Gaps seen in Arundel finances after audit

Up to $20 million in county purchases lacks documentation

March 15, 2000|By Scott Calvert | Scott Calvert,SUN STAFF

A scathing new report on Anne Arundel County's financial books spotlights a host of deficiencies, including inadequate monitoring of cash balances and a lack of paperwork detailing up to $20 million in apparent county purchases and orders.

If all that spending did occur, an anticipated $28 million budget surplus could shrink by as much as $7 million to help pay for it. That could mean less money for hiring new employees, or renovating schools -- a top priority of County Executive Janet S. Owens.

While auditors found no sign of wrongdoing, they wrote that if the problems are not corrected, "the county has an increased risk that errors and irregularities, including fraud, would not be detected."

The nine-page report, which accompanied an annual audit, angered County Council members.

"We can't continue to operate like this," said Councilwoman Pamela G. Beidle, a Linthicum

Democrat, at a briefing for the council yesterday.

Alfred F. Warfield, the county's assistant financial officer, attributed the problems largely to staffing shortages and a rocky transition to a new computer system called One World that keeps track of the $750 million county budget.

He predicted in an interview that the picture will brighten when budget officials in his office find time to track down the answers. "It's not going to be perfect, but I don't think it's going to be as bad as it was for this audit," he said.

But Warfield further riled some council members when he told them that his office would not formally respond to the auditors' comments until next month.

The authors of the new report -- County Auditor Teresa Sutherland and representatives of accounting firm Arthur Andersen -- said staffing and computer problems did not amount to an excuse.

"That's all the more reason to have careful review," Sutherland told council members. "That process did not occur."

What particularly frustrated some council members is that auditors have recommended for years that the county implement various financial controls, such as verifying cash amounts by regularly comparing bank statements and county records. A lack of controls has led to at least five embezzlement investigations during the 1990s and the conviction of a detention center employee.

The biggest question centers on "accounts payable," or bills the county owes for goods and services. The county's general ledger reflects $29 million of purchases, but a detailed list does not show $11 million of those purchases. Auditors could not determine reasons for the discrepancy or which figure is accurate. In addition, no records were found to support another $2 million in purchases for which invoices had not yet been received.

Another unknown involves "encumbrances," goods and services the county ordered last year that did not arrive by the end of the fiscal year, July 1. The financial statement lists $2 million, but the budget office estimates the real number is somewhere between $4 million and $9 million.

That range is an estimate based on past experience: The figure the year before was $7.3 million. The reason budget officials must resort to an estimate is that while switching to the new computer system last year, they accidentally deleted all encumbrance data. Although the budget office re-created $2 million worth, it has not been able to piece together the rest.

Taxpayers may take a hit as a result. If encumbrances turn out to be higher than $2 million, it would cut into the projected general fund surplus of $28 million, Sutherland said, possibly reducing it to $21 million. Departments may run out of money in May or June, requiring the council to dip into the surplus.

No such impact is possible with the $11 million accounts payable issue, because the budget is based on the assumption that $29 million is accurate. If the correct amount turns out to be lower, that will mean a windfall for two county funds: utilities and capital projects.

Auditors also highlighted a litany of problems with how the county tracks cash. "Significant amounts" of cash receipts, they said, were recorded by banks but not posted to the general ledger; as of January, the county had not checked to make sure cash balances were accurate for August through December, and some entries were recorded twice.

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