City Coun­cil Ac­cepts Past Au­dit Find­ings

Washington County Enterprise-Leader - - NEWS - By Lynn Kut­ter

FARM­ING­TON — Farm­ing­ton City Coun­cil at its Oct. 8 meet­ing voted to ac­cept the city’s 2016 au­dit con­ducted by Przy­bysz & As­so­ciates Cer­ti­fied Pub­lic Ac­coun­tants, and one sec­tion in the re­port re­peats de­fi­cien­cies in in­ter­nal con­trol that were spelled out dur­ing an in­ves­tiga­tive au­dit com­pleted by Leg­isla­tive Au­dit in 2017.

The in­ves­tiga­tive au­dit found that for­mer fi­nance direc­tor and court clerk Jimmy Story had mis­ap­pro­pri­ated more than $1.5 mil­lion over an eight-year pe­riod by re­ceiv­ing rev­enues for Farm­ing­ton Dis­trict Court and the city’s gen­eral fund but not de­posit­ing the money into the ap­pro­pri­ate bank ac­counts.

Story pleaded guilty in Novem­ber 2017, to one count of theft con­cern­ing pro­grams re­ceiv­ing fed­eral money and one count of fil­ing a false in­come tax re­turn.

In July, U.S. Dis­trict Judge Tim­o­thy Brooks sen­tenced Story to 46 months in fed­eral prison and or­dered Story to pay al­most $1.3 mil­lion in resti­tu­tion to the city of Farm­ing­ton and $371,956 in resti­tu­tion to the In­ter­nal Rev­enue Ser­vice. Story’s sen­tence in­cludes three years of su­per­vised re­lease fol­low­ing his prison term.

The Leg­isla­tive Au­dit in­ves­ti­ga­tion re­vealed that Farm­ing­ton did not have in­ter­nal con­trols in place over the re­ceipt­ing, record­ing and de­posit­ing of rev­enues. Specif­i­cally cited was a lack of seg­re­ga­tion of du­ties and fis­cal over­sight.

As court clerk and fi­nance direc­tor, Story was the sole em­ployee re­spon­si­ble for pre­par­ing and mak­ing bank de­posits, rec­on­cil­ing bank state­ments and en­ter­ing in­for­ma­tion in the Dis­trict Court’s case-man­age­ment sys­tem.

City Clerk Kelly Penn handed out copies of Przy­bysz’s 2016 Farm­ing­ton au­dit re­port to Coun­cil mem­bers, say­ing the firm was ful­fill­ing its con­trac­tual obli­ga­tion to fin­ish the 2016 au­dit.

Ba­si­cally, Penn said, Przy­bysz took in­for­ma­tion from the Leg­isla­tive Au­dit in­ves­ti­ga­tion and in­serted it into the 2016 au­dit.

Przy­bysz’s au­dit re­port cites three find­ings: (1) mis­state­ments due to fraud en­tered into the ac­count­ing records; (2) in­cor­rect record­ing of ac­tiv­ity and in­ter-fund trans­ac­tions not in bal­ance; (3) in­ter­nal con­trols over fi­nan­cial state­ment prepa­ra­tion.

The ac­count­ing firm rec­om­mended the city im­ple­ment a sys­tem of in­ter­nal con­trols that seg­re­gates the du­ties so that one per­son au­tho­rizes trans­ac­tions, one has cus­tody of as­sets and one keeps and records ac­tiv­i­ties.

It also rec­om­mended the city im­ple­ment an ad­e­quate mon­i­tor­ing and re­view of jour­nal en­tries and in­ter-fund trans­ac­tions on a monthly ba­sis.

The third rec­om­men­da­tion was to im­ple­ment sys­tems of in­ter­nal con­trols and per­son­nel re­gard­ing the prepa­ra­tion and re­view of fi­nan­cial state­ments.

For each of the find­ings, the city of Farm­ing­ton agreed to the rec­om­men­da­tions made by Przy­bysz.

Penn told Coun­cil mem­bers that Farm­ing­ton has put mea­sures in place to di­vide up du­ties and pro­vide fis­cal over­sight.

She said six peo­ple have been as­signed dif­fer­ent du­ties when it comes to the city’s fi­nances, rev­enue com­ing into City Hall and rev­enue com­ing into Dis­trict Court. The city now has a court clerk and a deputy court clerk who are re­spon­si­ble for the court’s case-man­age­ment sys­tem.

Du­ties have been seg­re­gated so that no one per­son has com­plete con­trol over de­posits, cash, re­port­ing and rec­on­cil­i­a­tions.

Przy­bysz au­dited the city of Farm­ing­ton for the years out­lined in the in­ves­tiga­tive au­dit, Jan. 1, 2009, to Dec. 6, 2016.

For 2017 and fu­ture au­dits, Farm­ing­ton is us­ing Leg­isla­tive Au­dit, not a pri­vate ac­count­ing firm.

Penn said the city’s 2017 au­dit con­ducted by Leg­isla­tive Au­dit has been com­pleted but it can­not be re­leased to the pub­lic un­til it is ap­proved by the Leg­isla­tive Au­dit Com­mit­tee. Penn said Farm­ing­ton re­ceived an ex­cel­lent au­dit and the City Coun­cil would be “very pleased” with the re­port.

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