Consulting Engagement

Transcription

1 COAST COMMUNITY COLLEGE DISTRICT Consulting Engagement Petty Cash/Cash Handling at Selected Departments Office of Internal Audit Rachel A. Snell, MPA Internal Audit Director CIA, CFE, CRMA, CICA May 2015 Providing value-added services in an independent, ethical, and collaborative environment

2 Consulting Engagement Petty Cash/Cash Handling at Selected Departments Chancellor Jones, What s Inside Objective, Scope, & Methodology. 1 Background 2 Consulting Engagement Results Attachment A..5 Summary of Results & Action Plan...6 The Office of Internal Audit conducted a Consulting Engagement related to the handling of Petty Cash at the District Office and Coastline Fiscal Services Departments and the District s Board Office. The objectives were to determine whether petty cash amounts were reconciled and supported, and whether the selected departments complied with cash handling policies, procedures, and best practices. This is Part 1 of a two-part series. To accomplish this task, we performed the following work: Reviewed relevant criteria; Interviewed relevant stakeholders; Analyzed relevant documentation; and Assessed risk and controls, including the potential for fraud, waste, and abuse. As a result, we identified opportunities to enhance controls surrounding cash handling. For example, Considering alternative approaches to small emergency purchases; Eliminating or reducing the amounts of petty cash; Performing regular petty cash reconciliations; and Revising policies and procedures. In pursuit of continuous improvement, we made recommendations geared toward addressing the controls identified above. A summary of the results is located on page 6 of the report. If you have any questions, I can be contacted at (714) or rsnell1@mail.cccd.edu. Rachel Snell, Director

3 Objective, Scope, and Methodology As ratified by the Board of Trustees in the Annual Strategic Plan , Internal Audit conducted this engagement. As per Board Policy, Internal Audit follows the International Professional Practices Framework (IPPF) to conduct its activities. For this project, no independence or objectivity issues were noted amongst the team members. Board Policy 6330 requires the Internal Auditor to perform an annual review of purchasing practices. The work performed herein was done so as part of this requirement. This report is Part 1 of a two-series. Part 2, related to change funds, will be distributed upon completion. Objectives: Scope: Determine whether petty cash amounts were reconciled and supported; Determine whether the selected departments complied with policies, procedures, and best practices. Transactional records from Methodology: At the request of the District s Board Office, Internal Audit reviewed petty cash funds within the Board Office. In an effort to gain a better understanding of petty cash uses, fund balances, and cash handling procedures, Internal Audit randomly selected two other departments. This resulted in including petty cash reviews at the District Office and Coastline Fiscal Services Departments. In order to perform our work, we performed the following tasks: Reviewed cash handling policies, procedures, and best practices; Conducted interviews with relevant stakeholders; Reviewed and analyzed relevant documentation; and Assessed risk and controls, including the potential for fraud, waste, and abuse. Team Members: Director, Rachel Snell, MPA, CIA, CRMA, CFE, CICA Team Member, Tracy Young 1

4 Background Internal Audit selected the following departments based upon several factors: Request by department Amount of cash on hand Volume of transactions Customers served Nature of business operations Physical access to cash Below is a summary of the petty cash functions at the departments selected for review. Campus Department Background Information Board Office Funded by the District Foundation, petty cash is used to purchase food and supplies for the Board of Trustees District Fiscal Services Funded by the Cash Revolving Fund, petty cash is used for small emergency purchases such as office supplies as defined by Board Policy Some monies also provided to Human Resources to operate a personal mail service for District Office employees. Coastline Fiscal Services Funded by the Cash Revolving Fund, petty cash is used for small emergency purchases such as office supplies or instructional supplies and materials as defined by Board Policy Funds are also used to make change for students purchasing parking permits. According to the District Foundation Petty Cash procedures, the Board Office is allotted up to $300 cash. Purchases are permitted up to an amount of $50 per transaction. When the fund is $40 or less, the Board Office Manager may request replenishment from the Foundation s Director. According to Coastline s Petty Cash Standard Operating Procedures, petty cash is limited to $1,500 with a maximum purchase limit of $50 per transaction. Replenishment requests are made to the District Office, and a check is sent from the District Office to Coastline s Fiscal Director. Checks are cashed and monies are placed in the safe. Most transactions are on a reimbursement basis, but in some instances, staff is advanced cash and must return change plus receipts. According to District Office Fiscal Staff and Human Resources staff, there are no formal written procedures for how to manage and maintain the fiscal petty cash or the postal monies. Consulting Engagement Results Board Office At the Board Office, transactions were supported with documentation, and monies were secured in a locked safe. Due to infrequent usage, the Board Office did not always perform petty cash reconciliations. For example, Board Member requests for small emergency purchases are infrequent, and petty cash did not need replenishment for almost three years. In addition, the District Foundation 2

5 procedures require petty cash reconciliations twice per month. In general, the cost of personnel effort to reconcile twice per month exceeds the benefit given the limited usage. Best practices recommend monthly reconciliations. In general, the District Foundation procedures do not take into consideration the various purchasing needs of the Board Office. For example, Board Member purchasing needs exceed the parameters associated with petty cash, and last minute purchases in an amount exceeding $50 are more frequent. Currently, staff expends personal funds and obtains reimbursement through the Direct Pay process. Internal Audit noted that the implementation of certain controls could enhance the security of petty cash; however, since the Board Office s Petty Cash fund is $300, the cost to implement the necessary controls exceeds the value of the cash itself. Overall, only two staff members have access to the petty cash, and the likelihood of unauthorized access exists, but is low. The Board Office will consider eliminating its petty cash when a more efficient, alternate purchasing method is available. District Office Fiscal Services Department At the District Office Fiscal Services Department, transactions were supported with documentation, and monies were secured in a locked safe. Purchases are limited to small emergency purchases, consistent with Board policy. We noted a $1.94 overage, but Internal Audit was unable to determine the cause of the overage with existing information. The petty cash fund is $1,000, and due to infrequent usage, reconciliations were not always performed regularly. During the course of work, Internal Audit became aware of potential weakness in cash controls related to Mail Room Services, which is operated by Human Resources. Cash on hand and the postal assets (stamps, UPS mailing labels, and Fed Ex mailing labels) are not always secured, monitored, or tracked. Internal Audit noted that the implementation of certain controls could enhance the security of petty cash; however, since the petty cash fund is $1,000, the cost to implement the necessary controls may exceed the value of the cash itself. Overall, only two staff members have access to the petty cash, and the likelihood of unauthorized access exists, but is low. As for the Mail Room, Human Resources management stated that is in the process of eliminating the practice of offering personal mail services to employees and will enhance security over the postal assets. Coastline Fiscal Services Department At Coastline, petty cash transactions were supported with forms and documentation in accordance with Coastline s standard operating procedure. The petty cash fund is $1,500, and is accessible to all fiscal staff. The room where the safe is located is locked at the end of each day, and cameras monitor the cash storage location. Overall, it appears that Coastline has implemented satisfactory security controls over the handling of petty cash. It was noted that fiscal staff maintain a change drawer outside of petty cash, which is used to replenish any shortages and is funded by any overages identified during the reconciliation process. This is called a 3

6 kitty, and it is not permitted under cash handling best practices. Coastline management stated it has eliminated the kitty. Review of Board Policy and Administrative Procedure 6310 According to Board Policy 6310, the District established petty cash funds in the amount of $5000 at the three campus business offices, and $1000 at the District Administrative Office. These funds allow for small emergency purchases such as instructional and office supplies, mileage, maintenance and transportation supplies, and other similar items. The District Administrative Office is charged with establishing administrative procedures, including establishing of limitations for single expenditures. Currently, the campus business offices do not always maintain $5000, since the dollar amount exceeds the cash need. In accordance with cash handling practices, the campuses only maintain cash at a level which is consistent with business need. In addition, Administrative Procedure 6310 does not have procedures applicable to petty cash funds for small emergency purchases, and it does not establish limitations for single expenditures from these funds. Conclusion Internal Audit noted that different departments may have petty cash in amounts that exceed their need, and exceed their ability to ensure appropriate controls are implemented over petty cash security. In addition, petty cash funds may not be the most efficient and effective purchasing option, given the diverse nature of business at the District Office and its campuses. Lastly, petty cash policies and procedures may not be consistent District-wide, as there is the potential for the District Office, Campuses, Foundations, and other auxiliary organizations to create and implement their own petty cash procedures. Given that departments work in partnership and collaboration with one another, inconsistent policies and procedures could increase confusion and inefficiency for handling petty cash, determining allowable purchases, and processing reimbursements and fund replenishments. 4

7 Attachment A: Petty Cash Locations For safety and security concerns, the physical location and dollar amounts of petty cash was not included for public release. However, those charged with management oversight of petty cash was provided the information for governance purposes. 5

8 Summary of Results and Action Plan Finding 1: Departments may have petty cash in amounts that do not reflect actual purchasing needs, and exceed their ability to ensure appropriate controls are implemented over petty cash security. Recommendation 1: The District Fiscal Directors and Business Officers should collaborate with stakeholders District-wide and a) determine whether certain departments need petty cash or whether petty cash amounts should be reduced; b) ensure appropriate controls are in place including physical security and regular reconciliations; c) determine whether alternate purchasing options may be more efficient and effective, while meeting the purchasing needs of the department; and d) ensure compliance with policies, procedures, and best practices, and develop consistent practices District-wide for handling petty cash. Management Response/Action Plan: We concur with the recommendations. The District Fiscal Directors and Business Officers will work towards creating a uniform petty cash procedure for use District-wide, and will work with stakeholders to evaluate petty cash amounts and purchasing needs. We will also work towards evaluating and possibly revising Board Policy and Administrative Procedure 6310 as needed. Due Date: December 2015 Responsible Party: Andy Dunn, Vice Chancellor Administrative Services Daniella Thompson, District Office Fiscal Director Rachel Kubik, OCC Fiscal Director Helen Rothgeb, CCC Director of Business Services Paul Wisner, GWC Fiscal Director 6