The Inspector General’s Office (“IGO”) performed an audit of the cash handling and inventory

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• Langue: English

Extrait

OFFICE OF THE INSPECTOR GENERAL
City of Chicago

















REPORT OF THE INSPECTOR GENERAL'S OFFICE:

*************************

IGO AUDIT OF THE OFFICE OF THE CITY CLERK
CICERO/ARCHER SOUTH SIDE SATELLITE OFFICE













NOVEMBER 2010
866-IG-TIPLINE (866-448-4754)

www.chicagoinspectorgeneral.org IGO File# 07-2021 11/19/10


TABLE OF CONTENTS

AUDITOR’S REPORT ...............................................................................................................................................2
EXECUTIVE SUMMARY .........................................................................................................................................3
BACKGROUND..........................................................................................................................................................6
SCOPE, OBJECTIVES, AND PURPOSE.................................................................................................................9
AUDIT FINDINGS AND RECOMMENDATIONS...............................................................................................10
FINDING 08-01: UNACCOUNTED FOR STICKERS AND LACK OF INVENTORY RECONCILIATION IN THE 2007-2008
STICKER YEAR .......................................................................................................................................................10
FINDING 08-02: FINANCIAL RECORDS NOT PROPERLY MAINTAINED.................................................................12
F08-03: INVENTORY PROCEDURES WERE WEAK AND AN INVENTORY RECONCILIATION WAS NOT
PERFORMED............................14
FINDING 08-04: INCOMPATIBLE FUNCTIONS PERFORMED BY ONE INDIVIDUAL................................................16
F08-05: OVERALL WRITTEN POLICIES AND PROCEDURES WERE DEFICIENT.......................................18
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AUDITOR’S REPORT

We have completed an audit of the Office of the City Clerk Cicero/Archer South Side Satellite
Office. The audit reviewed cash handling for the periods of January 1, 2006 through December
31, 2006 and January 1, 2008 through December 31, 2008, and further analysis of vehicle sticker
inventories for the period of June 1, 2007 through May 31, 2008.

The authority to perform such an audit is established in the City of Chicago Municipal Code § 2-
56-030 which states that the Inspector General’s Office has the power and duty to review the
programs of City government in order to identify any inefficiencies, waste and potential for
misconduct, and to promote economy, efficiency, effectiveness and integrity in the
administration of City programs and operations.

Our purpose was to review, test, and evaluate activities performed to determine whether the
Cicero/Archer Clerk’s Office had effective and efficient operations and internal controls as well
as adequate policies and procedures. City Clerk management is responsible for establishing and
monitoring effective internal controls over the cash handling and sticker inventory. We also
evaluated whether controls effectively prevented theft, loss, waste, and misconduct.

We conducted this audit in accordance with generally accepted Government Auditing Standards
issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our audit
objectives.

Based upon the results of our audit, we determined that the Clerk’s Office’s application of
internal controls was not adequate to ensure efficient and effective management of the cash
handling procedures until late in 2008 when a new point of sales system was installed and a new
Program Manager was put in place. However, internal controls over sticker inventory
procedures were not adequate throughout the entire audit period. The Clerk’s Office planned to
implement a new electronic inventory system for the 2010 – 2011 sticker year which was not
tested as it was beyond the audit period.

We identified significant deficiencies in internal controls over cash handling and the sticker
inventory process. A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the entity’s ability to effectively carry out the function or
program being audited. We cannot be assured that the controls in place would prevent theft,
loss, waste, and misconduct at the Cicero/Archer Office.

We would like to thank the Office of the City Clerk’s management and staff for their cooperation
during the audit. Their assistance contributed significantly to the successful completion of the
audit.

Wendy Funk
Chief Auditor
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EXECUTIVE SUMMARY

The Inspector General’s Office (“IGO”) performed an audit of the 2006 and 2008 calendar years’
cash handling procedures and the 2007-2008 inventory process of the Office of the City Clerk’s
1(“OCC”) satellite office located at 5674 S. Archer Avenue, Chicago, IL (“Cicero/Archer”) The
audit was prompted by evidence developed in a since-closed IGO investigation revealing
significant control issues in the operation of the Clerk’s Office. That investigation was initiated
on the basis of a referral from the City Clerk. In making that investigative referral, the Clerk
noted concerns of more systemic irregularities at the Cicero/Archer location originating under
the administration of a prior City Clerk and invited independent IGO inquiry into those broader
suspected irregularities.

The Clerk’s Office sells over one million vehicle city stickers to residents of the City of Chicago.
The purpose of the audit was to review, test, and evaluate cash handling and inventory
procedures to determine whether the Clerk’s Office had effective and efficient operations and
internal controls, as well as adequate policies and procedures in place. We also evaluated
whether controls effectively prevented theft, loss, waste, and potential for mishandling. To our
knowledge, this is the first comprehensive operational audit of the City Clerk’s Cicero/Archer
satellite office.

Audit steps included:
 interviewing and observing office management and employees to document process flow;
 determining whether cash and receipts were properly safeguarded throughout the process
from collection to deposit;
 determining whether daily receipts and daily deposits agreed to daily sales records, and
that the reconciliation process was performed by an employee independent of the receipt,
recording, and deposit processes;
 determining whether the appropriate inventory process of all items received, sold, and
unsold was properly maintained; and
 reviewing the master inventory to ensure inventory was appropriately distributed.

Based upon the results of our audit, we determined that for the 2006 calendar year and 2007-
2008 sticker year, the Cicero/Archer office’s application of internal controls was not adequate to
ensure efficient and effective management of the office. We found deficiencies in most of
Cicero/Archer’s internal controls relating to cash handling and inventory. As a result, we cannot
be assured that inventory and/or cash were properly safeguarded against theft or loss.

We found, among others, the following deficiencies in internal controls and resulting negative
consequences:


1 In August 2008, the Cicero/Archer office was moved to its current location at 5674 S. Archer, from 5301 S.
Cicero. To avoid confusion, we will refer to both offices as the Cicero/Archer office.
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 Weak inventory procedures and lack of inventory reconciliation. Sticker inventory
requested from the vault was not maintained by one set, standardized process, thus
allowing for and resulting in inconsistencies. Inventory count sheets and the master
inventory were inconsistent. For example, items scheduled to be sent to one location
were sometimes sent to another. A sticker analysis performed for the 2007-2008 sticker
year revealed 19,786 stickers, valued at $1,756,110 that were initially unaccounted for,
and had not been reconciled, reviewed or investigated by the Clerk’s Office until
questioned by the auditors. Further inquiry identified 18,406 of those stickers as having
actually been sold. Therefore, of the 19,786 stickers that had not been reconciled, 1,380
of them remain missing, with a corresponding pot