A forensic audit was completed of the Shelby County Clerk's Office, per a document obtained by The Commercial Appeal. Shelby County Clerk Wanda Halbert has repeatedly claimed that when she assumed office she requested a forensic audit, but it was never completed.
The audit was completed for the fiscal year starting July 2019 to June 2020.
CBIZ Risk & Advisory Services, LLC, the firm that completed the audit, said in their assessment of the audit that the audit was "at the request of the Shelby County Clerk." Commissioner Mick Wright cited the audit in his formal complaint against the office he submitted earlier this year.
Per the formal complaint, Wright said the Board of Commissioners did not see the audit report but only the response from the county's external auditors.
The auditors reviewed 12 months of documentation provided by the clerk's office, did "high-level walkthroughs of the key processes," and "documented process flow charts to appropriately capture the following process: revenue sources, daily deposits and accounting procedures, bank reconciliations, and annual comprehensive financial reporting."
Part of the audit required the auditors to identify all revenue sources, collections, commissions and fees received by the clerk's office from the exam period. In the assessment of the audit, CBIZ said they were unable to fulfill their complete duties of the audit due to missing documents.
"However, our charge to identify, scrutinize, and document all records supporting revenues obtained during the audit time period was prohibited due to missing documentation supporting bank account reconciling items," the assessment said.
"Lastly, documentation used for tracking changes in the custody of cash could not be independently validated with information obtained from the Trustee’s office. Specifically, data gathered to prepare the Annual Comprehensive Financial Report could not be confirmed. This lack of transparency regarding Shelby County Clerk’s revenue reporting procedures increases the level of potential fraud risk associated with the process."
The Commercial Appeal has documented the issues surrounding the clerk's office revenue reports.
What issues did the audit find?
The assessment said that CBIZ's overall takeaway was the reporting process from Shelby County Clerk’s Office to the Department of Finance for the purposes of preparing the Annual Comprehensive Financial Report was "inadequate."
"It appears the Shelby County Clerk’s Office does not have proper insight into revenues and cash flows reported to the Department of Finance. Additionally, we noted a breakdown in communication of financial information between the primary entities including the County Trustee’s Office," the assessment said.
The areas of concern from the CBIZ audit include bank account reconciliations, monthly fee report processes and annual comprehensive financial reporting procedures.
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CBIZ listed areas their team observed and provided recommendations to the clerk's office. One area of concern was supporting documentation for discrepancies on bank account reconciliations for four separate months that could not be located by Shelby County Clerk's office staff.
CBIZ recommended the office should retain documentation to support bank account reconciliation discrepancies, and that the over or short amounts should be "appropriately supported with backup information clearly identifying the cause of the condition."
'Lack of transparency'
The team of Local Government Auditors from the Tennessee Comptroller's office also reviewed the deposit and disbursement bank accounts during their visit earlier this year. When doing a test of a sample of daily collection reports in September 2023 and December 2023 the auditors had to "rely on paperwork maintained by the Clerk’s staff to match the collections to the deposits on the bank statements."
"LGA was unable to reconcile the deposits between the BIS general ledger and the bank statements because the County Clerk’s Office generally checks out their daily collections by collection site," the Comptroller's report said.
The Comptrollers team also found that disbursements in the office are not being processed in the s Business Information Systems software and are instead handled through a different software.
"The office also utilizes a positive pay service through their bank, which allows them to submit a list of checks issued to the bank. Any checks presented for payment against the bank account that do not match the provided list would have to be approved for payment," the Comptrollers report said. "LGA asked employees of the County Clerk’s Office if they reconciled this check list, and it does not appear anyone has attempted to reconcile the list in several years."
It was also noted during the audit from 2019 that the clerk’s staff was "unfamiliar" with the purpose of the weekly fund balance reports, "and could not reconcile the balances to any relevant source documentation."
"These reports were later determined to not be utilized during the preparation of the Monthly Fee Report," the assessment stated.
CBIZ recommended that the purpose of the fund balance reports from the Shelby County Trustee's office be "further defined," and fund balances reported from the trustee’s office should be independently verified with supporting documentation from the Shelby County Clerk.
The assessment also states that the revenue from various other offices in the county government is recorded based on the reports submitted by those offices. For the clerk's office, however, the reports are submitted to the county trustee's office and finance records the clerk’s revenue from the monthly reports submitted by the trustee.
"Lack of transparency between revenue reported from the Trustee’s Offices on behalf of the County Clerk’s office increases the risk of potential misappropriation of funds," the assessment states.
CBIZ recommended the procedures be "enhanced with additional clarity regarding the monthlyrevenue reporting process," for the Shelby County Clerk's office funds to the finance department from the trustee’s office.
CBIZ also listed "opportunities for improvement," for the clerk's office which include implementing spreadsheet controls and laying out written policies and procedures for all business processes.
Shelby County Clerk Wanda Halbert was unable to be reached for comment before publication.
Brooke Muckerman covers Shelby County Government for The Commercial Appeal. She can be reached at (901) 484-6225, Brooke.Muckerman@commercialappeal.com and followed on X, formerly known as Twitter @BrookeMuckerman.
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