HomeMy WebLinkAbout2122-10 Admin_Risk - Cash Handling report (Final 5-25-22)Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Administrative Services &
Risk Management –
Cash Handling
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Deschutes County,
Oregon
The Office of County Internal Audit
David Givans, CPA, CIA – County Internal Auditor
Aaron Kay – Performance Auditor
internal.audit@deschutescounty.gov
Audit committee:
Daryl Parrish, Chair - Public Member
Jodi Burch – Public Member
Tom Linhares - Public Member
Scott Reich - Public Member
Summer Sears – Public Member
Stan Turel - Public Member
Patti Adair, County Commissioner
Charles Fadeley, Justice of the Peace
Lee Randall, Facilities Director
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Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
TABLE OF
CONTENTS:
HIGHLIGHTS
1. BACKGROUND ON ADMINISTRATIVE SERVICES AND RISK
MANAGEMENT
1.1. Background on the Audit .……………………………….……….………….…………… 1
1.2. Background on the Departments ……………………………………………..….. 1-2
2. FINDINGS and OBSERVATIONS
2.1. Observations ……….………………………..……………………………………………… 3-5
2.2. Other Considerations ……………………………………………………………………. 5-6
3. MANAGEMENT RESPONSE
3.1. Administrative Services, Risk Management, and Community
Development Department ………………………………….…………………..…….. 7-8
A. APPENDIX A: OBJECTIVES, SCOPE, AND METHODOLOGY
i. Objectives and Scope ….……..………….…………………………….………………….. 9
ii. Methodology …………………………………….………….…………………………….. 9-10
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
HIGHLIGHTS
Why this audit was
performed:
A periodic review of
internal controls over
cash handling of receipts.
What was
recommended:
Recommendations
include:
centralizing check
processing within Risk
Management;
raising liquor license
fees;
including liquor license
fees on the County fee
schedule; and
utilizing electronic
systems to benefit OLCC
applicants.
Administrative Services & Risk Management– Cash Handling
The focus of the review was on internal control over the handling of external customer
payments.
What was found
Overall, the Administrative Services department and Risk Management performed well in
providing fiscal control over receipts. Each currently handles limited customer payments.
Recommendations were developed to assist the Administrative Services department and
Risk Management comply with County policy or prudent business practices for cash
handling. Also, identify areas of improvement such as fees being collected and how best to
collect them.
The audit identified the following areas for further improvement:
Risk Management’s handling of checks received by mail can be improved. Due to
staff schedules, some checks are left unsecured and deposits are not made timely.
Current OLCC liquor license fee charges are insufficient to cover County costs. Fees
are limited by Statute, but can be increased due to the complex application review
process.
Restructuring the OLCC application review process to use existing electronic systems
for workflow and payment to better serve the public. Workflow can be coordinated
by the offices that perform the reviews and removed from departments with no
review role.
Deschutes County Internal Audit
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 1
1.1 BACKGROUND ON THE AUDIT
1.
Introduction
Audit Authority:
The Deschutes County Audit Committee authorized the review of cash handling practices of
Administrative Services and Risk Management in the Internal Audit Program Work Plan for 2022-
2023. Internal audits of cash handling are routinely performed for identified County departments.
Audit objectives, scope, and methodology can be found in Appendix A.
1.2 BACKGROUND ON ADMINISTRATIVE SERVICES AND RISK MANAGEMENT
Graph I
Revenue
composition for
Administrative
Services Fund 625
(FY 22 budget)
The Administrative Services department provides general oversight and direction, both in terms of
planning for the County’s long-term financial and organizational health and managing the day-to-
day operations of one of Central Oregon’s largest employers. Administrative Services also provides
oversight of the video lottery, economic development, Humane Society of Redmond, special
transportation fund and Taylor grazing funds.
The majority of revenues are from
internal service fund charges due to the
nature and scope of administrative
functions for all county departments.
Payments, from external customers, fall
into the other categories and accounts
for less than 1% of the overall budget.
They are mainly from OLCC liquor license
application fees and notary fees.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 2
Graph II
Revenue
composition for
Risk Management
Fund 670 (FY 22
Budget)
Risk Management administers the County’s self-insurance program for workers’ compensation,
unemployment, general liability (for claims up to $1 million), and vehicle liability. Additionally,
administration of insurance programs relative to property, building, volunteers, public officials’
bonds, and excess workers’ compensation is also handled by this department.
Risk Management revenues are from
internal service charges paid by
departments. Payments, from external
customers, fall into the claim
reimbursement and event fees
accounting for 1% of the overall budget.
The skidcar program was not in
operation due to the COVID-19
pandemic.
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
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 3
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.
Management has responsibility for the system of internal controls, including monitoring internal
controls on an ongoing basis to ensure that any weaknesses or non-compliance are promptly
identified and corrected. Internal controls provide reasonable but not absolute assurance that an
organization’s goals and objectives will be achieved.
Administrative
Services and Risk
Management don’t
frequently receive
customer payments.
2.1 OBSERVATIONS
Overall, the Administrative Services department and Risk Management performed well in providing
fiscal controls over collected revenues. The following observations are noted to help further
improve the procedures put into place.
Additional controls could improve oversight over mailed in checks.
Risk Management receives claim reimbursement checks in the mail. A couple of areas were noted
where additional procedures could be beneficial.
Mailed in checks are left unsecured and deposits delayed.
The Risk Management staff person’s schedule does not allow for daily deposits. They make
their deposits when they are in the office. Checks assigned to that person come infrequently,
but may be up to several thousand dollars. Undeposited checks, in the meantime, are not
secured. The County’s cash handling policy (F-11) indicates that all cash, including checks, is
safe and secure at all times and that cash be deposited within 24 hours of receipt.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 4
Example
Endorsement
Department not endorsing checks on receipt.
Reimbursement checks were not endorsed by the staff when received, but by the Finance
department when received from Risk Management staff for deposit. Check endorsement
identifies the County as owner and where the monies will be deposited. County policy (F-11)
directs staff to immediately endorse checks received with a county bank depository stamp.
It is recommended Risk Management centralize the process for receiving checks by mail to ensure
security of funds, daily deposits, and immediate endorsement.
As of the issuance of this report, Risk Management has implemented procedures to improve
oversight over mailed in checks.
County costs exceed County OLCC liquor license fees.
The County currently collects a $25 fee for a basic review of initial or change in ownership OLCC
application at the Administrative Services office. County staff (in various departments/offices) spend,
on average, 2 hours per liquor license application review, with an approximate cost in the $150-200
range. Temporary and renewal applications have no fee. The OLCC fee has not been included in the
County fee schedule since Fiscal Year 2011.
The Oregon Liquor and Cannabis Commission (OLCC) requires all initial, temporary, renewing, or
change in ownership liquor license applicants to obtain the recommendation of their local governing
body. Initial, temporary, and change in ownership application reviews are done through the Sheriff’s
Office, Environmental Health, and the Community Development Department (CDD). License
renewals are only done at the Sheriff’s Office. OLCC uses these recommendations for consideration
of the licensing decision.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 5
Due to the complex application review process already in place, the statutory regulation ORS
471.166 (8) does allow the County to adopt a staggered fee schedule based on the type of
application. The statute allows for a maximum of $100 for a new application, $75 for a change in
ownership, and $35 for renewal or temporary applications. The statute outlines the process to seek
higher fees.
The County annually reviews all items on the fee schedule to verify inflation, cost increases, and
competitive rates are evaluated. The OLCC fee has not received an evaluation due to its exclusion.
It is recommended the County raise OLCC application fees to the maximum levels allowable in
accordance with ORS 471.166 (8).
Currently, the $25 fee is allocated to departments providing the services. CDD has included the fee in
the proposed 2023 fee schedule.
2.2 OTHER CONSIDERATIONS
County OLCC liquor license application review process can be restructured for
public benefit.
OLCC initial and change of ownership applications are coordinated through the Administrative
Services office. The office currently administers the process, but does not review or make
determinations on the application. The County does not use a centralized system to manage the
application review process.
All County OLCC liquor license application reviews occur at the Sheriff’s Office, Environmental
Health, and/or CDD. Administrative Services staff are involved in routing applications to the
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
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office/departments, collecting the fee, and allocating the revenue across the involved parties. OLCC
initial and change of ownership applicants are currently required to pay by check or cash in person
when they bring in their application.
CDD, who provides four of the six review functions, indicated the importance of ensuring businesses
are operating within County requirements during application review. Liquor license application
reviews mitigate threats to public health, including food handling, unpermitted commercial sites,
and exceeded occupancy limits for buildings.
Additional payment methods are accepted at both the CDD and Sheriff’s Office. CDD has an existing
system with the capability of accepting permit applications and payment online through Oregon
ePermitting.
The CDD system also manages the application review process with internal sign offs after review
determinations. This ensures consistency in the review process before a recommendation is made,
lowering the possibility of incomplete reviews.
It is recommended the County revise the liquor license review process to utilize electronic systems
for workflow and payment.
It is suggested that CDD be the initial contact and utilize their electronic systems to coordinate with
other departments. Administrative Services can be removed from the process entirely.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
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3. Management response
Administrative
Services and
Risk
Management
Erik Kropp,
Deputy County
Administrator
Community
Development
Department
Peter
Gutowsky,
Director
Date: May 20, 2022
To: Aaron Kay, Performance Auditor
From: Erik Kropp, Deputy County Administrator
Peter Gutowsky, CDD Director
Re: Management Response to Cash Handling Audit
Thank you for completing the “Administrative Services and Risk Management – Cash Handling” audit,
report #2122-10. We appreciated your professionalism and approach to the audit. We concur with the
findings and recommendations. Listed below is a response to each recommendation.
1. Risk Management’s handling of checks received by mail can be improved. Due to staff schedules,
some checks are left unsecured and deposits are not made timely.
Agree - recommendation has been implemented.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 8
Management
Responses
(continued)
2. Current OLCC liquor license fee charges are insufficient to cover County costs. Fees are limited by
Statute, but can be increased due to the complex review process. It is recommended the County raise
OLCC application fees to the maximum levels allowable in accordance with ORS 471.166(8). The last
recommendation is revised recommendation communicated via memo.
Agree - the fees will be managed by CDD. The ORS requires two-separate steps to change liquor license fees (a
public hearing to address licensing guidelines for OLCC application review by a local entity, then, separately
adopting the associated processing fees). After step one, the fee will become part of the County’s annual fee
schedule review. CDD will complete the first step before the next annual fee schedule review. Increased fees
will be proposed no later than the next County annual fee schedule review (around May 2023).
3. Restructuring the OLCC application review process to use electronic systems for workflow and
payment to better serve the public. Workflow can be coordinated by the offices that perform the
reviews and removed from departments with no review role.
Agree – CDD has already started working with departments on moving the OLCC application review process
into CDD’s electronic workflow and payment system.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 9
i. OBJECTIVES and SCOPE
Appendix A:
Objective,
Scope, and
Methodology
“Audit
objectives” define
the goals of the
audit.
Objectives included:
1) Review of internal controls for cash handling as outlined in County Finance policy (F-11) for cash
handling. Identify areas for improvement. Additionally, review management of any change, petty cash,
checking accounts, and billings, as applicable.
2) 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 March 2022 and extended into April 2022. Included in review of cash
handling of the Administrative Services and Risk Management departments are accounting funds
primarily handled in Funds 625 and 670, respectively. Neither department employs change or petty
cash, nor checking accounts. The focus of the review was on internal control over handling of third
party customer payments. The scope of the audit did not include all aspects of the internal controls
employed.
ii. METHODOLOGY
“Audit procedures
are created to
address the audit
objectives”
Audit procedures included:
Interviewing staff related to cash handling, receipting, and billing procedures (staff reviewed
and answered the County’s cash handling checklist provided in the cash handling policy F-11),
Surveyed process owners to establish process significance and time to review applications,
Reviewing written procedures and documents provided,
Reviewing and analyzing receipt transaction data for the identified funds, and
Reviewing and analyzing revenue data for the identified funds.
Administrative Services and Risk Management – Cash handling report #2122-10 May 2022
Page 10
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.
(2018 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.)
The County Internal Auditor was created by the Deschutes County Code as an independent office
conducting performance audits to provide information and recommendations for improvement.
{End of Report}
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