Campbell County ‘not alone’ in audit findings, state says

Haley Parnell
Haley Parnell
Haley is a reporter for LINK nky. Email her at [email protected]

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Last week’s Campbell County clerk audit report for 2021, which looks into the financials of the clerk’s office, named three categories in which the county did not meet state standards; but the state said the county is “not alone in having these types of audit findings.”

State audits of county clerks and sheriffs are required annually.

As part of the process, the state auditor’s office must comment on noncompliance with laws, regulations, contracts, and grants. The office must also comment on material weaknesses involving internal control over financial operations and reporting.

The three categories for which the state said the county did not meet requirements, according to the audit, are:

  • Not properly handling delinquent tax sale deposits
  • Inadequate internal controls over receipts
  • Inadequate internal controls over payroll

“The findings in the audit of the Campbell County Clerk’s fee account are common and are similar to findings that appear in the audits of other county clerks,” Spokesperson for State Auditor Mike Harmon’s office, Michael Goins, said. “So, Campbell County is not alone in having these types of audit findings.”

The department of revenue requires county clerks to collect an upfront deposit of funds for third parties purchasing delinquent tax certificates and then put the funds into the bank. 

Executive Director of the Office of Local Government Audits, Jim Royse, said Campbell County Clerk Jim Luersen did not follow that requirement. 

According to the audit report, when Luersen received the blank checks, he locked them in a safe until the date of the tax sale. Once the third party purchased delinquent taxes on the date of the sale, Luersen would complete the blank check for the total amount owed.

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“The county clerk was not aware that a deposit check needed to be deposited and cleared in a bank account to follow deposit requirements,” the report said.

Luersen said his office hasn’t done anything differently in the eight years he has been in office.

“The auditor is a new auditor, and he kind of went at things from a different angle,” Luersen said. “At first, he said, ‘everything is good; every dollar is accounted for; there’s just a couple of things that make my job easier if you do it this way.’”

Luersen explained that to participate in a tax sale, you have to submit a list of the tax bills you are interested in purchasing, and then you have to deposit at least 25 percent of the total amount. He said most people are interested in all the tax bills, making 25 percent a pretty large number to deposit.

“No one wants to put $50,000 down for $4,000 or $5,000 worth of bills,” Luersen said. “A lot of the county clerks, what we did was we basically get a blank check from each of the companies, and then when the sale is over, they write the check for what the sale ends up being. It seemed to work real well.”

The Campbell County Clerk’s office was also noted in the audit not to have met the standards for their receipts.

“There were noted weaknesses in the clerk’s internal controls for handling receipts,” Royse said. 

More specifically, Royse said employees share cash drawers, shortages are not being accounted for, check-out sheets are not being totaled, and receipts are not classified properly on the ledgers. 

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“The clerk is responsible for having adequate controls in place,” Royse said. “By not having proper controls in place increases the risk that errors or fraud would go undetected.”

Luersen said the state has a new process for accounting payroll and receipts. He said his predecessor Jack Snodgrass accounted for everything using the same systems he is.

“It’s never been brought up, so it’s a little frustrating on our end,” he said.

Past reports are available on the state’s website. Previous Campbell County Clerk’s audits can be viewed here:

“The payroll and receipt thing has to do with the software system that we use, and they have to change on their end how the numbers are entered in order to keep that particular auditor happy, which they’re supposedly working on,” Luersen said.  

Regarding the payroll system, Royse said that staff was not entering distributions into the general ledger software, which caused the financial statement to be incomplete. He added that Luersen did not have proper controls in place to ensure payroll amounts were included in his financial statement/quarterly report.

“We will work with our software vendor to get better internal control over our payroll,” Luersen said. “This should enable us to include payroll amounts made by the state on our behalf and be incorporated into our ledger and quarterly reports.”

Luersen said the audit shows that all $30 million of their budget is accounted for.

“We take this very seriously,” Luersen said. “It’s not my money. It’s the county’s money and it goes to all the different taxing districts. So we’re very careful with it and we make sure everyone gets everything they’re supposed to.”

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