After spending $1.6 million on a computerized financial management system, McHenry County officials have found more than 1,000 errors caused either by the system or its users.
To fix them, county officials are hiring KPMG Peat Marwick, the auditing and consulting firm that designed and sold the system and trained county officials to use it. Some officials believe the purchase of a computer system from a company other than a computer firm is the root of the problem.
Among the problems the county has encountered is the deduction of some expenditures from the wrong accounts, officials say. And the system has been so difficult to use that county employees constantly made mistakes entering data.
“It’s outrageous that we have to pay Peat Marwick another $60,000 to help us fix mistakes caused by their system,” said County Board member Mike Tryon, who added he would likely oppose renewing the county’s contract with the company, which audits the county’s financial records.
Peat Marwick agreed to do its annual audit for $73,000, on the condition that certain financial records would be in order.
Because of the many errors in the Peat Marwick-designed financial management system, the treasurer’s office cannot provide those records, and County Treasurer William LeFew has had to hire Peat Marwick accountants to help his staff correct cash reconciliations, accounts payable and other information for the audit.
“This is not a user-friendly system,” LeFew said. “It was designed by accountants for accountants, and we don’t have that many high-level people. You almost need CPAs to use it. Training has also been lacking. I’ve brought this up four times (to the County Board), in writing and in person. So, it certainly shouldn’t have caught anyone by surprise.”
Peat Marwick officials could not be reached for comment.
Last month, the board’s Finance Committee approved LeFew’s request to ask the state controller’s office for the maximum 60-day deadline extension to file the audit. The state granted the extension, which means the county must file by July 28.
“Even with the extension, the county cannot meet the deadline without outside help,” LeFew said. “It’s all attributable to the new system. We have now identified well over 1,000 entry errors by various departments that my office has to go back and correct. The biggest problem is incorrect coding (to show which accounts money is in). The individual departments give us the account information, and we have no way to second-guess them.”
The $60,000 charge for Peat Marwick’s help in correcting the errors is not sitting well with many County Board members, especially since Purchasing Director Don Widick told them last month that Peat Marwick had never installed such a financial management system before. Widick said county officials had been led to believe Peat Marwick had installed several similar systems for other large government bodies and businesses across the country.
“I’m not happy that we are practically doubling the cost of the audit,” said board member John Heilser. “I thought we might actually be able to reduce the cost of the audit.”
Earlier this year, tax problems prompted the county to pay two other auditing firms nearly $20,000 for special audits of county payroll records for the 1996-1997 budget year and the previous four years. Heisler said those other auditors have done much of the work needed to prepare the payroll portion of Peat Marwick’s annual audit.
“I didn’t vote for Peat Marwick when the county hired them, and I don’t think you’ll see my hand go up to cast a vote for them after this year,” Heisler said.
LeFew said most of the problems have been solved. But he said, “It was a mess” at the beginning, so the current audit is mired in that mess.
If the county cannot get its records corrected in time to complete the audit by the July deadline, it would receive a qualified audit. That means the audit would contain warnings that the accuracy of the information cannot be verified. If the county receives a qualified audit, its bond rating could drop, raising the county’s borrowing costs.
Board member Ann Gilman said that despite the extra costs to correct the mistakes from last year, she has been “somewhat reassured” by LeFew and other department managers that the worst is over.
“They are telling me that things are working much better now,” she said.
