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HomeMy WebLinkAboutAgenda Report - November 2, 1983 (20)0 i 2 CITY COUNCIL MEETING NOVEMBER 2, 1983 EMS1 WHINNY Following introduction of the matter by City Manager Claves, N ACRI'1M LEIrM Council, on motion of CounciI Member Pinkerton, Murphy FCR RM 30, 1983 second, received for filing the Ernst and Whinney Management RECEIVED FP. Letter - June 30, 1983. FILING r R a tr: E`v �,wt& ' R ,! f. ! ' i y Ntt✓ 5�� r R xs_ E`v �,wt& ' t . y Ntt✓ 5�� F � ; A � < F � ; A � '� • t. �T�•ka i k F P 4 MEMORANDUM TO: Henry A. Glaves, Jr. City 'manager- FROM: Robert H. Holm Finance Director DATE: October 13, 1983 SUBJECT: Ernst & Whinney Management Letter - June 30, 1983 I have discussed the management letter with E & W and Finance Dept. staff and wish.to offer the following comments. PRIOR YEAR ITEMS E & W's management letter of last year recommended we strengthen controls in the areas of payroll, budgeting, data processing and the protection of marketable securities. I am pleased to report we have taken care of all of :hese items. CASH RECEIPTS E & W is recommending the use of cash registers to record -all cash receipts: We are.looking into electronic cash registers that interface with oar`System 34 computer and I will give you a full report as soon as I can gather all the data. CASH DISBURSEMENTS E & W is recommending the check signature plate be picked up by myself, the Assistant Finance Director or the Senior Accountant. I concur with --their recon*endation and staff has initiated this procedure. AUTHORUATNM OF PAYROLL DEDUCTIONS In tba past, we al�owed the current Presidents of the several employee ass*4iations to give us a list of their members and an amount to deduct for dues with the understanding each association maintain a card file with an employee's signature. We will now contact each Association and ask.that these cards be turned over to our department. GRANTS E & W recommends our office be notified whenever grants are applied for and that quarterly reconciliations be made b:ttween the Grantors records anA the City. I concur with their recommendation and ask that each department notify our office when applications for grants are submitted. Our office will examine the expenditure reports on a monthly 'iasis for grant expenditures and follow up with the'respective`departments to see that claims for reimbursement are filed. Our office will send quarterly confirmation requests to the Grantors to enable us to reconcile the balances due the City. INVESTMENTS E & W recommends someone besides myself maintain the subsidiary records on each inveFtment. I concur and when I return from a weekend treasury management se 'nar, sponsored by the California Municipal Treasurers Association in November, I will have a procedure established to take care of this. Ernst & Whinney The City Council City of Lodi Lodi, California SSS Capitol Mall, Suite 650 Sacramento, California 95814 916;447-3237 We have examined the financial statements of the City of Lodi for the year ended June 30, 1983 and have issued our report thereon dated September 14, 1983. As part of our examination, we made a study and evaluation of the system of internal accounting control only to the extent we considered necessary to determine the nature, timing, and extent of our auditing procedures. Our study and evaluation made for the limited purpose described above would not necessarily disclose all material weaknesses in the system. Accordingly, we do not express an opinion on the system of internal accounting control of the City of Lodi taken as a whole. However, our study and evaluation disclosed no condition that we believed to be a material weakness at June 30, 1983. The following suggestions are submitted to assist in improving procedures and controls. This report is intended solely for the use of the City Council. 44.� VL Vj 11� Sacramento, California September 14, 1983 Prior Year Items In previous management letters, we commented upon areas in which we believed internal accounting controls could be strengthened. Upon considering the City's response to our management letters, we believe that these items have been adequately addressed and would like to commend the City on their efforts to improve internal controls.. Cash Receipts Of all assets hald by the City, cash is the most liquid and susceptible to loss from employee error or misappropriation. Therefore, the City's system of internal controls must be particularly strong in this area. We believe controls over cash receipts could be strengthened by implementing the following procedures in the collection department. We recommend that the City use cash registers to record all cash receipts, whether remitted through the mail or directly from customers. Each day, the cash register total should be agreed to the daily deposit by an employee who does not handle the cash receipts. This will establish segregation of duties, control and accountibility over the receipts. We believe that with the City's growth, these procedures will result in improved operational efficiency and stronger internal controls over cash. Cash Disbursements During our examination, we noted that the payroll and accounts payable clerks have access to the check signing machine signature plate. We recommend that duties be segregated so that occess to this plate be limited to the Director and Assistant Director of Finance and the senior accountant. Authorization of Payroll Deductions Authorization for some payroll deductions are not being retained by the City. We recommend that these authorizations be included in the personnel files. While we realize that this would require extra time by the City, we believe that the City should protect its interests by maintaining a record of payroll deductions as authorized by the employee. Grants The City has become eligible to receive money under an increasing number of grants. We recognize this as an important source of funds and support the City in its efforts to obtain all available grants. In order for the City to receive the maximum benefit from these funds, we recommend that the following procedures be implemented. Request for reimbursement of expenditures under grants should be filed as soon as possible, and the Department of Finance should be notified of all such requests. In addition, we recommend that the Department be informed of new grant applications subaitted to grantors. The City should prepare quarterly reconciliations between its records and those of the grantor. These procedures will improve cash flow and resolve on a timely basis differences which could arise between the City's and the grantor's records. Investments During the past few years, the City has more closely monitored its investment activities with the objective of maximizing interest revenue and therefore has entered into an increasing number of investment transactions. Currently, the City maintains a subsidiary ledger to record all invest►aent transactions which is the basis for posting to the general ledger. We recommend that an employee independent of the -� investing activity maintain the investment subsidiary ledger. i- -2- E - CITYCOUNCIL HENRY A. GLAVES, If. City Manor EVELYN M. OLSON, Mayor CITY OF L o D JOHN R. (Randy) SNIDER ALICE M. REIMC Mayor Pro Tempore city Clerk CITU HALL. 221 WEST PINE STREET ROBERT G. MURPHY POST OFFICE BOX 320 RONALD A& STEIN JAMES W. PINKERTON• p, LODI. CALIFORNIA 95241 City Atlw n" FRED M. RE ID (209) 334-5634 Noventer 7. 1983 Ernst a %himwy 555 Capital Mall Suite 650 Sacramento, Ck 95814 Gentlemen: This letter will confine the action taken by the Lodi City C D mc1l at its regular meeting of Novenber 2, 1983 whereby Council, by motion action. received for filing the Ernst and Whinney M agement Letter - June 30, 1983. Should you have any questions regarding this matter, please do not hesistate to call. Very truly yours, Alice M. Re City Clerk ANR:ii The City Council City of Lodi Lodi, California We have examined the financial statements of the City of Lodi for the year ended June 30, 1983 and have issued our report thereon dated September 14, 1983. As part of our examination, we made a study and evaluation of the system of internal accounting control only to the extent we considered necessary to determine the nature, timing, and extent of our auditing procedures. Our study and evaluation made for the limited purpose described above would not necessarily disclose all material weaknesses is the system. M_cordingly, we do not express an opinion on the system of internal accounting control of the City of Lodi taken as a whole. However, our r study and evaluation disclosed no condition that we believed to be a material weakness at June 30, 1983. The following suggestions are submitted to assist in improving procedures and controls. This report is intended solely for the use of the City Council. Sscra.:-onto, California September 14, 1983 Prior Year items In previous management letters, we commented upon areas in which we believed internal accounting controls could be strengthened. Upon considering the City's response to our management letters, we believe that these items have been adequately addressed and would like to commend the City on their efforts to improve internal controls. Cash Receipts t i Of all assets held by the City, cash is the most liquid and susceptible to loss from employee error or misappropriation. Therefore, the City's system of internal controls must be particularly strong in this area. We believe controls over cash receipts could be strengthened by implementing the following procedures in the collection department. i We recommend that the City use cash registers to record all cash receipts, whether remitted through the mail or directly from customers. Each day, the cash register total should be agreed to the daily deposit by an employee who does not handle the cash receipts. This will establish segregation of duties, control and accountability over the receipts. We believe that with the City's growth, these procedures will result in improved operational efficiency and stronger internal controls over cash. Cash Disbursements Duringour examination we noted that the roll and accounts able P8Y payable clerks have access to the check signing machine signature plate. We recommend that duties be segregated so that access to this plate be limited to the Director and Assistant Director of Finance and the senior accountant. 3 Authorization of Payroll Deductions Authorization for some payroll deductions are not being retained by the City. We recommend that these authorizations be included in the personnel files. While we realize that this would require extra time by the City, we believe that the City should protect its interests by maintaining a record of payroll deductions as authorized by the employee. Grants The City has become eligible to receive money under an increasing number of grants. We recognize this as an important source of funds and support the City in its efforts to obtain all available grants. In order for the City to receive the maximum benefit from these funds, we recommend that the following procedures be implemented. Request for reimbursement of expenditures under grants should be filed as soon as possible, and the Department of Finance should be notified of all such requests. In addition, we recommend that the Department be informed of new grant applications submitted to grantors. The City should prepare quarterly reconciliations between its records and those of the grantor. These procedures will improve cash flow and resolve on a timely basis differences which could arise between the City's and the grantor's records. Investments During the past few years, the City has more closely monitored its investment activities with the objective of maximizing interest revenue and therefore has entered into an increasing number of investment transactions. Currently, the City maintains a subsidiary ledger to record all investment transactions which is the basis for posting to the general ledger. We recommend that an employee independent of the investing activity maintain the investment subsidiary ledger. -2-