Multiple past years’ audits require Fiscal Court’s focus

Fulton County Fiscal Court met in regular session on Nov. 13, with Magistrates Billy “Bubba” Nelms, James D. Black, and Henry Callison attending. Magistrate George A. Jones was absent.

The Court was updated on Tender Release Agreement with Kentucky Association of Counties (KACo), a litigation Fulton County Fiscal Court initiated against KACo relative to a contractor failure at the jail. The contractor supplied by KACo on scene after the tornado in March 2017 failed to perform certain duties and failed to perform to the County’s satisfaction. A claim was brought against them and the court is limited as to what can be said about the claim.

Fiscal Court entered into an agreement with KACo, to settle the complaint with them and they compensated the Court with $600,000. The check was written to the County Attorney who held it in his escrow account, held out his fee of $47,000, and then presented the Fiscal Court with a check for $552,000 in the bank.

“We will now join with KACo in a litigation against all the little parties. I can’t discuss more because of litigation,” said Judge/Executive Jim Martin.

Martin reported, “The lawsuits were greater than the $600,000, but had they ligated the County would have gotten a lot less. As the Court goes forward, if there is a finding against the other parties, KACo will recover the money they paid the Court, plus their expenses, and any money beyond that will belong to Fulton County.”

“I want to go on record and say the executive director of KACo is Brian Roy and has been wonderful in the whole thing of litigation and worked for Fulton County even though some was against Fulton County,” reported Judge Martin.

“The Audit Reports for 2013/2014 and 2014/2015 are really a complicated issue,” stated Martin.

“First of all, the last Audit Report the Fiscal Court received was for 2012/2013, this is five years of audits the Fiscal Court hasn’t seen. The audits were in the hands of the Auditors,” continued Martin.

“The Audit Report is the most convoluted use of words and would need to make sure there are not distractions in order to read,” said Martin.

“I’m going to try and summarize the Audit Report. The Audit Report received in June of 2013 is what is called an ‘unmodified’ opinion. If you look this up that is a good Audit. A ‘modified’ opinion is not a good report. I look at it as ‘unmodified’ is an ‘A’, and a ‘modified’ is a ‘B’, ‘C’, or ‘D’. We received an ‘unmodified’ opinion. When we got the 2014 Audit, they changed to ‘qualified’ opinion not an ‘unqualified’, the same as a ‘unmodified’,” stated Martin.

“The Court went from a 2012 Audit an ‘A’ to something in the middle. The way this happens is if you have disclosed all your financial information, are in balance, and kept books in accordance with the Gap Standards, you receive an ‘unqualified’ opinion. If there are findings, in other words, exceptions to the rules, you go from ‘unqualified’ to ‘qualified’. We have gone to not having any Audit findings to 2015 having 13 findings. What happened? We had indictments between the A and C reports,” Martin said.

“We have to publish in the paper these findings, and run the Auditor’s cover letter, where they lay out sketchy terms 13 findings, but no opportunity to respond, and no explanation to the public how this happened. What you will see in the paper is we received the Auditor’s cover letter saying we got a ‘modified’ rating. All accounting practices were correct, but there were exceptions and corrections that were made. The errors were later laid out in the Audit. The 2013/14 Audit was finished, the Auditor came by my office and said the Audit was finished, thumbs up, you are getting an unqualified report. Went by the jail and said you got a clean report, everything is fine, thumbs up. About 10 days later the Auditor receives a call from the State Auditor’s office and says someone has put information on the fraud hotline that suggests there is fraud involved in the jail and asked the Auditor to go back and readdress some of these issues. When they did, auditing the same information the report went from unqualified opinion to a qualified opinion, with 12 or so findings. I’m complaining about stuff that went on at the jail, but the Auditor makes statements on what you will see in the newspaper that the Fulton County Fiscal Court did not properly utilize the purchase order system, when in fact it was not the Fiscal Court at all, but the Jail,” continued Martin.

“I want to say a few things about the relationship with the Auditor and what I experienced. When I got here in 2015, I began to notice things that I thought were not appropriate. I’m not an accountant, but I have been in government and know what procedures are, and I read the Kentucky Procurement Code, so I began to throw flags at things that were going on. I would go to the Jail, and former Jailer Ricky Parnell would say, ‘Auditors never said anything about that. I’ve never had a bad audit report.’ I went to the Auditors and said I need a little help when we have the irregularities and procurements, which he has made an audit finding out of. If you put that in the report you are sending a message to the people that looks at the report that things are not being done the way they should be. I asked the Fiscal Court, when you get an audit report and it says you got an ‘A’, unqualified opinion, what do you think that tells you? I asked the jailer and a couple of other people and they said everything is okay. We found out we were getting unqualified reports and everything was not ok,” continued Martin.

A lot of statements I made in the audit report I think there is a failure in the statutes to clearly define who is responsible for activities between two constitutional offices, Martin said.

“When the State Auditor went back and looked at these things, some people are just covering themselves when the report used to be this big and now it is this big, and saying that is just slightly over the edge and doesn’t warrant a flag. After the Auditors found out there were indictments and people had gone to jail, they throw the Fiscal Court under the bus,” continued Martin.

County Attorney Major stated, “The original letter came back with five or six more findings than what they ended up with were patently illegal. Totally in violation of Kentucky law, we responded to that and the auditor refused to talk to the Court and referred us to her personal attorney two years ago. That should be clear.”

“The reason I am bringing this up is because next week you will see the cover letter and it will basically say it is done in accordance to the standards with the exceptions of 13 findings. The Fiscal Court did not properly utilize the purchase order system. You can make any kind of reference from that like we are totally negligent, when the jailer, in construction of the 300 block, did not use the proper bid procedures, proper purchase order system, even though he said they were in the files, but were empty when the FBI came.

In other business, the Court:

• Heard the second reading of Ordinance 2018-03, allowing the Waterfowl Board to expand the citizen membership from two to four members.

• Accepted Alexander, Thompson, Arnold as the new Auditor for $12,000 each year.

• Approved an increase of $500 to make CodeRed an All Call system.

• Heard the jail construction has exhausted the money drawn on the bond issue and is now coming out of the jail operating account.

• Approved to redirect $6,500 in the budget to supplement the Meals on Wheels food delivery.

• Voted to start receiving financial statements from all county boards.

• Authorized Leslie Woods as the part-time Emergency Management Director, $15,000 a year.