External auditors report four findings to Knox County audit committee, including procurement irregularity

Ted Hodes, of QCPAs, told the Knox County Audit Committee on March 10 that the firm's single-audit compliance report includes four current-year findings and reflects progress on prior issues.

"No new significant accounting policies were adopted during the fiscal year," Hodes said, summarizing the audit governance letter and noting auditors attached proposed audit adjustments and a schedule of significant accounting estimates.

Hodes described the four findings. The first involves liability-account reconciliations in the trustee's office, where reconciling items remained but had declined in number; he cited an example reconciling difference of about $30,000 that auditors said has since been resolved after updated bank statements were provided. The second finding concerns year-end accounting and reconciliations from the Clerk and Master's office: audited financial information arrived late and required revisions, producing errors in cash reconciliations and a trust-account variance Hodes described as roughly $18,000.

The third finding identified payroll accounting issues in the sheriff's office. Auditors found some employees who work a 9.5-hour schedule were charged only 8 hours of paid time off when taking a full day, producing accumulative timing variances. Hodes said the sheriff's office will change payroll handling for that group beginning with the March 27 pay period to align charged PTO with scheduled work hours.

The fourth finding stemmed from a prior hotline investigation and an internal-audit report into parts-and-equipment purchases in a county department. Hodes said department personnel and a vendor revised quotes so a purchase would fall under the $10,000 capitalization threshold, avoiding higher-level approvals; one item originally exceeded $10,000. Hodes said personnel involved were disciplined (one no longer employed, another demoted) and the vendor was removed from the approved-vendor list. He added that parts of the special report are confidential because of personnel matters and that the state comptroller has been provided the internal audit record and had not indicated whether its review was finished.

Committee members asked for clarifications on the dollar amounts and timing; auditors said many reconciling items were resolved over the audit period and that follow-up audit testing is planned. Hodes recommended continued monitoring, additional internal controls around transactions near the capitalization threshold and periodic testing of reconciliations. He said federal grant testing disclosed no issues for the grants sampled in this audit year.

The committee voted earlier to send the countystate audit contract for fiscal 2025 to the full county commission after law reviewed the draft with no changes. The audit committee directed auditors to follow up on the listed findings and scheduled further testing in the next audit cycle.

Next steps: auditors will perform follow-up testing on repeat findings and the committee will receive updates in future meetings.