State faults county’s bank reconciliations
Annual audit finds accounting errors, again
YOUNGSTOWN — The Ohio Auditor’s Office has again found fault with the Mahoning County Treasurer’s ability to carry out its “most basic and primary” responsibility to reconcile county accounting records with cash bank balances.
The 2022 audit released late last month by Ohio Auditor Keith Faber’s office made a finding that there was a difference between those two amounts in 2022.
A difference of $1,793,038 was “a result of unposted investment transactions such as interest income, bank service charges, purchases, sales” and other items from September through December of 2022, the finding states.
The items were “posted and corrected as of Jan. 6 and 11, 2023,” the finding states. The finding does not indicate that any money is missing.
This year’s finding is similar to what occurred last year in the state audit for 2021, when the Ohio Auditor’s Office issued a finding in August 2022 to the county treasurer’s office failing to provide information to allow its office and the county auditor’s office to timely reconcile county financial records for June through December 2021.
Mahoning County Treasurer Dan Yemma hired an accounting firm in September 2022 to assist the treasurer’s office because of issues raised in the audit. Yemma said in 2022 that the issues arose because of the sudden departure in 2021 of a treasurer’s office employee who handled tasks related to the reconciliations.
This year’s finding states that testing of the county’s financial records for 2022 found there were 371 “reconciling items totaling $582,248” found, including 22 that dated back to 2021. Thirty-seven of the reconciling items remained as of May 15 this year.
The issues “resulted in delays in performing monthly bank-to-book reconciliations by the county treasurer’s office such as the January 2022 month-end reconciliation not happening until March 22, 2022, for instance, and the December 2022 reconciliations not happening until March 6 of this year.
“Failure to reconcile on a timely basis increases the possibility that the county will not be able to identify, assemble, analyze, classify and record its transactions correctly or to document compliance with finance related legal and contractual requirements,” the finding states.
“Further, the lack of accurate daily … and monthly reconciliations increases the risk of theft / fraud over the cash cycle and could lead to inaccurate reporting in the annal financial statements.”
The finding urges county departments that work with the county’s finances to “work collaboratively to meet their joint obligations and to the broader expectations of the citizens of the county” to prepare and verify accurate and timely reconciliations.
Yemma wrote a July 26 letter to the Ohio Auditor’s Office stating that the county treasurer’s office made “Daily Form 6” statements to the county auditor’s office in 2022 showing all moneys received and expended and balances in the county depository.
“My office has always and continues to be in compliance by submitting a completely balanced Form 6 to the County Auditor on a daily basis,” Yemma stated.
He said the state auditor’s office’s findings of unposted investment transactions for September through December of 2022 “states these items were posted and corrected Jan. 17, 2023,” but the state auditor’s office “has been provided with pertinent documentation … confirming the transactions for each of those months were posted on a routine basis the following month, and that there were no investment transactions posted Jan. 17.
“This is a material dating error by the” Ohio Auditor’s Office, which later admitted it had “‘mistakenly used the 1/17 date rather than the correct date of 1/06 and 1/11 for December postings,'” Yemma’s letter states.
“Additionally, (State Auditor’s Office) commentary leads one to believe all postings for Sept., Oct., Nov. and Dec. were made 1/6 and 1/11. This is not accurate, only December postings were made 1/6 and 1/11,” Yemma stated. “Sept., Oct. and Nov. were made in the month following,” which Yemma indicated are “initial entries” and not “corrections.”
The letter acknowledges that there were late bank reconciliations for 2021, which were caused by “staffing challenges presented during 2021 by the sudden and unexpected retirement of a key staff member and the COVID pandemic.”
The state auditor’s office is “also aware” that Yemma contracted with a professional accounting firm and engaged with the state auditor’s office’s Local Government Services Division and brought “all bank reconciliations … current as of March 2023 and continue to be completed monthly,” Yemma’s letter states.
Mahoning County Auditor Ralph Meacham wrote a response to the finding in a letter to the state auditor’s office, saying he is “in complete agreement with the finding itself,” but Meacham took issue with the sentence urging the auditor’s and treasurer’s offices to “work collaboratively to meet their joint obligations,” because it does not “acknowledge my efforts and those of my staff” to address the reconciliation issues.
“From the time the issue was first discovered in July 2021, I have kept the Auditor of State’s staff and the county commissioners fully informed of the status” of the issues, and Meacham’s staff “performed the reconciliations of the county bank accounts” from June 2021 to March 2022 for the county treasurer’s office.
Meacham finally “pulled my staff off of the project” after completing the March 2022 reconciliations because of the audit finding and because the state auditor’s office indicated that it was a violation for the county auditor’s office to be “performing the duties of the (county) Treasurer,” Meacham added.
He concluded, “if the (Ohio Auditor’s Office) has specific county officials who should become more engaged in the process, then please identify them. It is grossly unfair to again diminish and discount the cooperation and efforts of the County Auditor’s Office. As it stands now this comment imputes my professional reputation.”
STATE AUDITOR’S RESPONSE
A “conclusion” statement by the Ohio Auditor’s Office regarding the finding noted that when members of the state auditor’s office visited Yemma and his staff June 14 regarding the finding, the state auditors brought with them “28 pages of information to provide support for the numerous errors and reconciling items that were identified.”
State auditor’s office staff were “fully prepared to present this information and answer all questions asked. However, due to less than professional behavior by (Yemma), the meeting was concluded in the best interest of both parties,” the statement says.
The statement denied that the state auditor’s office had made a “material dating error.” The reason was that the county treasurer’s office’s “Daily Form 6” postings “excluded several reconciling items which were needed to properly balance the Daily Form 6 throughout 2022.”
The State Auditor’s office stated that it “has acknowledged the staffing changes back in 2021 and the outside assistance provided, however, control deficiencies were still identified throughout 2022,” the conclusion states. “As noted … the final journal entries for calendar year 2022 were reported as of May 15, 2023.”