Accounts Receivable Process Port Everglades Department

Transcription

1 Accounts Receivable Process Port Everglades Department October 22, 2007 Report No Evan A. Lukic, CPA County Auditor

2 Executive Summary This report presents the results of our evaluation of the processes, policies and procedures of the Port Everglades Department (Port) to ensure efficient and effective recording, monitoring, and collection of accounts receivable. Our objectives were to evaluate the internal controls over Port accounts receivable processing and the effectiveness of collection efforts. To accomplish our objectives, we conducted interviews, tested selected transaction attributes and reviewed source documentation and system reports. We found that staff actively monitor and pursue delinquent accounts resulting in a collection rate of over 99%. We noted the following instances of procedural and system deficiencies: inactive receivables that were not submitted to the Board, internal control deficiencies involving two processes needing segregation of duties, and a need for an interface between the revenue control (billing) system and the accounting system. Management has indicated the internal control deficiencies were immediately corrected following our review. Purpose and Scope The objectives of this review were to evaluate: internal controls over accounts receivables, and the effectiveness of delinquent account collection efforts. The scope of our review was fiscal year Methodology To accomplish our objectives, we: interviewed Port staff, reviewed receivable process documentation, tested selected controls and attributes, analyzed billing and collection records, and reviewed documentation of collection efforts. Background Revenue Types Port operating revenues consist of vessel and cargo service charges (dockage, wharfage, crane and other), property rental, parking, and other miscellaneous fees. 1

3 Exhibit 1: 2006 Operating Revenues (Millions) Other, (5.8) Parking, (7.3) Property Rental, (10.5) Vessel and Cargo Services, 78.7 Source: County Auditor Analysis Vessel and Cargo Services Charges Wharfage, (47.1) Dockage, (26.6) Crane, (5.3) Other, (5.0) Wharfage fees (fees assessed for unloading passengers or cargo from a vessel) of $47.1 million accounted for 44% of operating revenues in fiscal year They include petroleum, cargo, and passenger wharfage fees. Dockage fees of $26.6 million accounted for 25% of operating revenues in fiscal year They include harbormaster 1, dock usage, line handler, water, and public works fees. Crane rental fees of $5.3 million accounted for 5% of operating revenues in fiscal year Other miscellaneous vessel and cargo services fees of $5.0 million accounted for 5% of operating revenues in fiscal year They include storage, port security, and cruise terminal security reimbursement fees. Property Rental, Parking, and Other Miscellaneous Fees Property rental fees of $10.5 million, parking fees of $7.3 million, and other miscellaneous fees of $5.8 million accounted for 10%, 7%, and 5% of operating revenues in fiscal year 2006, respectively. Billing The Port utilizes a revenue control software program to track and bill most revenues. The program is referred to as the Klein Revenue Control System (Klein). On a monthly basis, total revenues billed in Klein are recorded into the accounting system. Parking and certain miscellaneous fees (business permit, identification badge, vehicle citation, and public safety permit/inspection fees) are charged and collected by third parties (parking operator or other government agencies) and recorded directly into the accounting system. Billing Dockage, Crane, and Other Vessel and Cargo Service Fees The Port harbormaster monitors vessel activity within the Port. Each time a vessel enters or exits the Port, the harbormaster updates Klein with the vessel s arrival and identification information. Port staff also updated the system each time they provide a service to a vessel. Klein automatically applies applicable fees pertaining to these activities (dockage, crane, and other miscellaneous fees) and calculates total charges. On a daily basis, the Port Billing section reviews the charges and prints invoice batches from Klein for any ship that has exited the Port. Billing Wharfage Fees 1 The harbormaster oversees and authorizes vessel entry into the Port. 2

4 Ships are required to submit their cargo and passenger counts within five business days of exiting the Port. The Port Billing section selectively audits the completeness and accuracy of the counts. On a daily basis, the Port Billing section enters the count information into Klein. Klein automatically applies applicable fees pertaining to these counts and calculates total charges and creates invoices. On a daily basis, the Port Billing section prints invoice batches from Klein. Billing Property Rental Fees The Port Business Administration section manages all lease agreements utilizing a rent module of Klein. The Port Billing section electronically retrieves the rent roll on a monthly basis and prints invoice batches from Klein. Billing Miscellaneous Fees The Port Billing section enters miscellaneous fees (those which are not charged and collected by third parties and recorded directly into the accounting system - see above) into Klein from various sources. For example, Identification Badge Fees: The Broward Sheriff s Office submits a report of issued identification badges to be billed to the respective companies. Utility Reimbursement Fees: The Port Billing section processes bills for utility meters with accounts owned by the Port but which are shared with or among lessees. These charges are allocated among various tenants as indicated by the Business Administration Division on a monthly basis. Public Works Fees: The Port Public Works section submits reports of provided services. Sanitary Waste Removal Fees: Franchisees submit reports of waste quantities removed. Late rent penalties and finance charges are also a component of miscellaneous fees. Klein automatically applies these charges. Managing Accounts Receivable (A/R) Reporting Klein produces a report of delinquent accounts (A/R Aging Report) grouped by customer and age category (ie. current, days, days, etc.). The report is reconciled to the accounting system on a monthly basis, reviewed by the Port Finance Director, and included in the monthly revenue report distributed to various Port directors. The A/R Aging Report is also distributed to the Broward County Accounting Division on a quarterly basis. Monitoring and Enforcement Procedures Payments are due in 30 or 60 days of billing depending on a customer s contract. Klein automatically applies finance charges of 1.5% per month to delinquent bills plus a 10% penalty to late rent payments. Collection of past due invoices are pursued by the Port Billing Section A/R Specialist via telephone and s. If the A/R specialist is unsuccessful, the account is escalated to the County Attorney who mails and faxes a letter requesting payment within five days. An enforcement hearing conducted by Port staff is scheduled if payment is not received. The customer s payment terms are then 3

5 reviewed and changed if necessary and legal action is pursued. Uncollectible Accounts Uncollectible accounts are transferred from Klein to a separate list of fully reserved accounts ( Fully Reserved Accounts Receivable Detail ) and recorded in the accounting system as an inactive receivable titled A/R WrittenOff. Findings and Recommendations Finding 1 - Staff actively monitor and pursue delinquent accounts. Klein produces a report (A/R Aging Report) of delinquent accounts grouped by customer and age category (ie. current, days, days, etc.). We found that this summary is: routinely monitored by an accounts receivable specialist who pursues delinquent accounts and documents collection efforts, and reconciled to the accounting system on a monthly basis, reviewed by the Port Finance Director, and included in a monthly revenue report distributed to various Port directors. Based on a review of delinquent account summaries, it appears that over 99% of amounts billed during fiscal year 2006 were collected by December 31, The uncollected accounts include 13 accounts totaling $28,171 classified as active (collectible) and 1 account totaling $29,140 which has been classified as an inactive (uncollectible) account. Finding 2 - Inactive (uncollectible) receivables were not submitted to the Board in accordance with County policy. County policy 2 requires accounts receivable to be submitted to Board prior to re-classification to inactive (uncollectible) status and again after a period of four (4) years prior to removal from the accounting records. Uncollectible accounts are transferred from Klein to a separate list of fully reserved accounts ( Fully Reserved Accounts Receivable Detail ) and recorded in the accounting system as a receivable titled A/R WrittenOff. This list represents a reclassification of receivables to inactive status 2. As of September 30, 2006, approximately $1.7 million representing 42 accounts were classified in Klein as A/R WrittenOff. Management indicated the 42 accounts represent all written off accounts during fiscal year 2006 and all prior years. We noted that 36 of 42 accounts (totaling approximately $898,000 of the $1,746,000) were outstanding four (4) or more years. In accordance with County policy these accounts should be submitted to the Board for removal from the accounting records. (See Appendix A) Of the remaining 6 accounts (totaling approximately $849,000) that were outstanding less than four (4) years, we noted that 3 (totaling approximately $217,000) were transferred to the inactive list without Board approval. (See Appendix B) 2 Broward County Administrative Code, Volume 6 Accounting, Payroll, and Tangible Property Procedures, Part 8 General Ledger, Section 5 Receivables 4

6 Finding 3 The Port lacked internal control over the reconciliation of accounts, recording of cash receipts and authorization of credit memos. Two key elements for sound internal control are adequate segregation of incompatible duties and proper authorization of transactions. Segregation of Incompatible Duties Adequate segregation of incompatible duties prevents an individual s ability to perpetrate and conceal irregularities while authorization of transactions ensures management s directives are carried out. The following staff functions represent a lack of adequate segregation of duties: irregularities, management has indicated that they were immediately corrected following our review. Finding 4 - The Klein revenue control system does not interface with the accounting system. On a monthly basis, invoice transactions from Klein are summarized and recorded into the accounting system. Because Klein does not interface with the accounting system, staff must print a multi-page Klein report each month summarizing the invoice transactions and manually enter them into the accounting system. This creates an additional level of staffing effort and potential for data entry errors. The same individual who reconciles the accounts receivable system to the accounting system (a monitoring activity) also has the ability to record cash receipt transactions. The same individual records and authorizes invoice and credit memo batches within the system. Authorization of Credit Memos The Port does not have written policies and procedures over the authorization of credit memos. Credit memos are applied to customer accounts to correct or adjust amounts owed. The Port does not have written policies and procedures over the approval of credit memos. As a result, unauthorized or inappropriate credit adjustments to customer accounts could be processed. While these deficiencies could result in a failure to prevent or detect errors and 5

7 Recommendations We recommend the Board of County Commissioners direct the County Administrator to: 1) Submit uncollectible accounts outstanding for less than four years to the Board for approval of reclassification to inactive status. 2) Submit uncollectible accounts outstanding four or more years to the Board for removal from the accounting records. 3) Reassign staff functions and/or system access to segregate incompatible duties regarding: a. Reconciliation of the accounts receivable system to the accounting system and recording cash receipt transactions. b. Recording and authorizing invoice and credit memo batches 4) Promulgate written policies and procedures over the authorization of credit memos. 5) Investigate the feasibility of interfacing the accounts receivable system with the accounting system. 6

8 Appendix A BROWARD COUNTY PORT EVERGLADES DEPARTMENT FULLY RESERVED ACCOUNTS RECEIVABLE DETAIL OUTSTANDING BALANCES OLDER THAN 4 YEARS TO BE REMOVED FROM RECORDS AT FISCAL YEAR END 09/30/06 (SORTED IN DESCENDING DOLLAR VALUE) CUSTOMER BALANCE MOST RECENT INVOICE DATE BOARD NOTIFIED COMMENTS MAC MILLAN BLOEDEL BLDG MATLS $ 223, /03/97 N This was a former tenant billed for ad valorem taxes for PORT RECYCLING 214, /31/92 Y 9/16/97 Board was advised that the courts had awarded the county $358, in this case. HALLMARK INTERMODAL, INC 120, /22/96 Y 5/23/00 Board authorized the County to pay a US Customs penalty of $56, HALLMARK INTERMODAL, INC 73, /27/98 Y 9/30/97 Board authorized County Attorney to go collect Hallmark Indemnity bond. STRACHAN SHIPPING CO 72, /25/00 N This amount is related to P2 crane damage that was not paid by the customer's insurance company plus interest. PJC OF S FLORIDA 69, /31/92 N Debt carried over from Port Everglades Authority. SPECIALTY RESTAURANTS CORP 31, /25/96 Y Board approved the termination of lease agreement with Port Everglades Rest. and Specialty Restaurants as Guarantor (Agenda Item 42, 8/20/02). Board approved motion 4/12/05 approve settlement amount of $2,440,000 (Agenda Item #69, 4/12/05). Settlement did not extinguish rent claims. Amount related to 1990 property tax billed to tenant. ROBIN SHIP AGENCY SERVICES, INC 23, /25/02 Y County Attorney's office authorized to take action necessary to enforce payment by Robin Ship Agency Services, Inc. (Agenda Item #41, 3/05/02). $160, This is the remaining balance. FEDERAL AIRPORT SVC TRANS, INC 16, /25/96 Y Board authorized County Attorney to initiate collection plus attorneys fees (Agenda Item 69, 6/25/96). VIALOMA TRADING CORP 13, /03/97 N This was a former tenant billed for ad valorem taxes TRANSCOMM INT'L 7, /26/97 N OWNER 5, /22/98 N Balances transferred from Port Everglades Authority SEL MADURO 4, /26/97 N MARINO TRUCKING 4, /21/02 N INTERAMERICANA 3, /27/98 Y Board approved lease termination (09/08/98 Item 34). ENVIRONMENTAL SCIENCES CORP 2, /03/97 N This was a former tenant billed for ad valorem taxes CLEVELAND CLINIC FLORIDA 1, /27/98 N OMEGA ELECTRONICS INC 1, /25/96 N USS HOGA YT-146 ASSOC 1, /25/01 N RAPID AIR & OCEAN INC 1, /16/01 Y Board approved a 3 year settlement plan 8/11/98 for quarterly payments totalling $3, This was a former tenant billed for ad valorem taxes that entered into a 3 year quarterly payment agreement. MARITIME MGMT INTL INC 1, /25/99 N JOSEPH LAND CONTAINER CORP /03/97 N This was a former tenant billed for ad valorem taxes MILITARY SEALIFT COMMAND /27/99 N OWENS CORNING /18/00 N Paid in full Dec. 15, 2006 S&S STORAGE /26/97 N LOBELL BERGMAN PRODUCTIONS /22/96 N SEA STAR EXPRESS INC /03/97 N This was a former tenant billed for ad valorem taxes GLENBROOK MGMT CO INC /11/97 N S&B OIL /09/98 N AMERICAN CANCER SOCIETY /28/97 N ETHANOL CORP /04/94 N GENERAL ELECTRIC CAPITAL /25/96 N BLACK FIN YACHT CORP /11/97 N H. WAY CORP /21/97 N EXXON COMPANY USA /06/97 N OCEANIC LINE INTER. INC /24/98 N Total Older Than 4 Years $ 898, Percent of Fully Reserved General Ledger Account Balance: 51.43% Fully Reserved GL Account Balance: 1,746, $ Source: Port Everglades Department 7

9 Appendix B BROWARD COUNTY PORT EVERGLADES DEPARTMENT FULLY RESERVED ACCOUNTS RECEIVABLE DETAIL OUTSTANDING BALANCES LESS THAN 4 YEARS OLD AT FISCAL YEAR END 09/30/06 (SORTED IN DESCENDING DOLLAR VALUE) CUSTOMER BALANCE MOST RECENT INVOICE DATE BOARD NOTIFIED COMMENTS TECMARINE LINES, INC $ 319, /23/03 Y Board approved termination of lease (Agenda Item # 41, 2/25/03). BRC CONSTRUCTION CO. ( final judgement) 269, /30/06 Y 6/29/04 Board authorized to declare breach of contract. 2/21/06 Motion to authorize to collect $207, Item 48C. Payments being collected monthly in accordance with settlement agreement. FLORIDA ENTERTAINMENT, LLC 160, /23/05 N Port filed claim w/ bankruptcy court on 4/27/05 for $197, in minimum wharfage guarantees. MARINE CARGO MGMT, INC 42, /23/03 Y (Agenda Item #30 02/25/03). Board authorized action to terminate franchises and to collect $64, PORT EVERGLADES SALES & LEASING, INC 36, /18/06 N SUNNILAND PIPELINE LINE CO 19, /24/05 N Debtor was a subsidiary of Enron which declared bankruptcy. Total Less Than 4 Years $ 848, Percent of Fully Reserved General Ledger Account Balance: 48.57% Fully Reserved GL Account Balance: 1,746, $ Source: Port Everglades Department 8