NASHVILLE – An audit of the Town of Bean Station’s financial statements for FY 2018-19 contained six findings related to inadequate record keeping.
The first finding addressed a deficiency in the segregation of duties. The Town has one employee who receives, records, prepares and deposits receipted transactions, leading to “possible intentional or unintentional errors” occurring without detection, and potentially resulting in loss to the town. The auditor recommended the Town take whatever steps are possible to prevent one, or only a few, employees having sole custody or authority over transaction sequences.
A response in the town’s corrective action plan from Mayor Ben Waller states, “The Town will take all possible steps to segregate the duties with limited staff.”
A second finding stated the “closing of books was not completed timely.” Tennessee law requires governments to close official accounting records and have them available for audit no later than two months after the end of the fiscal year. According to the report, journal entries to close the Town of Bean Station’s accounting cycle were not completed in the two-month period required by law. The auditor recommended management follow procedures to ensure compliance.
Waller’s response states, “Management will follow procedures of internal controls to the best of their ability to ensure compliance.”
A third finding states, “At June 30, 2019, certain general ledger accounts were materially incorrect, and significant audit adjustments were required for the financial statements to be free of misstatements at year-end.”
According to the report, revenue and expenditures weren’t properly recorded and accounted for. The auditor recommended the town have appropriate processes in place to ensure the general ledger and financial statements are accurate.
Waller’s response states, “The Town will appropriate [sic] procedures to ensure that the general ledger and financial statements are accurate.”
A fourth finding cited the town’s failure to properly prepare financial statements in conformity with U.S. generally accepted accounting principals.
The report states, “Revenue and expenditures were not properly recorded and accounted for to ensure accurate and reliable financial reports.”
The auditor’s recommendation states, “Consideration should be given to developing or retaining a qualified individual with sufficient skills, knowledge and experience to participate in the development of the draft of the financial statements.”
For this finding, a response by Waller states, “The Town feels that the cost to correct the deficiency would exceed the benefits to be derived. We believe our knowledge and expertise enables us to review the annual audited financial statements and understand them.”
The fifth finding cited in the auditor’s report states that due to a lack of control over accounting processes that code expenditures based on an approved budget, General Fund expenditures “could not be appropriately classified to determine compliance with the approved final budget.”
The auditor’s recommendation states, “Expenditures should be coded individually in the general ledger accounts such that actual to budget expenditure comparisons can be made at each meeting, to identify which line items are likely to exceed approved amounts. Budget amendments should be timely made to authorize additional expenditures.”
Waller’s response states, “The budget was amended, but the lack of appropriate coding generated erroneous numbers. Steps were implemented to ensure compliance in the budgeting and reporting.”
The final finding in the audit report relates to the failure of town leadership “to oversee management practices and activities which resulted in various actual and potential violations of laws, regulations and town policies, as well as actual cash losses related to the drug fund.”
The town’s Board of Mayor and Aldermen voted to relinquish oversight of the police department’s drug fund shortly before a Tennessee Comptroller of the Treasury’s office investigation was launched into the police chief’s theft from that fund. Following the initiation of the investigation, the town’s Board of Mayor and Aldermen voted to rescind its decision to give the chief of police total control of the fund.
The auditor recommended the town strengthen its oversight of management to deter high-level mismanagement.
Waller responded, “The Board of Mayor and Alderman and management agree and will restructure as needed to provide adequate oversight in the future.”