Report on and Audit of the Disbursements Process fo the City of Tallahassee

Auditing

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• Publié par: Uproi
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• Langue: English

Extrait

REPORT ON AN AUDIT

OF THE DISBURSEMENTS PROCESS

 

AUDIT PROJECT #9802  

 

 

 

Roberta McManus, CPA, CIA, CGFO Interim City Auditor   Joanne Becknell, CIA, CGFO Acting Senior Auditor   Gordon R. Klein, CISA, CGFO Auditor II Auditor-In-Charge    

AUDITING DEPARTMENT

M a r c h 1 9 9 9

 

 

Table of Contents

 

TABLE OF CONTENTS

 

I. SCOPE AND OBJECTIVES............................................................................................1  II. METHODOLOGY ..........................................................................................................2 III. BACKGROUND............................................................................................................5  IV. CONDITION STATEMENTS AND MANAGEMENT ACTION PLANS ...............10 A. The City should strengthen controls to prevent duplicate payments ............10

1. Valid receiving reports.............................................................................13 2. Documentation authorizing payments......................................................14 3. Cancellation of paid invoices...................................................................15 4. Detailed requisitions/POs.........................................................................16 5. Invoice routing .........................................................................................17 B. The City should strengthen internal controls to ensure the integrity of financial reporting ........................................................................................20 1. Proper account coding..............................................................................20 2. Retention of support for payments...........................................................21 C. Payments for the receipt of services pursuant to a contract should be requested and made using the contract payment forms and process............22 V. EXIT CONFERENCE..................................................................................................24   

 

Audit of the Disbursements Process

 

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Scope and Objectives & Methodology

I. SCOPE AND OBJECTIVES

 

Our 1998 audit work plan included a review of the Citys disbursements process. Our primary objectives were to determine whether 1) disbursements made by the City were appropriately authorized; 2) goods/services paid for were actually received; and 3) an adequate system of internal controls is in place to minimize the risk of loss due to waste, fraud and abuse. The audit period was May 1997 to March 1998. In order to perform certain tests, we also examined transactions spanning a longer period of time (Section II. Methodology).

We focused our review on those disbursements processed by the Accounts Payable section of the Department of Management and Administration (DMA). Payroll transactions, refunds of deposits to utility customers, and investment transactions were not included in this review.

It is important to note that the Citys internal controls over the procurement/disbursement cycle are highly dependent upon proper system security within the FMS and Purchasing systems. In our Report on Financial Controls Review in the Police Department (#9846) we evaluated system security and authorizations of the Purchasing System as it related to Tallahassee Police Department (TPD) cost centers only. We identified several significant security weaknesses and resultant risks which were reported to DMA management for corrective action. We did not evaluate system security in this audit.

Audit of the Disbursements Process

 

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Scope and Objectives & Methodology

II. METHODOLOGY

 

Our review was conducted in accordance with generally accepted government accounting standards and accordingly included such tests of the records and such other auditing procedures as we considered necessary under the circumstances.

We completed a profile of the disbursement process by interviewing key staff, documenting the process, reviewing operating/procedures manuals, reviewing prior audit findings, and confirming all results with the audit liaisons. The overall analysis provided us with the basis for selecting the areas warranting more detailed testing and/or analysis. Periodic progress meetings were held with the audit liaisons. These meetings serve to inform the program administrators of the audit progress and as a discussion forum which enhances the effectiveness of the audit.

We randomly selected 113 disbursements (checks and wire transfers, generically referred to as Checks) made between May of 1997 and March of 1998. Twenty (20) of these were selected from TPD cost centers as part of the Financial Controls Review in the Police Department (#9846). We have chosen to incorporate and report the results of those tests within this audit report.

We reviewed the Checks and supporting documentation for compliance with City policies and procedures. This review included, but was not limited to, tests (Attribute Tests) to ensure that:

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 funds for the check were appropriated by the City Commission,

Audit of the Disbursements Process  

Scope and Objectives & Methodology

 release of the funds was authorized by the appropriate level of management,   ce was properly delivered,  the invoi  the check was for the correct amount and to the correct recipient,   s properly canceled, and  the invoice wa  the disbursement was accounted for properly.

 

Our samples comprised 4.4% of the dollar amount and 0.3% of the volume of checks issued during the audit period and consisted of:

Number of Disbursed pursuant to Total dollar Checks amount 58 Purchase orders $ 249,499.99 32 Check requests $ 11,777,139.59 14 Travel advance/Reimbursement request $ 4,845.25 2 Contract payment request $ 113,112.88 5 Interface with Fleet Managements FASTER $ 5,401.57 system 2 Payments directly from invoices $ 1,571.00 Total - 113 $12,151,570.28 We chose not to test transactions from the Citys payroll system, investment or debt management activities, or those resulting from the interface with the Citys Customer Information System (CIS).

We applied additional audit procedures to test for duplicate payments. We downloaded all paid disbursement vouchers for the 19-month period from October 1996 through April 1998 (Total Population) in order to perform the tests (Duplicate Payment Tests). We aggregated the total number of checks issued by vendor and selected the top 25 vendors for the Duplicate Payments Test. We designed our procedures to detect whether duplicate payments were made to these vendors. The current systems used to process disbursements do not contain the

Audit of the Disbursements Process

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Scope and Objectives & Methodology

 

 

functionality to compare the vendor invoice number against previous payments.

Based on the results of that review of the top 25, we expanded our tests to include

the total population of paid vouchers.

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Audit of the Disbursements Process  

Background

III. BACKGROUND

 

 

This audit was conducted under the authority of Section 33 of the Tallahassee City Charter and in accordance with our audit work plan. Our review was limited to those disbursements made by check or wire transfer from the Citys general checking account (Operating Account) through the accounts payable process.

In planning our procedures for this audit, we examined the volume and dollar amounts disbursed by the City for the 14-month period from January 1, 1997, through February 28, 1998. During this period, $328 million was disbursed by the City from its Operating Account. This was accomplished through 53,396 separate checks, wires, or electronic fund transfer (EFT) transactions.

As seen in Exhibit 1, a significant percentage of the volume of these transactions (40%) represent individual disbursements under $100, while the majority of the disbursements (55%) were between $100 and $10,000. Only 5% of the disbursements were for amounts in excess of $10,000 and only 2% for amounts in excess of $50,000.

Audit of the Disbursements Process

 

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Background Exhibit 1 - Percentage of Checks Disbursed by Volume

Between $100 and $10K 55%

Between $10K and $50K 3% Over $50K 2%

Less Than $100 40%

   All checks distributed from the Citys operating account from January 1997 through February 1998 .

As shown in Exhibit 2, those checks over $50,000 (2% of the volume) represent 78% of the dollar amount of monies disbursed. Those disbursements between $100 and $10,000 and those between $10,000 and $50,000 each represent 11% of the dollar amounts disbursed.

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Audit of the Disbursements Process  

Background Exhibit 2 - Percentage of Checks Disbursed by Dollar Amount

 

Over $50K 78%

Less Than $100 0% Between $100 and $10K 11%

Between $10K and $50K 11%

All checks distributed from the Citys operating account from January 1997 through February 1998 .

 

There are six general processes by which disbursements from the Operating Account are requested and processed:  Purchase Order payments  -- disbursement of funds to pay for items acquired pursuant to a properly authorized and approved City Purchase Order.   equest  -- disbursement of funds for limited purposes  Check R pursuant to a check request from the departments.  Contract Payment Request  -- disbursement of funds against a contract pursuant to a contract pay request from the contract manager.    s,s for travel exp  Travel Check  -- disbursement of fund ense advance or reimbursement pursuant to a Travel Advance/ Reimbursement Request form from the department. Audit of the Disbursements Process

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