A new method to audit the bookkeeping of some public officials in Kentucky is saving Lyon County taxpayers thousands of dollars each year.
Last Wednesday, Kentucky State Auditor Mike Harmon announced the first-year savings from a new law that allows agreed-upon procedures, or AUP engagements, for county sheriffs and county clerks that meet eligibility requirements to receive them. According to Auditor Harmon, there has been a 62 percent reduction in audit costs for 45 county clerks who received an AUP, and a savings of 67 percent for 19 eligible county sheriffs that got an AUP instead of an audit. Those figures are far above what was expected.
"Initially, when we pushed for legislation to allow AUP's for local sheriffs and county clerks in Kentucky, we estimated counties would save between 25 and 50 percent on the cost of an AUP compared to a full financial statement audit," Harmon said during remarks at the Kentucky County Judge/Executives Association's winter conference in Lexington. "Based on the first year of AUPs, the savings for sheriffs and clerks exceed 60 percent."
In Lyon County, the Fiscal Year 2018 AUP for County Clerk Lori Duff cost $2,353, a 62 percent decrease from the prior year's full financial statement audit. Audit expenses are paid from the county's general fund.
"It is basically a modified audit for clerks that have had a clear full audit," said Duff. "A clerk can have three AUPs in a row, but must have a full blown audit every four years."
The 2018 savings were based upon a clear audit from 2017, and more good news lies ahead.
"I applied and have been approved to have an AUP for 2019," she said.
However, Sheriff Brent White does not anticipate his office to benefit much from the AUP cost-savings based upon the nature of having a small staff to process a large amount of revenue from property taxes.
"We would love to do this, but I don't know that we will ever get beyond the segregation of duties requirement of the state auditor's office," he said.
White has only one part-time tax collector and one bookkeeper. He said he would need three tax collectors and himself in order to comply with their requirements. Though the sheriff is trying to rebuild his staff after cuts made due to the county's increased jail costs, he is not expecting to qualify for AUPs anytime soon. The last three sheriff audits cost $7,489, $6,514 and $5,758.
"Our county is so small, and we just don't have the funds to support this many staff in the sheriff's office, so I am unsure if we would qualify for the AUP program, but I hope we can some day," he said. "It is a potentially significant audit savings for a county our size."
Auditor Harmon proposed the idea of AUPs for county sheriffs and county clerks during the 2018 General Assembly, and the idea became a reality with the passage of Senate Bill 144, sponsored by Sen. Stan Humphries, a Cadiz Republican who represents Lyon County in the upper chamber of the legislature. The legislation, which received bipartisan support during the 2018 session, allows for local sheriffs and clerks who have a past record of clean audits to be eligible to receive an AUP.
"The idea was that it would both save counties money and allow us to operate more efficiently by spending less time on low-risk audits," said Harmon. "It also offers an incentive to sheriffs and clerks who may have only one finding to address the issue, so they could be eligible for the cost savings an AUP could provide to their county."
County fiscal courts are not eligible to receive an AUP because most carry debt, which requires a full audit.