clerk or designee should prepare the investment report required by the investment
plan.
