The Tennessee Office of the Comptroller released last week the results of its financial audit for Cheatham County for the fiscal year ending June 30, 2022, and noted seven findings and recommendations: one for the Office of Building and Codes, two for the Emergency Medical Service and four for Cheatham County Schools.
Among the findings in the school audit were the director of schools receiving $9,000 in compensation not approved by the Cheatham County School Board, fraudulent fuel charges resulting in a net loss of $29,774, materially incorrect ledger balances in the General Purpose School Fund and not maintaining adequate controls over capital assets records.
According to the report, Dr. Cathy Beck received $9,000 in compensation from federal Elementary and Secondary School Emergency Relief 2.0 funds, and the payment wasn’t part of the terms of her contract, nor was it approved by the Cheatham County School Board. The comptroller report did note that the $9,000 payment did meet federal documentation requirements. Though referred to as “compensation” in the full Comptroller report, an email newsletter sent to media outlets referred to the $9,000 as a “bonus.”
CCS Communications Director Tim Adkins issued a statement on behalf of the district, which read, “The Cheatham County School District, along with the Dickson County and Hickman County school districts, created a consortium to provide oversight and support to each other for all Elementary and Secondary School Emergency Relief (ESSER) requirements through an ESSER planning grant. The Tennessee Department of Education heralded this consortium as an innovative model for rural school districts. The grant, which was approved by the TDOE, provides stipends for all team members for after-hours work. The stipend for Director of Schools Dr. Cathy Beck was for her after-hours work on the ESSER consortium. This was not a bonus, and the School Board was not required to vote on the stipend. The School Board has been made aware of this situation, which was recommended by the State Comptroller’s Office to address the finding.”
Requests for official verification of ESSER payment and requirements from TDOE were not available at press time. However, Dickson County Director of Schools Dr. Danny Weeks said the consortium was formed in the Spring of 2021 in compliance with a TDOE ESSER Planning Grant and Dickson’s grant was finalized in August 2022.
Beck said the payment is on the agenda for the school board’s January retreat, and that going forward, she will have the school board approve any payment she receives from TDOE work.
The second finding with CCS were fraudulent charges to the district’s fuel cards in March and October of 2021 totaling $59,788.95. Though the district’s fleet management company reimbursed the district for $30,015.42, it resulted in a net loss of $29,774. The Comptroller’s report stated the loss resulted from its failure to have written policies and procedures in place regarding the use of fuel cards.
“The Cheatham County School District uses credit cards for school bus fuel purchases. Two cards were skimmed when used at a Cheatham County business. The thieves then reportedly used the card information at other businesses in Middle Tennessee. The district was able to catch most of this activity and turned it over to law enforcement. No one in the district has made any fraudulent charges. The district has additional checks and balances in place to ensure this doesn’t happen again,” Adkins said in his statement.
Adkins said the district reported the thefts to the Cheatham County Sheriff’s Office. Emails sent to the Cheatham County Sheriff’s Office to verify had not been returned by press time.
The Comptroller’s Report includes corrective action issued from CCS Chief Operating Officer Dr. Tara Watson, who said, “Fuel Card administrative procedure was developed and implemented by the Director of Transportation and the Chief Operations Officer. Fuel card usage accuracy will be verified and any fraud will be reported immediately.”
The third finding in the Comptroller’s report stated, “At June 30, 2022, certain general ledger account balances in the General Purpose School Fund were not materially correct, and audit adjustments totaling $8,091,154, related to overstated property tax receivables were required for the financial statements to be materially correct at year-end.”
The Planned Corrective Action offered by Watson is “The Accounts Payable Associate will enter property tax receivable into the accounting software. The Chief Operations Officer will verify the entry for accuracy.”
The last finding related to CCS was the district did not maintain proper control over its capital assets records. According to the Comptroller’s report, “Various purchases were not recorded correctly on the school department’s capital assets records. This resulted in capital assets and current-year depreciation expense being understated by $967,063 and $70,914, respectively.”
The Planned Corrective Action offered by Watson is, “The Accounts Payable Associate will run a monthly account analysis for any items, which exceeds the capital assets threshold. The Chief Operations Officer will review the monthly analysis to identify all capital assets. Assets, which qualify as capital assets, will be entered into the district’s accounting software.”
Concerning the Office of Building and Codes, the Comptroller’s report stated the Office’s system data backups were performed semiweekly instead of daily, as required by Tennessee Code Annotated.
In response, Cheatham County Building Commissioner & Director Franklin Wilkinson said, “The permitting software provider for the Building & Codes Department backs up the entire range of permit data off site twice a week per our service agreement. Given the extensive amount of data involved, a daily backup of the entire system was not feasible per the vendor. We have arrived at a solution with the permit software vendor to perform local daily backups to satisfy TCA §10-7-121 as required by the Tennessee Comptroller. This issue has been resolved and a new service agreement with the permitting software vendor has been drafted. I do not expect this issue to be an audit finding in the future.”
The two findings related to Cheatham County EMS concern official prenumbered receipts not being used for all collections and duties not being segregated properly.
According to Comptroller of the Treasury Director of Communications John Dunn, “Prenumbered receipts help financial staff and auditors determine whether all funds collected were turned in for deposit. This is a basic internal control that provides a permanent record supporting the posting of payments to financial records while also providing a receipt to the person who is making a payment. Local governments are required to issue receipts and retain receipts in duplicate.”
Cheatham County EMS Director BJ Hudspeth said at some point, his secretary grabbed the wrong prenumbered receipt book, which got the receipts out of sequence.
Dunn said that duties concerning collections of funds need to be properly segregated, with different individuals responsible for authorizing transactions, recording transactions and maintaining custody of assets. Separating the responsibilities cuts down the likelihood of error and fraud.
Hudspeth said once his office was made aware of the issues with both the prenumbered receipts and segregation of duties, both were corrected and new procedures put in place as of June 2022.
The Comptroller’s Audit of Cheatham County for Fiscal Year 2022 can be viewed online at www.comptroller.tn.gov/content/dam/cot/la/documents/county/2022/FY22CheathamAFR.pdf
