The Island County Clerk’s Office is doing a poor job of handling cash and public funds could be at risk, the state auditor said this week in an audit of Island County government.

The Washington State Auditor’s Office said the county clerk’s office lacked internal controls to safeguard receipts and payments from court settlements. State officials said more oversight was needed on the handling of cash, and the county was criticized for lacking independent scrutiny of bank account reconciliations.

The audit, released Dec. 1, noted the clerk’s office was at least six months behind in reconciling accounts, and could not provide detailed information on $1.1 million of outstanding checks and outstanding deposits of more than $925,000.

Public money was at risk, according to the state auditor’s office.

“Without an effective bank reconciliation process, inappropriate transactions my go undetected,” the audit states. “Further, in the event funds were misappropriated, the clerk’s office would be unable to determine who was responsible.”

The audit covered the 2007 year.

The state also found fault with the county for not following state law in the use of interest that is earned from restricted funds. The county transfered more than $375,000 of investment interest in 2007 into the county’s current expense fund, the account that pays for general government services such as planning, parks and police.

The state said the county should reimburse the funds where investment interest was shifted — accounts that include hotel/motel funds, Conservation Futures, real estate excise taxes and others — by $375,089 because the transfers were not allowed under state law.

It’s not the first time the state has warned Island County over the transfers of investment interest. Previous audits for the years 2006, 2005 and 2004 also highlighted the problem.

Island County officials, however, disagree with the state auditor on the transfers. Island County’s chief civil deputy prosecuting attorney disagrees with the state’s interpretation of the law, and county officials said they are in compliance because the laws governing Conservation Futures, real estate excise taxes and other funds do not set out how investment earnings should be used.

On the problems detailed in the clerk’s office, however, the county has vowed to make changes.

The clerk’s office has said it will improve its internal controls over cash receipting, and added that bank reconciliations will be made a priority.