O R A N G E C O U N T Y I N T E R N A L A U D I T

Transcription

1 O R A N G E C O U N T Y AUDITOR-CONTROLLER I N T E R N A L A U D I T EXHIBIT A Auditor-Controller Internal Audit Quarterly Status Report For the Period January 2014 March 2014

2 Audit Summary udit Title Audit Report Date B Continuous Compliance Auditing of the Treasury Investment Portfolio for the Quarter Ended September 2013, Job No January 21, 2014 C D E Management Letter on Audit of the Statement of Assets Held by the County Treasury as of December 31, 2012, Job No Report on the Schedule of Assets Held by the County Treasury as of June 30, 2013, Job No (Contracted through Macias Gini & O Connell LLP) Audit of Probation Department Internal Controls Over Juvenile Records and Accounts for the Fiscal Years Ending June 30, 2012 and June 30, 2013, Job No February 5, 2014 March 14, 2014 March 26, 2012 Page 1 of 6

3 B Department: Treasurer-Tax Collector Continuous Compliance Auditing of the Treasury Investment Portfolio for the Quarter Ended September 2013 Job No: 1134 January 21, 2014 Audit Information The Treasurer s Office is responsible for investing the Treasury s unexpended monies under the investment authority of the Treasurer in accordance with the Orange County Treasurer Investment Policy Statement. This policy is approved annually by the Board of Supervisors and reviewed annually by the Treasury Oversight Committee. The Treasury Oversight Committee has requested that the Auditor-Controller Internal Audit Unit perform quarterly continuous compliance audits of the Treasurer s Investment Pools. We conducted a Continuous Compliance Audit of the Treasury investment portfolio for the quarter ended September 2013 to determine whether the Orange County Money Market Fund, Educational Money Market Fund, John Wayne Airport Investment Pool, and Extended Fund were in compliance with certain provisions of the Treasurer s Investment Policy Statement. Our compliance procedure included judgmentally selecting 10 business days for testing from each month. Based on the continuous compliance auditing performed for the selected dates, we did not note any compliance deficiencies. Recommendation: 1. Based on the continuous compliance auditing performed for the selected dates, we did not note any compliance deficiencies. C Department: Treasurer-Tax Collector The Treasurer s Office is responsible for the receipt, Page 2 of 6

4 Job No: 1116 February 5, 2014 Auditor-Controller Internal Audit custody, deposit, investment, and recording of funds for the County, school districts, and voluntary pool participants Management Letter on such as special districts. California Government Code Audit of the Statement of Assets Held by the requires that the Auditor-Controller perform quarterly reviews and an annual audit of the assets of the County County Treasury as of Treasury. The Treasurer, as required by California December 31, 2012 Constitution Article XVI, Section 6, and per the Board of Supervisor s Resolution is authorized to make temporary transfers to school districts to address their short-term cash flow needs. This Management Letter communicates two audit recommendations which resulted from our Audit of the Statement of Assets Held by the County Treasury as of December 31, 2012 with a report issue date of September 9, The audit was conducted pursuant to California Government Code 26920(a) and and in accordance with Government Auditing Standards issued by the Comptroller General of the United States. The audit included third-party confirmation of the Treasurer s investments. The Management Letter identified two findings: Finding No. 1: A total of $35 million in Educational Investment Pool Temporary Transfers was incorrectly recorded (Significant Deficiency) The Treasurer s Office incorrectly recorded temporary transfers of $15 million to the Anaheim Union High School District and $20 million to the Placentia-Yorba Linda Unified School District using deposit orders rather than journal voucher transfers. This error caused the assets to be overstated in the Treasurer s Fund Accounting System and the County s general ledger. Recommendation No. 1: We recommend that the Treasurer s Office discontinue using deposit orders to record temporary transfers from the Educational Pool to school districts or schools within the Page 3 of 6

5 pool. We have confirmed that this recommendation has been implemented. We consider this recommendation to be closed. Finding No. 2: The Northern Trust Confirmation listed an Investment which was not included in the Treasury s Investment Inventory (Control Deficiency) In 2007, the Treasurer invested in a structured investment vehicle (SIV) called Whistlejacket which went into receivership in The SIV went through an auction process and was restructured as Serpentine Funding Limited. After the sale of Serpentine the Treasury recorded a loss of approximately $7.6 million. The custody bank, Northern Trust, continued to carry the Whistlejacket residual holdings, with a combined cost of $13,518,328, on its records in order to track any residual receipts that may be collected in the future although the investment does not have a market value. The Treasurer s Office had removed the remaining Whistlejacket/Serpentine cost from its inventory and reconciliations, which increased the risk that residual income received by the Treasurer s Office might not be correctly applied. Recommendation No. 2: We recommend that the Treasurer s Office track and monitor the Northern Trust account in a manner that will provide transparency and an audit trail to assist in monitoring any future residual income from the Whistlejacket Receiver. Since this finding was noted, Treasury Accounting has started including the residual Whistlejacket cost of $13,518,328 as a reconciling item on its monthly Securities Reconciliation, which reconciles securities held by custody banks to the Treasurer s investment system. Due to the recent steps taken by the Treasurer s Office in response to this finding, we consider this recommendation to be Page 4 of 6

6 implemented and closed. D E Department: Treasurer-Tax Collector Orange County Treasury Report of the Schedule of Assets Held by the County Treasury as of June 30, 2013 Job No: 1118 March 14, 2014 Department: Probation Department Audit of Probation The Treasurer s Office is responsible for the receipt, custody, deposit, investment, and recording of funds for the County, school districts, and voluntary pool participants such as special districts. California Government Code requires that the Auditor-Controller perform quarterly reviews and an annual audit of the assets of the County Treasury. This year the audit was contracted out to Macias Gini & O Connell LLP (MGO). We contracted with MGO to perform this audit of the Schedule of Assets held by the County Treasury as of March 31, 2013, pursuant to California Government Code 26920(a) and They conducted the audit in accordance with Government Auditing Standards issued by the Comptroller General of the United States. The financial schedule presented fairly, in all material respects, the assets held in the County Treasury as of June 30, 2013 in accordance with the basis of accounting as described in Note 1. Note 1 describes the Treasury s basis of accounting. The Treasurer s financial schedule is prepared on the modified cash basis of accounting, which is a basis of accounting other than United States generally accepted accounting principles. Recommendation: There were no recommendations from this audit. The Orange County Probation Department is a criminal justice agency whose primary focus is on adult and juvenile offenders who are charged with or convicted of crimes. The Probation Department is divided into three key service Page 5 of 6

7 Department Internal Controls over Juvenile Records and Accounts for the Fiscal Years Ending June 30, 2012 and June 30, 2013 Job No: 1133 March 26, 2014 Auditor-Controller Internal Audit bureaus: Juvenile Intake and Detention, Field Operations, and Operations Support. The Auditor-Controller is required to audit the Probation Department s juvenile books and accounts on a biennial basis. This audit was conducted in accordance with Chapter 2, Section 275(b) of the Welfare and Institutions Code. The audit included an evaluation of Probation s internal controls and processes relating to cash receipts, disbursements, and case file set-up of juvenile probation cases and selected general and application information technology controls as they relate to Probation s financial system. Based on our audit, Probation s internal controls over its books and accounts relating to juveniles are generally adequate and effective to ensure management s goals and objectives are accomplished in accordance with Chapter 2, Section 275(b) of the Welfare and Institutions Code. Recommendation: There were no recommendations from this audit. Page 6 of 6