State audit for Brushcreek Township lists 22 findings

The Ohio Auditor’s Office listed 21 findings of noncompliance and/or internal control deficiency, plus one finding for recovery, in the 2020-21 Brushcreek Township audit released Tuesday, Dec. 5.

In a letter to Brushcreek Township trustees dated Nov. 21, Ohio Auditor Keith Faber said that “those charged with governance should address” the nine findings of internal control deficiency.

“An internal control deficiency exists when the design or operation of a control does not allow management or employees, when performing their assigned functions, to prevent, or detect and timely correct misstatements, whether caused by error or fraud,” Faber wrote.

There were also 16 instances of noncompliance outlined, Faber said, which “could directly and materially affect the determination of financial statement amounts.”

The lone finding for recovery (also a finding of noncompliance) was issued against former fiscal officer Betty McElwee due to the township paying “a late fee of $509 for late payments of fiscal year 2019 payroll taxes to the Ohio Department of Taxation in 2021. The payment of a late fee is not a proper public purpose. Under Ohio law, public officials are strictly liable for all public money received or collected by them or their subordinates under color of law,” the audit says.

Findings of both internal control deficiency and noncompliance were as follows:

• In 2020, the current fiscal officer did not complete time certifications for nine of the nine payrolls; the prior fiscal officer did not complete time certifications for one of the three payrolls; and a trustee did not complete time certifications for two of 12 payrolls. In 2021, the current fiscal officer did not complete time certifications for 12 of 12 payrolls, and two trustees separately did not complete a time certification for one payroll.

Therefore, the state audit says, “all gross salaries and related employer contributions (OPERS, Medicare and insurance reimbursements) should have been paid from the General Fund” instead of being paid out of different funds.

As a result, there were overstatements to the Gasoline Tax Public Works Cash Disbursements, Road and Bridge Public Works Cash Disbursements and General Fund General Government Cash Disbursements in both years.

• Multiple deficiencies were found in the township’s accounting records, including that they did not maintain a receipts ledger, appropriation ledger or payroll ledger; “did not integrate the budgetary accounts into their financial accounting system;” and “did not carry the balance of the Bequest certificate of deposits on the cash journal.” Their manual cash journal also “did not properly foot or crossfoot, causing balances to be incorrect. There were multiple entries from the bank statements that were not posted to the cash journal.”  

• The Ohio Administrative Code stipulates that there should be “adequate segregation of duties or compensating controls.” Since the final officer performs “all accounting functions ... it is therefore important that the Township Trustees monitor financial activity closely,” the audit says.

However, state auditors found that the “Fiscal Officer did not provide the Trustees with financial reports to review. Bank reconciliations were not completed by the Fiscal Officer and reviewed and approved by Trustees. No evidence was provided that showed the Trustees reviewed supporting documentation and/or weekly check registers, budget to actual financial reports were not monitored by the Trustees.”

Findings of internal control deficiency were:

• The township “did not timely notify their public funds depository of changes in authorized government signatories,” which the audit cautions can “increase the risk that loss or misappropriation of funds could occur and not be detected in a reasonable time period.”

• There were 11 errors to revenues and expenditures, including overstatements, understatements and additional misstatements, in 2020 and eight errors in 2021.

• The township “does not have a formal policy implemented which informs employees of the prohibition of political activity with township funds” and needs to develop such policy.

• The township also does not have a policy regarding credit card usage and internal controls.

• The township failed to follow “sound accounting practices,” the audit says. In part, the finding says that “monthly bank to book reconciliations were not prepared by the Fiscal Officer or reviewed by the Board each month of 2019, 2020 and 2021. Failure to reconcile monthly increases the possibility that the Township will not be able to identify, assemble, analyze, classify, and record its transactions correctly or to document compliance with finance related legal and contractual requirements. Further, the lack of accurate monthly reconciliations increases the risk of theft/fraud over the cash cycle and could lead to inaccurate reporting in the annual financial statements.”

• In 2020, the township had $29 in “late fees for not timely remitting pension and payroll taxes.”

Findings of noncompliance included:

• In 2021, one trustee was underpaid $151, and one trustee was underpaid $93.

• None of the township’s elected officials whose term ended in 2020 attended a required Certified Public Records Training.

• The state auditors were “unable to confirm,” due to lack of documentation, that the township complied with competitive bidding procedures.

• The township failed “to have adequate appropriations in place at the time expenditures” due to “inadequate policies and procedures in approving and reviewing budget versus actual information.” As a result, “the Township's General Fund and Special Revenue Funds had expenditures in excess of appropriations of $66,577 and $233,606, as of Dec. 31, 2020 and $68,878 and $204,210 as of Dec. 31, 2021, respectively.”

• The township failed to file a certificate of estimated resources with the budget commission in 2021, as required by law, “due to deficiencies in the budgetary compliance and monitoring control policies and procedures.”

• The township did not approve an appropriations measure in 2020 or 2021 as required by law.

• The township “did not establish a resolution complying with the requirements of Ohio Rev. Code 505.601,” regarding health insurance.

• The township “has not approved a policy to extend the time between collection and deposit beyond one business day.” As a result, 78 percent of the “miscellaneous receipts tested, totaling $22,393, were not deposited with the Fiscal Officer or designated depository for a period ranging from five to 24 business days in 2020 and five to 42 business days in 2021 after initial receipt of the monies,” according to auditors.

• Ohio law requires that public officials “shall provide information about the Ohio fraud reporting system and the means of reporting fraud to each new employee upon employment with the public officials.” According to the audit, “for 2020 and 2021, the township neither made its current employees aware of the new fraud reporting system nor made new employees confirm receipt of this information.”

• Financial reports are required to be filed “within 60 days of the fiscal year end” with the state auditor’s office. However, Brushcreek Township “filed its 2020 and 2021 financial reports on Sept. 16, 2022, which were not within the allotted timeframe.

“The Fiscal Officer should file the Township's annual financial reports, in the proper format, with the Auditor of State within 60 days of the fiscal year end,” the audit says. “Further, the Township should establish an accounting system capable of accurate financial reporting. Also, all of the Township's officials should obtain the necessary training needed to obtain an understanding in accounting information and reporting.”

• The previous Fiscal Officer “did not attend the annual continuing education programs provided by the Auditor of State or complete the annual exemption to the Auditor of State’s office in fiscal year 2021.”

• The township used numerous “then and now” purchase orders. The law requires that “that no orders or contracts involving the expenditure of money are to be made unless there is attached thereto a certificate of the fiscal officer” regarding its appropriation. “Then and now” certificates are an exception to approve payment, “if the chief fiscal officer can certify both at the time the contract or order was made (‘then’), and at the time the fiscal officer is completing the certification (‘now’), that sufficient funds were available or in the process of collections, to the credit of a proper fund, properly appropriated and free from any previous encumbrance.”

According to the audit, the township “used Then and Now purchase orders for 41 out of 48, or 85 percent, of the disbursement transactions selected to be tested.”
 
For all of these findings, the officials’ response listed is “The Officials did not respond to this finding.”
 
The complete audit can be viewed at: https://ohioauditor.gov/auditsearch/Reports/2023/Brushcreek_Township_21….