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HomeMy WebLinkAboutDiversion checking accountsPage 1 of 5 Report #2003-6 (dated June 10, 2003) June 10, 2003 Marty Wynne, Finance Director Les Stiles, Sheriff Deschutes County Deschutes County Sheriff’s Office 1340 NW Wall St 63333 Hwy 20 W Bend, OR 97701 Bend, OR 97701 cc: Audit committee RE: REQUESTED AUDIT WORK (Report#2003-6) Limited procedures in review of two unauthorized checking accounts – Youth diversio n programs of the Sheriff’s Office EXECUTIVE SUMMARY Purpose As requested by Count y Finance, limited procedures were performed in review of two un-authorized checking accounts. These bank accounts were established in 1999 for two separate youth diversio n programs run by the Sheriff’s Office. The checking accounts were both closed in 2002. Reco mmendat ions have been limited to those that, in the auditor’s opinio n, might be useful to ongoing Count y operations. Results in brief Nothing observed in the review of the bank account activit y indicated additional procedures or invest igat ion is needed. Based on the limited control environment, it is impossible to assess if anyt hing wrong occurred. Analyses performed indicated it was unlikely material fraud occurred. The fo llowing recommendat ions are for management’s considerat ion: o Checking accounts lacked sufficient oversight– The Sheriff’s Office should implement controls to monitor and supervise these programs. The Sheriff’s Office should obtain approval fro m the Board of County Co mmissio ners on all bank services. Deschutes Count y, Oregon Internal Audit Program David Givans, CPA County Internal Auditor Deschutes County-Administration building 1130 NW Harriman Bend, OR 97701 Phone: 541-330-4674 Fax: 541-388-4752 davidg@co.deschutes.or.us Page 2 of 5 Report #2003-6 (dated June 10, 2003) o Receipts were not provided for all inco ming monies – Received mo nies should be deposited intact (as received) and in a timely manner (daily). Controls should be implemented to assure all mo nies received are deposited. Programs should fo llow Count y policy wit h regard to collectio n and deposit of monies. o Expenditures were not completely supported by receipts and lacked authorizat ion –Program staff should obtain proper approval for all expenditures. Support should be referenced to the expenditure made. o Sheriff’s Office did not include grant program in budget – The County budget for the Sheriff’s Office should include resources and expenditures for grant programs. The Sheriff’s Office should analyze and review the accounting for receipts and disbursements to budgetary expectations. OBJECTIVES, SCOPE AND METHODS Audit objectives: The object ive o f the audit was limited to the review the associated checking accounts for unusual act ivit y. Unusual act ivit y is defined, for these purposes, as deposits and or withdrawal act ivit y that would have been outside the potential scope of running this program. Scope The two bank accounts being reviewed are for the LaPine Youth Diversio n program and Sisters Jet Program. Both of these accounts were for youth diversio n programs in the associated communit ies. There were inquiries made of the account custodians for addit ional background on this program. The analyses performed were limit ed by the checking account support provided by the custodians on these two checking accounts. Expenditures were not evaluated for appropriateness to the program. The records received fro m the checking account custodians included bank statements, deposit slips, check carbons, registers, expense support etc... The informat ion was believed to be all that existed in support of deposits and expenditures. There were no bank reconciliat ions provided. There was no account ing provided for the activit y o f the bank accounts. Since the accounts have been closed, recommendatio ns have been limited to those that, in the auditor’s opinio n, might be useful to ongoing Count y operations. Methods: The audit included the following limited procedures based on the auditor’s judgment: · Analyses of act ivit y o Comparison o f receipted monies to deposits by mo nth and year o Analysis of expenditures by payee and by year (Bank statement and receipt book information was compiled by County Finance.) Page 3 of 5 Report #2003-6 (dated June 10, 2003) · Judgmentally reviewed support provided, such as signatures and descript ions, as considered necessary. · Agreed deposits with Count y Finance to monies held on closure of the checking accounts. The sufficiency of the procedures is solely based on the auditor’s judgment. Consequent ly, no representation is made regarding the sufficiency of the procedures for any purpose other than which this report has been requested. The audit was not conducted in accordance wit h Government Auditing Standards issued by the Co mptroller General o f the United States. BACKGROUND ON ACCOUNTS County Finance identified the LaPine Youth Diversion checking account by requesting bank account information fro m Count y financial inst itutions with the Deschutes County’s emplo yer ident ificat ion number. This is a recent ly added internal control. Bank accounts under a separate taxpayer ident ificat ion number are much more difficult to ident ify. An emplo yee identified the Sisters Jet Program checking account. The Board of County Co mmissioners did not authorize either of these bank accounts. LaPine Youth Diversio n - South Valley Bank & Trust Banking services for LaPine Youth Diversio n Services commenced in September 1999 through a savings account. The account was disclosed as a not-for-profit with Deschutes County’s emplo yer ident ificat ion number. Emplo yees o f the Sheriff’s Office established the account at the direct ion of Sheriff Greg Brown. The savings account was converted to a checking account in April 2001. Only one designated emplo yee of the Sheriff’s Office signed checks. The checking account was closed by Deschutes County on 8/21/2002. At that time, there was $1,510.01 in the account. These mo nies were deposited with Count y Finance. Sisters Area JET Program – Bank of the Cascades Banking services for Sisters Area Jet Program commenced in January 1999. The account was disclosed as an associat ion or other organizat ion. Emplo yees of the Sheriff’s Office established the account at the direction of Sheriff Greg Brown. The account appears to have been set up under an individual taxpayer ident ificat ion number. It is assumed the ID# is for one of the original signers. Two designated emplo yees of the Sheriff’s Office signed checks. The checking account was closed on 9/17/02. At that time, there was $46.73 in the account and $80 in cash on hand. These mo nies were deposited with Count y Finance. AUDIT FINDINGS Nothing observed indicated addit ional procedures or investigation is needed. Based on the limited control environment, it is impossible to assess if anyt hing wrong occurred. Analysis performed indicated it was unlikely material fraud occurred. The findings are by their nature subject ive. Page 4 of 5 Report #2003-6 (dated June 10, 2003) The fo llowing recommendat ions are for management’s considerat ion: Checking accounts lacked sufficient oversight The County ident ified two unauthorized checking accounts. There was no evidence of supervisio n or review of the underlying disbursements, bank statements, or activit y. Bank services obtained by Count y departments require authorizat ion of the Board of County Co mmissio ners. In addit ion, proper oversight and management of these checking accounts requires ongo ing supervisio n of its activit ies. Lack of sufficient operational oversight can allow potential misappropriat ions to go undetected. The Sheriff’s Office should implement controls to mo nitor and supervise these programs. The Sheriff’s Office should obtain approval fro m the Board of Count y Commissio ners on all bank services. The County should consider request ing Count y emplo yees report any bank accounts used for County business. This might result in addit io nal disclosure of bank accounts being handled or supervised by County emplo yees for County programs. Receipts were not provided for all incoming monies A co mparison of receipted monies and deposits indicates that receipts did not sufficient ly account for inco ming monies. In additio n, deposits were not made timely or intact because the deposits often differed from receipted monies on a monthly basis. County po licy (P-1999-075) indicates all receipts should be receipted with pre- numbered forms with the Count y’s name and department and deposited within 24 hours. There should be controls to make sure activities are properly accounted for. Based on the informat ion provided, it could not be determined if addit ional mo nies went un-deposited. Average deposits for the bank accounts (excluding bank transfers and grant monies) for the last two years are $1,500 and $1,100 for LaPine and Sisters, respectively. Received monies should be deposited intact (as received) and in a timely manner (daily). Controls should be implemented to assure all mo nies received are deposited. Programs should fo llow Count y po licy wit h regard to collect ion and deposit of mo nies. Page 5 of 5 Report #2003-6 (dated June 10, 2003) Expenditures were not completely supported by receipts and lacked authorization Analyses indicated a lack o f complete support for expenditures. There was no evidence that the support was authorized and cancelled on payment. Expenditure receipts supported some 90% and 70% of expendit ures made through the LaPine and Sisters checking accounts, respectively. The expenditure support was not referenced to specific disbursements. Analyses of expenditures by payee (in total and by year) did not ident ify any significant payments of an unusual nature. Primarily one person handled the LaPine Youth Diversio n program checking account. The Sisters Jet Program had two signers, which helps assure so me level o f control over disbursements. There was no evidence of supervisio n on either account. Sufficient accounting, documentation and support should exist for the activit y in bank accounts. Appropriate supervisio n and monitoring should occur to make sure disbursements are properly authorized and accounted for. Average expenditures for the bank accounts (excluding bank transfers and grant mo nies) for the last two years are $1,000 and $1,100 for LaPine and Sisters, respectively Program staff should obtain proper approval for all expenditures. Support should be referenced to the expenditure made. Sheriff’s Office did not include grant programs in budget The Sheriff’s Office budget did not include youth diversio n program expenses outside of personnel costs. Since July 1998, the Sheriff’s Office has had responsibilit y for the youth diversion programs. These were previously handled through the Juvenile department. Up through June 2001, a portion of payro ll was funded through grants fro m the Deschutes County Co mmissio n on Children and Families. Sheriff’s Office management made periodic grant budgets and reported quarterly on grant expenses for the program. These reports did not include the activit y for these checking accounts. It was apparent fro m init ial grant budgets that they ant icipated communit y donat ions and incidental expenses. County budgets should include all resources and expenditures planned for anticipated grants. Lack of sufficient budgetary and operational oversight can allow potential misappropriat ions to go undetected. The County budget for the Sheriff’s Office should include resources and expenditures for grant programs. The Sheriff’s Office should analyze and review the accounting for receipts and disbursements to budgetary expectations.