A REPORT FROM THE OFFICE OF INTERNAL AUDIT

Transcription

1 A REPORT FROM THE OFFICE OF INTERNAL AUDIT PRESENTED TO THE CITY COUNCIL CITY OF BOISE, IDAHO AUDIT / TASK: AUDIT CLIENT: #16-08, Heritage Fund / Perpetual Care Fund Parks & Recreation REPORT DATE: October 17, 2016 AUDIT GRADE: Satisfactory REPORT AUTHORS: APPROVED FOR RELEASE: Paige Holstine, Audit Intern Steven Rehn CIA, CFSA Steven Rehn CIA, CFSA Director of Internal Audit AUTHORITY: Boise City Code, FY2016 Work Plan

2 TASK #16-08, Heritage Fund / Perpetual Care DATE OF ENGAGEMENT: June 8, 2016 INTRODUCTION The Heritage Fund and Perpetual Care Fund are both under the management of the Department of Parks & Recreation. Previously, Internal Audit reviewed these two funds at a summary level during an audit of Parks Resources in fiscal year The current year s review was construed as an in-depth look at receipts, expenditures, and operations of the two funds. Heritage Fund The Boise City Parks & Recreation Heritage Fund was established February 1980 to allow individuals, organizations and / or corporations to donate funds for public purposes such as a park project, capital improvements within parks, scholarships for Parks program participants, memorials, event sponsorships, or recreational programs that benefit the Boise community overall. These funds are held separate from the City of Boise s capital and general fund accounts. Donations are tracked based on the purpose for which they were designated. Parks staff pre-plan projects involving these funds in order to ensure the funds are used as originally stipulated. Perpetual Care The City of Boise owns, operates, and maintains three cemeteries: Morris Hill, Pioneer, and Fort Boise Military Reserve. The City provides perpetual care to these properties which consists of maintaining neat and attractive grounds, watering and mowing lawns, trimming around the memorials, pruning trees and shrubs situated within the cemeteries; cleanup and removal of trash, leaves, withered flowers, etc ; and preservation of grade at the burial sites. In order to provide this care, the City created a Perpetual Care Fund to which sixty percent of all internment-related revenues are deposited and then invested. All disbursements and expenditures from the Fund are limited to the net income that is derived from the investments. Only the income can be utilized for care; the principal cannot be used. 2

3 SCOPE AND METHODOLOGIES The overall purpose of the audit was to gain a reasonable degree of assurance that the control environments related to the Heritage and Perpetual Care Funds within the City are adequate. Those should ensure that appropriate accounting controls are in place, that resources are properly safeguarded, that goals and objectives are being met, and that activities comply with applicable policy, law, and/or regulation. In addition, Internal Audit defined the following specific objectives for each of the funds: Heritage Fund To ensure that Heritage Fund donations are appropriately tracked, managed, and utilized as intended by the donor. Determine that investments held by the fund are allocated appropriately relative to yields and maturities. To ensure that residual balances are utilized according to program parameters. Perpetual Care Fund To ensure the proper allocation of revenues by source to the fund. Ensure that reporting required by Code is occurring as stipulated. Determine that the use of Perpetual Care Funds is compliant with City Code. Determine that miscellaneous fees are properly booked to the Fund. Internal Audit established the scope of review to include all Heritage and Perpetual Care Fund activities that occurred within the fiscal periods beginning October 1, 2013 and ending September 30, A combination of interviews, observation, and detailed attribute testing were utilized in order to accomplish the defined objectives. The methods employed and the evidentiary materials developed were deemed to be adequate to support the conclusions contained within this report. 3

4 EVALUATION AND COMMENTS Based on the work performed, the level of administrative effort and the oversight efforts surrounding the Heritage and Perpetual Care Funds result in a Satisfactory level of performance. (Refer to Appendix A for additional details concerning Internal Audit s existing grading scale.) Heritage Fund During our evaluation of the Heritage Fund, we tested a sample of transactions representing both receipts / donations, and expenditures. All transactions appeared to be reasonable within the context of their intended purposes and / or associated projects; all reflected appropriate approvals as well. Audit also reviewed investments that were held by the fund for both yield and maturity. During our fieldwork no formal audit findings were issued. The control environment appears adequate. Perpetual Care Fund Internal Audit tested cemetery maintenance transactions to ensure those expenditures complied with Boise City Code definitions of care and maintenance. All transactions in the sample we tested were deemed reasonable. While reviewing other aspects of the Perpetual Care Fund, we noted two instances in which strict compliance with existing Boise City Code does not appear to have been achieved. The first falls under section and involves how on-going revenues from the sales of plots have been allocated. Code stipulates 40% is to be allocated to support on-going maintenance. In reality, during the past two fiscal years only 27% and 32%, respectively, were allocated to that purpose. Documentation suggests this issue relates to Policy Adjustments that were pursued during a previous administration; dating back to at least Fiscal Year The practice followed since that time resulted in a minimum of $50,000 being retained each year in Perpetual Care. The Perpetual Care Fund likely benefited as a result of these actions; this would effectively shift a larger portion of cemetery maintenance costs to the General Fund during those years where revenues / receipts were low. The second instance is from section and involves reporting by Treasury. According to this section of City Code, Treasury reports should include the securities acquired and held as well as a statement of income and expenditures incurred for perpetual care. Internal Audit was unable to locate these disclosures in the reports. 4

5 Due to impending changes in the regulatory environment governing Perpetual Care (see the Conclusion section below), we discussed the two issues we noted with management, but left any follow-up to their discretion. CONCLUSION Overall, Parks & Recreation has in place an effective system to track and manage all Heritage donations and expenditures. The results of our review indicate that donations are being spent as intended by the donors. Relative to Perpetual Care, this Fund doesn t appear to function as originally intended. The earnings from the fund, along with a portion of the receipts for the sale of internment plots and licenses, likely were anticipated to be adequate to provide for a significant portion of cemetery care. Currently they fall short of that goal. These funding sources represented slightly less than 25% of the maintenance costs incurred during FY 15. Steps are underway to dissolve the Perpetual Care Fund, and to fold that activity into the General Fund where it has effectively been lodged, from a financial standpoint, for some time. This will involve the addition of a new section to City Code, Chapter An Ordinance to affect that change was in the process of adoption as this report was being drafted. Dissolution of the fund as it currently exists likely will not change the level of care and maintenance directed to the cemeteries; it will, however, result in a more efficient administrative process. Internal Audit would like to recognize the assistance provided by Parks & Recreation s management team as this review was being completed. MANAGEMENT PARTICIPANTS Karen Bledsoe, Chief Administrative Officer / Parks & Recreation Lynette Gould, Finance Manager / Parks & Recreation 5

6 APPENDIX A Evaluation and Grading of Audits Each audit will be evaluated or graded, and will receive one of the three following ratings. Grades will be assigned based on the perceived best fit. Thus, not all attributes associated with an assigned grade may be present within a given Department or Division. Satisfactory No significant weaknesses or operational issues were noted during the audit. If any issues were noted, they did not materially detract from the business unit s ability to deliver services and / or to accomplish defined mission, goals, and objectives. Overall, systems of internal control are effective, and management oversight is adequate and effective. Needs Improvement Weaknesses or issues detrimental to operational efficiency or effectiveness existed within the audited area, and were encountered frequently enough to lose the appearance of isolated. Issues noted were strongly suggestive of an impaired ability to provide services at needed levels, or to accomplish mission, goals, and objectives successfully. Internal control mechanisms may not be universally in place, implemented, or actively observed. Management oversight is weak. Unsatisfactory Material or significant issues were noted within the operations under review. Issues posed risks that were mission-fatal; the business unit could not successfully deliver services in an acceptable fashion. Management failed to implement appropriate internal control mechanisms. Management oversight is ineffective, absent, or willfully avoided. 6