HomeMy WebLinkAbout2122-16 Sheriffs Office - Cash Handling report (Final 11-18-22)Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Sheriff’s Office
Comprehensive Cash Handling
Included service areas: Business Management, Corrections, Civil, Records,
Evidence, Street Crimes, and Central Oregon Drug Enforcement (CODE)
To request this information in an alternate format, please call (541) 330-4674 or send email to internal.audit@deschutescounty.gov
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
Joe Healy - 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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Recommendations
3
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
TABLE OF
CONTENTS:
HIGHLIGHTS
1. BACKGROUND ON SHERIFF’S OFFICE
1.1. Background on the Audit ........................................................................... 1
1.2. Background on the Sheriff’s Office ........................................................ 1-3
2. FINDINGS and OBSERVATIONS
2.1. Recommendations and Implementation Guidance .......................... 4-11
3. MANAGEMENT RESPONSE
3.1. Sheriff’s Office ..................................................................................... 12-13
A. APPENDIX A: OBJECTIVES, SCOPE, AND METHODOLOGY
i. Objectives and Scope ............................................................................... 14
ii. Methodology ............................................................................................. 15
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
HIGHLIGHTS
Why this audit was
performed:
A periodic review of
internal controls over
cash handling of receipts.
What was
recommended:
Recommendations
include:
• strengthening the
internal control system
to better oversee all
payment they receive;
• developing procedures
to make more timely
deposits; and
• implementing
additional control
activities through
policies and
procedures.
Sheriff’s Office – Comprehensive Cash Handling
The focus of the review was on internal control over fiscal cash handling. Unlike prior
audits performed in individual areas of the Sheriff’s Office, this audit covered the entire
Sheriff’s Office.
What was found
Overall, the Sheriff’s Office performed well in providing fiscal control over receipts.
Recommendations were developed to assist the Sheriff’s Office comply with County policy
or prudent business practices for cash handling.
The following areas were identified for further improvement within the wide range of
professional public safety services at the Sheriff’s Office.
Improve the internal control system over collected monies within these divisions/units:
• Civil
• Corrections
• Records
Opportunity exists to improve deposit activities within these divisions/units:
• Business Management
• Evidence
• Records
A variety of control practices could be improved within these divisions/units:
• Business Management
• Central Oregon Drug Enforcement (CODE)
• Street Crimes Unit
Deschutes County Internal Audit
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 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 the
Sheriff’s Office in the Internal Audit Program Work Plan for 2022-2023. Internal audits of cash
handling are routinely performed for identified County departments. Prior audits of Sheriff’s Office
fiscal cash handling controls were performed by division or area. This scope of this audit included
all divisions and areas relating to Sheriff’s Office fiscal cash handling controls. Audit objectives,
scope, and methodology can be found in Appendix A.
1.2 BACKGROUND ON THE SHERIFF’S OFFICE
Graph I
Sheriff’s Office
Revenue Sources
(FY2022 Actual)
Source: County Financial
Records
The Sheriff’s Office is the lead law enforcement agency in Deschutes County, dedicated to providing
a wide range of professional public safety services. The Sheriff’s Office is led by an elected sheriff
who has statutory authority for organizing the work of the Sheriff’s Office. The largest ongoing
source of revenue are the two Law Enforcement Districts approved by Deschutes County voters.
The Sheriff’s Office collects charges for services
performed, fines and fees accounting for 1% of the
overall budget. The divisions/units with direct cash
handling responsibilities are corrections, civil
services, records, detective, evidence, business
management, and their fiscal oversight of the Central
Oregon Drug Enforcement Team (CODE).
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 2
Graph II
Five-Year Trend in
Collected External
Payments
(FY2018-FY2022
Actual)
Source: County Financial
Records
Areas where cash
handling are
identified in
green.
Revenues collected from external payments have declined over 16% over the last three years from a
high in 2019. Reduced demand for services due to the Covid-19 pandemic is the most likely cause.
Services of the Sheriff’s Office include 1 :
• Administration: Included business management, human resources, information
technology, legal and command staff.
• Corrections: Includes the adult jail, work center, court security transports and
maintenance.
• Court Security: Provides a security checkpoint, which conducts a security screen for each
visitor to the DA’s Office and Courthouse, including the grand jury, trial juries and the public.
• Patrol: Responsible for crime prevention, responding to 9-1-1 calls for service, enforcement
of traffic laws, and investigation of traffic crashes and apprehension of suspects. Special
functions include school resource, K-9and reserve deputies.
• Civil: Responsible for receiving and serving all court documents presented to the
Sheriff, processing paperwork on all towed or impounded vehicles, assisting with
1 Deschutes County Adopted Budget Fiscal Year 2022-2023
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 3
Sheriff’s auctions and other civil activities.
• Automotive/ Communications: Maintains the Sheriff’s Office vehicle fleet and
communication network.
• Records: Responsible for all storage, dissemination and transcription of deputy reports.
• Training: Responsible for planning, scheduling, preparing, conducting, maintaining and
coordinating initial and continual training for all sworn and non-sworn personnel.
• Detectives: Investigates crimes that include homicide, domestic violence, narcotics, forgery,
child pornography, child and elderly abuse and sexual assault.
• Street Crimes /CODE/ Digital Forensics: Consists of membership in the Central Oregon
Drug Enforcement Team (CODE), street crimes, digital forensics, and concealed handgun
licensing.
• Special Services: Provides the coordination of search and rescue missions and marine patrol
on county lakes and rivers. Other functions include off-road vehicle, marine and snowmobile
patrol.
• Emergency Services: Responsible for all emergency disaster planning and preparedness.
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
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 4
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.
2.1 RECOMMENDATIONS AND IMPLEMENTATION GUIDANCE
Legend:
The following recommendations are tailored to the Sheriff’s Office with consideration to staffing
levels, business demands, and operational challenges and are intended to further improve the
policies, procedures, and controls already in place.
Each division/unit within the Sheriff’s Office has unique work environments and the following were
included in the audit:
The Records Unit is responsible for handling information for staff and the community regarding any
police reports or police records. This includes reviewing reports, report control, release of public
information, records maintenance, data entry and managing the availability and confidentiality of all
records. They handle payments for copies of police officer’s reports and/or recorded media, local
records checks, and public information requests.
The Civil Unit processes, serves and enforces court orders, other documents issued by the courts
and other legal processes. The Unit handles paperwork on all towed and impounded vehicles, as
well as conducting Sheriff’s auctions of real and personal property. They collect monies associated
with service of legal documents, vehicle impounds, and auctions.
Records
Civil
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Page 5
The Deschutes County Sheriff’s Office Adult Jail was built in 1994 and has a capacity of 362 beds. The
Corrections Division are professional staff who provide a safe and secure environment for the
citizens of the county and the inmates lodged there. They handle monies associated with posted
security (bail); inmate account funds; and corrections related fees and services.
The Sheriff’s Office Business Management performs professional-level administrative work in such
areas as budget development; financial administration and reporting; and managerial duties to
support the function of the Sheriff’s Office. Their cash handling responsibilities include billing,
collection, accounting, and oversight of Sheriff’s Office accounts.
The Evidence Unit maintains a property management system that ensures accuracy and
completeness of records. The chain of custody for evidence is strictly maintained from receipt to
disposal. This is critical for the successful conviction of criminals. The Evidence Unit also processes
all applications for concealed handgun licenses (CHL). They handle monies related to CHL
applications, found money, and cash evidence.
The Street Crimes Unit focuses on enforcement of street-level drug cases and quality of life issues
connected to property crimes throughout the county. They maintain a cash fund for investigative
purposes and confidential informant payments.
The Central Oregon Drug Enforcement (CODE) team is a multi-jurisdictional narcotics task force that
identifies, disrupts, and dismantles local, multi-state, and international drug trafficking organizations
using an intelligence-driven, multi-agency prosecutor-supported approach. They maintain a
checking account for investigative purposes and confidential informant payments. The Sheriff’s
Office provides administration and fiscal oversight over CODE.
Corrections
Business
Evidence
SCU
CODE
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
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“Control gaps are
potential
vulnerabilities to
the effective
stewardship of
public resources.”
The Sheriff’s Office could improve the internal control system over collected
monies.
Overall, the Sheriff’s Office performed well in providing fiscal controls over collected monies.
However, the implementation of the cash handling control system was inconsistent across all the
divisions of the Sheriff’s Office creating identified control gaps. Control gaps are potential
vulnerabilities to the effective stewardship of public resources.
The County cash handling policy (F-11) encourages an effective internal control environment.
Though there are a number of resources to build or assess systems of internal control, the
corporate financial world strongly favors guidance from the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) who has provided internal control guidance through an
integrated framework. The U.S. Government Accountability Office interpreted COSO’s guidance in
their “Standards for Internal Control in the Federal Government” (also referred to as the “Green
Book”) as a source of information for developing an internal control system in government. The
Green Book has adapted control “principles” for a government environment related to each of the
COSO components. Management is ultimately responsible for implementing appropriate internal
control systems.
Effective internal controls minimize the potential for errors or irregularities to occur, and if they do
occur, will detect such errors or irregularities in a timely manner during the normal course of
business.
Processes evolve over time due to employee turnover and changing business objectives.
Management monitoring and evaluation of the internal control system is not apparent based on the
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 7
This
recommendation
applies to:
inconsistent implementation of the processes and missing controls over revenues noted below.
They bear the responsibilities over ongoing assessment of risks and evaluation of deficiencies.
It is recommended the Sheriff’s Office strengthen the internal control system to better oversee all
payments they receive and periodically assess their operating environment to assure the system is
operating as intended.
Guidance for this recommendation by unit/division includes:
• Using Munis to immediately receipt all payments as they are received and balance
transactions daily:
The Records Unit does not make receipts for any payments received by mail or if the
customer declines a receipt. The Records Unit does not balance monies received daily
against any accounting system. Because of the inconsistent usage of receipts, they have
no complete record of the monies received to test against when funds are counted. During
deposit preparation, monies are recorded in Munis without any receipts used to
determine an expected total.
The Corrections Division accepts payments for Adult Jail records request fees, issuing a
manual receipt, and does not balance these funds in their deposit. The funds are then
given to the Business Manager who is tasked with documenting the funds in Munis and
deposit preparation.
• Eliminating cash handoffs between staff:
The Records Unit retains monies received as payment with the records request
paperwork through processing. Staff hands monies off to prepare the deposit after
processing is complete. The deposit is independently counted by a secondary staff
member with another handoff.
As mentioned above, the Corrections Division accepts payments for Adult Jail records
request fees. Payments are physically handed over to the Sheriff’s Office Business
Manager without recount or record.
Records
Corrections
Civil
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Page 8
• Employing a locking cashbox or cash drawer to secure funds as they are collected:
As previously stated for the Records Unit, monies received as payment are kept with
the records request paperwork and are not secured until processing of the records
request has finished (up to 2 weeks).
• Establishing a cash custodian responsible for all daily collected revenues:
At the Records Unit, custody of the monies received is not formally established as the
monies are kept with the paperwork and transferred between staff.
The Civil Unit allows multiple staff to accept payments on any given day. Collected
funds are not adequately restricted and protected from unauthorized access. Each
technician has a locking cash bag to secure cash payments individually, however the keys
to the locking cash bags are accessible to other staff. Check payments are placed in a
shared locking cash box accessible by all Civil staff.
• Endorsing checks as they are collected:
Checks are endorsed only during preparation of the deposit at the Records Unit.
Opportunity exists to improve deposit activities.
Deposit activities are disparate among the divisions of the Sheriff’s Office. The Corrections Division
makes daily deposits of collected monies to the bank, while other division’s deposits are less
frequent. Deposits may be twice weekly or monthly, depending on available staff. Additionally, Cash
evidence was gathered for up to three months before deposit. Finally, paper checks are being used
to transfer funds between the Inmate Trust account and Inmate Bail Account, as well as the Inmate
Trust account and County accounts. Paper checks have inherent delays between issuance and
deposit and have a risk of theft/loss.
The County cash handling policy (F-11) requires deposit of checks, drafts, cash and other types of
payments to the bank within 24 hours of receipt. The Sheriff’s Office Evidence Control Policy 4.10
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
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This
recommendation
applies to:
states, “The money shall be deposited as soon as possible and no later than one business week
from the date of placement in evidence.”
Funds carried over daily increases the potential for errors or irregularities to occur. Paper checks
have higher labor expenses, material expenses, and bank fees than electronic payments. A 2022
Association for Financial Professionals Payment Cost Benchmarking Survey 2 estimates the median
cost of issuing paper checks between $2-4 per check.
Management did not recognize the opportunity for improvement of deposit processes.
It is recommended the Sheriff’s Office develop procedures to make more timely deposits.
Guidance for this recommendation by unit/division includes:
• Consolidating bank deposit duties across the Divisions:
While some divisions combined their deposit activities for greater efficiency, the delivery
was still not daily.
• Making weekly deposits of evidence monies in accordance with policy:
Cash that is not needed for evidentiary purposes should be deposited into the bank for
safekeeping within one business week. Documentation indicated a notification to
command staff after two months of accumulation. An additional month elapsed before
the deposit was made.
• Utilizing electronic transfers between County funds whenever possible:
The Business Management use of electronic payments could offer time savings by cutting
out the printing, transportation, and delayed deposit of paper checks.
• Providing opportunity for either in-person or online customers to pay by credit/debit card:
The Records Unit does not currently accept credit/debit card payments, while other
services in close proximity to the Records unit offer customers those options. In the past,
2 Nacha.org February 14, 2022 by Michael Kahn – “ACH Costs are a Fraction of Check Costs for Businesses”
Records
Business
Evidence
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 10
This
recommendation
applies to:
they utilized a portable handheld terminal shared with the Civil Unit. This practice ended in
early 2020 when the Civil Unit transitioned to an online card processor.
A variety of control practices could be improved.
For appropriate design, implementation, and operating effectiveness, internal control activities must
be consistently applied through established policies and procedures. Control activities occur at all
levels and functions of the Office. The Sheriff’s Office has not developed policies and procedures to
mitigate risks associated with meeting the objectives of the Office in some areas.
The County cash handling policy (F-11) designates management responsibility for designing,
implementing, and monitoring effective controls. COSO expands on this responsibility to include
documentation through policies and procedures at a level appropriate to allow management to
effectively monitor the control activity.
In the absence of effective ongoing evaluation of risks, documentation, and oversight; the system of
internal controls can be undermined.
It is recommended the Sheriff’s Office implement additional control activities through policies and
procedures.
Guidance for this recommendation by unit/division includes:
• Providing additional segregation of duties:
A staff person (separate from the Business Manager) should receipt and deposit Sheriff’s
Office monies received.
• Applying a consistent review of deposit activity:
Business Manager should perform a regular comparison of bank receipts to accounting
Business
SCU
CODE
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Page 11
system records of monies deposited.
• Documenting audit activities:
The SCU Detective Captain is responsible for quarterly audits of the investigative funds
and paperwork associated with disbursement, however no records are kept documenting
the timing or results of the audits.
• Recording in the CODE fiduciary accounts the additional CODE checking account balance
and activity:
CODE occasionally uses investigative funds for emergency operational purchases. Since
these purchases do not meet the intent of the investigative funds, they must be adjusted
for in the accounting system. The County maintains a fiduciary accounting of CODE monies
to the extent the County is aware of how the funds are disbursed. The County currently is
not routinely tracking the checking account activities. The County external auditor’s report
on internal control over financial reporting has noted issues in the last three years with
material audit adjustments and/or reconciliation.
• Eliminating petty cash funds:
Business Management has a fund of petty cash being used for small purchases
established using monies from bottle and can deposit redemptions. This fund is not
accounted for within the County’s financial system and therefore is not subject to the
oversight requirements of County petty cash policy (F-8). Procurement cards can be
utilized for these same purchases making the fund unnecessary.
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
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3. Management response
Sheriff’s
Office
Captain Michael
Shults and Joe
Brundage,
Business
Manager
To: Aaron Kay, Performance Auditor
From: Captain Michael Shults and Joe Brundage, Business Manager
Subject: Management’s response to Audit report
Recommendation: It is recommended the Sheriff’s Office strengthen the internal control system to
better oversee all payments they receive and periodically assess their operating environment to
assure the system is operating as intended.
a) Management position concerning recommendation: Concurs
b) Comments:
• Divisions will use Munis to receipt payments. This will require training from the County.
• Records will begin tracking and balancing all monies received. Corrections will process their
deposits and will no longer involve the Business Mgr.
• Locking cashboxes will be purchased for Records and Civil divisions. Divisions will each
designate a cash custodian.
• Checks will be endorsed upon receipt.
• Business Manager will review new processes to assure compliance.
c) Estimated date of corrective action: 3 months
d) Estimated cost to implement recommendation, if significant $ 2,000.
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 13
Sheriff’s
Office
(Continued)
Recommendation: It is recommended the Sheriff’s Office develop procedures to make more timely
deposits.
a) Management position concerning recommendation: Concurs
b) Comments:
• We will work internally to develop appropriate procedures to make timely deposits in each
division or across divisions, as necessary. Consolidation will depend on the hourly rate of the
personnel taking the deposit.
• We will work with County to identify internal EFT opportunities. This will require training from
the County.
• The replacement or repair of the card processor in the records division will be prioritized.
c) Estimated date of corrective action: 3 months
Recommendation: It is recommended the Sheriff’s Office implement additional control activities
through policies and procedures
a) Management position concerning recommendation: Concurs
b) Comments:
• The Business Manager will delegate deposit duties to the Admin Analyst, thus allowing
segregation of duties and allowing oversight and reconciliation of deposit activity.
• Street Crimes was already in the process of converting to ATM cards and will no longer keep
cash on hand. This will allow reconciliation to bank statements and eliminate the need to audit
the cash.
• CODE Administration will work with Finance to integrate First Interstate account into Munis and
CODE balance sheet. This will require training from the County.
• We will eliminate the employee recycling petty cash fund.
c) Estimated date of corrective action: 3 months
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Page 14
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 at the Sheriff’s Office as outlined in County Finance
policy for cash handling (F-11). Identify areas to improve efficiency and effectiveness.
Additionally, review management of any change cash, petty cash, checking accounts,
investigative funds, receipts, collections, 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 began in May 2022 and extended through August 2022. Included in review of cash
handling of the Sheriff’s Office are accounting funds primarily handled in Fund 255. The Office
employs no change funds, but has petty cash and checking accounts. The focus of the review was
on internal control over custodial funds and handling of third party customer payments. Central
Oregon Drug Enforcement (CODE) is included in the review as they are funds managed by the
Sheriff’s Office. The scope of the audit did not include all aspects of the internal controls employed.
Areas identified:
The audit reviewed cash handling controls in the following areas:
• Business Management;
• Corrections Division, including any revenues from the inmate work center;
• Civil Unit;
• Records Unit;
• Street Crimes Unit;
• Evidence Unit, including concealed handgun licensing; and
• CODE.
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Page 15
ii. METHOOLOGY
“Audit procedures
are created to
address the audit
objectives”
Audit procedures included:
• Interviews and observations of the Sheriff’s Office 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),
• Analysis of records and documents under the custody of staff,
• Reviewing department documentation of systems of internal control,
• Collection and analysis of revenue data, and
• Review or reconciliation of revenues to County Financial system (Munis).
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.
Sheriff’s Office – Comprehensive Cash Handling report #21/22-16 November 2022
Page 16
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