RUTHERFORDTON — NC Auditor Beth Woods, CPA released this week a financial related audit of Rutherford County Clerk of Superior Court. The work was performed by authority of Article 5A of Chapter 147 of the North Carolina General Statutes and was conducted in accordance with the performance audit standards contained in Government Auditing Standards, issued by the Comptroller General of the United States. This audit was conducted in 204 hours at an approximate cost of $21,012.
The results of the audit identified a deficiency in internal control and an instance of noncompliance that is considered reportable under Government Auditing Standards. The audit scope covered the period July 1, 2018 through February 28, 2019,” stated audit report.
The internal control related to the following objectives:
Cash – The Clerk’s Office collects various fines, fees, and court costs daily, as well as collections for bonds, judgments, and other matters. We examined internal controls designed to ensure that the Clerk properly safeguards and accounts for cash receipts.
We also examined internal controls designed to ensure compliance with laws and regulations related to depositing cash receipts. During the audit period, the Clerk collected $4,030,355 in cash.
Estates – The Clerk’s Office ensures all estates are charged an application fee plus an assessment based on the value of the estate’s inventory. An estate inventory is to be filed by the representative of the estate. We examined internal controls designed to ensure that the Clerk properly obtains an inventory for each estate in compliance with laws and regulations.
We also examined internal controls designed to ensure compliance with laws and regulations related to the appropriate assessment and collection of estate fees. During the audit period, the Clerk collected $118,256 in estate fees.
The Clerk’s Office ensures that all estate guardians are properly bonded based on the value of the annual estate inventory. An annual estate inventory is to be filed by the estate guardian of a minor or incapacitated adult. We examined internal controls designed to ensure that the Clerk properly obtains an inventory for each guardianship in compliance with laws and regulations. We also examined internal controls designed to ensure that bonds assessed and collected are sufficient and in compliance with laws and regulations.
During the audit period, auditors examined $15,828,378 in estate guardian bonds retained by the Clerk.
Escheats – The Clerk’s Office transfers abandoned property to the State. The transfer results when the person legally entitled to the property fails to make a valid claim on the property within a prescribed period of time. After that time, all abandoned property held by the Clerk is required to be transferred to the North Carolina Department of State Treasurer. We examined internal controls designed to ensure that the Clerk properly identifies escheatable funds.
We also examined internal controls designed to ensure compliance with laws and regulations related to escheating unclaimed funds after a prescribed period of time. During the audit period, the Clerk transferred $73,480 in escheats to the State Treasurer.
Trusts – The Clerk’s Office receives, administers, and disburses trust funds for minors and incapacitated adults. We examined internal controls designed to ensure that disbursements from minor and incapacitated adult trust accounts are proper to ensure compliance with laws and regulations. As of February 28, 2019, the Clerk had $706,489 in trust accounts.
RESULTS AND CONCLUSIONS
Based on the results of audit procedures described in the Methodology section of this report, auditors identified a deficiency in internal control and an instance of noncompliance that is considered reportable under Government Auditing Standards. This item is described in the Audit Findings, Recommendations, and Responses section of this report. Management’s response is presented after the audit finding. We did not audit the response, and accordingly, we express no opinion on it.
A<strong>UDIT FINDINGS, RECOMMENDATIONS, AND RESPONSES
FAILURE TO IDENTIFY AND TRANSFER UNCLAIMED FUNDS TO THE STATE TREASURER, RIGHTFUL OWNER, OR THE COUNTY
The Clerk’s Office did not identify and transfer unclaimed funds to the North Carolina Department of State Treasurer (Treasurer), rightful owners, or the County in accordance with state law.
Auditors examined the February 2019 aging reports for items held over one year and identified 65 unclaimed items totaling $94,233.
Twenty-six (40%) out of the 65 unclaimed items totaling $9,059 remained on deposit with the Clerk as of the time of our audit that should have been
transferred to the Treasurer, rightful owners, or the County. Specifically,
• Sixteen (25%) items totaling $5,609 in unclaimed funds should have been transferred to the Treasurer during the periods 2017 and 2018.
• Eight (12%) items totaling $3,150 in forfeited bonds should have been transferred to the County Finance Officer during the periods 2013-2018.
• Two (3%) items totaling $300 in unclaimed funds should have been transferred to the rightful owner during the periods 1996 and 2009. There was no evidence of attempts to contact the rightful owners.
As a result, the return of unclaimed funds to the rightful owners has been delayed. Additionally, there is a potential loss of earnings on the Unclaimed Property Fund, or Escheats Fund. A loss of Escheats Fund earnings reduces the amount of funds available for transfer to the North
Carolina State Education Assistance Authority.2 Finally, the delay in forfeited funds remitted to the County reduces the amount of funds available to benefit the local school system.
According to the Clerk, his staff was not properly trained on how to review items on the monthly aging report and to identify money that needs to be returned to the Treasurer or other applicable parties.
North Carolina General Statutes3 and the North Carolina Clerk of Superior Court Escheats
Manual4 require the Clerk’s Office to:
• Review monthly aging reports to identify funds that should be disbursed to the rightful owners, the County, or escheated.
• Determine that unclaimed funds are eligible for delivery to the Treasurer and transfer those funds at the appropriate time.
Recommendation: The Clerk should ensure responsible employees receive proper training and implement effective monitoring procedures over the escheat process, such as a periodic review of aging reports.
1 The monthly aging report reflects all case level account funds being held by the Clerk and the amount of time the funds have remained in the Clerk’s office without any activity. 2 The State Education Assistance Authority provides loans and grants to worthy and needy North Carolina
students attending state-supported colleges and universities. 3 NCGS 116B-53(c) and 116B-60(d) 4 Sections C1 and C2
Steve Owens, elected Clerk of Superior Court, responded to the deficiencies by agreeing that 26 items did remain on deposit with the Clerk as of the time of this audit and should have been transferred to the proper account.
The 16 cases totaling $5809 in unclaimed funds were from trying to contact heirs from both closed estates and estates that were never opened. The aging report is being reviewed monthly.
The 8 forfeited bonds totaling $3150 are from cash failure to appear bonds.
The 2 unclaimed funds totaling $300 are from posted cash bonds that should have been returned after cases were disposed of in court.
As of May 23, 2019 all of the 26 items have already been properly addressed.clerkofcourt audit2019