Management Response to Audit Findings - Board of Reps



Management Response to Audit Findings

FY 2004 Audit (6/30/04)

|IC04-1. |Finding: |

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| |During the audit, we noted the City did not record all capital assets and in certain instances, assets were recorded |

| |twice. |

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| |Recommendation: |

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| |Fixed assets recorded by the City should be closely monitored in the system to ensure that they are not duplicated and |

| |that City capital assets have been properly entered into the City’s system records. |

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| |Management Response: |

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| |There may have been a few instances where an asset was recorded twice because manual entries were necessary to split the|

| |assets into the proper enterprise fund. The City will continue to review all new capital assets that are added through |

| |the H.T.E. interface to ensure they are not duplicated. Also, manual entries will be carefully scrutinized to ensure |

| |duplicates are not added this way. |

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|IC04-2. |Finding: |

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| |During the audit, we noted that the City does not have an adequate process in place to recognize which expenditures |

| |should be recorded as capital assets, and which assets should be retired. |

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| |Recommendation: |

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| |We recommend the City implement a process to better track Capital projects and recognize when long-term projects become |

| |depreciable assets. The City should implement a process where each invoice is reviewed to identify which items should |

| |be recorded as a fixed asset. The City should also implement a review process of old assets that may be disposed of. |

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| |Management Response: |

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| |The Controller’s Office will work with OPM and the departments to determine when projects are complete and assets are |

| |placed in service. We will also review old assets that should be deleted from the list. Last year, we completed that |

| |process for computer equipment and vehicles. This year, we will review all land and buildings. We will also look at |

| |the older equipment and machinery to determine if they are still in use. |

|IC04-3. |Finding: |

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| |During the audit, we noted that the City did not complete their main disbursement account monthly bank reconciliations |

| |on a timely basis. |

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| |Recommendation: |

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| |We recommend that all bank reconciliations should be completed once the bank statements are received, and are reviewed |

| |by management. |

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| |Management Response: |

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| |We have resolved one technical issue (downloading and uploading of cleared check activity into the H.T.E. system) that |

| |caused delays in the bank reconciliation. Wachovia Bank has changed their on-line reporting capabilities and we are |

| |working with the technical support team to get the reports we need. Once this technical issue is resolved, we will post|

| |the Controlled Disbursement Account activity on a weekly basis. Because this account has the bulk of activity, we |

| |expect that this will expedite the monthly reconciliation process. The Treasury Accountant, Controller and Account |

| |Clerk are working together to ensure the reconciliation process is completed timely and make changes to the process if |

| |needed. We have completed the bank reconciliation through November. As soon as we have the banking reports we need, we|

| |expect to quickly bring the rest of the months up to date by the end of March. Then going forward, they will be |

| |completed within the timeline outlined in the accounting manual (within 4 weeks of the end of the month). |

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|IC04-4. |Finding: |

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| |While performing our audit procedures, it was noted that not all transactions are recorded on the City’s HTE system. |

| |Items noted were the WPCA Revenue Bond activity, and general obligation bonds. |

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| |Recommendation: |

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| |We recommend all transactions be recorded with adequate documentation and support. |

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| |Management Response: |

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| |All transactions/activity is being recorded on the H.T.E. system on a monthly basis and all are supported by adequate |

| |documentation. |

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Management Response to Audit Observations

FY 2004 Audit (6/30/04)

|Observation #1: |

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|While performing our audit procedures, it was noted that the City does not maintain copies of invoices for false fire alarms sent to the |

|customer. The only support maintained is the billing database. |

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|Recommendation: |

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|The City should maintain copies of invoices sent to the customer for false fire alarms in order to properly record and collect monies |

|outstanding. |

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|Management Response: |

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|The City does not agree with this recommendation. The City sends out approximately 600 alarm bills each month. We have the ability to view |

|on-line and reprint invoices (or customer history) at any time. The city also has a detailed receivable report as well as collection reports|

|that support monies billed and collected. We don’t believe there is added value in keeping copies of invoices. |

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|Observation #2: |

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|During testing at the Smith House, it was noted that there were significant receivable balances older than a year. |

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|Recommendation: |

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|The Smith House accounts receivable balance needs to be reviewed and analyzed regularly to ensure that balances that are not collectible are |

|written-off. |

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|Management Response: |

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|The City agrees that there should be a process in place to regularly review receivable balances and write off those that are un-collectible. |

|The contract with the new management company, Premier Healthcare Resources, Inc., contains language that specifically addresses their |

|responsibility in this area. The City will work with them to set up a procedure to periodically review the aged receivables and write off |

|those we believe we cannot collect. |

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|Observation #3: |

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|While performing our audit procedures, we noted that the City’s former Director of Administration was not properly removed as a check signer |

|and replaced with the new Director of Administration. |

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|Recommendation: |

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|We recommend the City change the check signer immediately upon the dismissal of a former employee. The City should verify with the bank that|

|the bank’s check signer records have been properly updated. |

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|Management Response: |

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|The bank records have been corrected. We believe the paperwork was submitted last year but was mishandled. In the future, we will ensure |

|that proper check signers are reflected on all city accounts. |

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|Observation #4: |

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|During our testing of the student activity funds, it was noted that some invoices could not be located. |

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|Recommendation: |

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|We recommend that each school follow the policies regarding record retention of documentation supporting expenditures. All supporting |

|documentation for both receipts and disbursements needs to be maintained to ensure proper recording and approval of transactions. |

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|Management Response: |

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|The Board of Education agrees with this recommendation. The building principals had previously been given notice (in a memo dated August 31,|

|2003) that all back-up documentation is to be retained for their student activity accounts. A second reminder will be sent to them |

|confirming the need to retain paid bills for three years after the audit and check registers for six years after the audit. As an additional|

|control, the Board of Education will begin reviewing building transactions on a quarterly basis to be assured that all back-up documentation |

|is being kept and that proper approvals are given to each transaction. |

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Observation #5:

During a review of the Board of Education and the City’s policies and procedures regarding medical benefits, the following was noted:

|1. |Once the original insurance forms are completed by the employee, there are minimal procedures in place to ensure the information |

| |included in the forms remains current and accurate. |

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|2. |There are no written policies regarding the need for employees to notify the City when spouses or dependents are no longer eligible|

| |for benefits. This requirement is only stated verbally during the employee’s orientation. |

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|3. |The Board of Education benefits administrator only reviews the third party administrator’s data on an annual basis even though |

| |quarterly and monthly statements are provided. |

|Recommendation: |

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|We recommend both the City and Board of Education revisit their medical benefits policies and procedures to ensure only the proper |

|employees and dependents are receiving benefits. Also that the BOE reviews the third party administrator’s data on a quarterly basis, at a|

|minimum. |

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|Management Response from the Board of Education: |

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|Currently, the Board of Education Benefits Administrator is reviewing Anthem Blue Cross reports monthly to ensure that the BOE is covering |

|everyone eligible to receive insurance benefits and that no coverage is provided to anyone ineligible for the program. The enrollment for |

|our health insurance is compared to names and identification numbers that are provided on the Anthem Blue Cross billing. Any exceptions |

|that are noted are followed up with the vendor as soon as possible. On an annual basis, dependent children between the ages of 19 and 25 |

|are being verified by Anthem Blue Cross to determine if they are full-time students and still eligible for benefits. Since we have moved |

|from a self-insured plan, the accuracy of enrollment has increased since all insured were recently verified during the conversion process. |

|Dental plan claims from Cigna and prescription drug claims through Medco will be verified against our current enrollment on a quarterly |

|basis by the Benefits Administrator. |

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|Management Response from the City: |

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|The City has drafted a memorandum reminding all employees of the need to keep us informed of changes in their personal status as it |

|pertains to address changes, marriage, divorce, etc., and have issued a very strong directive that any failure to do so may result in |

|failure to provide coverage or we will seek direct reimbursement of any costs expended on their behalf that should not have been. We have |

|also implemented a “random” selection process whereby we will select a group of employees and perform an internal audit of all information,|

|enrollments, etc. In addition, we regularly review each enrolled dependent for adherence to the age limit requirement consistent with each|

|union contract. Additionally, each vendor is aware of this requirement and has the age limit programmed into their systems to be flagged |

|whenever necessary. |

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|Observation #6: |

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|The City should adopt a pension plans policy to follow when paying administrative costs and other expenditures. |

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|Recommendation: |

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|We recommend the policy for expenditures be written and implemented to improve internal controls. The policy should include uniform |

|policies for all plans which limits expenses on meals and entertainment, administrative costs, and other expenses. There should also be |

|policies for issuing checks and approvals for expenditures. The City does not currently have in place a pension plans policy to follow |

|when paying administrative costs and other expenditures. |

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|Management Response: |

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|The City agrees with this recommendation. To date, two of the pension funds (Classified and Custodians) have adopted the City’s Travel |

|Policy. The City will prepare a letter to each pension board recommending that they adopt selected portions of the City’s accounting |

|policies that relate to administrative costs and other expenditures and policies for issuing checks and approval of expenditures. |

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