HomeMy WebLinkAbout2324-4 DA Cash Handling (Final 9-18-23)Office of the District Attorney - Cash Handling – 22/23-4 September 2023
Office of the District Attorney –
Cash Handling
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internal.audit@deschutes.org
Deschutes County,
Oregon
The Office of County Internal Audit
Elizabeth Pape, CIA, CFE – County Internal Auditor
Aaron Kay – Performance Auditor
internal.audit@deschutes.org
Audit committee:
Daryl Parrish, Chair - Public member
Jodi Burch – Public member
Joe Healy - 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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Recommendation
1
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
Table of Contents
1. Introduction ................................................................................................................................................................................. 1
1.1. Background on the Office ................................................................................................................................................... 1
2. Findings and Observations ......................................................................................................................................................... 4
2.1 Missing controls provide opportunity for fraud .................................................................................................................... 5
3. Management Response .............................................................................................................................................................. 9
Appendix A: Objective, Scope, and Methods .................................................................................................................................. 10
i. Note on Internal Controls ..................................................................................................................................................... 11
ii. Objectives and Scope ............................................................................................................................................................ 11
iii. Methods .................................................................................................................................................................................. 12
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
HIGHLIGHTS
Why this audit was
performed:
A periodic review of
cash handling receipts.
What was
recommended:
Office of the District
Attorney staff should
update accounting
procedures to help
staff comply with the
Deschutes County Cash
Handling Policy and to
decrease the chance
cash is stolen.
Office of the District Attorney—Cash Handling
The focus of the review was on internal control over the handling of Office of District
Attorney customer payments, mostly discovery fees.
What was found
The Office of District Attorney did not comply with County cash handling policy when
processing smaller and infrequent payments related to items like discovery. They did not
make deposits daily which meant checks were sitting around unaccounted for. They also
did not issue pre-numbered receipts, which made it easier to dispute transactions.
These smaller payments made up less than 0.1 percent of Office revenue. The small
amount of these collections might make this area seem low risk, but the same factor makes
them vulnerable to fraud.
Staff did not comply with County policy because the Office had outdated procedures in
place which did not ensure compliance. Staff were working on updating procedures, but
they were not yet complete.
Deschutes County Internal Audit
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
Page 1 of 14
1. Introduction
Introduction
The Deschutes County Audit Committee authorized the review of cash handling practices for the
Office of the District Attorney in the Internal Audit Program Work Plan for 2022-2023. Internal audits
of fiscal controls are routinely performed for identified County departments or functions. Audit
objectives, scope, and methodology can be found in Appendix A.
1.1. Background on the Office
Background on the Office
The mission of the Office of the District Attorney is to seek justice, advance public safety, and uphold
the law. The Office achieves this mission by working with the community to prevent crime, holding
offenders accountable when they commit crime, and ensuring victim voice in the criminal justice
system. The Office is headed by an elected District Attorney who leads 25 attorneys and support
staff comprised of trial assistants, victim assistants, information technology staff, and administrative
staff.
Since 2019, staff, expenses, and revenue have all trended up. Full time equivalent staff increased
from 49.1 to 60.6 in 2023. Expenses increased from $7.9 million to $12.1 million. Excluding general
fund contributions, revenue doubled from $1.2 million to $2.4 million. Personnel expenses
increased faster than other expenses.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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Graph I
Staff, Expense, and
Revenue Trends
Source: County Financial Information
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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Graph II
Trends for
Personnel and
Other Expenses
Source: County Financial Information
Most non-General Fund revenue remained steady, however grants increased while discovery and
document fees decreased. Grants increased from $161,000 in 2019 to $1.1 million in 2023. Most of
the increase was due to Criminal Justice Commission grant related to the emerging adult program.
Document and discover fees decreased from $155,000 in 2019 to $17,000 in 2023. Some of the
decrease was due to the ending of a state program that provided counties with a flat amount to pay
for discovery for defendants who could not otherwise pay.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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Graph III
Detailed Revenue
Trends
Source: County Financial Information
2. Findings and Observations
Findings and Observations
Collecting revenue is not a main function of the Office of the District Attorney. Most revenue comes
from the County General Fund. Other significant sources of revenue include federal and state
funding as well as a few private grant programs. The Office also collects discovery fees and some
small sources of miscellaneous revenue such as refunds. This revenue mostly came in the form of
checks although there were some payments made with currency.
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2.1 Missing controls provide opportunity for fraud
Missing controls provide opportunity for fraud
The Finance Department received and processed most federal, state, and grant funding that went to
the Office of the District Attorney. Funds came in the form of electronic deposits and checks ranging
from $6,000 to $680,000.
In contrast, Office staff deposited other fees and miscellaneous revenue inconsistently. These fees
made up a small portion of the Office’s budget. Discovery and document fees along with
miscellaneous revenue totaled less than $20,000 in 2023. That made up less than 0.7 percent of
non-general fund revenue and less than 0.1 percent of all resources. The Office made sporadic
deposits over the year ranging in size from $50 to $2,360.
The small amount of revenue from this source and its sporadic nature made cash collection seem
like a low-risk activity. But these same factors also made it an opportunity for fraud. If no one is
paying attention, and no one is relying heavily on the revenue, a fraudster can more easily fly under
the radar.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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Graph IV
Daily Deposits for
Fees and
Miscellaneous
Revenue
Source: County Financial Information
The County Cash Handling Practices Policy (F-11) requires controls to limit opportunities for fraud
and to ensure revenue is accurately recorded. For example, the policy requires daily deposits so
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
Page 7 of 14
Image I
Copy of a deposit
slip with multiple
checks
checks and currency aren’t sitting around, but the Office was not making daily deposits. Staff
grouped multiple checks on deposit slips. Numbers ranged from one to 29 checks with an average
of 12. The most time between deposits was just over three months.
The same County policy also requires staff to provide customers with a pre-numbered receipt in
triplicate. Pre-numbered receipts prevent payment disputes and make it possible to identify missing
receipts to prevent fraud. The Office was not using pre-numbered receipts and instead used a form
front desk staff generated each time they received cash. Staff were exploring options to use the
County’s financial information system, Munis, to generate pre-numbered receipts, but had not yet
instituted the practice. Staff turnover may have contributed to the delay.
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Despite the conflict with County policy, these were long-standing practices at the Office. Auditors
first noted these practices in a 2009 Office of the District Attorney cash handling audit. The Office
reported that it started making daily deposits and using numbered receipts in a 2010 follow-up, but
the practice had gone by the wayside since. Auditors again noted the practices in a 2023 transition
audit.
The Office continued to be without these controls because the Office had outdated procedures in
place which did not ensure compliance. Staff were working on updating procedures, but they were
not yet complete. Documented procedures are more important, not less, when activities happen
irregularly or infrequently.
Recommendation
Office of the District Attorney staff should update accounting procedures to help staff comply with
the Deschutes County Cash Handling Policy and to decrease the chance cash is stolen.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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3. Management Response
Office of the
District
Attorney
Response
Steve Gunnels District Attorney
1164 NW Bond Street Bend, Oregon 97703 (541) 388-6520 Fax: (541) 330-4691 www.dcda.us
September 15, 2023
Steve Gunnels
District Attorney
Deschutes County District Attorney’s Office
Elizabeth Pape
County Internal Auditor
Deschutes County Office of the County Internal Auditor
RE: DA Cash Handling Audit Response
Dear Ms. Pape,
I am writing to express my agreement with the recent findings of the cash receipts audit pertaining to
our office. I fully support the recommendation that our accounting procedures should be updated to
align with the Deschutes County Cash Handling Policy.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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The audit revealed areas where our current procedures may not comply with the county's policy,
potentially increasing the risk of cash mishandling or theft. To address this, we will update our
accounting procedures to ensure our practices align with the policy and enhance financial controls. We
commit to completing these within 4-6 week, submitting to you no later than November 1, 2023.
Additionally, I recommend establishing a regular auditing schedule to maintain compliance and
promptly address any issues. Strengthening our financial controls will not only protect our funds but
also reinforce public trust.
Please consider this letter as my formal endorsement of the audit findings and my commitment to
implementing the recommended changes.
Thank you for your attention to this matter, and feel free to contact me for further information or
support.
Sincerely,
Steve Gunnels
Deschutes County
District Attorney
Appendix A: Objective, Scope, and Methods
Appendix A: Objectives, Scope, and Methods
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.
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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i. Note on Internal Controls
Note on Internal Controls
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 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.
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.
ii. Objectives and Scope
Objectives and Scope
Objectives included:
1. Review of internal controls for cash handling with the Office of the District Attorney as
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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“Audit
objectives” define
the goals of the
audit.
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, receipts, credit cards, judgements, 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 occurred in August and September 2023. Included in review of cash handling of District
Attorney’s Office accounting, primarily Fund 001-11 and Fund 212. No petty cash was present in the
Office. The focus of the review was on internal controls over discovery and other small payments.
The scope of the audit did not include all aspects of the internal controls employed.
iii. Methods
“Audit
procedures are
created to
address the
audit objectives”
Methods
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 Deschutes
County cash handling policy F-11).
• 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.
We conducted this performance audit in accordance with generally accepted government auditing
Office of the District Attorney - Cash Handling – 22/23-4 September 2023
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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.)
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{End of Report}
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