Audit Follow Up. Citywide Cash Controls Development and Transportation Services (Report #0134, Issued August, 2001) As of March 31, 2002

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1 Audit Fllw Up As f March 31, 2002 Sam M. McCall, CPA, CIA, CGFM City Auditr Citywide Cash Cntrls Develpment and Transprtatin Services (Reprt #0134, Issued August, 2001) Reprt #0231 July 25, 2002 Summary The varius departments within Develpment and Transprtatin Services have cmpleted many f the actin steps develped as the result f ur previusly issued audit reprt #0134, Citywide Cash Cntrls. Actins have been initiated t address a significant number f the remaining steps. Significant remaining issues include, fr example: (1) independent verificatins and recnciliatins f recrded activity t cllectins received and depsited, (2) establishment f cntrls ver cmpetency cards issued t cntractrs, and (3) timely and direct transfer f cllectins t the Revenue Office fr depsit. In audit reprt #0134, issued August 29, 2001, we identified significant risks at several lcatins thrughut the City that increased the likelihd that cash cllectins wuld nt be prperly and efficiently handled and depsited int the City s bank accunt. Recmmendatins were prvided t eliminate r reduce thse risks. The cllectins t which these risks and related recmmendatins pertained were classified int 26 categries. A separate presentatin f the risks and recmmendatins fr each categry was prvided in audit reprt #0134. Actin plan steps were develped fr each f the 26 categries. The departments within Develpment and Transprtatin Services were respnsible fr eight f the 26 categries. The applicable departments/ffices were (1) Grwth Management, (2) Airprt, (3) Real Estate, (4) Taltran, (5) Public Wrks Engineering, and (6) Planning. These departments/ffices had a ttal f 57 actin plan steps due fr cmpletin as f March 31, Mst f these steps have been cmpleted r initiated. Reprt #0134 Scpe, Objectives, and Methdlgy The scpe f reprt #0134 included a review f cash cllectin and prcessing functins at each City lcatin where significant amunts f cash were cllected. The audit fcused n cntrls pertaining t cash upn cllectin by the City and/r City emplyees. The review was cnducted during the perid January 2, 2001, thrugh May 15, The primary bjectives f the audit were t determine whether adequate cntrls had been established ver cash cllected thrughut the City. This included a determinatin as t whether cash cllectins were: received and prcessed in a prper and efficient manner, adequately dcumented and accunted fr, safeguarded, and timely depsited int the City s bank accunt. The audit disclsed that, fr the mst part, cntrls were in place t prvide accuntability fr cllectins frm the time f receipt until depsit. Hwever, the audit identified significant risks at several lcatins that (1) culd result in the undetected lss r unauthrized diversin f cash, (2) limit the interest that culd be earned n cash upn depsit, and/r (3) result in cash due the City nt being received. Reprt #0231 The purpse f this audit fllw up is t reprt n the prgress and/r status f the effrts t implement the recmmended actin plan steps due as f March 31, T meet this bjective and t facilitate the usefulness f ur fllw up wrk, a separate fllw up reprt will be issued fr each f the five service areas t which the initial audit pertained. The service area 1

2 Audit Fllw Up Reprt #0231 addressed by this reprt is Develpment and Transprtatin Services. T btain infrmatin, we cnducted interviews with key department staff and reviewed relevant dcumentatin. This audit was cnducted in accrdance with Generally Accepted Gvernment Auditing Standards, and accrdingly included such tests f the recrds and ther auditing prcedures as were cnsidered necessary. Backgrund The City cllected revenues (i.e., cash) f apprximately $414 millin at 22 separate departments/ffices during fiscal year Thse 22 lcatins were cmprised f the Revenue Office and 21 departments/ffices external t the Fr audit purpses, the cllectins at thse 22 lcatins were classified int 26 categries. Eight f the 26 categries pertained t ffices that are rganizatinally under Develpment and Transprtatin Services. Thse eight categries included: Grwth Management Airprt Operatins Airprt Jetprt Diner Real Estate Parking, Leases, and Clsings Real Estate Cemetery Sales Taltran Public Wrks Engineering, and Planning Cllectins fr these eight categries during fiscal year 2000 ttaled apprximately $27.88 millin. Previus Cnditins and Current Status In reprt #0134, we identified several risks that needed t be addressed in regard t cllectins received at Grwth Management, the Airprt, Real Estate, Taltran, Public Wrks Engineering, and Planning. These risks included, fr example, unsecured cllectins, inadequate segregatin f duties amng emplyees, untimely depsits, lack f restrictive endrsements n negtiable instruments, lack f independent verificatins f cllectins t depsits, and lack f recrds adequately dcumenting dates f receipt r custdial transfers t the Actin plan steps were develped t address thse risks. The current status f tasks due as f March 31, 2002, is as fllws: Area Tasks Due and Cmpleted Ttal Tasks Due Cmpleted In Prcess Nt Cmpleted Grwth Mgt _ Airprt _ Real Estate _ Taltran 1 1 Engineering Planning Ttal Table 1 prvides a summary f the cnditins and actins taken. Table 1 Cnditins Identified in Reprt #0134 and Current Status Previus Cnditins Cmpetency cards available fr issuance t cntractrs will be sequentially numbered. Grwth Management Current Status Cmpletin f actin plan steps relating t cmpetency cards was delayed as staff assigned t cmplete these steps was temprarily reassigned t the City s PepleSft CIS implementatin team. Hwever, subsequent t March 31, 2002, actins were initiated t cmplete thse steps. Fr example: (1) plans have been made t btain sequentially numbered cmpetency cards and (2) necessary prgramming changes t the Permit Enfrcement Tracking System [PETS] have been made and tested and will be placed int peratin in the near future. Cmpletin f thse actins will 2

3 Reprt #0231 An accunting f cmpetency cards will be maintained that reflects the dispsitin f each card made available fr issuance. Apprpriate prgramming changes will be made that allw the Permit Enfrcement Tracking System (PETS) t reflect the applicable sequential number fr each cmpetency card that is issued. Independent and/r supervisry verificatins f cmpetency cards issued t fees cllected as recrded in PETS will be dne. The PETS will be prgrammed t generate a daily summary reprt that reflects ttal cmpetency card certificatin fees cllected each day. Independent and/r supervisry cmparisns will be cnducted f fees cllected per the daily summary reprts (see preceding actin step) t actual cllectins picked up by the Revenue Office r depsited by Grwth Management staff. T the extent practicable, duties amng staff will be segregated such that emplyees cllecting cmpetency card fees will nt als access and issue cmpetency cards. In the Land Use/Envirnmental Services sectin, thse receiving requests fr and making dcument cpies will nt prvide such cpies t custmers until a paid receipt is presented. Custmers will make payment t an emplyee different frm the maker and handler f the cpies. Grwth Management will btain an endrsement stamp frm the Revenue Office and will restrictively endrse negtiable instruments upn their receipt. Credit will n lnger be extended t selected cntractrs. Cntractrs will be allwed t depsit funds int trust accunts maintained by the City and accunted fr in PETS, against which fees can be applied as permits are btained. Fees cllected fr permit issuances and replacements f security badges will be secured in a lcked bx in the Supervisr s ffice. Access t the lck bx cntents will be restricted t authrized staff. Audit Fllw Up prvide management a means t accunt fr cmpetency cards and t ensure that fees are prperly cllected and depsited. Same as abve. Same as abve. Same as abve. Same as abve. Same as abve. Same as abve. Airprt Operatins and Jetprt Diner Emplyee functins relating t prvisin f dcument cpies t the public and cllectin f the related fees have been prperly segregated. Negtiable instruments are nw restrictively endrsed with a stamp btained frm the Credit is n lnger extended. Fr applicable cntractrs, permit fees are nw paid frm funds maintained in the described trust accunts. Cllectins are secured as described. Access is prperly restricted. 3

4 Audit Fllw Up Reprt #0231 Keys t vending machines will be stred in the safe lcated in the Airprt Finance and Administratin ffice. Tw emplyees will be present whenever mney is remved frm vending machines. Bth emplyees will sign and date the cash reprts used t accunt fr thse cllectins. Except when fees are paid at the time f applicatin, entities that peridically rent airprt facilities will be billed thrugh the City s accunts receivable system. Airprt staff will check the City s accunts receivable system t ensure that requested amunts are prperly billed. The Operatins sectin will btain an endrsement stamp frm the Revenue Office and will restrictively endrse negtiable instruments upn receipt. The Airprt Finance and Administratin sectin will btain frm the Revenue Office a restrictive endrsement that specifies the City bank accunt t which negtiable instruments must be depsited. Cllectins received in the Operatins sectin will be transferred t the Airprt Finance and Administratin sectin within ne week f receipt. All external parties billed thrugh the City s accunts receivable system will be instructed t remit their payments directly t the Revenue Office at City Hall. Dates f receipt fr cllectins received in the mail will be dcumented. Sequentially numbered receipt frms will be accunted fr in a manner that will reflect the dispsitin f all receipt frms available fr issuance. Independent and/r supervisry recnciliatins f amunts cllected per cmpleted receipt frms t amunts depsited will be peridically cnducted. Independent and/r supervisry recnciliatins f permits issued t related cllectins received and depsited will be peridically cnducted. Written prcedures fr the receipt and prcessing f cllectins at the Airprt will be established. All keys t vending machines are nw stred in the lcked safe when nt in use. Tw emplyees are present when mney is remved frm vending machines, cunted, and transferred fr depsit. Bth emplyees nw sign and date the applicable cash reprts. Subsequent t March 31, 2002, Airprt staff initiated a cntinuus billing thrugh the City s accunts receivable system fr the ne applicable entity (the ther entity addressed in the audit n lnger rents facilities n a regular basis). Reprts are btained frm the City s accunts receivable system and used t verify that requested amunts are billed and cllected. Negtiable instruments are nw restrictively endrsed with a stamp btained frm the Negtiable instruments are nw restrictively endrsed with a stamp that specifies the City bank accunt number t which the funds must be depsited. Cllectins are nw timely transferred. Five f the 14 applicable vendrs cntinued t send their payments t the Airprt. Additinal effrts are t be made by Airprt staff t have these vendrs submit their payments t the Date stamps are used t dcument the dates f receipt fr mail cllectins. All bks cntaining sequentially numbered receipt frms are adequately safeguarded and cntrlled in a manner t allw an accunting fr all receipts. The initial supervisry recnciliatin as described was cmpleted subsequent t March 31, Adequate recrds were established t allw fr the described recnciliatins. Hwever, such recnciliatins had yet t be cnducted. Written prcedures were established subsequent t March 31,

5 Reprt #0231 Audit Fllw Up Airprt staff will ensure that the vendr perating the Jetprt Diner establishes written prcedures that address billing, cllecting, and accunting fr redeemed meal vuchers and catering sales. Airprt staff btained a cpy f the vendr s prcedures that address all aspects f receiving, safeguarding, and handling cash. These prcedures include prvisins fr billing and cllecting amunts due frm ther parties. Real Estate Parking, Leases, Clsings, and Cemetery Sales Republic Parking System (RPS) will be instructed t make the City f Tallahassee the sle payee n checks submitted fr payment. Real Estate will btain an endrsement stamp frm the Revenue Office and will restrictively endrse negtiable instruments upn receipt. Applicable parties leasing City-wned prperties will be instructed t remit their payments directly t the Any cllectins received in Real Estate will be transferred directly t the Revenue Office and nt submitted thrugh Accunting Services. Dcumented acknwledgements f custdial respnsibility will be btained frm the Revenue Office upn the transfer f cllectins. Dates f receipt fr any cllectins received in Real Estate will be dcumented. Written prcedures addressing the receipt and prcessing f cllectins will be established. Cllectins fr cemetery sales will be stred in lcked desk drawers r file cabinets pending transfer t the Access t thse drawers/cabinets will be restricted. Cllectins fr cemetery sales will be timely transferred t the An emplyee independent f the cllectin and custdial functins will peridically verify that amunts are cllected fr each cemetery lt and perpetual care sale. An emplyee nt assigned respnsibility fr cllecting cemetery sales prceeds will maintain an accunting f sequentially numbered burial request frms. That accunting will shw the dispsitin fr each frm. Taltran staff will peridically check the City s accunts receivable system t ensure that amunts are prperly billed based n billing requests submitted t Accunting Services. Taltran The City is nw the sle payee n RPS checks. Negtiable instruments are nw restrictively endrsed with a stamp btained frm the Real Estate instructed applicable entities t submit their payments directly t the Revenue Office. Cllectins received in Real Estate are nw transferred directly t the Revenue Office fr depsit. Real Estate staff btains dcumented acknwledgements f the transfer f cllectins frm Revenue Office staff. Real Estate staff dcuments the dates f receipt fr all cllectins. Written prcedures were established by April 15, Cllectins are prperly secured and safeguarded pending transfer t the Cllectins are nw timely transferred. Written prcedures requiring these verificatins have been established. Hwever, verificatins have nt been perfrmed t date. Written prcedures requiring these accuntings have been established. Hwever, accuntings have nt been perfrmed t date. Taltran staff verifies that amunts requested are prperly billed. 5

6 Audit Fllw Up Reprt #0231 Cllectins pending transfer t the Revenue Office will be stred in lcked desk drawers r file cabinets and access t thse places restricted. Engineering will btain an endrsement stamp frm the Revenue Office and will restrictively endrse negtiable instruments upn receipt. The dispsitin f all cllectins will be prperly dcumented. Management staff will review and apprve fee cllectin activity, including the dispsitins f cllectins. Thse reviews will be dcumented. Fees fr bid packages will nt be held pending bid clsing dates r review f applicatin packages. All cllectins will be timely transferred t the Revenue Office fr depsit. FDOT will be instructed t send advancerefunding payments directly t the Revenue Office. Recrds will be maintained f the bid packages available fr issuance and the dispsitin f each f thse packages. Fr thse bid packages issued fr a fee, an emplyee independent f the cllectin and custdial functins will verify that the apprpriate fees are cllected and transferred fr depsit. Management will review the apprpriateness f bid packages issued fr which n fees are cllected. An emplyee independent f the cllectin and custdial functins will verify that the prper fees are cllected and transferred fr each prequalificatin applicatin that is received, reviewed, and entered int the department s database. Written prcedures will be established fr the receipt and prcessing f cllectins. Planning will btain an endrsement stamp frm the Revenue Office and will restrictively endrse negtiable instruments upn their receipt. Public Wrks Engineering Planning Cllectins are nw secured and safeguarded pending transfer t the Negtiable instruments are nw restrictively endrsed with a stamp btained frm the Apprpriate recrds (plan hlders lists, prequalificatin lgs, and transfer memrandums) are nw maintained in a manner that allws the dispsitin f cllectins t be tracked. Staff indicated that the described reviews and apprvals were being dne. Hwever, the reviews/apprvals were nt cnsistently dcumented. Cllectins were nt always timely transferred t the Instances were nted where sme cllectins were held fr perids ranging frm 14 days t 26 days befre being transferred. FDOT was instructed verbally and by letter t submit subsequent payments directly t the Engineering staff indicated that FDOT has cmplied with thse instructins. Bid packages are generated based n requests and needs reflected n the plan hlders list. Accrdingly, the plan hlders list prvides an accunting fr all bid packages available fr issuance. Staff indicated that the described verificatins were being dne. Hwever, the verificatins were nt cnsistently dcumented. Prject managers identify n the plan hlders list the entities entitled t receive bid packages fr n fee. An emplyee independent f the cllectin and custdial functins verifies that apprpriate fees are cllected and transferred fr depsit. Thse verificatins are dcumented. Written prcedures fr prcessing bid package fees and pre-qualificatin applicatin fees were develped. An endrsement stamp had nt been btained at the time f ur initial fieldwrk. Planning subsequently btained a stamp. 6

7 Reprt #0231 Audit Fllw Up Any grant payments received in Planning will be transferred directly t the Revenue Office and nt submitted t Accunting Services. Dcumented acknwledgements f custdial respnsibility will be btained fr grant payments transferred t the Revenue Office fr depsit. Cllectins will be timely transferred t the Revenue Office fr depsit. An emplyee independent f the fee cllectin and handling prcess will maintain a lg f all accepted applicatins. That emplyee will peridically verify that fees have been cllected and transferred fr depsit fr each applicatin accepted and reviewed by Planning staff. An emplyee nt assigned respnsibility fr cllecting fees will maintain recrds that dcument the dispsitin f all receipt frms. An emplyee nt assigned respnsibility fr cllecting fees will peridically recncile fees received per cmpleted receipt frms t amunts transferred t the Revenue Office fr depsit. External parties requesting cpies will be instructed t pay the applicable fees at the Cpied dcuments will nly be prvided upn evidence (e.g., Revenue Office paid receipt) that payment has been made. Written prcedures addressing the receipt and prcessing f cllectins will be established. All but ne grant administratr transferred grant payments directly t the The ne grant administratr cntinued t transfer grant payments t Accunting Services. That administratr has subsequently been instructed t submit payments directly t the Dcumentatin evidencing the transfer f grant payments t the Revenue Office is maintained. Hwever, n dcumented acknwledgements f receipt were btained frm the Revenue Office upn the transfers. Planning indicated that such receipts wuld nw be btained. Cllectins are generally timely transferred t the Hwever, ne instance was nted where a $100,000 grant payment received n January 7, 2002, was nt submitted t the Revenue Office until after ur review n May 22, 2002, disclsed that the payment had nt been transferred. Subsequent t ur ntificatin, Planning immediately transferred the payment t the This instance was attributed t staff versight. Interest lst by the City due t this untimely transfer apprximated $730. Planning indicated that this prcess is currently being develped. Planning indicated that this prcess is currently being develped. Planning indicated that this prcess is currently being develped. Because f the ne instance (described abve) where a $100,000 grant payment was nt timely transferred t the Revenue Office fr depsit, we recmmend that additinal prcedures be implemented t have an independent recnciliatin f anticipated grant payments t actual grant payments received and depsited. Individuals, requesting cpies f Planning dcuments, are required t pay the related fees t the Revenue Office and bring a receipt evidencing their payment t Planning befre the cpies are released. Written prcedures were develped subsequent t March 31, Table Legend: Issue addressed in the riginal audit Issue addressed and reslved Crrective actin initiated but nt cmpleted Actin nt taken 7

8 Audit Fllw Up Reprt #0231 Significant Outstanding Issues As nted in Table 1, many actin plan steps were cmpleted. The remaining actin plan steps, sme f which have been initiated and partially cmpleted, include: Dcumented independent verificatins and/r recnciliatins f recrded activity (e.g., permits issued, cemetery lts sld, frms cmpleted) t cllectins received/depsited (Airprt Operatins, Real Estate, Public Wrks Engineering, and Planning). Establishment f cntrls ver cmpetency cards t ensure that fees are cllected fr cards issued and thse cllectins are prperly depsited (Grwth Management). Having applicable parties billed thrugh the City s accunts receivable system make their payments directly t the Revenue Office (Airprt Operatins). Timely and direct transfer f cllectins t the Revenue Office fr depsit (Planning and Public Wrks Engineering). Obtaining dcumented acknwledgements f the acceptance f custdial respnsibility when grant payments are transferred t the Revenue Office (Planning). City Manager: Respnse frm Appinted Official The majrity f the Develpment and Transprtatin actin plans have either been cmpleted r sn will be. I appreciate the assistance f the City Auditr's staff in identifying ways t imprve ur cntrls ver cash cllectins. We appreciate the respnse and assistance prvided by the applicable departments/ffices during this audit fllw up. Cpies f this Audit Fllw Up r audit reprt #0134 may be btained frm the City Auditr s web site ( 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 (dleym@talgv.cm). Audit Fllw Up cnducted by: T. Bert Fletcher, CPA, Audit Manager Sam M. McCall, CPA, CIA, CGFM, City Auditr 8