1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12
FINDINGS AND RECOMMENDATIONS
(24) The Walton County Board of County Commissioners
(BCC) and the Walton County Clerk of the Circuit Court (Clerk) have been assigned
responsibilities by law for performing numerous functions and duties, as described in the BACKGROUND section
of this report. The BCC is funded primarily from ad valorem and other taxes, moneys
received from other governmental agencies, and fees and charges for services and licenses.
The Clerk is funded primarily from fees, charges for services, and appropriations from the
BCC. Because of the fiduciary responsibilities associated with the handling of those
public funds and the accomplishment of the functions set forth in law, certain constraints
are imposed on all governmental agencies in this State:
· Some such constraints apply to all or most political subdivisions in the State of
Florida, including Section 112.061, Florida Statutes, which governs per diem and travel
expenses of public officers, employees, and authorized persons; Chapter 112, Part III,
Florida Statutes, which establishes a code of ethics for public officers and employees;
Chapter 218, Florida Statutes, which includes various financial matters pertaining to
political subdivisions, including counties; Section 286.011, Florida Statutes, commonly
referred to as the Sunshine Law; and Section 287.055, Florida Statutes, the
Consultants’ Competitive Negotiation Act.
· Other laws apply to specific types of local government entities, including Chapter
28, Florida Statutes, Clerks of the Circuit Courts; Chapter 125, Florida Statutes, County
Government; Chapter 129, Florida Statutes, County Annual Budget; Chapters 130 through 132,
Florida Statutes, County bonds and refunding thereof; Chapter 136, Florida Statutes,
County Depositories; Chapter 145, Florida Statutes, Compensation of County Officials;
Chapter 219, Florida Statutes, County Public Money; and Chapter 274, Florida Statutes,
Tangible Personal Property. The controls established by the BCC and the Clerk must be
designed to assure compliance with applicable legal requirements as well as provide for
the safeguarding of assets.
(25) Our audit of the BCC and the Clerk disclosed numerous instances in which the BCC
and/or the Clerk had not established the controls necessary to assure the safeguarding of
their resources and compliance with applicable legal requirements or had not established
adequate records systems to demonstrate compliance with such requirements. These instances
are described under appropriate subheadings below, together with recommendations for
corrective actions. Because of the nature of certain transactions discussed in this
report, our audit report will be filed with the Office of the State Attorney, First
Judicial Circuit, for a determination of whether any criminal violations of law occurred
in connection with these transactions.
(26) The Chairman of the Board of County Commissioners and the Clerk, in their
written responses, indicated disagreement with several of the findings included in this
report and requested that those findings and/or related recommendations be removed from
the report. Because the Chairman and the Clerk generally did not provide additional
documentation to support their positions and refute the findings, we have not, in most
instances, removed the findings and/or recommendations. Where appropriate, we have
included clarifications to address the Chairman’s and the Clerk’s responses. The
clarifications are presented in bold under the appropriate subheadings. Cooperative
efforts between the Clerk and the BCC will be required to address many of the findings in
this report and to establish processes and methods that will assure an efficient and
effective county government for the citizens of Walton County.
Commissioner Responsibilities
(27) During the audit period, individual members of the BCC appear to have exercised
the power to carry on County government without the benefit of action by a majority of the
BCC.
(28) Article VIII, Section 1.(e) of the Constitution of the State of Florida, provides
that the governing body of a county shall be a board of commissioners composed of five or
seven members. The powers and duties of a board of county commissioners are set forth in
Section 125.01, Florida Statutes (see paragraph 3), which states that the legislative and
governing body of a county shall have the power to carry on county government. We are
unaware of any statutory authority that confers the exercise of such power on a county
commissioner other than through participation with the other county commissioners in a
public board meeting.
(29) The Attorney General, in Opinion No. 83-100, stated, " Generally, a county
commission must act as a body and an individual commissioner cannot, unless authorized by
law, make official decisions or bind the county. See Kirkland v. State, 97 So. 502
at 508 (Fla. 1923), wherein the Florida Supreme Court stated: ‘The people, for whom
the county commissioners as a board are vested with the power to manage and control the
property of the county, have the right to the combined information, experience and
judgment of all the members of the board, or a majority of them, in legal session,
when a majority of them, and at no other time, can act with any binding effect upon the
county.’ (Emphasis supplied.)"
(30) Based on representations by the BCC’s Administrative Supervisor, as
corroborated by the examples discussed below, individual members of the BCC appear to have
exercised the power to carry on County government without the benefit of action by a
majority of the BCC:
· For each of the five commission districts, the Commissioner representing a
particular district and the assigned road foreman (see paragraph 238) made decisions as to
priorities for road paving or other improvements for the district. For example, as
discussed in paragraph 189, road paving and other improvements done on behalf of the
Walton County District School Board were approved by the former District 3 Commissioner
without full BCC approval, of record. No formal written road improvement plans for the
County’s five districts were adopted for submission to the BCC for approval. At its
November 27, 1996, meeting, the BCC approved the establishment of a Countywide system for
evaluating paving needs, which would require full BCC approval. At its June 23, 1998,
meeting, the BCC voted to adopt a centralized road department plan. As of the time of our
review in July 1998, the BCC had not established written policies and procedures
addressing the centralized road department plan.
· Individual Commissioners had the authority to make decisions and initiate actions
regarding bids for the purchase and sale of heavy equipment. As indicated in paragraph
114, we noted that several heavy equipment items were disposed of without obtaining BCC
approval prior to disposition. At its November 27, 1996, meeting, the BCC approved the
establishment of a central purchasing office and full BCC approval of purchases or sales
of heavy equipment. At its September 9, 1997, meeting, the BCC appointed a committee to
open and record bid results. Subsequently, on December 9, 1997, the BCC adopted written
policies and procedures regarding purchases; however, such policies and procedures did
not, at the time of our review in July 1998, address the sale of heavy equipment.
· Individual Commissioners had the authority to hire, fire, and promote employees
without full BCC approval. At its November 25, 1997, meeting, the BCC appointed a
committee to review employment applications and present recommendations for employment to
the BCC. However, the BCC’s written personnel policies did not, at the time of our
review in July 1998, make reference to the committee and its responsibilities.
· In some instances, budget amendments were approved by the BCC Chairman but were not,
of record, approved by the full BCC (see paragraph 54).
(31) We recommend that the BCC continue its efforts to preclude Commissioners from
acting in an individual capacity when conducting County business. In doing so, the BCC
should ensure that written policies and procedures are established or modified to
specifically prescribe those actions requiring BCC approval, such as prioritization of
road projects, sales of heavy equipment, hiring of employees, and budget amendments.
Management Controls
(32) The accomplishment of an organization’s responsibilities (see paragraphs 3
through 8 for a description of the responsibilities of the BCC and the Clerk) requires the
establishment of certain management processes to assure that the resources available to
the organization are properly identified, acquired, safeguarded, and utilized. The
BCC’s and the Clerk’s stewardship responsibilities associated with such
resources, including public funds, carry with them a responsibility to assure that
management controls provide for the effective and efficient use of the resources in
accordance with applicable laws, ordinances, and other guidelines. Our evaluations of the
BCC’s and the Clerk’s management controls are discussed under appropriate
subheadings below.
Policies and Procedures
(33) The BCC and the Clerk had not established adequate written policies or procedures
for several of their accounting and other business-related functions. Such policies and
procedures are essential to providing both management and employees with guidelines
regarding the proper conduct of County business and the effective safeguarding of assets
and ensuring that County records provide reliable information necessary for management
oversight.
(34) Our review of the operations of the BCC and the Clerk for the audit period
disclosed that these entities did not have adequate written policies or procedures in
effect for many of the accounting systems and business-related functions necessary to the
accomplishment of their respective responsibilities. For example, the BCC had not
established written policies or procedures documenting controls over budget preparation,
cash receipts, and accounts receivable. Likewise, the Clerk had not established written
policies or procedures documenting controls over budget preparation, electronic funds
transfers, certain accounts receivable, and disbursement processing (including pre-audit
of proposed expenditures of the BCC and the Clerk). Those instances of noncompliance or
lack of adequate internal controls, which may have been the result, at least in part, of
the lack of written policies or procedures, as well as instances where actual practices
are not consistent with established policies, are discussed under appropriate subheadings
in this report.
(35) Written policies and procedures adopted by the BCC or the Clerk, as appropriate,
which clearly define the duties and responsibilities of employees performing accounting
and other business–related functions, are essential to providing both management and
employees with guidelines regarding the proper conduct of County business and the
effective safeguarding of assets and ensuring that County records provide reliable
information necessary for management oversight. Additionally, written policies and
procedures, if properly designed, communicated to employees, and effectively placed in
operation, would provide management and the public with additional assurances that County
activities are conducted in compliance with applicable laws, ordinances, and other
guidelines.
(36) Written policies are important and necessary. However, to be effective, it is not
necessary that written policies be voluminous, extremely detailed, and attempt to cover
every conceivable possibility that can be thought of. They can be concise, plainly stated,
provide general guidance, and still be effective.
(37) During the 1997-98 fiscal year, both the BCC and the Clerk adopted written
policies and procedures for selected areas. For example, on December 9, 1997, and June 23,
1998, the BCC adopted written policies and procedures regarding purchasing and tangible
personal property, respectively, while the Clerk implemented written policies and
procedures regarding personnel matters effective June 5, 1998. We recommend that the BCC
and the Clerk, as applicable, continue their efforts to adopt comprehensive written
policies and procedures consistent with applicable laws, ordinances, and other guidelines.
In doing so, the BCC and the Clerk should ensure that the written policies and procedures
address the instances of noncompliance and internal control deficiencies discussed in this
report.
Separation of Duties
(38) The BCC’s and the Clerk’s organizational structure and assignment of
employee responsibilities did not provide for an adequate separation of duties in certain
areas of operations, thus increasing the possibility that errors or irregularities could
occur and not be detected in a timely manner.
(39) An essential element of an effective system of internal control is the adequate
separation of duties to reduce the opportunity for any one individual to be in a position
to both perpetrate and conceal errors or irregularities in the normal course of the
individual’s duties. Our review of the BCC’s and the Clerk’s organizational
structure and assignment of employee responsibilities observed to be in effect at the time
of our review, and also in effect during at least a portion of the audit period, disclosed
the following instances in which the BCC or the Clerk had not provided for an adequate
separation of duties in that the same employee performed incompatible functions:
· The Clerk’s former Director of Management Information Systems/Finance (resigned
effective May 4, 1998) was an authorized check signer and had access to blank checks. This
employee was also responsible for assigning and maintaining employee passwords and access
levels and had accounting system update capability.
· The Clerk’s former Finance Supervisor was responsible for the preparation,
approval, and posting of journal entries, including entries to record cash receipts and
expenditures by manual checks. In addition to these record keeping functions, the former
Finance Supervisor also prepared checks (both system-printed and manual), recorded
transactions to the accounting records, and reconciled the bank statements.
· Electronic funds transfer agreements with the Florida State Board of Administration
(SBA) show that the Clerk and two former Clerk employees (currently employed by the BCC)
as being authorized to transmit or withdraw funds from the Clerk’s accounts with the
SBA and to notify the SBA of changes to account information.
· During the period December 1997 through May 1998, a Clerk employee who was
responsible for the accounting functions of the Clerk also was an authorized check signer,
had access to checks, prepared checks, recorded transactions to the accounting records
(including adjusting entries), made deposits, and performed bank
reconciliations.
Subsequent to our audit inquiry, this employee was removed as an authorized check signer
and the function of preparing checks was assigned to a different employee.
· During the period November 1997 through August 1998, a BCC employee was responsible
for recording amounts received from patients for emergency medical services (EMS) into the
subsidiary accounts receivable records, generating billings, receiving and remitting
payments received on account to the Clerk’s Finance Office, and updating the
subsidiary EMS accounts receivable records for payments received on account. Subsequent to
our audit inquiry, the responsibility for receiving and remitting payments received on
account to the Clerk’s Finance Office was assigned to a different employee.
(40) While our audit tests did not disclose errors or irregularities resulting from
these control deficiencies, the lack of separation of incompatible duties in each of these
areas of the BCC’s or the Clerk’s operations increases the possibility that
errors or irregularities may occur and not be detected on a timely basis. While the BCC
and the Clerk may have limited staff available to perform these functions, in view of the
potential for errors and irregularities, as well as the internal control deficiencies
discussed in this report related to bank reconciliations and check writing (see paragraphs
67 through 73), we recommend separating, to the extent practicable, the functions listed
above so that no one employee has control of all aspects of a transaction (i.e., both
recording responsibility and custody of assets).
Journal Entries
(41) The County’s internal control over journal entries should be enhanced to
ensure that all journal entries are properly recorded, contain an adequate explanation of
the entry, and contain evidence of review and approval by supervisory personnel.
(42) The Clerk used journal entries to make adjustments to the accounting records,
correct previous recording errors in the accounting system, to record electronic transfer
of moneys, and to record cash receipts and expenditures by manual check. The results of
our tests of journal entries indicate that many journal entries did not contain adequate
explanations of the entries and evidence of review and approval by supervisory personnel.
Under these conditions, there is an increased risk that improper entries could be made
without timely detection. Our tests also disclosed several journal entries that were not
properly recorded. For example, one journal entry for $17,500 to record a transfer of
moneys from one BCC bank account to another was recorded at the wrong amount and to the
wrong account code. We recommend that procedures be enhanced to ensure that all journal
entries are properly recorded, include evidence of supervisory review and approval, and
are supported by documentation to explain the purpose of the entry.
Budgetary Controls – Board of County Commissioners
(43) Chapter 129, Florida Statutes, establishes a budget system for the boards of
county commissioners, including requirements for the preparation, adoption, execution, and
amendment of an annual budget. Section 129.025(1), Florida Statutes, provides that each
board of county commissioners may designate a county budget officer to carry out the
duties set forth in Chapter 129, Florida Statutes. In the absence of such a designation,
Section 129.025(1), Florida Statutes, provides that the clerk of the circuit court or the
county comptroller, if applicable, shall be the budget officer. Pursuant to the August 26,
1997, Joint Stipulation (see paragraph 6), the BCC established an Office of
Management and Budget (OMB) and staffed the OMB with a county budget officer to carry out
the duties set forth in Chapter 129, Florida Statutes. Prior to that date, the county
budget officer duties prescribed in Chapter 129, Florida Statutes, were performed by the
Clerk. The BCC’s budgeted appropriations for expenditures (excludes interfund
transfers and reserves) for all governmental fund types and component units totaled
$30,182,868 and $40,188,447 for the 1996-97 and 1997-98 fiscal years, respectively. As
discussed below, our review of the budget practices of the BCC and the Clerk disclosed
several deficiencies and/or violations of applicable law which could result in over- or
under-taxing and inadequate information being provided to oversight authorities and
taxpayers.
Budget Preparation
(44) Contrary to Section 129.01, Florida Statutes, the BCC, in preparing its 1996-97
and 1997-98 fiscal years budgets, did not properly consider all beginning fund equities
available from prior fiscal years. The amounts of such balances brought forward have a
direct impact on the amount of additional funds to be raised to finance County operations.
(45) Section 129.01, Florida Statutes, states that the budget of the boards of county
commissioners shall be balanced; that is, the total of the estimated receipts, including
balances brought forward, shall equal the total of the appropriations and reserves.
Contrary to this law, the BCC, in preparing its 1996-97 and 1997-98 fiscal year budgets as
advertised and adopted, did not properly consider all beginning fund equities available
from prior fiscal years. Although the BCC’s general purpose financial statements for
the 1995-96 fiscal year showed a total ending fund balance of $24,697,947 for all
governmental fund types and component units, the BCC’s 1996-97 fiscal year budget
only showed a " Cash Forward" balance of $2,982,388. Similarly, although the
BCC’s general purpose financial statements for the 1996-97 fiscal year showed a total
ending fund balance of $32,469,028 for all governmental fund types and component units,
the BCC’s 1997-98 fiscal year budget only showed a " Cash Forward" balance
of $7,271,512.
(46) Fund equity represents a governmental entity’s net available resources. Some
portion of ending fund equity may not be available for immediate expenditure in the
subsequent fiscal year; however, it provides a better measure of a governmental
entity’s resources available for appropriation than does a cash balance. Estimated
prior year ending fund equities should be carefully considered and included in the budget
as the amounts of such balances brought forward have a direct impact on the amount of
additional funds to be raised to finance County operations. If balances brought forward
are significantly underestimated, the amount of taxes or other revenue sources
contemplated in the proposed budgets may be increased beyond those amounts necessary to
carry out planned expenditures. We recommend that the BCC, as required by Section 129.01,
Florida Statutes, consider the effect of all beginning fund equities when preparing future
annual budgets.
(47) The Chairman, in his written response to this finding, stated that reserves for
contingencies were included in the annual budget rather than fund equities and that there
is no justification for the conclusion that fund equities were not considered when
adopting the budget. The Chairman is apparently referring to the cash balances brought
forward as these were the only amounts shown in the budgets as having been carried
forward. As indicated in paragraph 46, cash balances are not indicative of the resources
carried forward and available for the subsequent fiscal year.
_________________
