HomeMy WebLinkAbout05.b. Presentation of internal audit report on purchasing card transactions from January 1, 2017 through December 31, 2017 Page 1 of 8
Item 5.b.
Central Contra Costa Sanitary District
May 21, 2018
TO: FINANCE COMMITTEE
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: PRESENTATION OF INTERNAL AUDIT REPORT ON PURCHASING CARD
TRANSACTIONS FROM JANUARY 1, 2017 THROUGH DECEMBER 31, 2017
(INVITED GUEST.- TIM CUE OF MAZE &ASSOCIATES)
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 is
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
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for the sufficiency of the procedures since they best understand their own needs. I n an engagement
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
After review of the report by the Finance Committee, the report is to be presented to the Board of
Directors. 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.
Strategic Plan re-In
GOAL ONE: Provide Exceptional Customer Service
Strategy 2- Improve Interdepartmental Collaboration
GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage Costs
GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability
Strategy 2- Evaluate Business Processes and Optimize Business Operations
ATTACHMENTS:
1. Maze Report on P-Card Transactions 05-2018
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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
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This Page Left Intentionally Blank
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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
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-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.
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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.
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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
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