The audit of the Harlan Fiscal Court has been released by Kentucky Auditor of Public Accounts Adam Edelen.
According to a press release, the auditor’s office has made numerous comments concerning the operations of the Harlan Fiscal Court.
The release states the fiscal court lacks controls over the overall environment of the county, and has a lack of segregation of duties over receipts, cash transfers and bank reconciliations.
“Due to weaknesses noted in internal controls, the risk exists for an individual to manipulate, misappropriated and/or direct funds,” states the audit report. “The county maintains one general bank account, which allows for confusion and creates complex accounting issues for simple transactions.”
Harlan County Judge-Executive Joe Grieshop’s response, included in the audit report, states the county is in the process of reviewing and implementing controls that will address the issues noted.
The audit also stated the fiscal court failed to comply with state law by being delinquent in submitting quarterly reports. The report further states the court does not post statements in a conspicuous place for 10 days or submit the quarterly reports to be approved at the meeting of the fiscal court.
Grieshop’s response states the county will see that this is done in the future.
The audit also mentions transactions concerning the Appalachian ChallaNGe Academy were difficult to trace in the fiscal court minutes, as well as in the financial statements, due to various names being used for the project. The audit states $1,309,250 was expended on the project in fiscal year 2012.
The audit also states the fiscal court should review the county engineer’s position for conflict of interest.
According to the auditor’s report, the county engineer, Leo Miller, is being paid without time sheets that document hours worked. The county engineer does not receive a W-2, but instead is issued a 1099. The report states the auditors were unable to determine or differentiate what work the county engineer performs as an employee of Harlan County and what work he performs through his engineering firm as an independent contractor.
“The engineering company submits invoices with a vague description of work completed monthly,” reads the audit. “Therefore, there is an increased risk that the fiscal court would be unable to determine if duplicate invoices are being presented for payment.”
The report mentions sections of the Harlan County Code of Ethics in reference to the county engineer.
The report mentions the Harlan County Code of Ethics states “no county government officer of employees or member of his immediate family shall have an interest in a business organization or engage in a business, transaction, or professional activity, which is in substantial conflict with the proper discharge of his duties in the public interest.”
The Harlan County Code of Ethics further states, according to the auditor’s report, that no county government officer or employee shall use or attempt to use his official position to secure unwarranted privileges or advantages for himself or others.
The ethics code also states “no county government officer or employee shall act in his official capacity in any manner where he, a member of his immediate family or a business organization in which he has an interest has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity or independence of judgement.”
The judge-executive’s response states “Leo Miller (county engineer) has been hired as county engineer beginning in mid 1974, and has contractually served consecutively up to the present. The compensation for the county engineer began at $10,000 per year and has received the yearly cost of living raise to bring the amount to it’s present figure. Harlan County reiterates that Miller is a contractor in said position and not an employee, is not being withheld state, federal Social Security, Medicare or retirement. Miller is issued a 1099 at the end of each year. This has been the case since Miller was first contracted.”
The judge-executive’s response further states Miller is not reimbursed any expenses whatsoever, stating expenses such as vehicle, gas, office, etc. are borne by Miller out of the monthly amount he is paid for his services. Miller also received no benefits, retirement, vacation or holidays.
“A day never goes by that Miller doesn’t answer several questions from various county employees, and or make site visits on various questions posed by said fiscal court employees,” states the judge-executive’s response.
Grieshop goes on to state that fiscal year 2011-2012 was an out of the ordinary year as far as construction of infrastructure, including water and sewer projects, as certain coal severance funding became available.
“It was not the intent for Harlan County Ethics Code to apply to independent contractors,” states Grieshop’s response in the report. “Leo Miller, county engineer, is an independent contractor. He is not an elected official, is not a government officer, is not a county employee and therefore not covered by the Harlan County Code of Ethics for County Officials and County Employees.”
The report also mentions the county should strengthen internal controls over waste removal collections, and the fiscal court does not maintain written agreements for leases.
The auditor’s report also states the county should review qualifications for the county road supervisor and maintain a complete and accurate schedule of expenditures.
Other comments made in the report include the treasurer should ensure ledgers are accurate, the treasurer shall not disburse money in any manner not authorized by fiscal court, the fiscal court should require that proper records be maintained for the Public Properties Corporation Fund, and the treasurer’s office lacks adequate segregation of duties over receipts, cash transfers and bank reconciliations.
The full audit report may be accessed online at the Kentucky Auditor of Public Accounts website at www.auditor.ky.gov.
Joe P. Asher may be reached at 606-573-4510, ext. 113, or on Twitter @joe_hde