33 OFFICE OF THE STATE AUDITOR PHIL BRYANT AUDITOR INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS July 27, 1998 Members of the Board of Supervisors Jefferson Davis County, Mississippi We have audited the primary government financial statements of Jefferson Davis County, Mississippi, as of and for the year ended September 30, 1997, and have issued our report thereon dated July 27, 1998. The auditor's report on the primary government financial statements is modified to reflect that the primary government financial statements do not include the financial data of the county's component units. We conducted our audit in accordance with generally accepted auditing standards and the procedures prescribed by the State Auditor, and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. As required by the state legal compliance audit program prescribed by the Office of the State Auditor, we have also performed procedures to test compliance with certain state laws and regulations. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the county's compliance with these requirements. Accordingly, we do not express such an opinion. The results of our procedures and our audit of the primary government financial statements disclosed certain immaterial instances of noncompliance with state laws and regulations. Our findings and recommendations and your responses are included in the accompanying Schedule of Findings. This report is intended for the information of management. This is not intended to limit the distribution of this report, which is a matter of public record. PHIL BRYANT RAMONA HILL, CPA State Auditor Director, Financial and Compliance Audit Division 34 JEFFERSON DAVIS COUNTY (This page left blank intentionally) 35 JEFFERSON DAVIS COUNTY SCHEDULE OF FINDINGS 36 JEFFERSON DAVIS COUNTY (This page left blank intentionally) JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended September 30, 1997 37 A. Findings - Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of the Primary Government Financial Statements Performed in Accordance With Government Auditing Standards Chancery Clerk. 97-1. Finding Section 27-105-315, Miss. Code Ann. (1972), requires financial institutions serving as depositories for county funds to place on deposit with the Chancery Clerk eligible securities in an amount equal to 105% of the maximum sum to be placed on deposit in such financial institution at any one time exclusive of the amount insured by federal insurance. At January 31, 1997, the county=s deposits were 17.3% undercollateralized. Recommendation The Chancery Clerk should monitor the county=s deposits to ensure they are adequately collateralized in accordance with state law. Chancery Clerk=s Response I will contact the depository and request compliance with Section 27-105-315, Miss. Code Ann. (1972). The securities are to collateralize all county funds and should be monitored on a monthly basis. Justice Court Clerk. 97-2. Finding Section 7-7-211, Miss. Code Ann. (1972), gives the Office of the State Auditor the authority to prescribe accounting systems. We noted serious internal control weaknesses in the operation of the Justice Court Office. A prescribed receipt was not written for all collections. A separate set of receipts, which were not posted to the journals, was maintained. Daily deposits were not made, which allowed cash to accumulate. The method of payment (cash or check) was not always indicated on the receipts. The amounts on the deposit slips did not correspond to the receipts. All collections were not settled to the proper authorities on a monthly basis. Recommendation The Justice Court Clerk should comply with the accounting system prescribed in the Mississippi County Financial Accounting Manual. Justice Court Clerk=s Response The Justice Court Clerk did not respond. Auditor’s Note The Justice Court Clerk resigned on August 18, 1998. There is an ongoing investigation by the Office of the State Auditor and the District Attorney=s Office. JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended September 30, 1997 38 Tax Collector. 97-3. Finding Section 7-7-211, Miss. Code Ann. (1972), gives the Office of the State Auditor the authority to prescribe accounting systems. As reported in the prior year audit report, the cash journal was not posted as required, and the bank account was not reconciled to the cash journal. Also, the amount of legislative credit posted to the journal as due from the state was not reconciled monthly to the amount received from the state. Recommendation The Tax Collector should post the cash journal and reconcile the bank account to the cash journal as prescribed in the Mississippi County Financial Accounting Manual. Also, the amount of legislative credit due from the state should be reconciled monthly. Tax Collector's Response I will reconcile the amount of legislative credit from the state to the amount posted in the journal or actually received each month. 97-4. Finding Section 27-29-11, Miss. Code Ann. (1972), requires the Tax Collector to settle all taxes collected for the county by the twentieth of the next month following the month of collection. As reported in the prior year audit report, all taxes collected were not settled monthly. Personal property taxes, totaling $177,439 were collected in February, 1997, but were not settled until May, 1997. Also, some commissions remained unsettled at the end of the audit year. Recommendation The Tax Collector should settle monthly all county taxes and commissions. Tax Collector's Response All taxes are settled on or before the twentieth of each month. However, I did not realize that the report had not been run for the month of February. When I began to document my reports, I realized this one was missing. I now run them one at a time. JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended September 30, 1997 39 97-5. Finding We noted the following internal control weaknesses in the operation of the Tax Collector=s Office: a. Daily checkup of individual cash drawers was not recapped by cash and check amounts received and reconciled to the daily deposits. b. The bookkeeper did not open and close each day’s business in the computer system. By not closing each day, receipts and other information in the computer could be changed. c. Several clerk’s worked out of one cash drawer, and the cash drawers were not locked. Recommendation The Tax Collector should take the following actions to correct the above weaknesses: a. Daily checkup of individual cash drawers should be recapped by cash and check amounts and reconciled to the daily deposits. To facilitate this, each receipt should indicate whether payment was by check or cash. b. The bookkeeper should close each day’s business in the computer system at the end of the business day. Clerk’s should only have access to the current day’s transactions. Changes to information in the computer system should be sufficiently explained in a log and approved by the Tax Collector. c. Each clerk should have his/her own cash drawer, and have the capability of locking the drawer. Tax Collector’s Response a. We will conduct daily checkups and indicate on each receipt if the transaction was paid by cash or check. b. The bookkeeper or Tax Collector will close each day’s business and any changes will be logged. c. Each clerk will be given a separate drawer with lock and key. Service Organization - Delta Computer Systems, Inc. 97-6. Finding Several systems supplied by Delta allow edit and deletion of critical records. Land redemption, Justice Court Office and Tax Collector’s Office along with other systems, require an unaltered numbered original to ensure adequate internal control. Delta software packages can be used with or without prenumbered original documents. JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended September 30, 1997 40 Recommendation Processes that require original unaltered documents with a sequential preassigned number should be modified to allow voiding but not edit or deletion. Counties using these systems should use prenumbered originals. Service Organization’s Response The application software is incapable of determining what type of paper is being used by the customer, thus incapable of assuring the use of prenumbered forms. The use of prenumbered forms should be directed to the county, not Delta. As you note, Delta supports prenumbered forms. There is no more we can do. If deletion of a critical record is allowed or occurs, the event is recorded in a log file for most releases of the software and will be in full effect upon year 2000 upgrades. B. Findings - Independent Auditor's Report on Compliance With State Laws and Regulations Board of Supervisors. 1. Finding Section 25-3-9(1), Miss. Code Ann. (1972), states the amount of salary to be paid to the county attorney. For calendar years 1996 and 1997, the county attorney was overpaid $1,210. Recommendation The county attorney should not be paid more than the allowable amount, and any overpayment should be repaid to the county treasury. Board of Supervisors' Response This amount has been reimbursed to the county. Future payments to the county attorney will be made in compliance with the statute. Auditor’s Note The $1,210 overpayment was repaid to the county on October 2, 1998. Circuit Clerk. 2. Finding Section 27-105-371, Miss. Code Ann. (1972), requires any unidentifiable funds found by the State Auditor to be settled into the General Fund of the county. At July 21, 1998, there was an unidentifiable balance of $3,318 in the Circuit Clerk's criminal account. JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended September 30, 1997 41 Recommendation The Circuit Clerk should settle the unidentifiable balance of $3,318 to the Jefferson Davis County General Fund. Circuit Clerk's Response The amount of $3,318 was paid to the Chancery Clerk of Jefferson Davis County on October 5, 1998. 3. Finding Section 9-1-43, Miss. Code Ann. (1972), requires the Circuit Clerk to maintain a fee account cash journal as prescribed by the State Auditor. As reported in the prior year audit report, the Circuit Clerk did not maintain the journal as required. Also, we found no documentation for $7,764 of expenses claimed. However, from analyzing revenue and expenses, we believe the Circuit Clerk did not exceed the earnings limitation for the year. Recommendation The Circuit Clerk should post all revenue and expenses to the journal, balance the journal and maintain a cash balance which should be reconciled to the bank balance as prescribed. All disbursements should be supported by sufficient documentation, and the Circuit Clerk should file an amended earnings report with the Public Employees’ Retirement System and the State Auditor’s Office. Circuit Clerk's Response I will work toward maintaining the fee account cash journal as required. I will also send an amended earnings report to the Public Employees’ Retirement System and the State Auditor’s Office. Tax Collector. 4. Finding Section 27-31-109, Miss. Code Ann. (1972), authorizes only the Board of Supervisors, in its discretion, to grant industrial tax exemptions. The Tax Collector collected ad valorem taxes from two industries at an exempt tax levy rate. The Board of Supervisor had not authorized an exempt rate for these industries. As a result, $17,960 of real and personal ad valorem taxes were uncollected for tax years 1996 and 1997. Recommendation The Tax Collector should collect taxes based on the tax levy rate approved by the Board of Supervisors. Any exemption to the tax levy rate should be approved by the Board of Supervisors. The Tax Collector should collect the unpaid taxes for the prior year assessments. Tax Collector's Response I will request payment of taxes that were erroneously levied. . 33 OFFICE OF THE STATE AUDITOR PHIL BRYANT AUDITOR INDEPENDENT AUDITOR& apos;S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS July 27, 1998 Members of the Board of Supervisors Jefferson. resigned on August 18, 1998. There is an ongoing investigation by the Office of the State Auditor and the District Attorney=s Office. JEFFERSON DAVIS COUNTY Schedule of Findings For the Year Ended. (1972), gives the Office of the State Auditor the authority to prescribe accounting systems. As reported in the prior year audit report, the cash journal was not posted as required, and the bank account