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HomeMy WebLinkAbout1819-4 911 CSD Cash Handling report (Final 3-5-2019)911 CSD – Cash handling report #1819-4 March 2019 911 County Service District – Cash Handling To request this information in an alternate format, please call (541) 330-4674 or send email to David.Givans@Deschutes.org Deschutes County, Oregon David Givans, CPA, CIA, CGMA County Internal Auditor 1300 NW Wall St Bend, OR 97703 Audit committee: Daryl Parrish, Chair - Public member Tom Linhares - Public member Lindsey Lombard – Public member Wayne Yeatman - Public member Patti Adair, County Commissioner Nancy Blankenship, County Clerk James Lewis, Property Manager Click here to take a survey on this report 911 CSD – Cash handling report #1819-4 March 2019 TABLE OF CONTENTS: HIGHLIGHTS 1. INTRODUCTION 1.1. Background on Audit …………..……………………………………………………………. 1 1.2. Objectives and Scope ……………….………………………………….…………………… 1 1.3. Methodology …………………………………….…………………………………………… 1-2 1.4. Background on 911 County Service District ………….………….……….…… 2-3 2. FINDINGS and OBSERVATIONS 2.1. Fiscal and efficiency observations ……....………………………..…………….… 4-6 2.2. Tax compliance …………………………………………………………………………………. 7 3. MANAGEMENT RESPONSES 3.1. 911 County Service District ……………………………..….……………......... 8-10 3.2. County Finance …………………………………………………………………………... 11 911 CSD – Cash handling report #1819-4 March 2019 HIGHLIGHTS Why this audit was performed: A periodic review of internal controls over revenues. What was recommended: Recommendations include: • safeguarding un- deposited monies overnight; • reconciling manual receipts to the County financial system; • depositing receipts within 24 hours; • periodically reviewing record requests fulfilled to receipts; • utilizing accounts receivable reports; and • County Finance evaluating non-cash compensation that should be included in wages. 911 County Service District – Cash Handling The focus of the review was on internal control over handling of external customer payments. What was found Overall, the District performed well in providing fiscal controls over collected revenues. Recommendations were developed to assist the District comply with County policy or prudent business practices for cash handling. The audit identified the following areas for further improvement, including • additional controls over movement of monies between staff members; • gaining efficiencies though addressing duplication of staff efforts in receipting monies; • achieving more timely deposits of monies collected (the County policy is 24 hours), • oversight over record requests that generate revenue and the generated receipts; and • oversight of accounts receivables through use of available reports. The District has been providing employees with a certain value of apparel with the District logo. Clothing purchases by the District for employees could be additional compensation. County Finance is responsible for the District and County wage reporting. The specific scenario will require additional research by County Finance to determine whether the value of apparel provided requires reporting as additional compensation. Deschutes County Internal Audit 911 CSD – Cash handling report #1819-4 March 2019 Page 1 1. Introduction 1.1 BACKGROUND ON AUDIT Audit Authority: The Deschutes County Audit Committee authorized the review of cash handling practices of the 911 County Service District in the Internal Audit Program Work Plan for 2017-2019. Internal audits of cash handling are routinely performed for identified County departments and districts. This was the first internal audit review of cash handling for the 911 County Service District (District). 1.2 OBJECTIVES and SCOPE “Audit objectives” define the goals of the audit. Objectives included: 1) Review of internal controls for cash handling with the District as outlined in County Finance policy for cash handling (F-11). Identify areas for improvement. 2) Review management of any checking accounts, petty cash, and billings. No checking or petty cash. 3) Be aware of any issues with compliance with federal and state regulations and requirements, as may be applicable. Scope and timing: The audit commenced in January 2019 and extended through February 2019. District accounting funds include Fund 705, 707 and 710. The focus of the review was on internal control over handling of third party customer payments. The District does not have petty cash, change cash or a checking account. The scope of the audit did not include all aspects of internal controls employed. 1.3 METHODOLOGY Audit procedures included: • Observing and interviewing staff related to cash handling procedures, • Reviewing written procedures and documents provided, 911 CSD – Cash handling report #1819-4 March 2019 Page 2 “Audit procedures are created to address the audit objectives” • Reviewing and analyzing receipt transaction data for the identified funds, • Reviewing and analyzing revenue data for the identified funds, • Reviewing for the number of days between receipt and deposit of payments, and • Interviewed and observed staff on practices and procedures regarding receipting and billing activities. 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.) 1.4 BACKGROUND ON 911 COUNTY SERVICE DISTRICT Deschutes County 911 Service District operates the County’s designated Public Safety Answering Point. The District answers and dispatches all emergency and non-emergency calls for thirteen public safety agencies and also for US Forest Service Law Enforcement. The District includes around sixty (60) employees as of their most recent budget (18/19). A majority of the District’s revenues (82%) are derived from taxes levied (see Chart I). The District’s current tax levy was approved by voters in the May 2016 election. The maximum permanent tax rate is 42.5 cents per thousand. The District has limited their rates in the last two years to a reduced tax rate of 36.18 cents per thousand. The District also has taken responsibility for operation and maintenance of the radio systems. This has resulted in additional charges to member agencies. 911 CSD – Cash handling report #1819-4 March 2019 Page 3 CHART I – Composition of 2018 resources for the District (all funds) CHART II – Trend in primary resources by FY for the District Source: 911 CSD audited financial statements The overall resources of the District have been trending upward with assessment valuations. Source: 911 CSD audited financial statements 911 CSD – Cash handling report #1819-4 March 2019 Page 4 2. Findings and Observations The audit included limited procedures to understand the systems of internal control around revenues. 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 and does not replace efforts needed to design an effective system of internal control. 2.1 FISCAL AND EFFICIENCY OBSERVATIONS Overall, the District performed well in providing fiscal controls over collected revenues. The following observations are noted to help further improve the procedures put into place. Overall, the District performed well in providing fiscal controls over collected revenues. Additional controls could improve oversight over revenues. The District processes for collecting monies are handled by two staff and supervised by an administrative supervisor. During observations of the District cash handling processes, a couple of areas were noted where additional controls or efficiencies could be achieved. • Movement of monies between staff members could be better controlled. The supervisor has been receiving monies from staff and recounting them without doing so in the presence of the staff that collected the monies. This puts staff and the supervisor at risk 911 CSD – Cash handling report #1819-4 March 2019 Page 5 should monies not be fully accounted for. Considering the procedures they currently follow, it would provide more control and efficiencies if the staff person sealed their deposit in the tamperproof bag. Placing monies in the tamperproof bag at the end of the day would further secure monies until they are deposited. In addition, other staff may have access un- deposited monies overnight. It is recommended for the District to develop a more secure method for safeguarding un- deposited monies overnight. • Staff duplicates efforts in receipting monies. Staff currently use manual receipts for some items and then later enter them into the County’s financial system to obtain a new receipt. They are also tracking the receipts in a book for each deposit. It is a more efficient and controlled process if receipts are made directly into the County system. This would alleviate the need for a book to track and would assure more timely deposits as the system would indicate the amounts that should be included in the deposit. Currently, the District routinely takes a couple of days to get in deposits and that isn’t always evident through review of the County financial system receipt. County policy (F-11) indicates monies should be deposited within 24 hours. Supervision would normally include periodically reconciling the manual receipt book to the County financial system. The current system could allow receipts to be delayed or missed. It is recommended for staff to directly provide receipts from the County System (MUNIS) and leave the use of manual receipts for those times when the County financial system is not available. Alternatively, if the manual receipt book continues to be used, the supervisor should periodically reconcile manual receipts to the County Financial System entries. It is recommended for all receipts to be deposited within 24 hours. 911 CSD – Cash handling report #1819-4 March 2019 Page 6 • Record requests generate revenue that should be reconciled through to receipts. Staff maintain a log of all public records requests. This ensures the timely provision of services as well as identifies whether it is an agency request. Many agencies are provided copies without cost. The public are generally charged a fee. The supervisor currently does not reconcile between the records log of records (fulfilled with a fee) and those receipted. In the absence of a reconciliation, it may not be noticed if monies collected are not deposited. It is recommended for the administrative supervisor to periodically review the record request log of fulfilled requests that have a fee to the receipts entered. • Oversight of accounts receivables could be improved. Billing staff has a process to check on collections of recent billings but were not aware of additional accounts receivable reports in the County financial system to follow-up on older receivables. There were a couple of older receivables that staff had not followed up on. The County financial system provides a number of reports to manage and oversee uncollected amounts. It is recommended for the District to routinely use accounts receivable reports to follow-up on outstanding invoices. {Note: Staff were quick to respond to this observation and are now using these reports and have followed up on the older receivables.} 911 CSD – Cash handling report #1819-4 March 2019 Page 7 2.2 TAX COMPLIANCE Employer provided clothing is generally treated as taxable wages. Clothing purchases by the District could be additional compensation. The District provided employees $75 in value for clothing (with the District’s logo). Any amounts over that were paid by the employees. The District also picked up the logo cost as well as any size upcharges for clothing above extra-large. It was noted that other County departments are purchasing branded clothing and may fall into this same scenario. What is includable in compensation of employees has few exceptions. Employer provided clothing is generally treated as taxable wages. Some exclusions exist for uniforms (working condition fringe benefit) and some for de minimis fringe benefits (of small value). For clothing to qualify as a uniform it must be unsuitable for personal wear. The facts in this situation have not been fully vetted and researched. Employees can refuse the apparel to avoid constructive receipt and taxation. Some staff didn’t participate in the orders. County Finance is responsible for the District and County wage reporting. Finance has been aware of the clothing purchases in some departments and has not contemplated the specific compensation circumstances for the 911 County Service District with apparel purchases. No additional compensation has been reported in the current or prior years for the District. It is recommended for County Finance to evaluate whether the District’s facts require any non-cash compensable items be included in wages. 911 CSD – Cash handling report #1819-4 March 2019 Page 8 3. Management responses SERVICE DISTRICT Pride Professional ism Dedication Sara Crosswhite, Interim Director To: David Givans, County Internal Auditor From: Sara Crosswhite, Interim Director, Deschutes County 9-1-1 Subject: Management’s Response to Audit Report FISCAL AND EFFICIENCY OBSERVATIONS Recommendation: It is recommended the District develop a more secure method for safeguarding undeposited monies overnight.  Management’s position concerning recommendation – Concur  Comment – We agree with the auditor’s comments. The District will begin with an additional level of security for safeguarding undeposited monies overnight. We will place the monies in a designated folder and place the folder in a locked cabinet in the supervisor’s office. This will now place those monies through four security checkpoints. The District will develop a document that two people will sign indicating the date and the dollar amount that has been placed into the cabinet for security. The monies will be deposited the next business day. The movement of monies will also be counted by both the employee and the supervisor approving the batch prior to the deposit being made.  Estimated date of corrective action – Immediate  Estimated cost of recommendation - $0.00 Recommendation: It is recommended for staff to directly provide receipts from the County System (MUNIS) and leave the use of manual receipts for those times when the County financial system is not available. Alternatively, if the manual receipt book continues to be used, the supervisor should periodically reconcile manual receipts to the County Financial System entries.  Management’s position concerning recommendation – Concur  Comment – We think we will use the alternative recommendation as the District would like to continue the use of manual receipting along with the MUNIS Financial System. Understanding the redundancy in this procedure, it does not take any additional staff time to write the additional 911 CSD – Cash handling report #1819-4 March 2019 Page 9 911 County Service District - continued receipt. This process is used by one individual who is the primary party responsible for completing report copy requests for the District Attorney, Law Enforcement, Public, and other agencies. The system currently developed helps expedite the process by providing a written receipt to the individual so they do not have to wait for the computer-generated receipt. The MUNIS receipt is generated later that same day with a copy of the written receipt attached. With this being said, an audit process will be developed by the supervisor to manually reconcile receipts on a quarterly basis.  Estimated date of corrective action – Immediate  Estimated cost of recommendation - $0.00 Recommendation: It is recommended for all receipts to be deposited within 24 hours.  Management’s position concerning recommendation – Concur  Comment – We agree with the auditors’ comments. The District will attempt to make daily deposits. In the event this is not possible, if undeposited monies should remain once a batch has been closed, monies will be secured as outlined above.  Estimated date of corrective action – Immediate  Estimated cost of recommendation - $0.00 Recommendation: It is recommended for the administrative supervisor to periodically compare the record request log of fulfilled requests to receipts entered when there is a fee involved.  Management’s position concerning recommendation – Concur  Comment – We agree with the auditor’s comments. The supervisor will conduct periodic reviews of the records.  Estimated date of corrective action – Immediate  Estimated cost of recommendation - $0.00 Recommendation: It is recommended for the District to routinely use accounts receivable reports to follow up on outstanding invoices.  Management’s position concerning recommendation – Concur 911 CSD – Cash handling report #1819-4 March 2019 Page 10 911 County Service District - continued  Comment – We agree with the auditor’ comments. The District did not know these types of reports were available. Once the District was made aware that these reports existed, they were utilized immediately.  Estimated date of corrective action – Immediate  Estimated cost of recommendation - $0.00 TAX COMPLIANCE Note – This report is titled “911 County Service District-Cash Handling.” Uncertain as to why Tax Compliancy is referenced in this report. {AUDITOR’S COMMENT: In the stated objectives, the auditor will address issues with compliance with federal and state regulations and requirements, as may be applicable. This tax compliance issue was identified through review of monies being collected. Since it also entailed Finance responsibilities and other departments, the recommendation was made more global as it did not just reflect a condition at the 911 CSD. } Recommendation: It is recommended for County Finance to evaluate whether the District require any non-cash compensable items be included in wages.  Management’s position concerning recommendation – Concur  Comment – We agree with the auditor’s comments. The District believes any tax decisions regarding apparel be the decision of the Deschutes County Finance Department. Once the decision has been made, the District requests the decision encompass Deschutes County as a whole.  Estimated date of corrective action – Unknown  Estimated cost of recommendation - Unknown 911 CSD – Cash handling report #1819-4 March 2019 Page 11 County Finance Wayne Lowry, Finance Director {End of Report} 911 CSD – Cash handling report #1819-4 March 2019 Page 12 Please take a survey on this report by clicking on the attached link: https://www.surveymonkey.com/r/911CSD-CashHandling If you would like to receive future reports and information from Internal Audit or know someone else who might like to receive our updates, sign up at http://bit.ly/DCInternalAudit.