Despite a clean audit and a growing fund balance, Tooele County lacks proper oversight over financial matters and internal financial controls, a county official says.
According to Tooele County Treasurer Jeremy Walker, a lack of oversight and responsibility for internal controls, along with inadequate formal polices over financial procedures, leave the county vulnerable to another financial crisis.
Walker is leaving his post as county treasurer after one term. He lost the Republican primary race for treasurer in June.
The county treasurer presented the county commissioners with a letter expressing his concerns over county financial procedures during the public comment period at the Aug. 5 county commission meeting.
“These matters do not relate directly to my duties as treasurer,” he said. “But as a financial professional and a citizen of the county, these are problems that I am aware of and I cannot ignore them.”
Walker is a certified public accountant who has worked as the finance director for Grantsville City, and for a private accounting firm that audited municipal governments.
Tooele County Commissioner Shawn Milne has credited Walker with discovering the county’s cash flow crisis last year. Walker also played a key role in the development of the county’s financial recovery plan, according to Milne.
“Commissioners, you must demonstrate a commitment to an effective internal control environment that will protect taxpayers dollars, increase efficiency and ensure the public trust,” Walker wrote in his letter.
He outlined three areas of concern: Lack of policies over financial processes, lack of oversight, and responsibility over internal controls.
The county has few financial policies that have been formalized by adoption in the county code.
“There are numerous financial policies referenced in the independent audit that are not part of the county code and are not available in writing to the public,” Walker said.
These informal, unwritten policies should be written down and adopted into the code so everybody, the public and employees, can find them, according to Walker.
“Without written policies, the county cannot require or measure compliance with those policies,” he said.
Walker pointed to the number of adjusting entries to the county’s general ledger made by the 2013 independent auditors as a sign that the county has failed to comply with accounting standards, state law and legal requirements.
He referred to 62 adjusting entries as “staggering” compared to an average of 12 audit adjusting entries in each of the last four years.
Tooele County Auditor Mike Jensen said the increase in adjusting entries was largely due to a change in independent auditors.
“Each auditor has their own opinion on how things should be done,” he said. “The new auditors told us when they started to expect changes.”
For example, the new auditors wanted the county to recognize sales tax received from the state in February, to be recognized by the county as income in December of the previous year because it is based on December’s sales, not February’s, according to Jensen.
Walker also stated that 27 checks totaling $84,402 were issued from the transient room tax fund to pay expenses for the Tooele County Fair.
“This was not authorized or allowable by statute,” he said.
County Commissioner Jerry Hurst disagreed with Walker about the fair expenses.
“These were authorized and it has always been our intention to review the fair expenses and move any expenses that are not proper for TRT to the general fund,” Hurst said. “The fair has a budget and they are within their budget.”
Walker also referred to the booking of the $6.5 million of internal loans to the Deseret Peak fund and violations of purchasing policies for county fair expenses as examples that the county lacks proper financial oversight.
“All of these violations have been brought to your attention in public meetings and nothing has been done to address them,” he told the commissioners.
The county also needs to take responsibility for internal financial controls, he added.
The independent auditors do not provide an opinion on the effectiveness of internal controls or compliance, according to Walker.
“The management of Tooele County is responsible for establishing and maintaining effective internal controls,” he said, quoting from the independent audit report.
Walker offered two suggestions to solve his concerns.
His first suggestion is to hire a professional auditor to guide the county through the process of risk assessment and develop comprehensive financial policies that include consequences for breaking the rules.
“You must be willing to enforce consequences for violating rules, or else the county will continue to be at risk of financial crisis and susceptible to fraud,” Walker said.
Once complete financial policies are in place, the county should hire an internal auditor to perform the internal audit function on a permanent basis.
The internal auditor should report to the county commission and perform systematic internal audits as well as investigate accusations of financial misconduct, according to Walker.
There may be other ways to achieve the things Walker recommended.
“This recommendation is not the only way to solve this problem,” he said. “I don’t care how you achieve that end, but you must achieve it in order to secure taxpayers dollars and restore the public trust.”