OAK GROVE, KY (CHRISTIAN COUNTY NOW) – The City of Oak Grove was presented findings from a routine audit that was conducted, which showed recurring problems with segregation of duties and recording transactions. Clifton Daniel from the financial institution Borland Benefield was present at the July 7 Oak Grove City Council meeting to discuss audit findings, where he reported a “clean audit” for the balances in the 2023-24 fiscal year.
“We come in and we’re observing, we’re inquiring, we’re pulling samples of transactions. We’re looking at bank statements, we’re looking at payroll data, all kinds of things,” said Daniel explaining the audit process.
Although there were multiple findings, the audit found no evidence of fraud or missing money from city accounts. Instead, the majority of findings highlighted the city’s need to improve documenting procedures.
Missing documentation, segregation of duties in audit
Issues with segregation of duties had previously been brought up for the city, although he clarified that with smaller sized municipalities such as Oak Grove, it is a common problem to have. “You’ve got the same people that are preparing and doing the billings that are also doing the collecting,” said Daniel. “And that’s just inherent with our limited capacity.”
He later added that having more separation by way of additional staff in financial departments provides more accountability and monitoring to prevent errors.
During the audit process, they pulled samples of cash receipts, seven of which Daniel said were missing supporting documentation, “The fact that you’re missing seven is enough to note…beyond that I don’t have any concern other than better record keeping.”
Samples were also pulled from the general fund, municipal road aid fund and the water fund. In these cases, there were some missing signatures on purchase orders, a supporting invoice was not found in one instance, and the water fund had over a dozen purchase orders that were missing approvals and supporting documentation for routine transactions. He once again faulted these issues to a need for better record keeping practices.
Improvements with payroll
In regard to payroll reporting, which the City of Oak Grove has previously had issues with, Daniel said, “One of the things that got off the rails a little bit was making sure we’re documenting approved pay rates for people across the city.”
Although pay rates may be correctly documented in the system, Daniel said that in some cases there are not corresponding documents to support it. He stressed that this is important procedure to follow in order to safeguard employees and the city.
When the audit was presented last year for the 2022-23 fiscal year, drastic inconsistencies with payroll were exposed which ultimately led to the arrest of a city employee. No such finding has been noted in this new audit.
“I think there’s positives here, I think we’ve got good staff here, we’ve got a better accounting software,” he said. “There’s positives economically, so getting our finances caught up needs to be a priority.”
Overall, Daniel emphasized that there are clear signs of internal improvements. However, he advised that the city could consider potentially creating a new position in the financial department to improve operations and eliminate repeat audit findings. He also recommended the possibility of bringing in an external firm to help mitigate some financial duties.
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