SEQUATCHIE COUNTY, TENNESSEE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Year Ended June 30, 2009
PART I, SUMMARY OF AUDITOR’S RESULTS
1. Our report on the governmental activities is adverse. Our report on the aggregate
discretely presented component units is qualified. Our report on each major fund
and the aggregate remaining fund information is unqualified.
2. The audit of the financial statements of Sequatchie County disclosed significant
deficiencies in internal control. Two of these deficiencies were considered to be
material weaknesses.
3. The audit disclosed one instance of noncompliance that was material to the financial
statements of Sequatchie County.
4. The audit disclosed no significant deficiencies in internal control over major
programs.
5. An unqualified opinion was issued on compliance for major programs.
6. The audit revealed no findings that are required to be reported under Section 510(a)
of OMB Circular A-133.
7. The Child Nutrition Cluster: School Breakfast Program, National School Lunch
Program, and Summer Food Service Program for Children (CFDA Nos. 10.553,
10.555, and 10.559); Title I Grants to Local Educational Agencies (CFDA No.
84.010); Special Education Cluster: Special Education – Grants to States and
Special Education – Preschool Grants (CFDA Nos. 84.027 and 84.173); and
Twenty-first Century Community Learning Centers (CFDA No. 84.287) were
determined to be major programs.
8. A $300,000 threshold was used to distinguish between Type A and Type B federal
programs.
9. Sequatchie County did not qualify as a low-risk auditee.

failed to correct the deficiency noted in the prior-year audit report. The inability to prepare
financial statements and notes is an indication of a lack of controls, or ineffective controls,
because material misstatements may not be detected.
RECOMMENDATION
Sequatchie County should develop the ability to produce financial statements and notes to
the financial statements that comply with GAAP. This could include having at least one
staff member trained in financial statement preparation. This staff member should have
sufficient skills necessary to prepare a complete set of year-end financial statements even
though the external auditors prepare the county’s financial statements as a matter of
convenience. If we, as the external auditors, continue to prepare the county’s financial
statements, this individual must have sufficient knowledge to determine the completeness
of financial statement information and disclosures.
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OFFICE OF HIGHWAY SUPERVISOR
FINDING 09.03 EMPLOYEES’ TIME RECORDS WERE NOT SIGNED BY A
SUPERVISOR
(Internal Control – Significant Deficiency Under Government
Auditing Standards)
Supervisors did not sign the employees’ time sheets or time cards as evidence of review and
approval. Sound business practices dictate that payroll time sheets or time cards should be
properly reviewed and approved. This deficiency is due to a lack of management oversight
and the failure to correct this deficiency noted in the prior-year audit report. If supervisors
do not review and approve time sheets or time cards, it increases the risk that improper
payments could result.
RECOMMENDATION
Supervisors should sign the employees’ time sheets or time cards as evidence of review and
approval.
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OFFICE OF DIRECTOR OF SCHOOLS
FINDING 09.04 A CASH SHORTAGE OF $31,710 EXISTED IN THE GENERAL
PURPOSE SCHOOL FUND AS OF JANUARY 21, 2010
(Internal Control – Significant Deficiency Under Government
Auditing Standards)
On January 25, 2010, School Department officials notified auditors that a payroll
discrepancy had been discovered. During the period July 1, 2006, through
January 21, 2010, the payroll bookkeeper had issued checks totaling $31,710 to herself in
excess of her allowable compensation. The payroll bookkeeper and two other School

Department bookkeepers receive compensation, in addition to their regular salaries, for
bookkeeping responsibilities related to special programs operated by the School
Department. According to school officials, the bookkeepers are required to work extra hours
to receive this additional compensation; however, there are no written policies and
procedures on file at the School Department addressing work hours, overtime, or additional
compensation. The payroll bookkeeper’s additional compensation from the adult education
program was budgeted at $5,000 annually. As part of her duties, she calculated her
overtime rate and additional overtime hours required to receive the additional
compensation, prepared the budget and reports for the adult education program, issued
payroll checks, and made direct deposits for payroll. The shortage was determined as the
difference in the overtime reported on the payroll bookkeeper’s time reports and the
amount she was paid from the adult education program, as follows:
Compensation
Fiscal Compensation Based on
Year from Adult Reported Calculated
Ended Education Overtime Shortage
6-30-07 $ 7,800 $ (2,910) $ 4 ,890
6-30-08 8,200 (3,148) 5 ,052
6-30-09 15,000 (4,262) 1 0,738
6-30-10* 13,500 (2,470) 1 1,030
Total $ 44,500 $ (12,790) $ 3 1,710
* These amounts are through January 21, 2010.
The payroll bookkeeper resigned her position on January 21, 2010. This finding has been
reviewed with the district attorney general.
RECOMMENDATION
The Board of Education should pursue collection of the cash shortage. Also, written policies
and procedures should be established covering employee work hours, overtime, and any
additional compensation. To strengthen internal controls, duties should be segregated
adequately among the employees. Adequate supervision should be provided over all
employees.
MANAGEMENT’S RESPONSE – DIRECTOR OF SCHOOLS
School officials notified the Comptroller’s Office immediately upon realizing the payroll
discrepancy. We are relieved that the segregation of duties that were in place did reveal
the discrepancy. We plan to strengthen our internal controls by re-evaluating our
segregation of duties and addressing the weaknesses that exist. The director of schools will
take the necessary actions to liquidate the cash shortage as soon as

The kids with the last lunch are getting fed yesterdays food and worse. I had two children in the school system and they constantly complained about the bad and sometimes inedible food. They would not allow me to complain because retribution against students is commonplace. This is most evident in the information coming from the SCHS parents and students.

MANAGEMENT’S RESPONSE – DIRECTOR OF SCHOOLS
Sequatchie County Schools officials understand that we cannot transfer indirect cost from
the Central Cafeteria Fund due to the food service program not meeting the three-month
excess balance. However, we are allowed to transfer direct costs relating to the food service
program. The school system has transferred costs from the Central Cafeteria Fund in
excess of 20 years. So, this is not a transfer that has suddenly taken place. School officials
feel that we have been conservative in the amount transferred from the Central Cafeteria
Fund, and we are very aware of the financial standing of the cafeteria and would not
impose an unfair financial burden on the program. Direct expenses incurred by the system
have been submitted, therefore we do not agree with this finding.
AUDITOR’S REBUTTAL
The School Department presented additional documentation for this transfer following our
review of the audit finding. This documentation was for amounts in excess of the amount
transferred; however, salaries for cafeteria monitors and maintenance personnel were not
supported by time reports or other documentation indicating the time related directly to
cafeteria operations, and workers’ compensation expenditures could not be tied directly to
cafeteria personnel. Upon further investigation, we noted that school officials had been
advised of these same deficiencies in a monitoring report prepared by the State Department
of Education dated March 2006.
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