This is why county audits are important

Geoffrey Lawrence

I just came across the most scathing audit I’ve ever read. The audit was performed last year and examined the cash receipts process for the Clark County Fire Department’s Inspection and Permitting function. It indicates that significant abuse and/or corruption may have occurred with regard to collecting fees by the Fire Prevention Bureau, the division of the Fire Department responsible for permitting.

Allow me to quote from the audit. Here are the audit’s objectives:

The objectives of the audit are to determine whether:
• The present system of internal controls over recording of cash receipts effectively safeguard against abuse and error.
• Details of transactions supporting recorded items are complete and exist.
• Receipts are properly recorded and deposited in their entirety on a timely basis.
• Transactions are in accordance with laws, rules, and regulations.

Here are some highlights from the Internal Audit Department’s findings:

Significant weaknesses exist in the present system of internal controls over the cash receipts process. The detail of transactions supporting recorded items is not always complete and in some instances does not exist. Receipts are not properly recorded in financial general ledger accounts. The receipts that were issued were deposited in their entirety and agreed to the total recorded amounts to within an insignificant difference. However, deposits are not always made on a timely basis. We further found that transactions are not all in accordance with the UFC, state statutes, or approved fee schedules.

The Bureau has also lent itself to business practices that may potentially place the Bureau in a financially liable position.

It is also apparent from the number and type of actual permits issued that many entities have not obtained required fire code permits, such as gasoline stations. Physical inspections are also not always performed for all permits issued. The Bureau has not reviewed all renewable permits to determine whether customers are operating without current permits. Reinspection fees are also not charged.

A substantial number of transactions have also been voided, without proper authorization, in attempts to adjust accounts.

Missing receipt numbers represent an internal control weakness. Missing receipts also indicate that revenue may be under recorded and funds may not be deposited. Adjustment to Prepaid Accounts may also be misstated.

These indictments are the Audit Department’s way of saying that it appears inspectors have either been cutting under-the-table deals with inspectees, accepting bribes, or outright voiding transactions in the Bureau’s computer database so as to pocket the permitting fees for themselves.

The issue of voided receipts is even more scandalous when one considers the total value of voided receipts.

Six voided receipts were examined. We found that voids were processed without supervisor approval for four of the receipts. The remaining two hardcopy receipts were not readily available due to organization of records. It was further noted that one voided receipt selected was deleted from the overtime receipts. This represents significant internal control weaknesses. The significance is greater when considering that transactions coded as voids amounted to $1.4 million…this represents 24 percent of $6 million receipts generated by the Bureau during the audit period for net receipts of $4.6 million.

This is the auditor’s way of saying he thinks $1.4 million was stolen from county coffers as a result of corruption within the Fire Prevention Bureau.

This audit is extremely incriminating for the Fire Prevention Bureau. Moreover, it exemplifies how important the Internal Audit Department is. As I have argued in the past, funding for performance audits should be increased at all levels of government in Nevada. Not only do audit departments more than pay for themselves by reducing waste and highlighting potential corruption, but taxpayers have a right to know that their money is being used in good faith.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.