Kentucky Auditor Mike Harmon’s office released the audit of the financial statement of Lyon County Fiscal Court for the fiscal year that ended June 30, 2022.
State law requires annual audits of county fiscal courts and in the latest audit, Harmon’s office had two findings.
One of the findings was that Lyon County Fiscal Court’s schedule of expenditures of federal awards was overstated. The original schedule of federal awards reported $2,889,008 of disaster grant – public assistance (presidentially declared) expenses, however the fiscal court only spent $2,856,856. Therefore, it was overstated by $32,152.
The fiscal court also reported $201,898 passed on to subrecipients for the same disaster grant, but the actual amount was $77,495. According to the county treasurer, the amounts reported as provided to subrecipients were based on estimates. Additionally, the amount reported included the matching portion of expenses. Due to a lack of effective operating controls, errors were made which resulted in the original funding being misstated.
Harmon’s office recommended that Lyon County Fiscal Court implement or strengthen controls over the reporting of federal award expenditures to ensure amounts reported represent true federal expenditures during the year.
Former Lyon County Judge/Executive Wade White said in a statement to the auditor’s office that the former treasurer was advised to estimate the Schedule of Expenditures of Federal Awards (SEFA) in FY 22 and then submit a revised SEFA once finalized. Lyon County was estimating the amount based on invoices and numbers provided by FEMA to get an estimate. FEMA has changed the amount we are to receive numerous times and has even denied some figures. Since the final numbers from FEMA to report on SEFA were not provided until FY 23, Lyon County has not had the opportunity to update it.
Current Lyon County Judge/Executive Jaime Green-Smith and new Treasurer Kathy Coursey now have a schedule with FEMA and verified amounts to be reported and passed on to subrecipients. This documentation is updated quarterly and/or as it is sent out by FEMA. All other SEFA categories are reported as preciously documented.
Additionally, Harmon’s office that Lyon County Fiscal Court did not maintain a schedule of leases. The court did not maintain a schedule of leases and did not provide a list of leases for auditors. However, Lyon County is the lessee of two leases and the lessor of one lease. While the Lyon County Fiscal Court adopted a resolution to set a threshold for leases at $30,000, that threshold would only apply to the reporting of leases. The county would still need to maintain a schedule of leases for accountability purposes.
According to staff, the fiscal court was unaware that a schedule of leases needed to be maintained regardless of the threshold. Therefore, a schedule of leases was not provided to auditors because it was believed that the county only had leases that were each less than the $30,000 threshold.
The auditor added not having this could cause the fiscal court’s notes to the financial statement to be insufficient. Furthermore, because a schedule of leases was not maintained, the county failed to report a lease in which the lease proceeds exceeded the $30,000 reporting threshold set by fiscal court.
The auditor’s office recommended that the government body maintains a schedule of all leases and follows the standards set forth by the Department of Local Governments.
Former Judge/Executive White said in a written statement to the auditor that he nor his Treasurer were aware that the lease between the Lyon County, Kentucky, Public Properties Corporation, and the Kentucky Administrative Office of the Courts was required to be reported. He added that state auditors have had a copy of this lease since the 2019-2020 audit, and it was never mentioned that the lease should be reported annually.
The Lyon County Judge/Executive did not recognize this agreement as a lease since the Lyon County Fiscal Court does not own the building. The AOC reimburses Lyon County Fiscal Court for any expenses spent in or on the building.
The new Lyon County Judge/Executive has received a copy of this lease and the new treasurer will make sure this lease is reported in every audit going forward.
Auditor Harmon’s office replyed back saying the Lyon County Public Properties Corporation acting as an agency of the Lyon County Fiscal Court maintains ownership of the facility. The Administrative Office of the Courts signed a lease agreement for the use of the facility in 2009, which was extended in 2019, and each year has continued to sign a reimbursement form for the use of the facility. A new rule was implemented for fiscal years beginning after June 15, 2021, which made it applicable to the fiscal year ending June 30, 2022.
