Loading...
HomeMy WebLinkAbout05. Receive Internal Audit report on 2017 Purchasing Card Transactions Page 1 of 8 Item 5. -- I Central Contra Costa Sanitary District June 7, 2018 TO: HONORABLE BOARD OF DIRECTORS FROM: MAZE &ASSOCIATES ACCOUNTANCY CORPORATION REVIEWED BY: THERESA NIDETZ, INTERNALAUDITOR PHILIP R. LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION ANN SASAKI, DEPUTY GENERAL MANAGER ROGER S. BAILEY, GENERAL MANAGER SUBJECT: RECEIVE INTERNAL AUDIT REPORT ON PURCHASING CARD TRANSACTIONS FOR CALENDAR YEAR 2017 Attached please find a completed report on Purchasing Card Transactions for calendar year 2017, conducted as part of Central San's internal audit work program for Fiscal Year (FY) 2017-18. The report was routed through the Finance Committee given the subject matter of the report, and the Finance Committee's charter to address: • Appropriate levels of internal controls • Oversee proper use of financial resources • Review expenditures The report was prepared by Maze &Associates, Central San's external financial statement auditor. Maze &Associates and other outside accounting firms may conduct work as part of Central San's internal audit program, in addition to the work performed by Central San's directly retained internal auditor. This work was conducted as an "agreed-upon procedures" engagement, which is defined in the professional standards promulgated by the American I nstitute of Certified Public Accountants (Al CPA) as follows: AT Section 201:03. An agreed-upon procedures engagement is one in which a practitioner is engaged by a client to issue a report of findings based on specific procedures performed on subject matter. The client engages the practitioner to assist specified parties in evaluating subject matter or an assertion as a result of a need or needs of the specified parties. Because the specified parties require that findings be independently derived, the services of a practitioner are obtained to perform procedures and report his or her findings. The specified parties and the practitioner agree upon the procedures to be performed by the practitioner that the specified parties believe are appropriate. Because the needs of the specified parties may vary widely, the nature, timing, and extent of the agreed-upon procedures may vary as well; consequently, the specified parties assume responsibility for the sufficiency of the procedures since they best understand their own needs. I n an engagement June 7, 2018 Regular Board Meeting Agenda Packet- Page 58 of 446 Page 2 of 8 performed under this section, the practitioner does not perform an examination or a review... and does not provide an opinion or negative assurance. Instead, the practitioner's report on agreed-upon procedures should be in the form of procedures and findings. The scope of the report covered Purchasing Card (P-Card)transactions for calendar year 2017. The format of the report generally follows the standard used for District issued internal audit reports, but differs slightly given that it was an agreed upon procedures report and Certified Public Accounting (CPA)firms performing such work do not use the term "audit" in connection with such work: District Issued Internal Audit External CPA Issued "Agreed Upon Procedures" Report Heading Report Heading • Audit Objective • Objective • Background • Background • Audit Scope and Limitations • Procedures & Methodology • Methodology • Summary • Findings / Management Response • Findings / Management Response The report was received and discussed by the Finance Committee on May 21, 2018. One additional internal audit report (Payroll Controls) is planned for delivery to the Board during the current fiscal year, as well as adoption of an internal audit plan for FY 2018-19. The Board is being asked to receive this audit report. GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage Costs ATTACHMENTS: 1. Maze Report on P-Card Transactions 05-2018 June 7, 2018 Regular Board Meeting Agenda Packet- Page 59 of 446 Page 3 of 8 INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED UPON PROCEDURES FOR THE CENTRAL CONTRA COSTA SANITARY DISTRICT IN REGARDS TO PROCUREMENT CARD TRANSACTIONS FOR THE CALENDAR YEAR ENDED DECEMBER 31,2017 June 7, 2018 Regular Board Meeting Agenda Packet- Page 60 of 446 Page 4 of 8 This Page Left Intentionally Blank June 7, 2018 Regular Board Meeting Agenda Packet- Page 61 of 446 Page 5 of 8 N: M& ASAZTESE Independent Accountant's Report on Applying Agreed-Upon Procedures for the Central Contra Costa Sanitary District in Regards to Procurement Card Transactions for the Calendar Year Ended December 31,2017 To the Board of Directors of the Central Contra Costa Sanitary District Martinez, California Objective We have performed the procedures described below, which were agreed to by the Central Contra Costa Sanitary District (District), to assist you in assessing whether procurement card transactions made by the District were in compliance with its policies and procedures during the calendar year 2017. The District's management is responsible for the District's accounting records and their supporting documents, compliance with its policies and procedures, and the design of its internal control structure. The sufficiency of these procedures is solely the responsibility of the District. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Background The District has 153 procurement cards (P-Cards) issued by the purchasing department to various staff. The purpose of this program is to provide a more efficient, cost effective method of obtaining and paying for large volume low dollar supplies and materials used by the District. A formal"Procurement Card User Guide" dated April 24, 2015 outlines the procedures and processes in which cardholders are to adhere to when making purchases with their procurement cards. We noted the following key controls and permissions during our review of the user guide and during our interviews with Purchasing and Finance Department Staff. -Cardholders are required to reconcile monthly P-Card statements with their Procurement Transaction Logs and attach all invoices, credit slips, receipts and any other supporting documents. Cardholders then sign the monthly statement and transaction log and provide all documents to their supervisor. -Cardholders' supervisors are required to review the monthly P-Card statements and transaction log and compare with the attached supporting documents. Supervisors also verify to ensure the appropriateness of each purchase. Once the review is complete supervisors are to sign the statement and transaction log and forward to the Finance Department for payment. -Finance Department staff will perform a second review to ensure that all documents have been provided for all purchases on the statement and transaction log. They will also ensure that a supervisor has approved and signed off on the statement and transaction log before processing the statement and making the payment. T 925.930.0902 Accountancy Corporation F 925.930.0135 3478 Buskirk Avenue,Suite 215 a mazeamazeassociates.com Pleasant Hill,CA 94523 w maxeassociates.com June 7, 2018 Regular Board Meeting Agenda Packet- Page 62 of 446 Page 6 of 8 -Training is provided to employees prior to providing the P-Card to the cardholder. -Purchasing performs internal audits and monitoring of purchases to observe potential split transactions. -The P-Cards automatically exclude specific high risk or cash-related transactions so that any attempts will be automatically declined. -Purchasing has a process in place to ensure that P-Cards are returned along with keys and badges when an employee leaves or retires. Procedures &Methodology The procedures are as follows: 1) Inquired with procurement card program administration (Purchasing Department) on current procedures and policies regarding procurement card transactions. 2) Inquired with accounts payable staff(Finance Department)on current procedures and policies regarding procurement card transactions. 3) Obtained and reviewed the Central Contra Costa Sanitary District "Procurement Card User Guide"dated April 24,2015. 4) Obtained a"Vendor Activity Listing" for procurement card transactions for the calendar year 2017. From this listing we noted a total population totaling $1.4 million comprising approximately 4,200 transactions and selected 60 procurement card purchases totaling approximately $70,000 for testing. In selecting the transactions, we ensured a representative sample by selecting purchases based on different cardholders, dates, vendors and dollar amounts. For these 60 transactions, we tested compliance with policies and procedures noted in #3, verified that there was proper supporting documentation and approval for each transaction, and determined that use of a procurement card was a compliant method of purchase for the specific transaction based on the item's description and amount. Findings &Recommendations While no significant exceptions were noted in the sample selected, we noted the following during our performance of the procedures noted above: Finding 1: Timely Submittal of Procurement Card Statement& Backup to Finance Department Per review of the "Procurement Card User Guide" dated April 24, 2015, it states that all reconciled and approved procurement card statements with backup receipts are due to Accounting by the 10"` day of the month following the statement closing date. During our testing of 60 procurement card transactions, we noted two transactions in which backup documentation was not provided to the Finance department within the time period stated above. Upon further inquiry with Finance Staff it was noted that payment for these transactions was held until the backup was provided. We recommend that the District ensure that all cardholders submit procurement card statements and backup within the time period established in the user guide so that payment of bills can be made timely by the Finance Department. June 7, 2018 Regular Board Meeting Agenda Packet- Page 63 of 446 Page 7 of 8 Management's Response: Through February 2017, the District held payment to the vendor until Pcard holders submitted required documentation to Accounts Payable. Accounts Payable informed users that Pcard statements and logs are to be turned in by the 10th of the following month. Accounts Payable also sent reminders and followed up with card holders and their supervisor for those that were not turned in by the end of the p-card process prior to the p-card bill payment. This was to encourage prompt submission of the required documentation to Accounts Payable, and to ensure that billed charges were valid and approved. Because of a few individuals who are late due to unavoidable issues (out of the office, in the field, vacation, sick, etc.), with the potential for the District to incur late fees, a process change was implemented. The District no longer withholds payment until the documentation is provided; Accounts Payable started paying the bills in full in February 2018. Reconciling and collecting required coding from the p-card users still takes place, but does not hold up payment of the bill. Additionally, a review of the entire p-card reconciliation and payment process has been commenced, as the current process is viewed as a very manual and time consuming process. Finding 2: Submittal of Procurement Card Transaction Log Per review of the "Procurement Card User Guide" dated April 24, 2015, current procedures are that cardholders record purchases on the Procurement Card Transaction Log. These transaction logs, along with statements and supporting documents, are then provided to supervisors for approval and Finance for processing. During our testing of 60 procurement card transactions, we noted two transactions in which a Procurement Card Transaction Log was not used. Upon further inquiry with program administration and Finance, it appears that if the purchases for the statement period are minimal and coded to the same expense account some cardholders will pass on using a transaction log and instead just note the account number on the credit card statement. We recommend that the District ensure that Procurement Card Transaction Logs are being used by all cardholders. Management's Response: Management agrees with the finding, and will require the use of the Procurement Card Transaction Logs in all instances. With this said, it has been only one p-card holder who does not regularly submit the Transaction Log,typically when the transactions are limited to one page. It is agreed that for consistency, all users should submit the Transaction Log. With that said, even without the Procurement Card Transaction Log, evidence of approval of the transactions by the supervisor is provided as the p-card statement has 2 signature lines (one for purchaser and 2nd for the supervisor to sign off on), and the supervisor has signed off in the instances where the Procurement Card Transaction Log was not provided. All statements (so all purchases) do require supervisor sign off. ******************** June 7, 2018 Regular Board Meeting Agenda Packet- Page 64 of 446 Page 8 of 8 This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion on whether procurement card transactions made by the District were in compliance with its policies and procedures during the calendar year 2017. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of District management and is not intended to be used and should not be used by anyone other than the specified parties; however, this restriction is not intended to limit the distribution of this report,which is a matter of public record. 34 Rf k� Pleasant Hill, California May 8,2018 June 7, 2018 Regular Board Meeting Agenda Packet- Page 65 of 446