The Salt Springs Township Board held a meeting for audit presentation on Thursday, November 17. Mike Peroo CPA, PA presented findings from the compliance audit completed for the 2022 fiscal year. Peroo shared that he had been asked to go through records and compliance and look at documentation. Peroo explained that he had taken every bank statement and transaction for 2022 and entered them into their system to collect data. The following statistics were shared for 2022: 257 disbursements and $89,000 in total payouts. 72 of the transactions amounted to $24,000 and were related to payroll and mileage. Peroo reported that there were things that could not be found in records/documentation. Of the $65,000 tested, no documentation could be found for 14%. Of the 41 main vendors that funds were spent on, 10 accounted for 83% of total dollars that went out.
As records and documentation were reviewed, Peroo noted he assessed whether or not business was completed/ conducted in accordance with state statutes. In findings, violations of State Statutes were identified. Compliance issues outlined were pertaining to lack of the following: documentation, personnel files, minutes and records reflecting approval of bills/wages for payment.
Peroo discussed the State Statute pertaining to reimbursement of expenses and compensation, K.S.A 80-207. As he began discussing findings, Peroo stated that minutes were the “backbone” for any entity spending tax payer dollars. Expenditures should be reflected in the minutes, with motions and approval of bills.
Peroo then discussed lack of documentation of pay rates and noted that he could not find this. He told those present that there should be a personnel file which should reflect wages and include a W4 and I9 form. He noted that this was something that needed to be fixed. In further discussion of compensation, Peroo noted that he had found something interesting in review of records. He relayed to those present that a township official is supposed to abstain from voting if they are serving in a paid capacity, to eliminate conflict of interest. After sharing this, Peroo then reiterated that he found no minutes to support any payments to anyone and added that documentation is critical. As discussion continued on payroll, Peroo noted something that he deemed as “more of an IRS issue.” He explained that if an individual has zero withholdings, a W4 is supposed to reflect the exception that affords it, as few people qualify for this. Peroo added that most who qualify for zero withholdings are students, but without a W4 for the employee, there was no way to validate this. Issues with the payroll being grossed up were also identified (Example: an employee paid at an hourly rate of $10 dollars, receives what remains after deductions are applied. These were being adjusted so that after deductions, the employee was receiving the hourly rate times the number of hours worked.) Peroo reported that if this were an intentional decision, it should have been documented. Only FICA and Medicare were withheld; Federal and State were not. Peroo shared that there was no W4 available where an exception affording for this would need to be noted. A spectator questioned Peroo, asking him to clarify if the employee was responsible for determining how to appropriately fill out the W4. Peroo responded, explaining that it is up to the township to provide the form and it is up to the employee to fill it out. Peroo added that this form must be looked at and updated annually.
During discussion, Peroo voiced the need for transparency when tax dollars are being spent.
The issue of mileage reimbursement was next brought to the floor. Peroo noted the need, required by the IRS, referenced as substantiation of documents. He told those present that it is critical to follow this statute and document where the employee went, how many miles were traveled, the purpose of the mileage driven and if it was legitimate business. Peroo stated that there was a lot of mileage and these details were not reflected in the minutes. He added that no reimbursement rate was found and there is supposed to be documentation of this to meet compliance. Township Board members noted that since the two newer members joined the board, a form for mileage had been drafted.
As the various vendors were considered, Peroo shared that 37% of checks didn’t have support. A check was written to someone, but no invoice was available reflecting to whom the check was sent. Peroo noted that disbursements should be documented within minutes and approved through a vote. He noted that one invoice had a difference of $100 between the invoice amount and what was paid.
KSA 80-302, outlining that an auditing board should meet to examine and audit all claims. Peroo noted that through this process you would see approvals. He stated that this statute was not being followed.
In recommendations, Peroo noted that there was “not a lot of policy, but there needs to be.”
A W9 has to go out to determine whether or not a 1099 is necessary. Peroo noted a hypothetical: If an IRS audit were conducted, a $50 fine would be issued where every 10-99 should have been sent out, but was not.
When questions were posed in regards to how the auditor was contacted and by who, Peroo told those in attendance that Township Treasurer Tina Kastning contacted him in early June of 2023. Kastning noted that this was included during meeting discussion at that time and approved by the board (minimum of two members of the three-member board must vote in favor of an item for it to be approved).
A member of the community present referenced it as a forensic audit and asked if anything criminal had been identified. Peroo corrected, noting that this was not a forensic audit as third parties were not contacted. He stated that while statutory violations were not necessarily criminal in nature, they were a legal violation. Peroo went on to note that fraudulent activities were difficult to figure out and the engagement agreed upon for this audit was not forensic in nature.
When Township Trustee Jeff Pittman argued that the audit was never approved, Kastning and Clerk Tammy Talkington noted that it had been voted on and approved. She added that he may not have voted on it, but two other members did. A spectator then questioned if maintaining audio recordings of meetings would be beneficial for records. After Peroo noted this would be good, Kastning shared that this has already been implemented.
As discussion continued, Kastning questioned if statutes were suggestions. Peroo noted that these were laws. Sheriff Heath Samuels elaborated, sharing that these financial statutes were not criminal, but civil and punishable by fines. When asked who would administer punishment, Peroo noted that this could be referred to the County Attorney who determines whether or not to asses a fine. It was then questioned who would be responsible for paying this. Peroo shared that this would fall on the township, not the individual board members.
Sheriff Samuels elaborated, noting that when such laws are violated, this is a violation of the Kansas Open Meeting Act and Kansas Open Records Act and as such, the Attorney General’s Office has investigators that can step in and refer to the county attorney. “The governance of this body is every one of you. You elected them. You hold them accountable.”
Talkington questioned what is to be done when something had been voted down by the majority, but a member proceeds to do it.
The auditor noted he was not certain of the process but thought refer to legal side or commissioners. Greenwood County Commissioner Paul Hodge clarified that all that can be done by the board of commissioners is appoint members in the event someone steps down during a term. He added that it is up to the people to vote in who they want to serve during election. Hodge went on to share that commissioners are unable to remove members. Sheriff Samuels commented that this is a common occurrence and it can be difficult to find people to volunteer for positions.
As the meeting continued, Kastning noted that before this, the township hasn’t really had an official audit and she felt it was needed to make sure things were being done correctly. “I’m trying to protect your tax dollars,” stated Kastning as she noted the need for more structure and transparency.
In regards to ealier questions about who had ordered the audit, Talkington commented that when she and Kastning were first appointed, they had asked for all documents and there were no receipts/documentation. Talkington stated that this was done for the benefit of the township.
Township resident June Bailey questioned about former statements in which she had heard that Pittman was offering his services for hire and asked if this were reflected in financials. Peroo commented that he hadn’t seen anything to reflect this. In regards to this Pittman stated, “We’re not anymore.” He continued, noting he had thought he could do things for people in the township, but had learned he could not. Pittman added that he had never completed work for anyone.
Bailey then asked about mileage in comparison to other places Peroo has worked with. Peroo first noted that it was a lot of miles. He explained that the township consists of roughly 47 miles of roadway. At this time, Pittman stated “It takes 100 miles just to go those 47 or 41 miles.” In regards to this, Kastining noted that she felt this had been excessive. Peroo shared that this had amounted to $13,000 in mileage for the 2022 fiscal year. The current grader operator now has a gas card which can only be used for diesel fuel.
In additional changes made, Kastning shared that they now have personnel files, but noted that Pittman had been given a W4 and not submitted it.
In regards to concerns voiced by Talkington in regards to poor conduct during meetings that often prevents business from being conducted, Peroo commented that every meeting should have an agenda that should be followed. Board members noted that they now have implemented an agenda. Peroo continued, adding that if they are not making it through business items, this is something he has never seen in over thirty years. After noting that the two meetings he has attended have went well, Sheriff Samuels offered the following advise “Grow up, get along and represent these people with the respect they deserve.” He continued, “You were appointed to do this job, represent them.”
