State auditors say that the Franklin County Clerk’s Office exceeded its 2018 budget by almost $200,000 while using a new process from the auditor’s office. 

The Office of Auditor of Public Accounts Mike Harmon released a 2018 agreed-upon procedures engagement with County Clerk Jeff Hancock. State auditors found that the clerk’s operating disbursements exceeded the approved budget by $198,998. 

In response, Hancock told state auditors that the disbursements were from third party purchaser deposits for delinquent tax sales and are not typically included as a budget item. 

“Third party purchaser deposits have not been budgeted in the past since they are not actual revenues,” Hancock told the auditors. “These deposits are held until the end of the tax sale and refunded back to the third party purchaser. The money is tracked in the quarterly reports to show where they are received and returned. There is no way to accurately estimate the third party purchaser deposit amount from year to year. The best way to show an accurate number without guessing would be to amend the budget after the fact. As a result of this new audit, we will begin the practice of amending the budget after the tax sale. This would allow us to show the actual numbers as they pass through and are refunded.” 

Auditor's Office spokesman Michael Goins said the finding was not a reportable issue in the past, thus it was not a finding in previous audits. Goins said the auditors don't dispute Hancock’s explanation. 

“As communicated to the County Clerk, AUP findings are different than findings in the context of a financial audit. A finding in a financial audit is a weakness. In an AUP, the ‘findings’ are merely the conclusion reached for the specific procedure listed,” Goins said.

"In this instance, the procedure was to compare the clerk’s fourth quarter report to the approved budget. The fourth quarter report reflected the disbursements related to the third party purchaser deposits, but the budget did not. The AUP finding simply reflects that reality. In the prior year audit this was not reflected as a weakness that would result in a reportable issue.”

The AUP engagement also found that the clerk’s office owes Franklin County Fiscal Court $55,272 in excess fees.

In response, Hancock told auditors that the office “holds back some money until after the audit and submits the difference to Fiscal Court once the audit is completed.”

Hancock later told The State Journal that the reason his office holds about 10% back is in case a clerical error is found in the audit. He has previously paid $400,000 in excess fees to the court. 

Hancock applied for and received approval from Harmon to obtain an AUP engagement for the 2018 calendar year. The AUP reports present procedures performed and the results of those procedures.

AUP engagement is allowed in place of an audit of Kentucky sheriffs and clerks’ fee accounts to reduce audit costs for those offices with a history of clean audits and maintain an appropriate level of accountability. 

Hancock said that this was his office’s first time going through the process. In order to apply for an audit, a sheriff or clerk’s office must have had at least three clean consecutive audits. Next year, the clerk’s office will undergo a full audit. 


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