By Allen Worrell firstname.lastname@example.org
May 28, 2014
A state audit of the Clerk of the Circuit Court of Carroll County shows a wide number of matters of internal control and its operation that has led, or could lead, to the loss of revenues, assets, or otherwise compromise the Clerk’s fiscal accountability.
In an audit for the two-year period from Jan. 1, 2012 to Dec. 31, 2013, the report by Auditor of Public Accounts Martha S. Mavredes claims Carroll County Circuit Court Clerk Carolyn H. Honeycutt “does not have adequate internal controls over liabilities and trust funds.” In total, the audit found more than a quarter of a million dollars ($253,865) of funds that were either incorrectly classified, disbursed to accounts that were not eligible, or miscoded, in addition to 18 cases in which defendants were not billed, state and local fines were incorrectly coded, and court costs were erroneously assessed to defendants.
“We have had some Clerks have as many findings as this before, but this is a lengthy list,” said Laurie Hicks, Local Government and Judicial Systems Audit Director for the State of Virginia. “When we go back to do the next audit, we will follow up on these things and make sure they are resolved.”
Hicks said her office is required by state code to audit Circuit Court Clerks at least once every two years.
In a written response to the auditor, Honeycutt claims she responded with 66 pages of objections and explanations of why each internal control mentioned should not be a problem because she had a court order, a justification and three years of running an office critically short-staffed due to illnesses of the permanent staff.
Mavredes begins with the following comments to Honeycutt, “We noted the following matters involving internal control and its operation that has led or could lead to the loss of revenues, assets, or otherwise compromise the Clerk’s fiscal accountability. The Clerk does not have adequate internal controls over liabilities and trust funds.”
Specifically, the auditor noted several “weaknesses.” The first case listed states the Clerk incorrectly classified a civil bond of $168,387 as a trust fund in the accounting system. The audit claims the Clerk also has not disbursed three trust fund accounts totaling $48,193 that are eligible for disbursement, four liability accounts totaling $12,700 that are related to concluded cases, and refunds totaling $490.
In addition, the audit found
- The Clerk has not recorded the disbursement of five liability accounts, totaling $14,586, in the accounting system.
- The Clerk miscoded $2,165 in trust fund money as an escrow account and $2,030 in civil deposits as trust funds.
- The Clerk did not reconcile the 2013 annual trust fund report to the subsidiary and general ledgers.
“We recommend the Clerk disburse the amounts noted above and correct the miscoding and classification errors,” the audit states. “Further, the Clerk should establish proper procedures to improve the ongoing management of liabilities.”
The audit also found that Honeycutt’s office did not properly bill and collect court fines and costs. Mavredes notes auditors tested 38 cases and noted the following errors.
- In 12 cases, the Clerk did not bill defendants for costs totaling $2,858.
- In five cases, the Clerk incorrectly coded $1,950 in state fines as local fines.
- In two cases, the Clerk erroneously assessed $506 in court costs to defendants.
“The Clerk should correct the specific cases noted above,” the audit states. “Further, the Clerk should work with her staff to ensure they understand the billing and collection requirements and, if necessary, request additional training from the Office of the Executive Secretary of the Supreme Court of Virginia.”
The audit also showed that the Clerk did not reconcile her bank account, properly review daily reports, improve daily reconciliation procedures, or control access to the Court’s automated information system.
“Timely and complete reconciliations are an essential internal control. Allowing reconciling items to go unresolved can lead to errors and irregularities going undetected and increases the risk of loss of funds. We recommend the Clerk reconcile her bank account in a timely manner each month,” the audit states. “In 15 of 24 months tested, the Clerk did not review and approve the daily financial transactions. The Clerk is required to maintain adequate internal controls over the assets and accounting records. Reviewing the daily transactions helps ensure the financial records are both accurate and reliable. The Clerk should review and approve the financial reports daily.”
The audit states that in two of nine days tested in which receipts were voided, the Clerk and her staff did not complete the daily cash reconciliation worksheet.
“The worksheet reconciles the cash receipt totals for the day to the court’s actual bank deposit. Daily reconciliations are an essential internal control to ensure that amounts recorded as collections in the court’s financial system agree to what was actually deposited in the bank,” according to the audit. “In addition, voided transactions pose an increased risk for fraudulent activity and, as such, must be closely monitored and reviewed. The Clerk and her staff should complete the daily cash reconciliation worksheet each day as required by the Financial Management System User’s Guide.”
The audit also stated that the clerk doesn’t have adequate internal controls over access to the Court’s Automated Information System (CAIS).
“During the audit, we noted an instance in which one employee did not log out of the system before another employee began using it. It is critical that each user have a unique password and user ID to provide accountability and integrity over the information within the automated system,” the audit states. “The Clerk should ensure that all staff have proper authorization to access the automated system and that they do not share log-in IDs and passwords.
The audit, which is available as a public record online at www.apa.virginia.gov, includes Honeycutt’s response to its findings.
“Before I begin responding to the points mentioned in this report, I want each reader to be aware that I responded with 66 pages of objections and explanations as to why each internal control mentioned should not be a problem because I as Clerk had a Court Order, a justification and three years of running an office critically short staffed due to illnesses of the permanent staff, as well as inconsistent errors caused by the particular illness of the former bookkeeper,” Honeycutt said. “I also want each reader to be aware that this office had 19 years of NO management points until the conditions as stated above became fact. The 19 years of clear audits is statement to the fact that the Clerk has adequate controls in place. The 66 pages as mentioned in this statement are available to the reader upon request to the Clerk.”
Honeycutt then outlined a plan for improvements resulting in the audit findings for Fiscal Years 2012 and 2013. In the case in which the Clerk incorrectly classified a civil bond of $168,387 as a trust fund in the accounting system, Honeycutt said she invested this bond money per court order.
“In the future, I will ask the Court for an amended Court Order stating that the invested bond monies (when applicable) be held as a Trust Fund Account for the individual for whom the money is invested,” Honeycutt wrote. “By doing so, I can invest the bond money in the Court held investment accounts.”
Honeycutt then responded to not disbursing three trust fund accounts totaling $48,193 that are eligible for disbursement, four liability accounts totaling $12,700 that are related to concluded cases, and refunds totaling $490, in addition to not recording the disbursement of five liability accounts totaling $14,586 in the accounting system.
“The five liability accounts totaling $14,586 were not shown as disbursed because those actual disbursals occurred during the tenure of the ill accountant. My improvement was to hire and train a new bookkeeper,” Honeycutt said. “The four liability accounts associated with concluded cases totaling $12,700 are associated with not having a Court Order to disburse. My plan is to request a Court Order to disburse shortly after the case is concluded. The $490 in refunds was delayed due to lack of office time to respond in a timely manner. I have a policy to not deliver refunds for two weeks after the collection to be sure that the funds clear the bank. The three Trust Accounts were not disbursed because no one had requested them. The individuals are known to me and the statutory one year had not run. In the future, I will summons the individuals to appear to collect their money. If the individual does not appear, I will mail by certified mail with signature verified return. All monies mentioned have been attended to and corrected.”
As for miscoding $2,165 in trust fund money as an escrow account and $2,030 in civil deposits as trust funds, Honeycutt said the $2,030 was being held in trust funds in accordance with Virginia State Code, and no change is needed, she said.
Responses to other findings included issues caused by training a new bookkeeper and other staff members, and errors made a former accountant. Honeycutt concluded her written response by saying since the audit was over a two-year period, and the personnel problems suffered by her office were due to severe and critical illnesses which resulted in the retirement of two employees, she felt that her staff performed admirably.
“You must remember that our work load levels since 2004 have been astronomical compared to the number of staff to perform the 800 various duties required in the Circuit Court Clerk’s Office. During this audit period, the office operated with over two staff positions below that which was needed to meet that work load level,” Honeycutt wrote. “During this audit period, this office was suffering from the frequent and sometimes lengthy absence of the accountant for one year. Before the accountant’s replacement was fully trained, another staff member was diagnosed with cancer and had to have immediate surgery. She never returned to work. Both staff members have retired and are now replaced with new staff members who are in training. During this two-year period, this office with six staff members (including myself), working where at least eight staff members were needed, have managed with four trained staff members most days. During this time period, if any staff member was sick or on vacation, we operated with three fully trained staff members. For at least a year of more, we were operating at half the needed staff. We tried and we are continuing to try to meet all responsibilities to serve the citizens and the Commonwealth. We did our best with extenuating circumstances.”