Conroe, June 18 – Reports are coming out from inside the Montgomery County Courthouse that the three-member Committee on Finance is struggling. 435th District Judge Patty Maginnis appointed three full-time accountants – James Wiggins, Brenda Webb, and Landon Estay – to conduct a full examination audit of Montgomery County. Chapter 111 of the Texas Local Government Code places them in a quandary, because they’re not permitted to earn more than $15 total for the entirety of their work.
The difficult job ahead for the Committee on Finance reveals, once again, the sore need for Montgomery County’s government to split the functions of chief budget officer, bookkeeper, and auditor among three people. Currently, County Auditor Phyllis Martin performs all three of those functions with the ultimate problem arising that Martin must audit her own books and her own budget. Under Generally Accepted Accounting Principles, Martin and the County government have all sorts of conflicts of interest.
The Golden Hammer, Montgomery County’s leading daily newspaper, has previously reported this problem in great detail. Please see “Full Report to Board of District Judge: ‘Need for an Independent Audit Under Section 111.033 of the Texas Local Government Code’,” The Golden Hammer, May 27, 2017.
The audits of Montgomery County are not full audits but rather test audits. The outside auditor, currently Weaver and Tidwell, L.L.P., performs a test audit only by conducting tests of the accuracy of information which the county has reported rather than confirming that all information is accurate. See, e.g., Letter from Weaver and Tidwell, L.L.P., dated August 31, 2016, to the Honorable County Judge and County Commissioners and Management of Montgomery County.
In other words, the County Auditor, who also acts as the Chief Budget Officer of the County, prepares the financial statements for the County. She audits her own books and accounts. The outside auditor then only tests those books and accounts for their accuracy rather than conducting a full audit.
The outside auditor does not check conformance of actual expenditures to the budget that the Commissioners Court approved. Rather, the outside auditor only tests whether the reported financial statements accurately reflect actual expenditures and the actual balance sheet (assets and liabilities) of the County.
As the County Auditor stated on November 17, 2016, in response to a Public Information Act Request:
“Barring the annual financial report, which is compiled by the Auditor’s Office and audited by an independent audit firm, such as Weaver, there is no other single document reporting an audit of the entirety of Montgomery County, Texas, for a specific point in time. Audits are performed regularly, on a much smaller scale, for individual functions, such as the cash counts referenced above.”
The County’s Internal Audit Function: The County Auditor
While the foregoing comments do not ascribe any sort of fault upon the County Auditor or upon the County, since 1987, Texas law has created a problem for counties such as Montgomery County with a population of 225,000 or more. The Local Government Code mandates that the County Auditor is also the chief budget officer of the Commissioners Court. Tex. Loc. Gov’t Code Ann. Section 111.032 (Vernon 2016).
The dual role of the County Auditor creates a serious problem in Montgomery County. She acts as the budget officer who establishes the budget and maintains the financial books and records of the County and then also audits those same books and records, which she prepared. In other words, the Auditor must audit herself. She reports her audit to herself.
The Texas Local Government Code provides a solution, however, in that a county of our size may create an independent “Chief Budget Officer,” which is precisely what Montgomery County desperately needs. The Chief Budget Officer should examine management practice and detail in every County Department, just like the effort David Stockman attempted to do as Director of the Office of Management and Budget for the federal government during the Reagan administration.
A Chief Budget Officer should work directly for the entire Commissioners Court and independently of any individual elected official or officer of the County government. The Local Government Code, Section 111.062 provides:
“APPOINTMENT OF BUDGET OFFICER; ABOLITION OF OFFICE. (a) The commissioners court of the county may appoint a county budget officer to prepare a county budget for the fiscal year.
“(b) A county that establishes the office of county budget officer may abolish that office only by a formal action of the commissioners court. The court must take the action after the first day of the second month of the fiscal year and before the first day of the sixth month of the fiscal year. If the office is abolished, the duties of budget officer shall be performed by:
“(1) the county judge, if the county has a population of 225,000 or less; or
“(2) the county auditor, if the county has a population of more than 225,000.”
The Citizens Budget Committee has examined various methods of segregating the three functions – audit, budgeting, and bookkeeping – so that there are no conflicts of interest between them. Actually, the solution is rather easy:
- The Commissioners Court should create a Chief Budget Officer with no staff and a salary no higher than the lowest salary any full-time County employee earns. No salary at all would be a lot better! The Chief Budget Officer should have the power to investigate operations and management within every County Department.
- The bookkeeping function should transfer to the County Treasurer. Our current County Treasurer clearly is not capable of such duties, but the Office of County Treasurer is the logical locale for the bookkeeping.
- The audit function should remain with the County Auditor who should act as a full-time auditor with a staff of approximately three (rather than the bloated staff she currently has).