State audit uncovers concerns
July 3, 2008 · Updated 1:14 PM
"A state auditor's report released this week cites ongoing problems in the Island County Treasurer's office that leave the door open to possible misappropriation of public funds. The report also criticizes other county departments for not following through on grant reimbursements. The county has lost tens of thousands of dollars in possible interest income due to delays, the report contends.In response, Island County Treasurer Maxine Sauter said the the state's interpretation of how her office operates is totally inaccurate.The state Auditor's Office conducts annual checks of county and city finances to makes sure state and local laws are being followed and that good management practices are being observed. This year, auditors found three areas of concern they felt warranted a formal notice. The most critical concerned what the report called cash handling weaknesses in the county Treasurer's Office, including the use of several cashiers working out of a common, unlocked cash drawer; the lack of written receipts for over-the-counter payments by check; and collections left unattended on counters or employee's desks.The report concludes that the deficiencies unnecessarily exposes the county to a greater risk of misappropriation. It goes on to say that if such misappropriation occurred it would be difficult to detect and to determine responsibility. By phone Thursday, Deputy State Auditor Jerry Pugnetti emphasized that no serious breaches of law were found in the county and no money was missing. But he added that the purpose of the state audit is to head off problems before they start.Sauter took exception with many of the state findings and said state auditors get only a narrow picture of an operation during the short time they are conducting their review. She said during this year's audit one of the state's representative was only in her office for about an hour and did not talk with her at all.State audits can take all year but much of the work takes place outside local offices.Sauter, who has held the Treasure's post since 1986, defended the office staff and assured county taxpayers that their money is safe.They are very, very, very cautious and in control. I am pleased and proud of our system, said Sauter. We are the best in the state of Washington as far as controls.The state report, however, recommends that there be more separation of responsibilities in the office so that cashiers, for instance, do not also handle billing statements. It also insists that receipts need to be written in a timely manner for all transactions, not just for cash payments. On the whole, state auditors said they wanted to see more checks and balances in the system.Sauter said the problem with the state's proposal is that more segregation of duties requires a larger staff. She said the Island County Treasurer's office currently operates with only eight people, including herself. That's one fewer than when she first took office. In order to handle the workload, Sauter said everyone is cross-trained so that all workers can do each job. This county has less cost from the Treasurer's Office because of the cross-training, said Sauter. Our system works for this county because we can't afford four more people.Sauter, a Republican, is a vocal supporter of small government. In recent years several of her fellow department heads have asked the county commissioners to increase their staffing levels to meet the demands of a growing population, but Sauter has not been among them. This past year the Treasurer's Office saw relatively high turnover and the departure of two long-time employees. Such turnover was cited by Sauter and Island County Auditor Suzanne Sinclair as a reason the county was late issuing financial statements to state officials this year. The state report was critical of the delay. It stated that the late submission resulted in extra auditing costs to the county.Pugnetti said the situation in Island County is not unusual and he acknowledged that smaller counties can have a tougher time because they are understaffed.It's fairly common to find some problems with internal controls, he said. But Pugnetti cautioned that close-knit systems that rely too much on trust can lead to trouble.When it comes to a misappropriation of public funds, trust can be one of the leading causes, he said.Pugnetti also said that many of the concerns in the current report have been outlined several times over the past seven years in letters between the state and the Treasure's Office. On another front, the state report also focused attention on the fact that the county failed to meet claim deadlines for money it was due from two federal grant programs. The report said county departments had not claimed reimbursement payments of $542,000 from the Federal Emergency Management Assistance program and more than $134,000 in U.S. Department of Justice money. Both claims have since been made but the report concluded that the county likely lost interest income of several thousand dollars by not processing the claims on time. These amounts could have been used to provide funding for various county operations, the report said. "