The Harlan City Council was presented with and accepted the city’s yearly audit during a meeting on Monday.
Mayor Danny Howard called Certified Public Accountant Richard Scruggs, who performed the audit, to advise the panel on the audit’s findings.
Scruggs went through the audit page by page, giving the council a thorough reading of the city’s financial position.
According to the audit, there were no instances of noncompliance material to the financial statements of the city of Harlan which were disclosed during the audit.
The audit cites two deficiencies, including segregation of duties.
The audit states deficiency in internal control design includes the absence of appropriate reviews and approvals in the accounting process in general government accounting systems. Internal controls should exist that have proper checks and balances to ensure that all areas of the accounting process are properly supervised.
Scruggs explained the problem is due to lack of staff.
“There’s not enough accounting people to make sure you have all your checks and balances in place,” Scruggs explained.
Scruggs said segregation of duties issues are common for a city the size of Harlan.
“I think it’s pretty much standard,” Scruggs said. “In some of the bigger cities, if you have six or eight employees you can have a lot of checks and controls, but it’s really difficult for two people to have that.”
Howard pointed out the city has improved controls in the last few years.
“From three or four years to now, it’s been a huge turnaround,” Scruggs said. “I feel much, much better from everything I’ve looked at in the last couple years than I did in prior years. It’s a big change.”
Scruggs also mentioned an issue with the sewer fund.
“The sewer fund is operating at a deficit,” Scruggs said. “The ordinance says you need to look at that and try to fix it.”
The audit recommends the city annually review the sewer fund’s revenues and expenses and make adjustments to bring the city into compliance.
After some discussion, the council voted to accept the audit.
Reach Joe P. Asher at 606-909-4132 or on Twitter @joe_hde.