HomeMy WebLinkAbout1819-6 Road Department - Cash Handling (Final 4-8-2019)Road Department – Cash handling report #1819-6 April 2019
Road Department –
Cash Handling
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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
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Road Department – Cash handling report #1819-6 April 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 Road Department ……………….……….………….…………… 2-3
2. FINDINGS and OBSERVATIONS
2.1. Fiscal and efficiency observations ……....………………………..…………….… 4-8
2.2. County actions required …………………………………………………………..………. 8
3. MANAGEMENT RESPONSE
3.1. Road Department ……………….…………………………..…………………...... 9-10
3.2. Finance Department ……………………………………………………………..…... 11
Road Department – Cash handling report #1819-6 April 2019
HIGHLIGHTS
Why this audit was
performed:
A periodic review of
internal controls over
revenues.
What was
recommended:
Recommendations
include:
• developing additional
safeguarding procedures
over change monies;
• securing prepared
deposits in tamperproof
bags;
• depositing Clerk’s
Office monies and
transferring those monies
to the Clerk’s Office;
• updating written
procedures over handling
of monies; and
• closing out the
checking account.
Road Department– Cash Handling
The focus of the review was on internal control over handling of external customer payments.
What was found
Overall, the Department performed well in providing fiscal controls over collected revenues.
Recommendations were developed to assist the Road Department comply with County
policy or prudent business practices for cash handling. The audit identified the following
areas for further improvement, including
• additional controls to safeguard and provide accountability for change monies;
• methods to provide greater safekeeping of monies through to deposit;
• providing greater safekeeping over monies received for another department; and
• improving and updating written policies over handling of monies.
In addition, the departments has been evaluating whether they still need a checking
account. The department has now been able to use procurement cards and a quicker
county disbursement process to more effectively handle their immediate purchase needs.
They have decided they will no longer need the checking account. Removing the checking
account eliminates some administrative burdens and custodianship.
Deschutes County Internal Audit
Road Department – Cash handling report #1819-6 April 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 Road
Department in the Internal Audit Program Work Plan for 2017-2019. Internal audits of cash handling
are routinely performed for identified County departments.
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 Department as outlined in County Finance policy
for cash handling (F-11). Identify areas for improvement.
2) Review management of any checking accounts, change cash, and billings.
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 February 2019 and extended through March 2019. Included in review of
cash handling of the Road Department are accounting funds handled which include Funds 325, 326,
327, 328, 329, and 336. The focus of the review was on internal control over handling of third party
customer payments. Road does not have a petty cash fund. 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,
Road Department – Cash handling report #1819-6 April 2019
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“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,
• Interviewed and observed staff on practices and procedures regarding receipting and billing
activities, and
• Reviewed user accounting system roles and security over cash handling and billings.
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 ROAD DEPARTMENT
Deschutes County Road Department is responsible for the development, operation, and maintenance
of the County road system, consisting of 900 miles of roadway, of which 700 miles are paved. The
department also handles some administrative tasks for the County Forester (natural resources
department).
The Road Department includes fifty-six (56) full time equivalent employees as of their most recent
budget (18/19).
A majority of the Department’s revenues (90%) are derived from intergovernmental resources (see
Chart I). These resources are primarily motor vehicle revenue.
Road Department – Cash handling report #1819-6 April 2019
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CHART I –
Composition of
2018 resources
for the Road
Department
CHART II – Trend
in primary
resources by FY
for the Road
Department
Source: County CAFR audited financial statements (Road)
The overall resources of the Department have been trending upward with increased funding for the
transportation system.
Source: County CAFR audited financial statements (Road)
Road Department – Cash handling report #1819-6 April 2019
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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 Road Department 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 Road
Department
performed well in
providing fiscal
controls over collected
revenues.
Additional controls could improve oversight over revenues.
The Road Department processes for collecting monies are handled by two staff and are supervised
by an administrative supervisor. During observations, a couple of areas were noted where additional
controls or efficiencies could be achieved.
• Security over change monies could be improved.
The change box does not a have a working lock, other staff have access to make change,
change is counted out monthly, and there is no specified custodian.
Road Department – Cash handling report #1819-6 April 2019
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The department by resolution is approved to have change monies. Change is used to help
customers pay the exact amount of fees. The department’s use of change funds parallels that
of a cash register, except that they do not place more funds into the cash box. Change
monies are supposed to remain the same amount regardless of receipts. All monies
receipted are held separately for the deposit. The change monies are not always used daily.
County Policy F-11 indicates for change funds that are held or are accessible by others that
staff responsible should recount the monies at the beginning and ending of their shift. This
would also include providing reasonable security and safekeeping of monies while they are
unattended. Generally, other staff should not have unsupervised access to these monies as
that puts the custodian’s responsibility at risk.
Staff need to have access to change, but since the amounts do not change, they do not
exercise the same level of safekeeping control as a cash register environment.
If monies were not all present, staff would not know where and when the monies changed. It
would also be problematic identifying with whom they changed.
It is recommended change monies be used as when opening a cash register with a specified
custodian; monies counted out at the beginning of the day; and monies recounted at the
closing of the day.
It is recommended the department have a locking change box with a specified custodian.
• Safekeeping of deposits could be improved.
Staff sometimes uses a plain unlocked bank bag for holding deposits. This provides only
Road Department – Cash handling report #1819-6 April 2019
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limited accountability and security until deposited. These deposits are sometimes taken by
other staff for deposit with the bank.
Prepared deposits should be held in custody or protected from alteration if the custodian
doesn't directly deposit the monies.
Staff trust each other with sharing these banking duties.
If there were differences identified in the bank deposit when duties are shared, it wouldn't be
clear where any changes may have occurred.
It is recommended for the safekeeping of prepared deposits that they be placed in a
tamperproof bag overnight or if they will be handled by another person.
• Handling of other department monies could be improved.
Some transactions involve recording surveys and customers provide separate monies (at the
time fees are collected) for also paying required recording fees with the County Clerk's Office.
This is an efficient process for the customer and assures that the surveyor approved
documents are recorded. However, the separate monies collected for the recording fees are
often held beyond a day. These checks were not endorsed and were not provided sufficient
safekeeping.
County policy F-11 requires that monies be deposited with 24 hours. In discussing this with
the Clerk's Office, they identified an efficient solution through use of an interfund transfer
form that would provide a method to communicate and transfer fees collected and deposited
to the Clerk’s Office.
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Road had collected these monies for a different department but was reluctant to deposit until
their services were performed and the documents were ready to be recorded.
Monies received (primarily checks) for the Clerk’s Office are frequently held for more than 24
hours.
It is recommended the Road department deposit the recording fees for the Clerk’s Office
and then communicate the transfer of funds for the associated service using the Clerk’s
Office provided transfer form.
• Written policies need to be updated.
The Road department has created written cash handling policy (2007-002) that has seen some
changes in the way cash handling is performed. In addition, the procedures do not go into
additional details relating to handling of billed customers.
Communication is an essential component of internal controls. Accurate written policies and
procedures are necessary for effective financial and accounting controls. The resulting
documentation is also useful for training and cross-training staff. Billed customers have
additional risks that should be explicitly addressed. The customer risk areas include creating
new customers; making billing adjustments; and providing separation of duties for staff
performing accounting and collections.
The policy is mainly out of date for recent County financial software changes.
Lack of current written procedures can lead to inadequately planned controls, inadequate
supervision, poor and inadequate training and lack of adherence to stated control
procedures.
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It is recommended for the Road Department’s written procedures to be updated to reflect
the current procedures and necessary controls. In addition, these procedures should
include necessary safeguards over billed customers.
{Finance has developed within the new financial system some additional workflow controls
to provide greater visibility to billing activities and that provides greater oversight and
control.}
2.2 COUNTY ACTIONS REQUIRED
The department is
now using
procurement cards
and no longer needs
their own checking
account.
Checking account is no longer desired.
The department has now been able to use procurement cards and a quicker county disbursement
process to more effectively handle their immediate purchase needs. The department has discussed
whether they will continue to need the checking account and has decided they will no longer need it.
The Road Department’s checking account was authorized by the Board of County Commissioners and
was last approved in 2004 (Resolution 2004-054) to increase the amount to $1,000.
The Finance Departments through their responsibilities in Policy F-14 – General Financial policies has
authority to manage and control all County bank accounts.
Removing the checking account eliminates some administrative burdens and custodianship.
It is recommended for the department and County Finance to close-out the Road Department
checking account.
Road Department – Cash handling report #1819-6 April 2019
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3. Management responses
Road
Department
Chris Doty,
Road
Department
Director
and
Kelli Candella,
Administrative
Supervisor
Memorandum
Date: April 5, 2019
To: David Givans, County Internal Auditor
From: Kelli Candella, Administrative Supervisor
Through: Chris Doty, Director
Re: Subject Manager’s response to Audit report
The following comments represent the Road Department’s management response to the above noted
audit.
Section 2.1: Additional Controls could improve oversight over revenues
• We agree with the auditor’s comments and the following action will be initiated:
o Locking cash box and locking box for checks received for deposit will be in place for cash
handling.
Road Department – Cash handling report #1819-6 April 2019
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o Updating the Cash Handling policy from 2007.
• Currently department holds a check received payable to County Clerk, this may be held up to
three days, until Plat is approved and ready for recording. We agree with the auditor’s
comments and the following action will be taken:
o Department will receive check, prepare a receipt for cash and deposit funds with the
department’s daily deposit. Funds will be transferred to the Clerk’s Office through a
transfer form provided by Clerk’s Office.
• We agree with the auditor’s comments and the following action to improve the situation for
cash handling procedures will take place:
o Update the Cash Handling Practices Policy from 2007.
Estimated date of corrective action: April 30, 2019.
Section 2.2: Checking account no longer desired
• We agree with the auditor’s comments and the following action will be taken:
o The checking account closed, on April 4, 2019, all blank unused checks/deposit forms
were destroyed by Beth Raguine and witnessed by Kelli Candella shred deposit slips.
Notification sent to James Wood that all steps completed to close this account.
Corrective action completed April 4, 2019.
Road Department – Cash handling report #1819-6 April 2019
Page 11
County
Finance
Department
Wayne Lowry,
Finance
Director
Finance has received the request from the Road Department and has started the process of
closing the account.
{End of Report}
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