wit Greuel February 22, 2011 The Honorable Antonio Villaraigosa The Honorable Carmen Trutanich Honorable Members ofthe City Council

Transcription

1 February 22, 2011 The Honorable Antonio Villaraigosa The Honorable Carmen Trutanich Honorable Members ofthe City Council I am releasing the Controller's annual review on the "Condition of All City Funds in the City Treasury as of June 30, 2010 and Review of Cash and Investment Activities." Based on our review we found the Treasurer's investment activities to be in compliance with the California State Government Code. Overall we found that as of June , 2010, the total amount of cash, banlc balances and unprocessed items for the City is $108,754,109. The City's General Pool of investments is $6,095,932,856. Finally, we found that the total amount the City has invested - including special investment pools - is $7,060,264,180. I would use this opportunity to again urge you to adopt the recommendation in my recent management audit of the Treasurer's Office, which recommended consolidating the Treasurer's Office with the Office of Finance immediately. Aligning finance related functions in one office would increase the efficiency and effectiveness of financial operations in the City and bring Los Angeles in line with the majmity oflarge cities in the country. The current and former City Treasurer and the CAO all agree that consolidation makes good business sense and, as our audit found, seven ofthe 10 largest cities in America, including New York, San Diego and Atlanta, all have both their treasury and revenue management divisions in one office. We must continue to look at additional opportunities to restructure City government, so that we can get the City back to a strong fiscal footing. A copy ofthis repmi was provided to the Office of the Treasurer. wit Greuel City Controller M~ ~ ~' N MA!f l <..TRE.E.T ~UIT 3C:.u L -l.:. /:;.."' E.LE'; 1,\. -u I,.:..1 ~~ 978-7:>Cl"< HTTP"' ClfiTF' Ll ER LAC IT1 ORG AN EOUAL E:MPLOYf'r,rNTUPP Jr.fTUNlTY AFFIRM/\TIVE ACTION F_MPlO"tL.H'

2 WE:NDY GRE:UEL CONTROLLER February 22, 2011 Steve Ongele, Interim City Treasurer Office of the Treasurer Room 201, City Hall 200 North Spring Street Los Angeles, CA Dear Mr. Ongele: Enclosed is a report entitled "Condition of All City Funds in the City Treasury as of June 30, 2010 and Review of Cash and Investment Activities" prepared by Simpson and Simpson, CPAs. A draft of this report was provided to you on February 7, Comments provided by your Department at the February 15, 2011 exit conference were evaluated and considered prior to finalizing this report. ;/# FARID SAFFAR, CPA Director of Auditing Enclosure cc: Reverend Jeff Carr, Chief of Staff, Office of the Mayor Austin Beutner, First Deputy Mayor, Office of the Mayor Miguel A. Santana, City Administrative Officer June Lagmay, City Clerk Gerry F. Miller, Chief Legislative Analyst Independent City Auditors 200 N. MAIN STREET, SUITE 300, LOS ANGELES, CA (213) AN EQUAL EMPLOYMENT OPPORTUNITY- AFFIRMATIVE ACTION EMPLOYER

3 CONDITION OF ALL CITY FUNDS IN THE CITY TREASURY AND REVIEW OF CASH AND INVESTMENT ACTIVITIES JUNE 30,2010

4 CONDITION OF ALL CITY FUNDS IN THE CITY TREASURY AND REVIEW OF CASH AND INVESTMENT ACTIVITIES JUNE 30,2010 TABLE OF CONTENTS Independent Accountant's Report Attachment I - Schedule of Cash and Bank Balances Attachment II - Schedule of Investment Pools Attachment III- Schedule of General Pool Investments Observation and Recommendation Status of Prior Year Observations

5 3600 WILSHIRE BOULEVARD, SUITE 1710 LOS ANGELES, CA (213) TELEPHONE (213) FAX SIMPSON & SIMPSON CEIUIFIED PUBLIC ACCOUNTANTS FOUNDING PAR TNER.S IIRAINARO C SIMPSON, CPA CA!tl P. SIMPSON, CPA The Honorable Wendy Greuel Controller ofthe City of Los Angeles INDEPENDENT ACCOUNTANT'S REPORT We have reviewed the accompanying schedules of condition of cash and investments of the Office of the Treasurer of the City of Los Angeles (Office of the Treasurer) as of June 30, 2010 as listed in the table of contents. Office of the Treasurer's management is responsible for the condition of cash and investments, its investment activities and compliance with the California State Government Code. Our review was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on the schedules of condition of cash and investments and the Office of the Treasurer's compliance with the California State Government Code. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the schedules of condition of cash and investments of the Office of the Treasurer as of June 30, As part of our review, we also performed testing of the Office of the Treasurer's investment activities for compliance with the California State Government Code. Based on our review, we are not aware of any instances of material noncompliance with the California State Government Code. However, we identified a matter that is presented herewith for your consideration. This report is intended solely for the information and use of management, City Council, City Treasurer, City Controller, and others within the entity, and is not intended to be and should not be used by anyone other than these specified parties. Los Angeles, California December 17, 2010 The CPA. Never Underestimate The Value:"

6 SCHEDULES OF CONDITION OF CASH AND INVESTMENTS SCHEDULE OF CASH AND BANK BALANCES AS OF JUNE 30, 2010 ATTACHMENT I Treasurer's Reported Balance Adjustments Adjusted Balance Cash $ 61,812 :$::.. _ $ 61,812 Bank Balances: Active Bank Accounts: Bank of America Wells Fargo- Active OJ Wells Fargo Disbursements 6112 (ll Wells Fargo Disbursements 6125 (l) Wells Fargo" Disbursements 6141 (l) Wells Fargo" Disbursements (l) Wells Fargo Total Active Bank Accounts Paying Agent Account: U.S. Bank- Wastewater Commercial Papers Total Paying Agency Account Total Bank Balances 792,913 90,934, ,980 16,556, ,690,905 1,392 1, ,692, ,913 90,934, ,980 16,556, ,690,905 1,392 1, ,692,297 TOTAL CASH AND BANK BALANCES $ 108,754,109 $ $ 108,754,109 Note: (I) The account was previously opened with Wachovia Bank, which was acquired by Wells Fargo. 2

7 SCHEDULES OF CONDITION OF CASH AND INVESTMENTS SCHEDULE OF INVESTMENT POOLS AS OF JUNE 30, 2010 ATTACHMENT II Treasurer's (1) Reported Balance Adjustments Adjusted Balance General Pool: Core and Reserve Portfolios $ 6,086,932,856 $ Certificates of Deposit 9,000,000 Total General Pool 6,095,932,856 $ 6,086,932,856 9,000,000 6,095,932,856 Special Pools: Harbor Emergency Fund (751) 37,219,452 Batiquitos Long Term Investment Fund (Harbor 72W) 5,973,743 Harbor Restoration Fund (70L) 556,665 MICLA Funds (26A, 26B, 289, 290, 292, 293, 294, 296 & 297) 41,763,233 Wastewater Fund (208) 338,588,594 DWP 2010-A Power Revenue (J5C) 360,046,793 MICLA Fund (260) 7,930,040 Solid Waste Revenue Fund (51 W) 25,515,245 Water System Revenue Fund (M9F) 45,950,208 Water System Revenue Fund (M9J) 100,787,351 Total Special Pools 964,331,324 TOTAL INVESTMENT POOLS $ 7,060,264,180 $ 37,219,452 5,973, ,665 41,763, ,588, ,046,793 7,930,040 25,515,245 45,950, ,787, ,331,324 $ 7,060,264,180 Note: (1) Investment amounts are presented at cost as recorded in the Financial Management Infonnation System (FMIS). 3

8 SCHEDULES OF CONDITION OF CASH AND INVESTMENTS SCHEDULE OF GENERAL POOL INVESTMENTS AS OF JUNE 30, 2010 ATTACHMENT III Investment Type Treasurer's (l) Reported Balance Adjustments Adjusted Balance U.S. Treasury Notes and Bills U.S. Federal Agency Issues Corporate Notes Commercial Papers Certificates of Deposit $ 2,668,598,230 2,202,935, ,635, ,764,048 9,000,000 $ $ 2,668,598,230 2,202,935, ,635, ,764,048 9,000,000 TOTAL GENERAL POOL INVESTMENTS $ 6,095,932,856 $ $ 6,095,932,856 Note: (1) Investment amounts are presented at cost as recorded in the Financial Management Information System (FMIS). 4

9 OBSERVATION AND RECOMMENDATION AS OF JUNE 30, Maintain supporting records for manual checks issued Observation: During the fiscal year ended June 30, 2010, 61 manual checks totaling $313,602 were issued by the Office of the Treasurer from the active account with the Bank of America for purposes of warrant/check replacements and escheated bond payments. For warrant/check replacements, the following documents are required under the City's policies and procedures and Article 1 Chapter 4 of the City's Administrative Code: 1. Request from Controller's Office (for warrants issued by Controller's Office) 2. The warrant/check to be replaced 3. Written affidavit or declaration and indemnification agreement approved by City's authorized officer 4. Death certificate of deceased employee 5. Application for Check from the Office of the Treasurer During our review of the manual check process, the Office of the Treasurer was initially unable to provide supporting docrnnents for five (5) of ten (10) manual checks selected for testing. According to the staff at the Office of the Treasurer, the supporting documents were misplaced due to staff turnover and transfer. Subsequently, the Treasurer's Office located support documentation for one of the five missing checks. For the remaining four, we obtained copies of the supporting documents (including the request from the Controller's Office, approved written affidavits, and death certificates of deceased employees) from the Controller's Office, and verified that the warrant/check replacements were in accordance with the City's Administrative Code. Although we were able to eventually locate supporting documentation for the four manual checks, the Office of the Treasurer should have maintained support documentation for them. Starting from July 1, 2010, the function to issue manual checks has been transferred from the Office of the Treasurer to the Controller's Office. Recommendation: None. Since manual checks are now issued by the Controller's Office, we have no recommendation. 5

10 1. CITY OF LOS ANGELES STATUS OF PRIOR YEAR OBSERVATIONS AS OF JUNE 30,2010 Observations Maintain an updated list of department signatories Observation: According to the Office of the Treasurer's internal procedures for Wire Transfers - Automated Clearing House (ACH) Settlement, "On an annual basis, each City department must submit an original list of authorized signers to the Office of Treasurer in order to make electronic payments. This list must be received no later than June 30." During our review of the lists of departmental authorized signatories for electronic transfers for the fiscal year ended June 30, 2009, we noted that fourteen (14) of thirty-five (35) samples selected were outdated. Current Status During our review of the lists of departmental authorized signatories for electronic transfers for the fiscal year ended June 30, 2010, we noted eighteen (18) out ofthirty-five (35) departments selected for testing did not submit an original list of authorized signatories during the fiscal year June 30, Due to recent staffing turnover in several departments, it is critical for the City to maintain an updated listing of authorized signatories. We consider this recommendation still outstanding. 6

11 2. CITY OF LOS ANGELES STATUS OF PRIOR YEAR OBSERVATIONS AS OF rune 30, 2010 Observations Take appropriate action to resolve unidentified reconciling items between book balance and bank balance Observation: Current Status We noted that there are unidentified reconciling items in the amount of $380,135 from fiscal year 2004~05 and prior in the bank reconciliation of the active bank account as of June 30, This observation is similar to the Finding No. 2 ofthe City Controller's report titled "Condition of All City Funds in the Office of the Treasurer as of December 31, 2006 and Audit of Cash and Investment Activities" dated September 20, As of June 30, 2010, the unidentified reconciling items totaled $378,291. The amount was subsequently approved by the City Council (CF ) for write-off on November 9, The recommendation has been implemented. I I 7