For Immediate Release:                                                      

September 8, 2020                                                                 

                                                                                               

Numerous Findings Issued Against Unauditable Village of Timberlake 

 

Columbus – Auditor of State Keith Faber’s Office released the 2017-2018 Non-GAGAS Engagement of the Village of Timberlake (Lake County). 

 

On August 5, 2019, the Village was declared unauditable amidst the financial audit conducted by the State Auditor’s Office – meaning the condition of their financial records was not adequate to finish the audit. At that time, the Village contracted with the Auditor’s Local Government Services to assist in their reconciliation and reconstruction of records to become auditable, but the service impairs the state’s independence for a traditional financial audit. Thus, this report is considered a Non-GAGAS Engagement and fulfills their audit requirement.

 

Since being declared unauditable, the Village, as mentioned earlier, contracted with the Auditor’s Local Government Services to bring their books into order, hired a new fiscal officer with prior experience, and joined the State Auditor’s Uniform Accounting Network.

 

The 2017-2018 Non-GAGAS Engagement contained numerous findings including noncompliance, internal control deficiencies, and findings for recovery. They are as follows:

 

 

Finding -001: Internal Control Deficiency – Budgetary Accounting

On multiple occasions, the Village funds had variances between the council approved appropriations or the certificate of estimated resources and the accounting system. The Village did not have procedures in place to accurately post authorized budgetary measures to the accounting system. This resulted in incorrect information being included in the budgetary footnote for Fiscal Years 2018 and 2017.

 

Finding -002: Noncompliance – Appropriations Exceeding Estimated Resources

At December 31, 2017, the Village’s appropriations exceeded the amount certified as available by the budget commission in the Capital Road Project fund by $4,968.

 

Finding -003: Noncompliance – Annual Financial Reporting

The Village did not file its financial statements for the year ended December 31, 2018 until December 19, 2019. In addition, the Village did not file its financial statements for the year ended December 31, 2017 until December 17, 2019.

 

Finding -004: Internal Control Deficiency – Financial Statement Adjustments

The following errors, mostly due to the net effect of various financial statements mispostings, were identified and adjusted to the 2017 and 2018 financial statements, and accounting system where appropriate, by management:

 

• General fund property taxes, income taxes and cash were overstated $21,874, $8,840 and $8,840, respectively, and intergovernmental revenue, cash, beginning fund balance and property taxes were understated $21,874, $56,422, $36,802 and $19,620, respectively.

 

• Special revenue funds’ municipal income tax, unassigned fund balance and assigned fund balance were overstated $10,133, $15,677 and $3,293, respectively, and cash, intergovernmental revenue and restricted fund balance were understated $8,840, $18,973 and $18,970, respectively.

 

• Capital projects funds’ property taxes, principal retirement, interest and other fiscal charges, cash and beginning fund balance were overstated $19,620, $5,037, $2,050, $63,509 and $36,802, respectively.

 

• Proprietary funds' cash, principal retirement and interest and other fiscal charges were understated by $7,807, $5,037 and $2,050, respectively.

 

 • General fund unassigned fund balance was overstated $94,814 and assigned fund balance, property taxes and cash were understated $94,814, $36,802 and $36,802, respectively.

 

 • Special revenue funds’ assigned and unassigned fund balances were overstated $939 and $15,635, respectively, and restricted fund balance was understated $16,574, due to the incorrect classification of fund balances.

 

 • Capital projects funds’ property taxes, cash, unassigned fund balance and interest and fiscal charges were overstated $36,802, $36,802, $10,000, and $1,416, respectively, and principal retirement and committed fund balance were understated $1,416 and $10,000, respectively.

 

Finding -005: Noncompliance Finding – Availability of Public Records

Various public record requests for the 2017-2018 financial statement audit including deposit slips, expenditure vouchers, cancelled check images from Huntington Bank, various council meeting minutes, and credit card purchase original vouchers were not made available after several requests and inquires resulting in significant delays in completing required audit procedures. Furthermore, support documentation for several expenditure vouchers could not be located by Village management at all.

 

Finding -006: Internal Control Deficiency and Noncompliance Finding – Fiscal Officer and Council Member Pay

Payroll testing conducted by auditors noted the Fiscal Officer appointed from June 2018 to September 2018 was paid an additional "PERS pick up" of $5 for each of the four checks issued, which totaled $20. This was not approved by council in the aforementioned ordinance. In addition, a Council Member whose term began on June 19, 2018 was paid a total of $1,500. A recalculation shows for seven months of service, the council member should have received only $1,050 resulting in an overpayment of $450.

 

Finding -007: Internal Control Deficiency and Noncompliance Finding – Child Support Over Payments

The Village paid child support payments on-behalf-of Geoffrey Esser totaling $2,965 for pay-dates (or 18 payments) ranging from September 2018 to May 2019 contrary to the fact he left service at the Village during September 2018.

 

The Village also paid child support payments on-behalf-of David Clarich totaling $1,277 for pay-dates (or five payments) ranging from March 2019 to May 2019 despite the fact that he became a part time employee and it was determined his other employer would be tasked with withholding and remitting child support payments. After this change in employment status, the Village continued to remit child support payments for Mr. Clarich for each pay-period from the second pay of March 2019 through the end of May 2019, even though the Village had stopped withholding child support from his pay check

 

The following lists responsible officials during the applicable obligation dates, with the respective obligation for each Fiscal Officer and acting Fiscal Officer:

• Angela Johns $164

• Michael Stanton $329

• Nina Transkey $3,749

 

A Finding for Recovery was issued against former employee, Geoffrey Esser and David Clarich, in the amounts of $2,965 and $1,277, respectively, in favor of the Village of Timberlake's General Fund.

 

Former Fiscal Officer Angela Johns, former Mayor (acting Fiscal Officer) Michael Stanton, Former Fiscal Officer Nina Transkey, and Village Bonding Company, Ohio Plan Risk Management, Inc., are jointly and severally liable in the amounts of $164, $329, $3,749, and $4,078, respectively, in favor of the Village of Timberlake's General Fund because they were responsible for correctly withholding and remitting child support payments during the time period these overpayments were incurred.

 

Angela Johns was not bonded while employed at the Village, therefore, the amount applicable to her is not included in the amount Ohio Plan Risk Management, Inc. is jointly and severally liable for. This matter is addressed in Finding 2018-014.

 

Finding -008: Noncompliance Finding – Remittance Payments

The Village failed to remit payments timely to the Internal Revenue Service (IRS), Ohio Treasurer of State, and Ohio Public Employees Retirement System (OPERS) for income tax and pension withholdings from May 2018 through December 2018. This resulted in penalties and interest charged to the Village, which is addressed in Finding 2018-009. The Village did remit the withholdings after the audit period.

 

Finding -009: Noncompliance Finding and Finding for Recovery Partially Repaid Under Audit – Overdraft Fees, Late Fees, Penalties, and Interest

The Village paid overdraft fees, late fees, penalties and interest for various items totaling $4,282 with obligation dates ranging from May 2018 to January 2020. The purpose for these fees, penalties and interest related to pension withholdings, overdraft fees, late payments for gas credit card, credit card interest and late fees, state tax remittances, federal tax remittances and Ohio Jobs and Family Services payments and forfeitures.

 

The following lists responsible officials during the applicable obligation dates, with the respective obligation for each Fiscal Officer and acting Fiscal Officer:

• Angela Johns $526

• Michael Stanton $339

• Nina Transkey $3,264

• Joanne Clapp $153

 

The fees, interest and penalties assessed against the Village could have been avoided had the Village timely and accurately remitted all payments and applicable forms; as such, these expenditures do not serve a proper, public purpose. The various aforementioned Village Fiscal Officers and acting Fiscal Officer were responsible for remitting payments during the time period these fees were incurred. This matter is addressed in Finding 2018-008.

 

A Finding for Recovery was issued against former Fiscal Officer Angela Johns, former Mayor (acting Fiscal Officer) Michael Stanton, former Fiscal Officer Nina Transkey, current Fiscal Officer Joanne Clapp, and the Village's Bonding Company, Ohio Plan Risk Management, Inc., in the amounts of $526, $339, $3,264, $153, and $3,756, respectively, in favor of the Village of Timberlake's General Fund.

 

Angela Johns was not bonded while employed at the Village, therefore, the amount applicable to her is not included in the amount Ohio Plan Risk Management, Inc. is jointly and severally liable for. This matter is addressed in Finding 2018-014.

 

At the January 21, 2020 Council Meeting, Joanne Clapp, Fiscal Officer, presented the Village with a personal check for $153 and we consider that portion of this finding for recovery to be resolved under audit.

 

Finding -010: Internal Control Deficiency and Noncompliance Finding – Credit Card Policy

The Village failed to adopt a credit card policy in accordance with House Bill 312 as required. Additionally, during testing of credit card purchases, it was noted that an employee of the Village used the Village’s credit card to pay their own personal cell phone bill. Upon review of that monthly credit card statement, the Fiscal Officer declined to pay the bill and billed the same employee for all of the interest and penalties accrued on the credit card account. The employee repaid the Village all that was owed by February 2018.

 

Finding -011: Internal Control Deficiency – Disaster Recovery Plan

The Village has not addressed the need for a complete disaster recovery plan which addresses the decision making process following a disaster. Without thorough, well-documented business recovery procedures, critical resources and processing may not be restored in a timely and efficient manner in the event of a disaster.

 

Finding -012: Noncompliance Finding – Negative Fund Balance

The Street Maintenance & Repair fund, Capital Road Project Fund and Sanitary Sewer Fund had deficit fund balances of $6,664, $70,679 and $3,284, respectively, at December 31, 2018.

 

Finding -013: Internal Control Deficiency – Bank Reconciliation

The original reconciled cash balances reflected on the accounting system’s December 31, 2018 and 2017 bank reconciliations did not agree to the final adjusted reconciled bank balances by differences of $67,272 and $40,878, respectively. These differences resulted in an initial “unauditable” designation by the Auditor of State and a significant delay in the completion of the Village’s 2018 and 2017 financial statement audit.

 

Subsequent review of accounting records and bank reconciliations by the Auditor of State’s Local Government Services Division during the reconstruction identified numerous errors that were later able to be reconciled to the reconstructed accounting system reports.

 

Finding -014: Noncompliance Finding – Public Official Bond

The Fiscal Officer hired from June 2018 to September 2018 did not post a bond in their name as required by Ohio law.

 

A full copy of this report is available online.

 

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The Auditor of State’s office, one of five independently elected statewide offices in Ohio is responsible for auditing more than 6,000 state and local government agencies. Under the direction of Auditor Keith Faber, the office also provides financial services to local governments, investigates and prevents fraud in public agencies, and promotes transparency in government.