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HomeMy WebLinkAbout1415-9 Sheriff's Office Transition reportSheriffs Office transition (7/1/2015) #14/15-9 L47 4 a Deschutes County, Oregon Sheriff's Office transition (7/112015) Click too t���ke �� SUI"V 21/ OI1 t�111S 1"2IJOJ"t Auaust2015 David Givans, CPA, CIA, CGMA Deschutes County Internal Auditor PO Box 6005 1300 NW Wall St, Suite 200 Bend, OR 97708-6005 (541)330-4674 David. Givans(cbDeschutes. org Audit committee: Shawn Armstrong, Chair - Public member Chris Earnest - Public member Lindsey Lombard — Public member Michael Shadrach - Public member Jennifer Welander, Chair - Public member Anthony DeBone, County Commissioner Nancy Blankenship, County Clerk Dan Despotopulos, Fair & Expo Director Big O® To request this information in an alternate format, please call (541) 330-4674 or send email to David. GivanskDeschutes.org Sheriff's Office transition (7/1/2015) #14/15-9 {This page left blank) Auaust2015 Sheriff's Office transition (7/1/2015) #14/15-9 TABLE OF CONTENTS: Auaust2015 1. INTRODUCTION 1.1. Background on Audit.................................................................... 1 1.2. Objectives and Scope................................................................... 1 1.3. Methodology............................................................................ 1-2 2. FINDINGS................................................................................... 3-7 3. MANAGEMENT RESPONSE 3.1. Sheriff's Office......................................................................... 8-10 Sheriff's Office transition (7/1/2015) #14/15-9 1. Introduction Auqust 2015 Audit Authority: The Deschutes County Audit Committee authorized the review of the Sheriff's Office transition in the amended Internal Audit Program Work Plan for FY 14/15. Internal audit has had a practice of reviewing operations for elected officials on transition in their office. Sheriff Larry Blanton announced his retirement on December 20, 2014 and the date of transition was set for July 1, 2015. On February 25, 2015 L. Shane Nelson (the Captain overseeing Jail operations) was appointed by the Board of County Commissioners to complete Sheriff Blanton's term as Sheriff effective on July 1, 2015. Objectives: The audit objectives include: 1) Observe the conveyance of the Office of Sheriff in accordance with ORS §206. 2) Review prepared accounting of all monies (Jail, Bail, Civil, and other). 3) Inquire into process to suspend authorizations and access to critical law enforcement and County systems. 4) Determine that assets assigned directly to the Sheriff have been returned to the Sheriff's Office. Determine how the Sheriff's duty firearm will be handled. 5) Judgmentally selected and review transactions by the Sheriff. Scope: The Sheriff's last day was July 1, 2015(Wednesday). The scope included observations and interviews with Sheriff's Office staff up through the transition on July 1, 2015. Internal audit work on this project was primarily in June 2015. The significant laws, regulations and guidance identified for these audit objectives included ORS 206. The limited scope of the audit objectives precluded a thorough review of internal controls employed. Selected internal controls were inquired about and were operating as understood. Audit procedures included: ■ Observing and interviewing selected staff on transitional procedures, ■ Reviewed April 2015 bank reconciliations with staff, ■ Reviewed for recent Sheriff expense reimbursements, Page 1of10 Sheriff's Office transition (7/1/2015) #14/15-9 2. Findings Auqust 2015 ■ Analyzed and reviewed recent expense trends by account and vendor, ■ Reviewed recent contracts executed by the Sheriff's Office, ■ Researching the cash resolutions and agreeing to cash on hand, ■ Followed up with IT staff on access rights to County systems, ■ Reviewing recent credit card statements and supporting expenses, ■ Inquired about handling of any assets utilized by Sheriff and their disposition, • Attended recent auctions carried out by Sheriff's Office, and ■ Reviewed for any outstanding internal audit recommendations from prior internal audit reports (none). We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. (2011 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.) The Sheriff's Office staff followed the state dictated procedures (ORS §206) for transition of the Office of the Sheriff. The Sheriff's Office and Sheriff sufficiently planned and executed their responsibilities in regards to the requisite forms to be signed and provided on transition between the retiring Sheriff Blanton and newly appointed Sheriff Nelson. The findings identified relate primarily to other observations during review of Sheriff's Office activity, which were included in the internal audit. No significant deficiencies were found in this audit. A significant deficiency is defined as an internal control deficiency that could adversely affect the entity's ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements. The findings noted were primarily compliance and efficiency matters. Audit findings result from incidents of non-compliance with stated procedures and/or departures from prudent operation. The findings are, by nature, subjective. The audit disclosed certain policies, procedures and practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure or transaction. Accordingly, the opportunities for improvement presented in the report may not be all-inclusive of areas where improvement may be needed. Page 2 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 Transition procedures performed and observations. Auqust 2015 1. Inquired as to suspension of authorizations and access to critical law enforcement and County systems. Observation Sheriff's Office is having Larry Blanton continue to provide some advisory services to the Office and therefore the authorizations will continue until such time that the employment ceases. 2. Inquired as to any assets to be retained by retiring Sheriff Blanton that should be returned to the Sheriff's Office. Ohservation All assets were returned. The retiring Sheriff's duty firearm was given to him by the Board of County Commissioners in gratitude for his many years of service. 3. Inquired about incoming Sheriff's qualifications under ORS 206.015 0h.Prvatinns The Oregon Department of Public Safety Standards and Training issued a letter to L. Shane Nelson indicating that he met the requirements as established by the state to be eligible to hold the office of Sheriff. The County Board of Commissioners also considered his experience and qualifications during their appointment process. 4. Delivery of jail/asset information, processes, prisoners and pending documents to new Sheriff pursuant to ORS 206.090. Observations These documents were prepared by staff and delivered on July 1, 2015. There was only one minor observation brought to the attention of staff. 5. Certificate of appointment served on Sheriff on date of transition pursuant to ORS 206.080. Observation Swearing in occurred on July 1. Appointment papers were submitted to retiring Sheriff Blanton by L. Shane Nelson. Page 3 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 August 2015 6. The Sheriff's office utilizes County trust accounts to disburse funds collected for others. This primarily occurs with auctions. Observation Trust accounts were reviewed with Finance who indicates that Sheriff's Office staff are clearing trust funds in a timely manner. These auctions were carried out in a professional manner. Monies were deposited with County Finance in a timely manner. 8. Inquired about financial statements for Central Oregon Law Enforcement Services (COLES) for FY 2014. COLES is an intergovernmental entity that oversees the Central Oregon Drug Enforcement team. The Sheriff's Office has been involved in the financial affairs of these organizations including the arrangement of financial audits. Observation The fiscal year 2014 financial statements were required to be completed by 12/31/2014. The auditors were not contacted in a timely manner and the reports are now delinquent. Recommendation It is recommended for the Sheriff's Office to establish a routine schedule for having these financial statements audited by their due date. Additional documentation supporting credit card usage is needed. The County has authorized four credit cards for specific purposes in the Sheriff's Office. The cards are issued to the Sheriff and the three Captains. These have specified limits and by policy are supposed to be used only for "emergency situations" (County Policy F-3) that are unforeseen and immediate. So far in FY 2015, the credit cards incurred less than $5,000 in expenses. Staff indicate they are careful in their use of these cards. The credit cards have been used for emergency situations but some uses are for internet purchases that do not indicate how these meet policy. It is unclear whether they are emergency situations. The Sheriff's Office has an internal policy governing credit cards requiring that documentation explain the expenditure. It is possible some of these expenses could have been handled under employee reimbursement or direct billing to the County. The policy specifies use of the Sheriff's Office credit cards for only emergency situations. In no event will the credit card be used for normal or routine training or travel expenditures. The policy also requires that Page 4 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 August 2015 staff utilizing the credit cards sign off on the policy. It was not clear whether this occurred since no signed copies could be located. The Sheriff's Office has an internal policy on use of the credit cards that was reviewed and acknowledged by the credit card holders. Documentation reviewed for credit card expenses appeared sufficient except for a purchase of two prepaid gift cards at McDonalds that were used to cover the cost of food for volunteers working an emergency. Gift cards are not a disbursement until used and can require additional safeguards. Gift cards are like cash and require further tracking of the use of the gift card to substantiate how the funds were used. In this situation, these were food gift cards but it would be necessary to know those were used as part of the emergency. During the course of operations for the Sheriff's Office, there are situations requiring immediate action or that involve vendors that will not establish an account with the Sheriff's Office. The Sheriff's Office would prefer not to require employees to use personal credit cards to pay for operational costs and seek reimbursement. The County prefers not to issue credit cards and tightly limits their usage. The County has authorized some department credit cards for use in transacting business on the internet. The potential non -emergency usage of credit cards was brought up during the last transition audit and has not been fully resolved. It is recommended the Sheriff's Office include with credit card purchases a brief explanation (if it is not apparent) how these purchases fall under an "emergency situation" identified in the policy. It might be necessary for the Sheriff's Office to seek a more expanded credit card use policy from the County for certain internet purchases. It is recommended for staff who have custody and use of County credit cards in the Sheriff's Office be provided copies of the policy and sign an acknowledgment that they have read the policy and will comply with its terms. {Staff authorized to have credit cards have signed and provided copies of the policy for the current transition.} It is recommended that purchase of gift cards be discouraged and practices be established to address potential use of gift cards in accordance with the credit card policy or operationally. Page 5 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 Auqust 2015 Staff dealing with Bail monies may be over -reporting transactions. The Sheriff's Office has the opportunity to increase efficiencies related to reporting certain bail monies received. The County provides information on bail monies received for information reporting requirements on certain bail monies received. The Jail, occasionally, receives monies from inmates in excess of $10,000 used for bail. The Sheriff's Office provides information for the Court Clerk to complete the information reporting for monies received. Cashiers' checks and money orders in excess of $10,000 are excludable from the determination of reportable amounts. In a unique circumstance, staff reported a bail transaction when a majority of the bail was comprised of a cashier's check in excess of $10,000. This resulted in the transaction being reported when it was not necessary and increased work performed by the Sheriff's Office and the Court Clerk. As agents for the Court Clerk, the Sheriff's Office is responsible for obtaining and providing sufficient information the Court Clerk needs for information reporting purposes. . It is recommended the Sheriff's Office to identify and exclude certain transactions that do not meet the reporting requirements. Accordingly, appropriate staff training will need to occur on these reporting standards. Some additional controls needed for bank accounts and cash During review of the checking accounts used in the Jail and other cash monies, identified some areas for improvement. Including Segregation of duties could be improved by having the business manager review the bank statements prior to completion of the bank reconciliation before it is handed over to Jail staff for reconciliation. In addition, the completed bank reconciliation should be reviewed by the business manager and shared with Finance. Remitting outstanding checks held beyond two years. The inmate account is currently holding some checks greater than two years. Certain cash is held for investigative purposes in different places and should be logged in a master ledger. Segregation of duties focusses on splitting up some incompatible accounting duties. No individual should authorize a transaction, record the transaction in the accounting records, and maintain custody of the Page 6 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 August 2015 assets resulting from the transaction. When these functions cannot be separated, due to limited personnel, a detailed supervisory review of related activities may be used as a compensating control activity. County resolution requires the bail and inmate bank reconciliations be provided to Finance. In the absence of sufficient controls, it may be difficult to identify in a timely manner whether all monies have been collected and deposited. Oregon's unclaimed property program currently requires that outstanding checks (of this type) be remitted when they are older than two years. The Jail has $2,300 of outstanding checks (693 checks) that should have been remitted by November 1, 2014. It appears this was a misunderstanding and they will be remitting those with their next unclaimed property check. Certain Sheriff programs require investigative cash and should have any monies cashed logged in a centralized location by amount, date, and location. These are periodically audited by independent staff. It is recommended the Sheriff's Office have the business manager receive the bank statements and review prior to providing to the division for reconciliation; provide the business manager and Finance copies of bank reconciliations performed for review; establish practices to remit unclaimed property that is older than two years; and include in program ledgers all investigative cash monies held by location. Page 7 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 Sheriff's Office F F,P-T Memo TO: David Givans, Internal Auditor FROM: Beth Raguine, Business Manager DATE: August 7, 2015 RE: Sheriff's Office Transition Audit Response Auqust 2015 Thank you for conducting the audit. We appreciate your input through recommendations in your report. The Sheriff's Office has reviewed the findings and has already taken some steps to implement some of the recommendations. Responses to specific recommendations follow: Audit of FY 2014 COLES/CODE financial statements are delinquent. The audit of FY 2014 and FY 2015 CODE/COLES financial statements is currently being conducted. These audits will be scheduled annually in September or October, to allow sufficient time for the County to close of the fiscal year and to accommodate the schedule of the outside auditor. It is recommended the Sheriff's Office include with credit card purchases a brief explanation (if not apparent) how these purchases fall under and "emergency situation" as identified in the policy. It might be necessary for the Sheriff's Office to seek a more expanded credit card use policy from the County for certain internet purchases. The Sheriff's Office is in the emergency business and operates in the most efficient and fiscally responsible manner while conducting business. Some situations may call for immediate action and payment via credit card may be the only option available. We explore other options when possible, to include setting up an account Page 8 of 10 Sheriff's Office transition (7/1/2015) #14/15-9 with the vendor. August 2015 The Sheriff's Office maintains and operates by an internal policy regarding credit card usage. This policy is under review based on the audit findings. As recommended, the Sheriff's Office staff will include additional documentation with credit card receipts to document the items purchased and describe the urgency that required use of a credit card. The audit refers to credit card usage for online purchases. These purchases were for software that was only available online from an international vendor who would not accept any other form of payment. Since this software was required for criminal investigations, the Sheriff's Office determined this to be an emergent situation, justifying the use of the credit card in compliance with our internal policy. The Sheriff's Office is in agreement that a review of the current County policy is needed to address situations where a credit card is the only form of payment accepted by the vendor (such as online orders from international companies) but the situation is not considered an "emergency" under the current policy. The Sheriff's Office is addressing these situations in the internal policy. It is recommended for staff who have custody and use of County credit cards in the Sheriff's Office be provided with copies of the policy and sign an acknowledgement that they have read the policy and will comply with its terms. This has been completed. The Sheriff's Office maintains an internal policy related to credit cards which has been reviewed and acknowledged by all credit card holders. It is recommended that purchase of gift cards be discouraged and practices be established to address potential use of gift card in accordance with the credit card policy or operationally. Gift cards are used very rarely by the Sheriff's Office. The purchase of two McDonalds gift cards noted in this audit was during a fire emergency (the Two Bulls Fire) during which Sheriff's volunteers and personnel were working to protect the community. Volunteers are a valuable asset to the Sheriff's Office. There are over 400 individuals contributing nearly $1 million in service hours to the community each year. In this circumstance, there was a need to provide lunch for numerous volunteers and staff working multiple locations. A McDonalds restaurant was identified as a location in close proximity to these sites, but the restaurant would not bill the Sheriff's Office for meals. Gift cards were purchased via credit card and retained at the restaurant. Volunteers and staff were able to go to the restaurant, present their identification, and receive a meal before returning to the fire. Gift cards are controlled by the Sheriff's Office Finance and additional procedures will be reviewed in light of the Page 9of10 Sheriff's Office transition (7/1/2015) #14/15-9 recommendations. Auqust 2015 It is recommended that the Sheriff's Office exclude certain transactions that do not meet the reporting requirement. Accordingly, appropriate staff training will need to occur on these reporting standards. The Sheriff's Office was previously reporting all transactions over $10,000, and this audit has identified certain transactions that are excluded from these reporting requirements. Staff will be trained on these reporting standards. It is recommended the Sheriff's Office have the business manager receive the bank statements and review prior to providing to the division for reconciliation; The bank statements are currently reconciled by the division using a software system. The business manager will review bank statements prior to providing to the division for reconciliation. provide the business manager and Finance copies of bank reconciliations performed for review; Copies of bank reconciliations are currently being sent to Finance and the Jail Captain. A copy will also be sent to the business manager for review. establish practices to remit unclaimed property that is older than two years; and Additional training from the State clarified the timing of submittals. The submittal in October 2015 will bring the Sheriff's Office up to date. include in program ledgers all investigative cash monies held by location. The business manager will create a master log of investigative cash and will conduct quarterly audits of cash monies held by location. Note: An opportunity was provided to Retired Sheriff Larry Blanton to review and provide written comment. No written response was received. {End of Report} Please take a survey on this report by clicking on the attached link: https://www.surveymonkey.corn/r/SheriffsOfficeTransition1415-9 Page 10 of 10