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The Covington County Commission received a letter from the Alabama Department of Examiners regarding the availability of a financial statement from fiscal year ending September 2020.

The letter, according to Alabama Chief Examiner Rachel Riddle, was sent to inform the commission that her office will only be able to perform a compliance audit rather than a full financial audit. The compliance audit, she said, ensures that various funds are being handled and spent appropriately.

The financial statement audit is required if the county has certain debt that requires such an audit or if the county meets a certain threshold in the amount of federal funds received. If the county meets that threshold, and does not have the financial audit, the county could lose future federal funds.

“A financial audit is required if the county holds debt that requires it, such as a bond covenant or if they receive a certain amount of federal funds,” Riddle said. “As for our department, the compliance audit is what is really important. Not saying the financial audit isn’t important, but we are still going to check to ensure that expenditures, procurement laws, and making sure money is being handled appropriately. We will do all of that in the compliance audit.”

“The reason for the letter is to inform the county that not receiving financial statements will not prevent us from coming in (for the compliance audit). It is our duty to do that,” Riddle said.

The letter states that not having audited financial statements could impact the county’s credit rating or the ability to borrow money.

County Commission Chairman Greg White said the county’s inability to provide the financial statement is the result of software that has required work to produce a statement as required the state.

“(The software) can generate budget reports, generate fund balances, cash reports … all the things you need to do to manage your affairs of the day. But, it does not create a financial statement in the format that government agencies need them to be in, which are complicated documents. At one time, the auditors could create the financial statement, but they are no longer allowed to do that. For years, the inability of the software to create a financial statement did not matter because typically the auditor who came in to do your books created all the reports and would put it into a financial statement format,” White said.

The county worked with a local auditing company to assist with the software, but recommended corrections were not being calculated appropriately, according to White.

“It has been a work in progress and has taken time, but we are close. We feel we are about six to eight weeks from having an auditable financial statement,” White said.

The chairman also said the financial statement audit would have been a higher priority if the county was seeking to borrow money.

“A financial statement audit is important and I don’t want to understate that; however, it has not been as urgent because Covington County is not in the mode of borrowing money. I do see our ability to apply for federal grants to be important and the compliance audit allows us to do that,” he said.

White added that he feels the county has strong internal controls in terms of reconciling cash and division of duties.

“We’ve had many financial audits over the years and all of those have come back with no exceptions. Our employees do a great job and I have the utmost confidence in the work they do,” he said.

The letter from the Department of Examiners, dated Feb. 15, 2024, was received by members of the commission earlier this week, according to White.

To view the letter in its entirety, click State Examiner Letter.