Essex County – Financial Condition and Internal Controls Over Payroll (2013M-177)

Issued Date
November 15, 2013

Purpose of Audit

The purpose of our audit was to review the financial condition of the County and internal controls over payroll for the period January 1, 2012 to January 31, 2013.


Essex County is located in northeastern New York State and has a population of approximately 39,000. The County is governed by a Board of Supervisors which comprises 18 members. The County’s budgeted appropriations for the 2013 fiscal year are approximately $107.1 million.

Key Findings

  • The Board adopted budgets for the general fund that were not structurally balanced, but instead the Board routinely relied on appropriating significant amounts of fund balance to finance operations.
  • The County’s enterprise health fund and enterprise refuse and garbage fund were not self-sufficient and, therefore, required subsidies from the general fund through both interfund transfers and advances. County officials did not ensure that interfund advances from the general fund to the enterprise funds were fully repaid by the close of the fiscal year. As a result, the general fund realized planned operating deficits, a declining fund balance, and a declining cash balance from 2010 to 2012. The County’s financial condition will likely decline further during 2013 because the Board has adopted budgets for the general fund, enterprise health fund, and enterprise refuse and garbage funds for 2013 using the same budgeting practices.
  • County officials’ failure to establish comprehensive written policies and procedures for the preparation and processing of payroll and leave time accruals has resulted in a lack of segregation of duties and lack of compensating controls. As a result, we found that employees were both over and underpaid and that employees’ leave accrual records were not properly maintained.
  • County officials have not properly limited users’ access within the computerized payroll systems and have not generated and reviewed change reports from these systems.

Key Recommendations

  • Adopt budgets for the general fund that are structurally balanced and rely on sources of recurring revenues that are sufficient to finance operations.
  • Authorize all interfund advances, and the Board should develop a plan to ensure that all outstanding interfund advances from the general fund are repaid.
  • Establish a comprehensive payroll processing and leave time accrual policy. Segregate payroll processing duties.
  • Ensure that someone who is independent of the payroll process generates and reviews payroll change reports.