Finding Text
The Union County Fiscal Court Did Not Have Adequate Controls Over Disbursements Of Economic
Adjustment Assistance (EDA) Funds
Federal Program: Assistance Listing Number #11.307 Economic Adjustment Assistance
Award Number and Year: 2024
Name of Federal Agency: US Department of Commerce
Compliance Requirements: Activities Allowed; Allowable Cost
Type of Finding: Material Weakness
Amount of Questioned Costs: None
Opinion Modification: None
COVID-19 Related: No
The Union County Fiscal Court failed to implement internal controls over federal expenditures of Economic
Adjustment Assistance Funds. During our testing, it was noted that purchase orders were not properly utilized.
All five expenditures, totaling $3,000,000 had purchase orders issued after the expense had already been
incurred.
According to staff, purchase orders are issued by the department heads and are typically dated when the invoices
are received.
A lack of controls over disbursements could result in inaccurate financial reporting, misappropriation of assets,
cash flow problems, and claims being paid that are not valid obligations of the fiscal court.
KRS 68.210 gives the State Local Finance Officer the authority to prescribe a system of uniform accounts. The
Department for Local Government’s (DLG) County Budget Preparation and State Local Finance Officer Policy
Manual outlines requirements for counties’ handling of public funds, including required purchasing procedures
for counties.
According to a memorandum from the Department for Local Government (DLG) dated August 4, 2016, “[t]he
main purpose of this system is to ensure that purchases can be made if there are sufficient appropriations
available within the amount of line items in the county’s budget. Because of this, it is a requirement by the State
Local Finance Officer that all counties have a purchase order system and follow the guidelines prescribed on
Page 54 of the County Budget Preparation and State Local Finance Officer Policy Manual.” Furthermore, DLG
highly recommends that counties accept the practice of issuing purchase orders for payroll and utility claims.
Lastly, KRS 46.010(2) requires, “each county treasurer, and each county officer who receives or disburses state
funds, to keep an accurate account of receipts and disbursements, showing a daily balance of receipts and
disbursements.” KRS 46.010(3) requires, “all county officers handling state funds, other than taxes, to make an
annual report to the Department for Local Government showing receipts and disbursements, and to make other
financial statements as the Department for Local Government requires.” The retention and review of adequate
supporting documentation for all disbursements, as well as an effective purchase order system, are basic internal
controls necessary to ensure the accuracy and reliability of financial reports. Moreover, implementation of
strong internal controls over disbursements, is necessary to prevent misappropriation of assets, cash flow
problems, and claims being paid that are not valid obligations of the fiscal court.
We recommend the Union County Fiscal Court strengthen internal controls over disbursements by ensuring
proper documentation is maintained for all disbursements to properly support claims and ensuring purchase
orders are issued prior to all purchases being made.