Accounting report faults treasurer

She recommended pulling certain functions from the treasurer’s office, implementing new policies regarding cash handling and creating a “tool” that would allow interfacing between the software program used in the tax office and the one in the treasurer’s office.

Catching up with unfinished financial work and implementing new policies would take a professional accountant “a couple months,” Kamp said.

Since Krause is an elected official, it limits the county commission’s control over the situation, she said.

She recommended hiring a consultant to do the work and the county commission agreed to move forward immediately, but wanted to be forewarned of any significant costs.

Kamp said the distribution of taxes to taxing entities before confirming enough taxes were received to cover them is “a huge concern. I have never ever seen a government that distributed money without posting revenue first… That just blows my mind.”

Krause responded in an email to the Chronicle by saying, “A delay in these postings has never been an issue with the [county] finance manager or our auditors in the past five years.”

He said recent postings of tax revenues have been the most timely they have ever been in the county.

When he first started his job in December 2010, he said tax postings —which were then done by county finance manager Monica Morris — were up to five months late and were done at the end of the fiscal year.

Morris said she was interim treasurer for a few weeks before Krause arrived.

She didn’t recall whether there was a backlog of tax postings at that time, but said, “Without going back and looking, I would have to say that is not accurate.”

SERIOUS FINDINGS

Kamp said the latest audit of the county included three material weaknesses regarding functions of the treasurer’s office, including untimely bank reconciliations, tax receipts not reconciled to tax software before being distributed, and period closings not timely.

All are “the most serious findings you can have in an audit,” Kamp said.

She said if things aren’t cleaned up, “You’re going to have a worse audit next year.”

Krause said the county’s bad audit – the first since he’s been treasurer — came on the heels of a “fiasco” of a tax software change in the assessor’s office, which happened during the 2013-14 fiscal year, which had the bad audit.

The assessor’s office receives tax payments from citizens and forwards them to the treasurer for deposit in the bank. It is all tracked via a software program called Ascend.

Not only did the assessor’s office’s new tax software not interface with the treasurer’s accounting software, called Eden, Krause said, but a key person at the county who was working on a fix, county Assessor Tim Lynn, died of pneumonia in January 2014.

Because of the software glitch, accounts were not reconcilable, Krause said.

He said the county went live with the new tax software “with no ability to produce an accurate general ledger record for the existing county account software.”

Even the software vendors struggled to get them to balance, Krause said.

He provided an email from a software vendor saying they were still working on balancing tax receipts after six months, and said, “If the company the county bought this tax software from can’t balance the county tax receipts after six months into the process, I don’t think I should be expected to either.”

Krause said the software vendors ultimately were only able to come up with what he called a “quite dangerous,” labor-intensive work-around that requires Krause to do extensive adding and deleting of data from a document with thousands of lines in it.

“It makes me very nervous to do that level of manual manipulation to $30 million-plus in tax revenue each year,” he said.

Kamp, who called the software problem a “nightmare,” told commissioners that work on fixing the problem ceased in July 2014.

She said “It feels like the treasurer kind of gave up and didn’t go back and fix things.”

Kamp recommended creating a tool to allow the two software programs to interface.

Krause responded that the two vendors for the tax software and accounting software “have both said this [labor-intensive workaround] is the best they can do.”

He also questioned whether the vendors met the county’s own requirements that the new tax software program be formatted to import into the existing accounting program.

“Maybe the county legal team should review the document and determine if the county received the deliverables they expected,” he said.

Kamp said County Assessor Jill Amery is “fantastic” and had a can-do attitude.

Amery was able to solve the software problem in her office with a new set of procedures.

“It’s not something the treasurer’s office is using and we don’t know why,” Kamp said.

Krause said Kamp is referencing a report that he does, in fact, use.

Krause said the county finance manager, Morris, “was also aware the general ledger wasn’t correct when she sent reports to the commissioners and department heads.”

He included a January 2014 email from Morris in which she said, “the GF [general fund] cash isn’t reflective of the tax revenue — hopefully Scott won’t figure that out.”

Krause said the “Scott” in that email referred to Wasco County Commissioner Scott Hege.

Morris said her January 2014 email was not an attempt to hide something from Hege, but a caution to Krause.

“I was trying to just say, ‘Chad, the commissioners are going to see. I’m sending this to the commissioners and the tax revenue wasn’t there.’”

But Morris said everybody was very open about the problem, including her and Krause.

Morris said she constantly tried to have Krause get revenue posted. She quit sending those monthly reports because they were inaccurate.

BOOKS NOT CLOSED

Kamp said several months of bank reconciliations for the county have not been closed because they are off by a small amount.

Kamp said it is “perfectly normal” to close a bank reconciliation with small “off” amounts such as $60, so officials can close the books and move on.

But she said Krause does not have an accounting background and may not know that.

Krause responded that he’s not allowed to “close” the bank reconciliation, and that is a function of the county finance office.

“I don’t know what he means by that,” Morris said. “He is allowed.”

Krause added he’s worked 16 years in management in banking and corporate finance, and for three years worked for the state of Kansas in billings receivables and collections for the entire state.

Kamp said larger counties reconcile cash accountings on a daily basis, and she recommended Wasco County do that also. She also recommended adopting a written, uniform policy for accepting cash on a daily basis from all departments, and that receipts be signed to verify those transfers.

Krause responded that the county’s three bank accounts historically were balanced monthly.

Since October 2014, two of them are balanced daily. He said officials from Kamp’s firm only met with him for an hour or two and “didn’t seem very interested in reviewing” binders showing that information.

Krause said a computer-based receipt is generated when the employee hits “save” on data entry of the cash.

A second physical receipt is also signed by the employee, initialed by him after he confirms in their presence the cash amount is correct, and the employee gets their own copy of the receipt.

DUTIES CONSOLIDATED

Kamp said a great deal of financial duties were done by Krause alone, which exposed the county to the risk of fraud or misappropriation of funds. She noted that there was no evidence of fraud.

She said the treasurer alone “collects monies from departments and directly from outside sources, posts to the general ledger, prepares the deposit, takes deposits to the bank, prepares bank reconciliations and can post journal entries, including changes to receipts, without any oversight or checks and balances.”

Kamp said, “I’ve never come across a county where someone with so much access to everything was so isolated.”

She said work not legally required to be done by the treasurer, such as bank reconciliation and cash reconciliation, should be shifted to the county finance office.

Krause responded that the county’s auditing firm suggested to the county commission several years ago that the reconciliation processes be taken from the treasurer “so a second person would review the transactions posted by the treasurer.”

Krause said he agreed with that request, but it was not adopted by the commissioners.

Krause also noted the first job function listed under the county finance director’s job title is overseeing posting and reconciliation of ledgers and accounts.

Morris responded that her own job duties as finance director were essentially copied from the treasurer’s duties.

“His says the same thing,” she said of Krause’s job description.

She said she has no problem doing the bank reconciliation, but it was a decision for the commissioners to make.

She said when she was first hired it was a duty of the finance office because the treasurer was only part-time.

When it became full-time, reconciliation moved to the treasurer’s office, she said.

As for the ability to change deposit amounts in the software system, Krause said system administrators — only he and Morris can change such entries — needed the ability to change dollar amounts in case employees entered cash amounts incorrectly.

TREASURER ISOLATED

Kamp said Krause first physically removed himself from his office inside the finance office, moving to a small office next door, and then he quit communicating with them. “That is very worrisome behavior,” she said.

She reiterated that she did not come across any evidence of wrongdoing, “but the opportunity is overwhelming.”

At the commission meeting, Runyon said Krause left the finance office “because of some situation” but Runyon wanted to relocate him back to the finance office.

“I don’t want the ‘cave effect,’” he said.

Wasco County Administrative Officer Tyler Stone said of moving Krause back to the finance office, “I don’t want to make it worse.”

Krause responded that the communication breakdown was initiated by others.

He said Stone “removed me from the invitation to monthly management/department head meetings several years ago.

Since that time the county relocated my office a couple years back, I can only think of one commissioner that has been in my office – one time... From Day One, I’ve invited this [board of commissioners] to come see me with questions – anytime. They have declined to do so for over four years.”

Kamp said the county administrator and county commissioners had multiple meetings and communicated by email many times with the treasurer, but they had been unable to receive financial reports or bank reconciliations

Krause responded that “Neither the county administrator nor any of the current county commissioners have ever requested to review a single bank reconciliation. Ever.”

Krause said he’s had “very few” emails from the three county commissioners and has not had multiple meetings.

He said he’s never met with Commissioner Steve Kramer, he’d met with Hege once, and Runyon had stopped in a couple times, but he wouldn’t call them meetings.

He said he was asked to meet with Stone and Hege in January, but declined when he wasn’t provided a formal agenda of the meeting.

“They did want over an hour to discuss “financial reporting” – clearly they had an agenda, but would not let me come to the meeting prepared,” he said.

FIX UNKNOWN

Kamp told the commissioners she asked Krause what the solution would be “and he said he didn’t know. He said he’s not quitting and he can’t work with certain people.”

Kamp added, “I think the county has been patient way too long.”

Stone said at the commission meeting, “Obviously this is a delicate situation. We’ve been trying to get it fixed for some time now.”

Kamp said the biggest hurdle was the lack of communication, and she didn’t know how to fix it.

“In order for that to happen, people are just going to have to let go of the past,” she said.