Originally Posted - October 12, 2005

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LAKE GEORGE--The Warren County Sheriff's Department lacks accountability over cash balances in their civil office division----including bail money-- and fails to comply with county budgetary accounting and purchasing policies in the corrections division.

That's according to a state audit released Tuesday of the civil and corrections divisions of the law enforcement agency headed by Sheriff Larry Cleveland.

The audit also found that nearly $165,000 of telephone commissions from the county's jail were improperly used to furnish Sheriff Larry Cleveland's office in the county's new Public Safety Building and without formal approval by the board of supervisors, in non-conformance with the county's adopted budgeted, purchasing and accounting procedures.

The audit found that Cleveland improperly used the telephone commission money and circumvented a system of controls in place to prevent such unauthorized spending. Auditors said that there was no legal authority for Cleveland to use the commission moneys as he did.

But despite the harsh audit of the department, controlled by Cleveland and the individual beneath him, division commander Major John H. Shine, Cleveland says that he is "very satisfied with the report".

In the handling of moneys from telephone commissions from pay phones in the jail, the state noted that the county contracted with a communications vendor covering the installation of inmate telephones and the operation of inmate telephone service at the county correctional facility. Pursuant to that agreement, the county received monthly commission payments based on a percentage of designated calls placed from inmate telephone at the county locations. Commission income ranged from approximately $40,000 to $50,000 per year.

Initially, the account clerks deposited commissions into the commissary account where they were used in the same manner as commissary fund profits for inmate related purposes in accordance with State Commission of Correction regulations (Former Warren County Sheriff Frederick Lamy is one of three commissioners with the state COC). The auditors said that county officials had told them that five years ago, the department began depositing telephone commissions into a separate departmental bank account apart from the commissary fund. These moneys were used for other law enforcement purposes, they said, because, unlike commissary fund revenues, there were no specific mandated guidelines governing the use of moneys the inmate telephone service generated. The department retained custody of the moneys and did not remit them to the county treasurer where they could have been recorded in the county's general accounting records.

In 2004, the department spent $164,193 in telephone commission bank account moneys to furnish the sheriff's office in a newly constructed facility that became home to virtually all of the department's divisions.

"We verified that the purchases, which included office and jail furniture, copiers and dental equipment for the jail, were for legitimate county purposes. We noted that certain of these purchases were made under the terms of the New York State Procurement Contract and others were made after obtaining quotes from vendors", the audit says. "Furthermore, the purchases were discussed by the sheriff's committee of the board of supervisors. However, there was no formal budgeting for the use of these funds in the county's adopted budget. Neither the receipt nor expenditure of the moneys was processed in conformance with the county's adopted budgeting, purchasing and accounting procedures".

The sheriff's department is generally subject to the same fiscal and budgetary controls that govern other county administrative units. These include the requirement that the county treasurer receives, and is custodian of county moneys; that no expenditure may be made without a budget appropriation and that claims against the county must be audited and approved before they're paid. 'We are not aware of any statute that would authorize a sheriff to establish a separate account for, and maintain custody of, income from inmate telephones. The commissary fund is specifically established to hold and account for the profits from the commissary sales, the comptroller's office said.

Failure to properly account for the receipt and expenditure of public moneys in accordance with established laws and guidelines increases the risk that errors and irregularities will occur. It circumvents a system of controls established to help assure the prudent use of public moneys and acquisition of quality goods and services at lowest possible cost, the audit said.

Since the examination, the sheriff has remitted the balance remaining in the telephone commission account to the county treasurer and agreed to remit all future commission to the treasurer's office on a regular basis, the comptroller's office said.

The comptroller's office audited the civil and corrections divisions of the law enforcement agency for the period of January through November, 2004 and although they said that the department's internal controls were "by and large appropriately designed and operating effectively", there were several problem areas.

The audit said that certain duties in the civil office and corrections divisions were not adequately segregated. Accounting software did not sequentially control cash receipts and issued checks. Accountability over civil office cash balances was lacking and officials handled old, outstanding checks in an inconsistent manner, according the audit.

The civil office is responsible for collecting and disbursing judgments, civil claims and related fees and his headed by Kevin Scellen. In 2004, according to the auditors, the sheriff's department collected over $1.2 million for bail, judgments and various fees. Telephone commissions are the county's share of revenues generated from the use of pay phones located in the jail. Inmate moneys are collected during the inmate booking process or from others on behalf of the inmates. The inmates use these moneys to purchase snacks and incidentals from the jail's commissary.

The department's 2003 operating expenditures were approximately $8.9 million, broken down according to an older departmental configuration of $4.9 million for the road patrol, investigative, civil office and administrative divisions; $800,000 for public safety communications; and $3.2 million for the correction facility.

Capt. Michael Gates is "division commander" of the corrections division.

The Warren County Board of Supervisors and Cleveland have the statutory responsibility to initiate corrective action. The audit results have been discussed with county officials and on Aug. 31, Cleveland penned a personal letter to the auditor at the comptroller's Glens Falls office, whose name was redacted in the comptroller's report, saying that his office would be submitting and implementing a course of action plan in the near future.

Karl Smoczyski is listed as the chief examiner at the Glens Falls office.

The audit found that in the corrections division, two account clerks were responsible for the receipt and disbursement of moneys related to three departmental bank accounts: the inmate account, the commissary account and the telephone services account. Both account clerks and the sheriff were authorized to sign checks from these bank accounts. The clerks were responsible for maintaining related accounting records and reconciling the bank accounts. Two additional individuals were also authorized to maintain civil office records and have signatory access to the civil office bank account, the audit said. One possesses and uses Cleveland's signature stamp, the other is empowered to sign her own name to the account checks.

The same individual handling cash should not be responsible for maintaining the records or reconciling bank accounts, the comptroller's office told the county. Furthermore, the account clerks should not be permitted to sign checks as part of their regular duties. This should be the responsibility of someone in a supervisory capacity within the department.

The accounting software the civil office utilized to account for receipts and disbursements lacked a basic feature essential to an effective system of internal controls, the state said. It did not produce sequentially numbered and controlled receipts. For November, 2004, it produced 738 receipts numbered from 8329 to 9066. Within this sequence 43 receipts were missing, presumably after one or the other of the clerks voided them. However, not only did the account clerks not retain voided receipts, but the software was not capable of producing reports explaining the voids. Additionally, numbers assigned to checks that the system produced were not sequentially controlled. Although numbers can be skilled for voids or other reasons, the software was unable to list the missing numbers with an accompanying explanation.

An effective system of internal controls over cash requires that detailed records be periodically reconciled with available cash balances. Although the account clerks reconciled the civil office checking account with the check book balance on a monthly basis, they did not perform an accounting to explain how much cash was left in the checking account balance. The civil office account is a fiduciary account whose moneys are generally remitted to various creditors and the county treasurer on a monthly basis. As of Oct. 31, 2004, the civil office account was carrying a balance of $3,985.75. Only $368.24 of the entire sum was identified in civil office records as being related to a bankruptcy case. Officials did not identify in their records the nature of the remaining $3,617.51 in funds.

The civil office issues numerous checks each month to various creditors on whose behalf the office has been assigned to collect moneys. After one year, uncashed checks are designated as "stale". As of Oct. 31, 2004, the civil office had 33 stale checks totaling $7,069.32. The civil office operations manual recommends that the office turns over a list of all stale checks every January to the county treasurer. It also states that if moneys turned over to the treasurer warrant a refund, then the civ8l office must formally request a refund. However, the manual also states that these moneys are to be retained in the civil office account. This ambiguity in the operations manual has caused an inconsistency in the handling of stale checks which has been a problem not only in the civil office but in corrections as well.

Corrections officials write checks from the inmate account primarily to refund moneys to inmates being discharged. As of Oct. 31, 2004, there were 232 stale checks. These checks, dated as far back as January, 1998, totaled $4,705.51. Although officials remitted a list of the checks to the county treasurer, the moneys remained in the inmate account and had to be factored into each month's bank reconciliation. These deficiencies in internal controls could lead to errors or irregularities that may not be corrected in a timely manner.

The comptroller's office issued recommendations to correct the deficiencies indicating that the department's lack of accountability for cash is the fault of Cleveland. June Maxam10-12-05

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