Final Audit Follow Up

Transcription

1 Final Audit Fllw Up As f September 30, 2005 Sam M. McCall, CPA, CIA, CGFM, CGAP City Auditr Parks and Recreatin Aquatics Divisin Revenue Cntrls (Reprt #0526, Issued July 7, 2005) Reprt #0608 February 1, 2006 Summary Parks and Recreatin management has cmpleted all nineteen actin plan steps develped t address issues identified in audit reprt #0526, Parks and Recreatin Aquatics Divisin Revenue Cntrls. In audit reprt #0526, issued July 7, 2005, we fund that, verall, the cashiering and revenue peratins within the Aquatics Divisin were nt adequate. Identified issues indicated the need t strengthen internal cntrls and imprve cmpliance with applicable plicies and prcedures. Specific issues identified included: Critical recrds (e.g., cash register tapes, registratin frms, class rsters) were nt always prepared and/r maintained. Management did nt prvide fr independent recnciliatins f surces recrds (i.e., cash register tapes, registratin frms, class rsters) t cllected and depsited revenues. A cntract with a private entity was nt adequately managed. Aquatics management did nt always review available accunts receivable reprts t identify cmpetitive swim prgram participants with delinquent payments. Daily fee cllectins were nt always timely depsited and cash reprts were nt always timely prepared. As als nted in reprt #0526, recrds tested and prvided by department staff indicated cllectins f $7,020 culd nt be traced t evidence f depsit r ther dispsitin. Management changes were made in the Aquatics Divisin subsequent t ur audit fieldwrk. Management established 19 actin plan steps t address the issues identified during the audit. All 19 1 actin plan steps have been cmpleted. In additin, we nted that depsited revenues generated frm the City s swimming facilities increased substantially after actin plan steps and related internal cntrls were implemented. Depsited revenues increased by 14% frm fiscal year 2004 t fiscal year Scpe, Objectives, and Methdlgy The audit and this subsequent fllw up were cnducted in accrdance with Generally Accepted Gvernment Auditing Standards and Standards fr the Prfessinal Practice f Internal Auditing, as apprpriate. Reprt #0526 The scpe f reprt #0526 included a review f revenue activity and cntrls within the Aquatics Divisin f the Tallahassee Parks and Recreatin Department during the sixteen-mnth perid frm January 2004, thrugh April The bjectives f the audit were t determine whether adequate cntrls were in place t ensure that: Fees were prperly charges and cllected; Revenues (frm fees) and related activity were prperly accunted fr in the divisin s recrds; and Cllected revenues were prperly safeguarded and depsited in a timely manner. T address the abve bjectives, we cnducted interviews, made bservatins, and reviewed relevant dcumentatin. Fr the different revenue categries, we cnducted data analyses, tests f cntrls, and relevant detailed tests f transactins. In additin, a surprise cash cunt f the imprest funds used in cashiering peratins was cnducted.

2 Final Audit Fllw Up Reprt #0608 Reprt #0608 The purpse f this fllw up is t reprt n the prgress and status f effrts by the Parks and Recreatins Department t cmplete actin plan steps due fr cmpletin during the perid March 31, 2005, thrugh September 30, As a result f prmpt crrective actin taken by management, this is ur first and final fllw up n actin plan steps identified in audit reprt #0526. Previus Cnditins and Current Status In reprt #0526, we identified issues that indicated the need t strengthen internal cntrls and imprve cmpliance with applicable departmental and City plicies and prcedures. Nineteen actin plan steps were develped t address the identified issues. As reflected in the fllwing table, each f thse 19 actin plan steps has been cmpleted. Table 1 - Actin Plan Steps frm Reprt #0526 and Current Status Actin Plan Steps Current Status Ensure apprpriate recrds are prepared and retained t supprt revenue peratins. Surce dcumentatin such as cash register tapes (Z tapes) and registratin frms fr swim lessns and lifeguard lessns will be retained in accrdance with City recrd retentin requirements. Rsters will be prepared and retained fr participants in registratin events such as swim lessns, lifeguard lessns, etc. Thse rsters will be updated as necessary t reflect new participants and/r drputs. The histry f such changes will be dcumented n the rsters. Registering participants will be required t cmplete registratin frms prir t participatin in applicable aquatic activities (e.g., swim lessns and lifeguard lessns). Pl rental cntracts will be cmpleted fr each rental event, including baptisms. The fficial (i.e., crrect final versin) internal cllectin reprts prepared fr applicable pls will be attached t the related daily cash register tapes and submitted t the Parks and Recreatin Administrative Divisin fr prcessing and retentin. In the event mre than ne versin is prepared and retained, the reprts will be clearly dcumented as t which represent the initial and final versins and an audit trail will be maintained t explain the differences. Staff will be reminded f the imprtance f dcumenting: (1) the dispsitin f all swim passes and (2) the dates f issuance f thse passes. All recrds related t revenues including cash register tapes, registratin frms, and class rsters are nw retained in accrdance with City recrd retentin requirements. Rsters are prepared and retained fr swim and lifeguard lessns. The rster and registratin frms are updated t dcument any schedule changes and cancellatins. Registratin frms are cmpleted prir t participatin in applicable aquatics activities (e.g., swim lessns and lifeguard lessns). Rental cntracts are required and cmpleted fr all rental events. The final versin f the internal daily cllectin reprts, alng with the applicable cash register tapes, are submitted t the Administrative Divisin fr prcessing and retentin. Pl supervisrs maintain cpies f the internal daily cllectin reprts fr their respective pls. Parks and Recreatin management reminded staff f the imprtance f dcumenting the dispsitin f swim passes and the issuance dates f thse passes. Pre-numbered pass tickets will be btained frm a vendr. Thse passes will be maintained and issued t applicable pl supervisrs by the Parks and Recreatin Administrative Divisin. The Parks and Recreatin Administratin Divisin purchased pre-numbered swim and water aerbics passes frm a vendr. The Administratin Divisin maintains thse passes and issues wrking supplies t applicable pl supervisrs as needed. 2

3 Reprt #0608 The cntractr prviding private swim lessns will be reminded f the cntractual requirement t maintain and retain adequate recrds f prgram participatin, as well as, cmplete recrds justifying all charges, expenses, and csts incurred pursuant t the City cntract. Future instances f nncmpliance will result in terminatin f the cntract. Participants in water aerbics will n lnger pre-register fr classes. Instead, passes (similar t thse used fr recreatinal swimming) will be btained and sld t participants. Each participant will be required t present a pass prir t participatin. The passes will be accunted fr in a manner similar t the prcess used fr recreatinal swim passes. Ensure fees are prperly cllected and timely depsited. Final Audit Fllw Up Parks and Recreatins management reminded the cntractr f the cntractual requirement t maintain and retain adequate recrds f prgram participatin, as well as, cmpleted recrds justifying all charges, expenses, and csts incurred pursuant t the City cntract. In additin, the cntract between the City and the cntractr was mdified n May 19, 2005, t require the cntractr prviding thse lessns t pay the City lane rental fees. Under this revised arrangement, Parks and Recreatin will n lnger cllect and retain a prtin f registratin fees frm private swim lessn participants (i.e., the City is reimbursed fr use f City facilities thrugh the lane rental fees instead f cllected and retaining a prtin f participant registratin fees). The Parks and Recreatins Administrative Divisin purchased pre-numbered passes fr water aerbics. Instead f registering fr classes, participants are nw required t purchase a pass and present the pass t applicable staff upn entry int the swimming facility prir t participating in the water aerbics class. Independent supervisry staff will peridically recncile: cash register tapes frm the varius pls t amunts depsited fr thse pls; participants in varius activities (i.e., swim lessns, lifeguard lessns, cmpetitive swim prgrams) t rsters prepared fr thse prgrams; rsters f participants (i.e., swim lessns, lifeguard lessns, cmpetitive swim prgrams) t fees cllected and depsited; Independent staff in the Parks and Recreatins Administrative Divisin nw cnducts peridic surprise audits at the varius aquatic facilities. The surprise audits include verifying that fees are prperly cllected, prcessed, and depsited based n recrded activities and surce recrds. In additin, supervisry staff at the individual aquatic facilities must nw dcument their verificatin f supprt (e.g., cash register tapes, tally sheets, rental cntracts) fr revenues reprted n their Daily Financial Reprts. rental events t rental fees cllected and depsited; and Pass sales t fees cllected and depsited. These peridic recnciliatins will be scheduled by management but nt annunced t staff. Apprpriate actins will be taken in the event that thse recnciliatins shw a lack f prper cllectin and/r depsit f fees. T ensure timely depsit f funds, revenue cllectins will be recrded, prepared fr depsit, and available fr pick up by the City s cntracted curier within tw business days f receipt. Cash reprts will be prepared and submitted t the Revenue Office n later than five business days after the related depsits are made. Staff will be reminded f the imprtance f reviewing reprts submitted by Accunting Services shwing participants in the cmpetitive swim prgram that are delinquent in their payments. Our review shwed that revenue cllectins are prepared fr depsit within tw business days f receipt. Parks and Recreatin Administrative staff is preparing and submitting cash reprts t the City s Revenue Office n later than five days after the related depsits are made. Parks and Recreatin management reminded Aquatics Divisin staff f the imprtance f reviewing reprts submitted by Accunting Services. Currently, the accunts receivable reprt sent t the Aquatics Divisin frm Accunting Services is reviewed n a quarterly basis t identify and fllw up n cmpetitive swim participants with delinquent accunts. 3

4 Final Audit Fllw Up Reprt #0608 An internal plicy will be adpted that specifies the actins t take fr cmpetitive swim prgram participants with delinquent accunts. Thse actins will include terminating prgram participatin if payments are nt made within a specified and reasnable time. The department will n lnger cllect and retain a prtin f registratin fees frm private swim lessn participants. Instead, the applicable cntract will be amended t require the cntractr prviding thse lessns t pay the City lane rental fees. Parks and Recreatin updated their written prcedures t: (1) include a prvisin requiring the Aquatics Divisin t review quarterly reprts fr the purpse f identifying cmpetitive swim prgram participants wh are delinquent in their accunts, and (2) nt allw further participatin by a delinquent participant until the utstanding balance is paid alng with the fees fr the next quarter. The cntractual agreement between the City and the vendr was mdified n May 19, 2005, t require the cntractr t pay the City lane rental fees fr private swim lessns taught by the vendr (i.e., a prtin f participant registratin fees is n lnger due the City). Ensure the accuntability and safeguarding f imprest funds. Custdians will be reminded f the imprtance f safeguarding and maintaining accuntability ver imprest funds used fr cashiering peratins at the varius City pls. Any identified shrtages will be timely researched, explained, and dcumented. Ensure a prper cntrl envirnment is maintained. Parks and Recreatin Administrative Divisin staff perfrmed a cash cunt f the imprest funds used as cash banks fr the eight aquatic facilities. N shrtages were nted. In additin, staff has been reminded f the imprtance f safeguarding and maintaining accuntability ver the imprest funds and researching, explaining, and dcumenting any shrtages. Department management will emphasize t staff the imprtance f implementing and cmplying with established City plicy and prcedures in regard t internal cntrls, revenue prcessing, and ethical behavir. Management (directr, assistant directr, and superintendent) will peridically visit the City pls and review peratins and prgrams, interview staff, and analyze activity fr the purpse f identifying risks and means t mitigate thse risks. Existing written internal prcedures will be revised t address essential aspects f the preceding actin steps. Table Legend: Parks and Recreatin management reminded staff f the significance f cmplying with City and department plicy and prcedures in regard t internal cntrls, revenue prcessing, and ethical behavir. Parks and Recreatin management nw perfrms peridic mnitring f financial activity thrugh site visits and surprise audits f the aquatic facilities. The Aquatic Divisin s written internal prcedures were updated as apprpriate t address essential aspects nted in the abve actin plan steps. Issue addressed in the riginal audit Issue addressed and reslved Recent Revenue Activity Because f the significant cntrl deficiencies identified in audit reprt #0526, there was an unacceptable risk that revenues were nt being prperly cllected, prcessed, and depsited. As reprted, we nted cllectins f $7,020 that culd nt be traced t evidence f depsit r ther dispsitin. As a result f these initial audit findings, as part f ur fllw up we cmpared recrded and depsited revenues in fiscal year 2004 (mst f which was cvered in ur initial audit) t fiscal year Mst f the activity fr fiscal year 2005 ccurred after (1) the cntrl issues were identified during ur audit fieldwrk and (2) applicable crrective actins were initiated. As shwn in Table 2 belw, we nted that fr the facilities audited, recrded/depsited revenues in fiscal year 2005 were 14% higher than recrded/depsited revenues in fiscal year While specific reasns fr this increase cannt be determined due t the lack f adequate recrds in fiscal year 2004, it is indicative that imprved cntrls have likely made a difference. 4

5 Reprt #0608 Final Audit Fllw Up Table 2 FY 2004 and FY 2005 Activity and Revenue by Pl POOL (Nte 5) ACTIVITY FY 2004 RECORDED REVENUE (Nte 1) Trusdell Aquatic Center (Year-rund activities) Wade Wehunt (Myers) (Year-rund activities) Frestmeadws (Seasnal nly - Nte 4) Hilaman (Seasnal nly - Nte 4) Levy (Seasnal nly - Nte 4) Recreatinal Swimming Daily Admissins Passes Swim Lessns (Nte 2) Water Aerbics (Nte 3) Lifeguard Lessns (Nte 2) Cmpetitive Swim Prgrams Pl Rentals Lcker Rentals Recreatinal Swimming Daily Admissins Passes Swim Lessns (Nte 2) Water Aerbics (Nte 3) Lifeguard Lessns (Nte 2) Recreatinal Swimming Daily Admissins Recreatinal Swimming Daily Admissins Recreatinal Swimming Daily Admissins Water Aerbics (Nte 3) Swim Lessns (Nte 2) FY 2005 RECORDED REVENUE (Nte 1) $206,528 $239,861 $75,021 $79,359 $2,264 $2,251 $931 $746 $1,644 $2,676 Rbinsn Truebld (Seasnal nly - Nte 4) Recreatinal Swimming Daily Admissins $2,229 $3,800 Walker Frd (Seasnal nly - Nte 4) Recreatinal Swimming $946 $1,857 Daily Admissins TOTAL $289,563 $330,550 (Nte 6) NOTES: 1. Amunts reprted by the Parks and Recreatin Aquatics Divisin. 2. Revenue cllected fr swim and lifeguard lessns taught at all pls (including Trusdell and Levy but excluding Jack McLean) was included in the Wade Wehunt amunt because all swim lessn fees were cllected and prcessed at that pl. 3. Sme f the revenues fr water aerbics classes held at Levy and Trusdell pls are included in the Wade Wehunt amunt because mst registratin fees (fr classes at thse pls) were paid and prcessed at Wade Wehunt pl prir t the initiatin f passes fr that activity. 4. Seasnal pls were pen nly during 70-day perids (end f May thrugh early August) each year. 5. Jack McLean Aquatics facility pened mid-april 2005 and was therefre nt included in the scpe f the initial audit r this fllw up engagement. 6. Revenues increased by $40,987, r 14%. 5

6 Reprt #0608 Cnclusin Parks and Recreatin management has been respnsive in addressing issues identified in audit reprt #0526. All actin plan steps have been successfully cmpleted. T ensure that subsequent revenues are prperly cllected, prcessed, and depsited, it is imperative that Parks and Recreatin management cntinue the actins implemented and taken t date. We appreciate the respnse and assistance prvided by applicable department staff during this fllw up. Final Audit Fllw Up Respnse frm Appinted Official City Manager: I appreciate the thrugh jb the City Auditr's staff did in examining the Aquatics Divisin's revenue prcess and peratins, and the steps the Parks and Recreatin Department have taken t successfully rectify identified deficiencies. We recgnize and appreciate the imprtance f gd internal cntrls, and are cnfident that cntinued active mnitring f the cntrls implemented as a result f this audit will imprve peratins and perfrmance within the Aquatics unit. 6

7 Reprt #0608 Final Audit Fllw Up Cpies f this Final Audit Fllw Up r audit reprt #0526 may be btained frm the City Auditr s website ( r via request by telephne (850 / ), by FAX (850 / ), by mail, r in persn (City Auditr, 300 S. Adams Street, Mail Bx A-22, Tallahassee, FL ), r by (auditrs@talgv.cm). Audit Fllw Up cnducted by: Stephanie Jnes, Senir Auditr T. Bert Fletcher, CPA, Audit Manager Sam M. McCall, CPA, CIA, CGFM, CGAP, City Auditr 7