City of New Hope Municipal Court

Transcription

1 Report on the Madison County, Alabama October 1, 2007 through April 30, 2009 Filed: October 30, 2009 Department of Examiners of Public Accounts 50 North Ripley Street, Room 3201 P.O. Box Montgomery, Alabama Website: Ronald L. Jones, Chief Examiner

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5 Table of Contents Page Summary A Contains items pertaining to state and local legal compliance. Schedule of State and Local Compliance and Other Findings D Contains detailed information about findings pertaining to state and local legal compliance and other findings. Exhibit #1 Mayor, City Council Members and Administrative Personnel contains an exhibit that presents the mayor, the city council members and administrative personnel. 1 Madison County

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7 Department of Examiners of Public Accounts SUMMARY Madison County, Alabama October 1, 2007 through April 30, 2009 The receipts, disburses and otherwise accounts for court costs, fines, forfeitures, and other miscellaneous receipts for cases under the Court s jurisdiction. The City of New Hope has a Mayor and five city council members who bear responsibility for decisions that affect city operations. The Honorable Brady Beasley served as Mayor of New Hope for the period November 2004 through November 2008 and the Honorable John Howard will serve as Mayor of New Hope for the period November 2008 through November Exhibit 1 lists the names and addresses of the Mayor and Council members for the examination period October 1, 2007 through April 30, The report encompasses an examination of the for compliance with applicable laws and regulations of the State of Alabama in accordance with the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section This report also includes some matters related to the operations of the City of New Hope. Many instances of noncompliance with state and local laws and regulations and other matters were found during the examination as shown on the Schedule of State and Local Compliance and Other Findings and they are summarized below. CURRENT FINDINGS relates to deficiencies in internal controls in Municipal Court indicates that deposits for the Municipal Court were not made intact and on a timely basis indicates that Municipal Court bank accounts were not properly reconciled concerns cash bond records that were not maintained properly A

8 discusses Uniform Traffic Citations that were not always provided to the Magistrate in a timely manner relates to the timeliness and accuracy of reports and remittances for Municipal Court concerns numerous payments that were made from the corrections account in error relates to internal control deficiencies for the City of New Hope concerns the City of New Hope s Policies and Procedures Manual and approval of salary adjustments concerns wages paid to the City Administrator that were not included on her W concerns impound fees and the lack of controls over the payments relates to control over expenditures pertains to bank accounts not being reconciled concerns the numerous transfers from the Gross Revenues Water Account into the General Fund that was not authorized by the Mayor and City Council concerns the amount of cash that should be on hand for water and sewer deposits pertains to deposits and shortages in the Water Department Special Account concerns deposits for the water department that are not being deposited timely and intact pertains to 7-cent gas tax revenue that was transferred to and used for general fund spending concerns a 1099 form not issued. The following officials were invited to an exit conference to discuss the findings and recommendations appearing in this report: Mayor John Howard, Councilmen Dean Manley, Ronald Schrimsher, Billy Jones, Jr., Craig Hill, and David Pritchett. Former Mayor Brad Beasley and former council members Jason Smith and Frita Fears were also invited B

9 The following officials attended the exit conference held at the New Hope City Hall: Mayor John Howard, Councilmen Dean Manley, Ronald Schrimsher, Billy Jones, Jr., Craig Hill, and David Pritchett. City Attorney, Douglas C. Martinson also attended. Former council member, Jason Smith, also attended the exit conference. Also in attendance representing the State of Alabama, Department of Examiners of Public Accounts were: Deborah P. Springer, Examiner and Randall C. O Bannon, Audit Manager C

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11 Schedule of State and Local Compliance and Other Findings D

12 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: The Code of Alabama 1975, Volume 23A, Rules of Alabama Supreme Court, Rule 43 calls for the magistrate or the municipal judge to design a system of internal control over all court records. These procedures should address the employee responsible for cash collections, bank deposits, bank reconcilement, posting the accounting records, and making disbursements from court collections. A good system of internal control also includes procedures to detect and/or prevent errors and or misstatements of financial information whether due to error or fraud in a timely manner by employees in the normal course of performing their assigned functions. Significant deficiencies existed in internal controls for the Municipal Court. The same person was responsible for receiving, recording and depositing cash, and for reconciling the bank statements. The Magistrate or Municipal Judge should design a system of internal control over all court records that includes procedures to eliminate deficiencies in internal control Finding: Minimum requirements prescribed by the Chief Examiner of Public Accounts and the Administrative Office of Courts require deposits of the municipal court to be deposited timely and intact. Deposits for Municipal Court were not made intact and on a timely basis. Deposits should be made intact and on a timely basis in accordance with the requirements set forth by both the Chief Examiner of Public Accounts and the Administrative Office of Courts Finding: A good system of internal control also includes procedures to detect and/or prevent errors and/or misstatements of financial information whether due to error or fraud in a timely manner by employees in the normal course of performing their assigned functions. The system of internal control should include procedures for the reconciling of all bank accounts. The Municipal Court s bank accounts were not properly reconciled. Bank accounts should be properly reconciled and uncleared items on bank reconciliations should be resolved. Madison County E

13 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: According to the Code of Alabama 1975, Volume 23A, Rules of Alabama Supreme Court, Rule 43, records should be maintained to show the date, case number, received from, and the bond amount. The register will also show the date, amount and check number of all dispositions. This account must be reconciled monthly with an analysis of all funds on hand. Cash bonds were not maintained properly. Records were not always prepared that showed the date received, the amount, the receipt number, and the disposition of the bond. The account was not reconciled monthly with an analysis of all funds on hand. Court records should be maintained in accordance with the requirements of Rule 43, Rules of Alabama Supreme Court Finding: Rule 43, Rules of Alabama Supreme Court, prescribes procedures that should be followed to account for Uniform Court Citations, including procedures to present the citations to the Magistrate in a timely manner. Uniform Traffic Citations were not always provided to the Magistrate in a timely manner. All Uniform Traffic Citations shall be provided in a timely manner to the Court Magistrate as outlined in the Code of Alabama 1975, Volume 23A, Rules of Alabama Supreme Court, and Rule Finding: The Code of Alabama 1975, Section , requires the Clerk of the Municipal Court to prepare a monthly report showing the total of all fines, trial tax, district attorney s fees and other fees that accrue to the benefit of the state, county, or municipality that were collected during the previous month. Reports and remittances were not always made timely in accordance with the Code of Alabama 1975, Section Also, the reports were not reviewed for accuracy, and there were several errors noted on the reports. Reports and remittances should be reviewed for accuracy and should be filed in accordance with the Code of Alabama 1975, Section Madison County F

14 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: The Code of Alabama 1975, Section , authorizes municipal governing bodies to levy, assess and collect additional court costs and fees for the operation and maintenance of municipal jails, or other correctional facilities. The additional court costs, or fees are required to be deposited in a fund designated as the Corrections Fund, and the court costs or fees are allocated exclusively for the operation and maintenance of the municipal jail or jails, other correctional facilities, if any, any juvenile detention center, or any court complex. Numerous payments were made from the Corrections Fund that were not in accordance with the Code of Alabama 1975, Section These restricted funds were transferred to and used for general fund expenditures. Court costs and fees deposited in the Corrections Fund should be used exclusively for the operation and maintenance of the municipal jail, other correctional facilities, or any court complex as required by the Code of Alabama 1975, Section Finding: The following internal control deficiencies were noted in the City of New Hope s audit for the year ended September 30, These deficiencies included: Multiple expenditures posted to erroneous accounts; Multiple transactions not posted in a timely manner; Cemetery activity not recorded in the City s general ledger; Transfers of funds not recorded correctly; Expenses occasionally paid twice; Lack of periodic reconciliation of various accounts to actual records, such as returned checks and customer deposits; The payroll tax payments entered into the accounting software were not always entered correctly; There is no reconciliation of payroll liability accounts to the actual taxes paid to verify that correct amounts are being paid. There were instances where the payroll tax deposit amounts calculated and paid were incorrect. These errors were not discovered until quarterly tax returns were prepared, leading to penalties and interest for late payment; According to City policy, the pay period ends on Friday and checks are to distributed the following Wednesday. Paychecks are often prepared and distributed early; often on the Friday the pay period ends. This results in employees estimating their time worked; Employees with duties from various departments, such as city administrator duties and water and sewer duties are not being split between the different funds; Madison County G

15 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding Continued: The City failed to monitor the financial activities in a timely manner. The Manager of the City should monitor and review City employees to ensure that all work is completed properly and in a timely manner; and No evidence of budgets was provided. Tests performed during the examination indicated that these same deficiencies existed during this examination. Additional issues concerning internal controls noted during the examination period were the following: Blank checks were being signed; Employee s personal checks were cashed from collections and then held for months; Employees were not adequately trained; Purchase orders were not approved; There were no travel claims prepared for reimbursement of expenses; and Regular computer back-ups were not performed. The City should review the compliance deficiencies noted above and prepare a corrective plan to address and correct these deficiencies Finding: The City of New Hope s Policies and Procedures Manual states that the City Administrator is considered to be an appointed and exempt position. Exempt positions are those that employees agree to work on a stated salary and are not subject to overtime compensation. On June 27, 2007, former Mayor Brad Beasley wrote a letter giving authorization for the City Administrator to be paid for overtime not to exceed $6, per year. According to his letter, the Administrator was to have documentation for the overtime hours worked. This payment of overtime was not authorized by the City Council. The City Administrator received $6, in overtime payments for 2008, but proper documentation was not provided. The City Administrator also received $100 each pay period for being on call for the water department. This was not authorized by the City Council. Although the City Administrator has taken many vacation days, none have been deducted from her earned vacation hours. The City should establish and record in the minutes the appropriate salary for the City Administrator, and the Mayor should approve the City Clerk s timesheet and ensure that appropriate leave amounts are deducted. Madison County H

16 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: Internal Revenue Service Regulations (IRS) require employers to report all wages and other compensation that is paid to employees and to withhold appropriate state, federal and other taxes from the employee s compensation. The amount of the wages and other compensation paid, along with the taxes withheld are required to be reported on the employees Form W-2 annually. The City Administrator was paid $1, in 2008 in addition to her regular salary for absentee ballot election duties. These wages were not included on her W-2 and there were no payroll taxes withheld. All wages paid to the City Administrator should be included on her W-2 and taxes withheld in accordance with the Internal Revenue Service s Circular E Finding: In January 2008, the City Council passed a resolution allowing them to process the impound fees from the City Hall. The City would collect the towing; daily impound fee, and processing fee. The City would keep the processing fee and pay the wrecker companies for the towing and impound fee. All receipts for these impound fees could not be accounted for. Deposits of the money collected were not timely. In October 2008, $ was collected; but only $ was deposited. Receipts should be prepared and maintained to account for all impound fees collected, and deposits should always be made timely and intact Finding: An effective system of internal control over disbursements should include properly prepared and approved purchase orders. Also, proper supporting documentation, such as invoices, contracts, and itemized claims for travel reimbursement (all of which have been approved) should be obtained before checks are issued. Expenditures were not always approved. Purchase orders were not necessarily used and approved. Numerous expenditures, including travel claims, were not properly documented. Sales tax was paid on several invoices for the purchases. There were purchases of assets that could not be located. Purchase orders should be used when applicable and they should be approved before a purchase is made. All expenditures, including travel claims, should have adequate documentation. The City should not pay sales tax on items purchased. Any new assets purchased should added to the City s inventory listing of capital assets and should be on hand for inspection. Madison County I

17 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: Bank statements for the City s General Fund, Special Revenue Funds, Water Department Funds and other various accounts are not reconciled correctly. All bank accounts should be properly reconciled each month. This would include investigating deposits in transit that are several months old and removing checks that have cleared the bank from the outstanding check lists Finding: Revenue generated from proprietary activities such as the City s Water Department should be retained for the operation of that particular enterprise. These types of activities should not be used for General Fund operations without explicit approval from the Mayor and City Council. There were numerous transfers from the Gross Revenues Water Account into the General Fund that were not authorized by the Mayor and City Council. The Mayor and City Council should approve and direct any transfers from the Water Department Finding: Detailed records should be maintained for all deposits received from customers for utility services. These deposits are required to be refunded to the customer when utility services are discontinued. One aspect of this accountability would be to reconcile the customer listing to the balance in the bank account and to the liability in the general ledger. Customer deposits should not be used to finance general fund operations. A listing of the total water and sewer deposits indicates that $98, should be on hand for customer deposits. The balance in that account as of April 30, 2009 is $22, $32,000 was transferred from this account to the General Fund in August The City Administrator cannot account for the balance of the funds due to be in that account. Deposits for water and sewer service should only be used for refunds to customers. Madison County J

18 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: Collections should be made timely (daily) and intact (i.e., in the form payment is received). All collections should be deposited, and employees should not be allowed to cash personal checks out of collections. There were numerous violations of these basic accounting controls. Over $36, was collected for water and sewer services for the period October 1, 2007 through April 30, There were only two bank deposits made in that 21-month period. A bank deposit was made in March 2008 for $9, and another bank deposit was made in March 2009 for $14,150. Several employees personal checks were cashed from these collections and were not deposited. Many of the employees checks were for several hundred dollars and were several months old. A cash count was performed on monies that should be on hand for the water and sewer collections. The cash count indicated that funds totaling $15, should have been on hand; however, only $5, was on hand. Therefore, there was a cash shortage of $9, Deposits for the water and sewer deposit collections should be made timely and intact. Employees checks should not be cashed from collections and should never be held and not deposited Finding: There are monthly billings for the amount of water and sewage usage each month. Deposits for the collections of the monthly water and sewer bills are not deposited timely and intact. Pre-numbered receipts are not used. Checks are constantly substituted for cash on deposit slips. According to the clerks, checks are taken from the water and sewer deposit collections and replaced with cash from the regular water collections. Deposits should be made timely and intact Finding: In accordance with the Code of Alabama 1975, Section , and others, the 7-cent State Gasoline Excise Tax should only be used for authorized purposes such as construction and maintenance of streets within the corporate limits of any municipality. Gasoline taxes are not authorized to finance the operations of the City s General Fund. Nevertheless, 7-cent gas tax revenue was transferred to and used for general fund expenditures. The 7-cent gas tax revenue is restricted and should only be used for allowable expenditures as determined in the Code of Alabama 1975, Section / Madison County K

19 Schedule of State and Local Compliance and Other Findings For the Period October 1, 2007 through April 30, 2009 Ref. No. Finding/Noncompliance Finding: Internal Revenue Service s Regulations require employers who pay $600 or more to individual contractors to report their earnings to the Internal Revenues Service. Individual contractors should be issued a Form 1099 by the municipality in accordance with the Internal Revenue Service s Circular E. A Madison County Commissioner was paid a total of $3, for invoices submitted by him for cooking at various city activities. A 1099 Form was not issued to him. A Form 1099 should be issued to individual contractors that are paid $ or more. Madison County L

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21 Mayor, City Council Members and Administrative Personnel October 1, 2007 through April 30, 2009 Officials Address Term Hon. Brad Beasley Mayor 280 Oak Grove Hon. John Howard Mayor P. O. Box 135 Hon. Jason Smith Council Member 924 Johnson Avenue Hon. Dean Manley Council Member 197 City Park Road Hon. Frita Fears Council Member 5362 Main Drive Hon. David Pritchett Council Member P. O. Box 385 Hon. Craig Hill Council Member 223 New Hope Road Hon. Billy Jones, Jr. P. O. Box 327 Hon. Ronald Schrimsher Council Member P. O. Box 361 November November 2008 November November 2012 November November 2008 November November 2008 November November 2012 November November 2008 November November 2008 November November 2012 November November 2008 November November 2012 November November 2012 November November 2012 Administrative Personnel Sherrie Davis City Administrator P. O. Box 419 Terri Gaffin Magistrate P. O. Box Exhibit #1 Madison County