DEPARTMENT OF REVENUE AND FINANCE DIVISION OF BANKING AND RECEIVABLES WIRE TRANSFERS AND CASH MANAGEMENT AUDIT JANUARY 15, 2013

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1 DEPARTMENT OF REVENUE AND FINANCE DIVISION OF BANKING AND RECEIVABLES WIRE TRANSFERS AND CASH MANAGEMENT AUDIT JANUARY 15, 2013

2 CITY OF TAMPA Bob Buckhorn, Mayor Internal Audit Department Roger Strout, Internal Audit Director January 15, 2013 Honorable Bob Buckhorn Mayor, City of Tampa 1 City Hall Plaza Tampa, Florida RE: Wire Transfers and Cash Management, Audit Dear Mayor Buckhorn: Attached is the Internal Audit Department's report on Wire Transfers and Cash Management, Audit The Revenue and Finance s Division of Banking and Receivables has already taken positive actions in response to our recommendations. We thank the management and staff of Revenue and Finance for their cooperation and assistance during this audit. Sincerely, /s/ Roger Strout Roger Strout Internal Audit Director cc: Santiago Corrada, Chief of Staff Sonya Little, Chief Financial Officer Lee Huffstutler, Chief Accountant 306 E. Jackson Street, 5N Tampa, Florida (813) FAX: (813)

3 DEPARTMENT OF REVENUE AND FINANCE DIVISION OF BANKING AND RECEIVABLES WIRE TRANSFERS AND CASH MANAGEMENT AUDIT JANUARY 15, 2013 /s/ Vivian N Walker Senior Auditor /s/ Roger A. Strout Audit Director

4 DEPARTMENT OF REVENUE AND FINANCE DIVISION OF BANKING AND RECEIVABLES WIRE TRANSFERS AND CASH MANAGEMENT AUDIT BACKGROUND The City of Tampa (City) participates in an active cash management program in order to maximize investment returns with a minimum of risk or loss of liquidity. Pursuant to the City charter, currently, the City s investment portfolio is comprised of United States Treasury Notes. Maturity of the investments must be timed to coincide with expected expenditures. Based on the types of securities purchased, there is no physical document produced and are therefore recorded as a book entry in the City s safekeeping account maintained by the custodian, which is the Bank of America. The City of Tampa currently utilizes the Pooled Cash account at Bank of America for all investment transactions by means of wires or internal bank transfers. Numerous other routine transfers between City accounts or other governments are also done by wire. The City classifies wires as either auto-transfer, repetitive or non-repetitive. Auto-transfer wires are for transfers from a City account to another City account within the same bank. Nonrepetitive wires require a secondary independent authorization from the Chief Accountant. Repetitive wires are recorded in a standard template and include the same account information as other wires. For repetitive wires, the only change is the amount of the wire. As of September 30, 2012, the City s investment portfolio was comprised 100% of U S Treasury Notes and the market value totaled more than $495 million. STATISTICS

5 STATEMENT OF OBJECTIVES This audit was conducted in accordance with the Internal Audit Department's FY12 Audit Agenda. The objectives of this audit were to ensure that: 1. Outgoing wire transfer requests were properly approved and recorded in the general ledger in a timely manner. 2. Incoming wire transfer credits complied with instrument instructions and were recorded timely in the general ledger. 3. Investments made during the audit period were in accordance with established criteria. 4. Collateral for investments were being held by approved institutions and were periodically inventoried or confirmed to ensure the assets were secure and accounted for. STATEMENT OF SCOPE This audit reviewed both wire transfers and non-pension related cash management activities for the period from October 1, 2010, through March 31, STATEMENT OF METHODOLOGY To achieve the audit s objectives, reliance was placed on computer-processed data generated through Bank of America's CashPro System. Based on a review of the system controls, the data was determined to be reliable. To achieve the objectives, documentation to support wire transfers processed successfully during the audit period was reviewed. This review included the original request documents, individuals initiating the requests, and the individuals approving the request. Additionally, testing involved a review of the timeliness between the date of the wire request and the date the transaction posted to the City of Tampa s financial system. STATEMENT OF AUDITING STANDARDS We conducted this performance audit in accordance with generally accepted government auditing standards. 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. AUDIT CONCLUSIONS Based upon the test work performed and the audit findings noted below, we conclude that: 1. Outgoing wire transfer requests were properly approved; however, they were not always recorded in the general ledger in a timely manner. 2. Incoming wire transfer credits could not be verified for compliance with instrument instructions and also were not always recorded timely in the general ledger. 2

6 3. Investments made during the audit period were in accordance with established criteria. 4. Collateral for investments were being held by approved institutions and were periodically inventoried or confirmed to ensure the assets were secure and accounted for. While the findings discussed below may not, individually or in the aggregate, significantly impair the operations of the Revenue & Finance Department, they do present risks that can be more effectively controlled. Before we completed our audit, Revenue & Finance personnel implemented some of the Internal Audit Department's recommendations. 3

7 OUTGOING WIRE TRANSACTIONS AUDIT ISSUE The process for issuance of outgoing wire transfers needs to be improved. OBSERVATIONS A sample of 40 outgoing wire transfers was reviewed to determine whether or not they were properly approved and recorded in the general ledger within a timely manner. The official documentation (financial resolution, purchase order, invoice, etc.) obtained provided the details for the issuance of the wire; however, 22 of the requestors were not identified as authorized signers for their department's accounts payable transactions. As part of our request for documentation supporting the journal entry to record the 40 sampled outgoing wires, we identified four transactions where the department issued a purchase order and the subsequent invoice to generate an actual check. Revenue and Finance staff indicated this was the method used to track activity by vendor for year-end reporting purposes. For one vendor (two transactions), the address for the vendor was the City of Tampa's Revenue and Finance office, which was intended to ensure that if the check was mailed in error, it would be received by the Accounts Payable Division of Revenue and Finance and not the vendor. CRITERIA A wire transfer is a method of payment and therefore should only be authorized by individuals designated by the Department Director. Additionally, to prevent duplication of payment, wire transfer activity should not be processed as traditional account payables through the Advanced Purchasing/Inventory Component (ADPIC) System. RISK DESCRIPTION The City could lose revenue if wire transfers were inappropriately directed to be sent by an individual not authorized to approve expenditures for the City of Tampa. RECOMMENDATION 1 Management should ensure those who are authorized to request the issuance of a wire transfer be consistent with those authorized to approve payment according to the City of Tampa's accounts payable policy. Management should re-evaluate the process that requires the issuance of a paper check when a wire transfer is the actual method of payment to the vendor. MANAGEMENT'S RESPONSE We agree. Banking will cross reference authorized signers for wires with the Accounts Payable authorized signature list to ensure requesting individuals are authorized to approve payments. Non-recurring wires are approved by the Chief Accountant. Wires that go through the off-cycle check process, obtain authorization via the purchase order process. 4

8 Banking will review the existing process which requires the issuance of a paper check when a wire transfer is the actual method of payment to the vendor. The current computer system will not record vendor 1099 and ADPICS information unless a paper check is generated. Therefore, under the current process an off-cycle paper check is generated in order to capture the required reporting information for tax purposes. This process is currently being reviewed during the ERP computer system upgrade implementation scheduled for May,

9 RECORDING WIRE TRANSFER ACTIVITY AUDIT ISSUE Wire transfer activity was not being recorded in the general ledger in a timely manner. Additionally, there were no records to support that the wire transfer followed the preestablished instructions. OBSERVATIONS A review of 40 outgoing and 25 incoming wire transfers was performed to determine if the transactions were posted to the general ledger in a timely manner. This review indicated that 26 of 65 (40%) of the applicable transfers did not post to the applicable general ledger account in a timely manner. The average number of business days that elapsed before posting was 18 days for outgoing transfers and 7 days for incoming transfers. Additionally, for the 25 incoming wire transfers, a review was performed to determine whether or not the transfer was due to an activity related to prior investments by the City. If the activity was related to an investment, this review determined if the funds were deposited in the proper bank account based on the instructions established at the time the investment was purchased. Instructions provided to all institutions with which the City conducts business were maintained in a vendor file. However, the information in the files had not been updated to reflect current staffing or any recent Administration personnel changes. CRITERIA Prudent accounting dictates the timely recording of transactions to accurately reflect the City s financial position. Additionally, accurate information is required to ensure the best business decisions can be made by Management based on the current availability of funds. RISK DESCRIPTION The untimely posting of financial transactions could result in the loss of revenue due to the inability to make informed decisions. RECOMMENDATION 2 Management should establish criteria that would help ensure the general ledger is updated in a timely manner to accurately reflect the City's financial position upon the completion of any wire transfer activities. Additionally, all documentation maintained by external parties should be kept current to reflect who is authorized to conduct business with them. MANAGEMENT'S RESPONSE We agree. Revenue and Finance will revise existing policies and procedures which will ensure processing of general ledger transactions within three business days. Additionally, all documents with external parties will be updated and a process implemented to ensure staffing and administrative personnel changes will be communicated with applicable entities in a timely manner. 6