Material weaknesses mar Ridgeway audit

RIDGEWAY – Ridgeway’s auditing firm identified several “material weaknesses” in how the town conducts its finances, according to the town’s annual audit.

“We identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies,” Love Bailey & Associates wrote in a letter to the town.

Specifically, the Laurens-based firm identified deficiencies in the following areas:

  • Timely Reconciliation of Bank Statements
  • Lack of Recording Transactions in the General Ledger
  • Lack of Segregation of Duties

Not segregating duties, the audit concluded, exposes the town “to potential fraud, errors, and misappropriation of assets.”

That assessment comes amid an ongoing investigation into over $14,000 in “improper payouts” of vacation accrual to a former town employee dating back to 2009, according to the audit.

The audit recommended instituting a series of checks and balances regarding the expenditure of public funds.

It also recommended developing and enforcing a formal policy outlining the segregation of duties over a wide variety of financial matters, going as far to suggest hiring an independent accounting firm to assist with monthly reconciliations.

Ridgeway Mayor Heath Cookendorfer couldn’t be reached for comment.

In the audit, the town provided responses to three material weaknesses accountants identified.

The town said it had hired a new town clerk, who’s tasked with reconciling bank statements with the mayor reviewing those reconciliations. The new clerk has also been tasked with correctly recording transactions.

In addition, the town has started using QuickBooks to link bank accounts with accounting software. The town also pledged to “carefully evaluate” risks associated with not segregating financial duties.

“A well-designed and effectively implemented segregation of duties framework will significantly enhance the integrity and reliability of financial transactions and mitigate the risks of fraud, errors, and misappropriation of assets within the Town,” the audit states.

This isn’t the first controversy involving Ridgeway annual audits.

In 2022, the town wouldn’t provide copies to the public without a Freedom of Information Act (FOIA) request.

Cookendorfer also said at the time there would be a charge to inspect the audit although state law prohibits charging to merely examine public records.

According to the 2023 audit, failing to reconcile bank statements exposes the town to a greater “risk of errors, misappropriation of funds, and the possibility of fraudulent activities going undetected.”

The second material weakness – not recoding transactions in the General Ledger – also increased the risk of fraud, and also led to misstated financial information and inaccurate cash balances, the audit stated.

“This deficiency in internal controls raises concerns about the accuracy and completeness of financial information recorded in the town’s books.”

Not segregating key financial tasks poses “a substantial risk,” further increasing the risk of fraud, errors, and misappropriating assets, according to the audit.

“One individual had full access and control over the entire payroll process, from initiating employee timekeeping to authorizing and processing payroll disbursements, without independent review or oversight,” the audit states.

“The absence of checks and balances increases the likelihood of fraudulent activities, such as unauthorized disbursements, payroll manipulations, or collusion between employees,” the audit continues.

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