Tradewinds Park Cash Handling Process

Transcription

1 Exhibit 1 Tradewinds Park Cash Handling Process July 8, 2014 Report No Office of the County Auditor Evan A. Lukic, CPA County Auditor

2 Table of Contents Executive Summary... 1 Methodology... 1 Background... 2 Findings... 5 Recommendations... 7

3 Executive Summary This report presents the results of our review of cash handling processes and controls at Tradewinds Park. Our objectives were to assess the effectiveness of controls over cash receipts and to determine whether revenues are processed in accordance with County policies and procedures. We reviewed a sample of FY 2013 cash receipts documentation and conducted a surprise cash count during a visit in April During our review we found: Cash handling processes lacked adequate preventive 1 and detective 2 controls, which could result in theft of County funds. o Account Clerk duties lack proper segregation, o Access to cash was not appropriately restricted or monitored, o Procedures for handling cash in the safe were not followed, and o Lack of signage instructing customers to obtain a receipt, which requires cashiers to record sales in the cash register. Controls were deficient for pass inventory valued at $12,200. On page 7 of this report we present recommendations intended to correct the above deficiencies. Methodology To accomplish our objectives, we: Reviewed: o The Broward County Internal Control Handbook, Volume 8, Cash Handling and Depositing Procedures (ICH); o County Administrator Procedure No. AAF0015, Self-Auditing Program for Cash Handling; o Broward County Administrative Code, Chapter to 37.58, Broward County Parks System Fee Schedule; o State of Florida s General Records Schedule GS1-SL for State and Local Government Agencies; o Parks and Recreation Division Numbered Procedures Memorandum (NPM) PAC 83, Internal Procedures for Cash Handling and NPM PAC 85, Internal Procedures for Administration Accounting Section Receipt Processing; o RecTrac Accounting and Operations Manuals; o Bank Statements; o Revenues recorded in Advantage; and o A sample of 25 daily cash receipt reports and 25 safe activity reports. 1 Preventive Controls are designed to keep errors or irregularities from occurring 2 Detective controls are designed to detect errors or irregularities that have occurred 1

4 Interviewed staff of the Parks and Recreation Division and Records, Taxes and Treasury Division; Observed transactions processed at the Tradewinds Park office, and Evaluated the park s internal control environment, including security and access to the safe and cash registers. Background Tradewinds Park opened in 1977 and is the County s second largest regional park, covering 627 acres. The Park offers a variety of amenities including an athletic complex, 3 horse stables providing guided trail rides, an educational farm, a general store and Butterfly World. Entrance to the park is free on weekdays and cost $1.50 per person on weekends and holidays. Fees for Butterfly World and the steam train rides are collected by contracted vendors and fees for use of other park amenities are collected by County staff. Park Revenues Tradewinds is the fourth highest revenue producing park in the County s park system, with annual revenues 4 averaging approximately $804,000 during the five years ended September 30, Annual Park revenues for each of the five fiscal years ended September 30, 2013 are displayed in Exhibit 1 below. Exhibit 1 Revenues by Fiscal Year - Tradewinds Park (in thousands) Source: Advantage Financial System FY 2013 revenues for Tradewinds Park totaled $893,000. This includes $241,000 from gate receipts and sale of park passports, $226,000 from classes and athletic activities, $192,000 from shelter/tent rentals and special events, $143,000 from stables, and $91,000 from other income including rental income (Butterfly World). 3 Athletic activities include soccer, softball and disc golf 4 Revenues exclude sales tax 2

5 Exhibit 2 Tradewinds Park FY 2013 Revenue Percentages Contract Class/ Athletic League 25% Shelter/Tent/ Special Events 22% Other 10% Butterfly World 2% Gate Receipts/Park Passport 27% Stables - Trail Rides 16% Other (Note 1) 8% Source: Advantage Financial Information System Note 1: Includes food and other income items Daily Cash Handling Process The daily cash handling process is summarized below. Tradewinds has cash points located at the north and south entrances to the Park, the General Store, and Park Office. Each morning 5 the Park Manager opens the safe, assigns each cashier to a cash point and provides them with change funds 6 for use at the register. Cash Register Transactions All cash points are equipped with a cash register and connected to RecTrac, the County s point of sale system. RecTrac is a comprehensive computer software package used to record sales, manage reservations, schedule events and track park attendance. Fees for amenities including facilities rental, horse-back riding, and tour of the educational farm, are approved by the Board of County Commissioners (Board) and preprogrammed into the RecTrac software. At the cash points, Cashiers log into RecTrac using their username and unique password 7 and load their change fund into the register. Cashiers enter customer reservations and process sales transactions through RecTrac, accept payments in the form of cash, check or credit card, and provide customers with a receipt. Refunds, 5 This process is repeated for relief Cashiers that provide lunch breaks 6 The change fund consists of small denominations and coins of $200 7 Cashiers are precluded from sharing their passwords with others 3

6 returns or over rings cannot be performed by Cashiers and require a Manager s authorization and password. Reconciliation and Deposit At the end of the shift, 8 each Cashier logs out of RecTrac and takes their cash receipts to the Park Office. In the presence of the Account Clerk, the Cashiers count the cash and checks, record the count on a Cash Balancing Worksheet (CBW) and compare the total against a report of the sales activity generated by RecTrac. The CBW shows the result of the count and any variance between sales and cash on hand. Both the Cashiers and Account Clerk then sign the CBW evidencing agreement with the count and reconciliation. At the end of the day the Clerk combines and counts the entire day s cash receipts in the presence of a Park Manager, records the day s total cash receipts on a consolidated CBW, compares it against the park-wide daily sales report generated by RecTrac, and prepares a deposit slip. During the softball season when the food concession is open until 8:00 p.m. Tuesdays, Wednesdays, and Thursdays, these end of day procedures are performed the following morning. The total cash receipts and the deposit slip are placed into a bank deposit bag and stored in the safe. The consolidated CBW and a copy of the deposit ticket are reviewed and signed by the Park Manager who observes the count. The deposit bag is picked up by an armored courier service and taken to the bank. Credit card transactions for all parks are combined by RecTrac and uploaded to a Processing Firm nightly. The following business day, Parks Administration Office staff enters the total credit card amount into an electronic spreadsheet and perform daily follow-up with the bank until the funds are received in the County s bank account. After receipt of the funds, a Parks Division Account Clerk electronically exports the credit card amount via RecTrac into Advantage, the County s accounting system. Internal Controls Internal controls are the policies and procedures that organizations implement to protect its assets, ensure its accounting data is correct and promote an atmosphere of compliance among its employees. There are three main types of internal controls: preventive, detective and corrective. Preventive controls are designed to keep errors or irregularities from occurring in the first place, Detective controls are designed to detect errors or irregularities that have occurred, and Corrective 9 controls are designed to correct errors or irregularities that have been detected. 8 This process is also performed at the end of the lunch break by the relief Cashiers 9 This review focused on Preventive and Detective controls 4

7 Establishing and maintaining effective controls in the cash handling process is a prerequisite to ensuring all funds are collected and appropriately recorded. As such, the County has developed procedures for the collection, storage and deposit of revenues. These procedures are documented in the County s Internal Control Handbook (ICH), Volume 8, Cash Handling and Depositing Procedures and Numbered Procedure Memorandum (NPM) developed by Parks Division. FINDINGS Finding 1 Cash handling processes at Tradewinds Park lacked adequate preventive and detective controls, potentially resulting in theft of County funds Preventive controls over cash handling include segregation of duties, supervisory approval of voids and over rings, supervisory review and approval of transactions and having physical control over assets (for example locking money in a safe). Auditing literature 10 describes detective control activities as policies and procedures to identify errors or irregularities after they have occurred. Examples of detective controls over cash handling include surprise cash counts, taking inventory of items held for sale and review and approval of accounting work. Detective controls can also be a deterrent to theft. For instance, if safe custodians know that the safe contents are routinely counted, they may be more likely to be honest. Our review disclosed the following control deficiencies: Duties performed by the Account Clerk lack segregation of duties. An important preventive control is segregation of duties, which requires more than one individual to be responsible for completing a process or have control over more than one phase of a transaction. This safeguard makes it difficult for intentional wrongdoing, because it requires collusion 11 of two or more individuals. Our review disclosed inadequate segregation of duties related to the duties performed by the Clerk. This is problematic because of a potential for the Clerk to take cash from daily receipts and adjust the supporting records to hide the theft. We found the following deficiencies: the Clerk performs daily Cashier closeouts as described on page six, including reconciling cash receipts to the day s sales activity. The Clerk also prepares the deposit slip, the accounting entry 12 to record the revenues in the County s financial system and has security access to perform adjustments to revenues recorded by RecTrac. These are incompatible duties requiring separation. 10 Sawyer s Internal Auditing, The Practice of Modern Internal Auditing, Fifth Edition, Institute of Internal Auditors 11 Collusion occurs when two or more employees collectively circumvent the control procedures 12 The RecTrac point of sale system also automatically exports revenue data to Advantage, the County s financial system. 5

8 Access to cash was not appropriately restricted or monitored. Failure to consistently control and monitor access to cash increases the likelihood of theft and reduces the ability to successfully investigate cash shortages. We found multiple instances of non-compliance with County policy and best practice: o Unique combinations to the main safe, assigned to two Account Clerks, were not deactivated after they transferred from Tradewinds in July 2013 and February The safe is used to store cash receipts and change funds, o The combination to the office safe that contains park passes has not been changed in at least five years, o At the start of the day Cashiers did not count their change funds and pre-numbered passes in the presence of the safe custodian to validate accuracy, contrary to County policy, o Security cameras are not installed inside the gatehouse cash points, and o Camera surveillance recordings are not backed up and are taped over in 5 days. This retention period does not comply with State of Florida s General Records Schedule GS1-SL for State and Local Government Agencies, requiring a 30 day retention period. Lack of signage designed to ensure sales are recorded. There are no signs posted at the Park Office and gate entrance cash points notifying customers that Cashiers must issue a receipt for all transactions. County policy requires agencies to post the highly visible signs at each cash point in an effort to ensure that all sales are properly recorded. This sign notifies the customer of the policy and encourages customers to notify management when Cashiers do not provide receipts. Finding 2 Controls were deficient for passes inventory valued at $12,200 Patrons purchase passes in advance for entrance to the park, its athletic complex and trail ride activities. On April 7, 2014, the inventory of passes totaled $12,200. Securing and accounting for the passes is important because the passes have cash value and failure to control and account for passes could result lost revenues and unauthorized use. We found the pass inventory was not independently counted and reconciled to sales monthly as required by County policy, and redeemed passes were not defaced or voided to prevent unauthorized reuse. 6

9 RECOMMENDATIONS 1. We recommend the Board of County Commissioners direct the County Administrator to take steps to improve control over cash handling at Tradewinds Park including: a. Separating incompatible duties of cash register closeout duties from processing adjustments in RecTrac. b. Controlling access to cash by changing the safe combination at least annually and when employees with access are transferred or terminated. c. Improving management and accounting by: o Requiring cashiers to count their change funds and pre-numbered passes in the presence of the safe custodian, o Voiding or defacing passes immediately upon redemption, o Performing independent monthly counts by someone other than the custodian of the passes, o Reconciling pass inventory to sales monthly as required by the County s Cash Handling Policy, o Posting signs at cash points notifying customers that Cashiers must issue a receipt for all transactions, o Installing cameras at the cash points inside the gatehouses, and o Backing up and retaining camera surveillance recordings at least 30 days. 7