KING WILLIAM — Ongoing weaknesses in financial reporting at King William County have been highlighted in an auditor’s report for fiscal year 2022.
A report by CPAs Robinson, Farmer, Cox Associates indicates material weaknesses in financial statements for the year ending June 30, 2022, but no significant deficiencies. Historically, King William has experienced a high turnover in the treasurer’s office and decades of delinquent taxes before a delayed property reassessment in 2022.
The county’s annual financial report highlights a concern by the auditors over the lack of internal controls over financial reporting in a year that saw a stand-off between the county’s finance department and treasurer’s office.
Financial reporting errors that required adjustments to financial statements “indicated a material weakness in financial reporting,” the auditors said.
These included reports in accounts receivable in the finance department, accounts payable and accrued expenses with the finance department and the school board, taxes receivable in the treasurer’s office, unavailable revenue related to property taxes in the treasurer’s office, and capital assets with the finance department and the school board.
“There is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented by the entity’s internal controls over financial reporting,” the report stated.
The auditor highlighted a lack of internal controls in financial reporting and said some year-end adjusting entries were not identified before the audit.
The auditor recommended that the county and school board “implement steps and procedures to improve its internal controls over financial reporting and to ensure that all year-end adjusting entries are identified and recorded on a timely basis.”
Both county administration and the school division have agreed with the recommendations and are considering corrective action for FY23.
The auditor raised a concern about the separation of duties after the county finance department took over bank reconciliations from the treasurer’s office in 2022. “No one employee should have access to both physical assets and the related accounting records, or to all phases of a transaction,” the report stated.
The auditors found proper segregation of duties had not been established in relation to bank reconciliation and cash receipts. “Misappropriation of assets could result from inadequate segregation of accounting duties and functions,” the report stated.
However, the report noted bank reconciliations were performed by the finance department “out of necessity due to turnover in the treasurer’s office.”
The auditor recommended a transition to a system in which monthly bank reconciliations are reviewed by personnel in both the finance department and the treasurer’s office.
The report noted a failure to complete bank reconciliations in a timely manner due to turnover in the treasurer’s office and a change in accounting systems.
“Many months were not reconciled at all. The June 2022 bank reconciliations were completed many months after the end of the fiscal year,” the report stated.
Concerns over the segregation of duties and weaknesses in financial reporting were also highlighted in FY2021. The county has pledged corrective action in FY2023.
Last year, tensions between the Board of Supervisors and the treasurer’s office resulted in a letter from the supervisors and the school board that expressed “no confidence” in the treasurer’s office including the former treasurer Mary Sue Bancroft, who had already tendered her resignation, and her deputy Abbi Carlton.
The letter, obtained under the Freedom of Information Act, said the treasurer’s office was unable to support the ending amount remaining in prepaid taxes as of June 30, 2022. It said the treasurer’s office failed to assist with bank reconciliations from the FY21 audit. It listed 11 issues and urged the judge to allow Julie Mills, the county’s Deputy Director of Finance, to take over as treasurer. However, Judge Benjamin Elliott Bondurant appointed Carlton to the position of interim treasurer until a special election was held on March 7. Carlton won the special election against Mills. The county finance department took over the task of bank reconciliations last year.
Aaron Hawkins of Robinson, Farmer, Cox Associates spoke of improvements over the prior year when he addressed the Board of Supervisors on May 22.
“The bank reconciliation was the theme ongoing from 2021,” he said.
Hawkins acknowledged the finance office’s takeover of bank reconciliations was a “necessity.”
“The issue is that the finance department is also the department that is recording transactions and can post journal entries. That can really create segregation of duties issues,” he said.
He said the fact the bank reconciliations were so far behind automatically presented a “weakness in internal control.”
“I do believe … the bank reconciliations are becoming more up to date in FY23,” Hawkins said.
Hawkins expressed confidence that progress is being made to address the weaknesses.
David Macaulay, [email protected]
