UNIVERSITY OF NEVADA, RENO WOLF PACK MEATS Internal Audit Report July 1, 2009 through February 28, 2011

Transcription

1 UNIVERSITY OF NEVADA, RENO WOLF PACK MEATS Internal Audit Report July 1, 2009 through February 28, 2011 GENERAL OVERVIEW Wolf Pack Meats was established in 1967 and falls administratively under the College of Agriculture, Biotechnology and Natural Resources (CABNR) at the University of Nevada, Reno (UNR). The Wolf Pack Meats facilities include a meat processing plant and a retail sales operation at its location on the Main Station Farm. These activities provide students who work in the facility a comprehensive educational experience in the production and retail distribution of meat products. All but a small portion of meat sold by Wolf Pack Meats is raised on the Main Station Farm and processed on-site. The products are sold to university employees and the general public. Wolf Pack Meats is primarily a self-supporting function. During the fiscal year, the facility generated approximately $516,000 in meat sales and received $39,397 in state support. Wolf Pack Meats employed three full-time, three part-time, and seven student employees during the audit period. SCOPE OF AUDIT The Internal Audit Department has completed a review of the Wolf Pack Meats Department for the period of July 1, 2009 through February 28, The scope of our review included tests of the accounting records and other procedures as we considered necessary. The tests included, but were not necessarily limited to, these areas. 1. Reviewing the department s business operations and testing controls over the collection and deposit of receipts. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 1 of 16

2 2. Testing expenditures for reasonableness, supporting documentation, and proper signature approvals. 3. Reviewing leave records and student timesheets for proper completion and approval. 4. Examining equipment inventories for proper accountability. 5. Reviewing employee access to the mainframe computer applications. In our opinion, we can be reasonably assured that Wolf Pack Meats is operating in a satisfactory manner. However, implementation of the following recommendations would further improve operations. CASH CONTROLS On-Site Sales As previously mentioned, the Wolf Pack Meats facilities include a retail operation where meat products are sold. We reviewed the manner in which meat sales are processed and accounted for to determine whether adequate controls are in place. The following exceptions were noted. 1. The university has issued a $250 change fund to Wolf Pack Meats for the retail operation. The change fund and sales receipts are maintained in a locking cash register, however, the key remains in the cash register at all times. The cash register is located in an area that is accessible to customers and others that may be in the facility. For improved security, we recommend the cash be locked at all times except when processing sales transactions. We recommend the key be maintained with the department manager or secured in a restricted area of the facility. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 2 of 16

3 Correction: The CABNR Fiscal Officer discussed this with the department manager and stressed the importance of keeping the key locked up. For improved control over the change fund, the department now maintains the key in a locked drawer that only department employees have access to. Prevention and Monitoring: The CABNR Fiscal Officer and the Experiment Station Operations Manager will periodically check to assure the key is maintained in a locked drawer. 2. During a visit to Wolf Pack Meats, we noted the daily deposit was left in an unsecured area of the facility. We recommend deposits be properly secured until they are ready to be delivered to the CABNR Dean s Office for processing. Correction: The CABNR Fiscal Officer sent an dated July 21, 2011 to the department manager to remind him that all deposits must be properly secured until they are ready to be delivered to the CABNR Dean's office. The department manager was advised to keep the deposit locked up in a file cabinet or drawer. Prevention and Monitoring: The CABNR Fiscal Officer and the Experiment Station Operations Manager will periodically check to assure that deposits are properly secured until they are ready to be delivered to the CABNR Dean s Office for processing. 3. While examining a sample of deposits and corresponding documentation, we noted many checks that were made payable to Wolf Pack Meats instead of the Board of Regents. We recommend customers be reminded to make checks payable to the Board of Regents by displaying this information in the facility, and if possible, on the department s invoices. Correction: The CABNR Fiscal Officer sent an dated July 21, 2011 to the department manager to have him advise all Wolf Pack Meats employees that all checks should be made payable to the "Board of Regents". On August 1, 2011 signs (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 3 of 16

4 Off-Site Sales were posted in the facility that read "Make checks payable to the Board of Regents". Prevention and Monitoring: The Dean s Executive Assistant is monitoring the deposits when they come in and advising the CABNR Fiscal Officer when checks are not made out to the Board of Regents. During the holiday season, Wolf Pack Meats delivers pre-ordered products to the UNR main campus for customer pick-up and collection of payments. This is generally done as a service to customers who may find it inconvenient to pick up their orders at the retail location. When this is done we were informed that additional meat product is taken to campus, in addition to the pre-ordered items, and offered for sale. In reviewing a sample of off-site invoices, we noted many had handwritten sales recorded on them. We were informed the sales reflected additional purchases made by customers upon pick-up of their pre-ordered items. We noted the sales were not input into the invoice system. We recommend the invoice system be updated with this sales activity. Correction: The CABNR Fiscal Officer sent an dated August 28, 2011 to the department manager advising him that off-site handwritten sales recorded on prenumbered receipts must be updated in the POS system when they return to the facility. Prevention and Monitoring: The CABNR Fiscal Officer sent an dated August 29, 2011 to the Dean's Executive Assistant to advise her that if handwritten prenumbered receipts come in with the deposit they must be returned for updating in the POS system and the CABNR Fiscal Officer is to be notified. Non-University Animals In addition to university owned animals, Wolf Pack Meats also harvests and processes animals for customers. Upon completion, the meat is returned to the customers for their own consumption. The department charges a fee for this service which is input into the invoice (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 4 of 16

5 system in the same manner as meat product sales. The invoices are held by the department until customers pick up the meat and pay the processing fees. We noted a method does not exist to ensure an invoice is generated and payment is received for each non-university owned animal that is harvested and processed. We were subsequently informed that Wolf Pack Meats personnel keep a log of every animal that is harvested. We recommend the invoice number corresponding to the processing fee that is charged for non-university owned animals be documented on the log. We recommend the log be copied and forwarded to the CABNR Dean s Office for review and verification of payments. Correction: Effective August 1, 2011, receipt numbers corresponding to the processing fee that is charged for non-university owned animals is documented on the log and a copy of the log is forwarded to the CABNR Dean's Office. Prevention and Monitoring: The Dean's Executive Assistant reviews and verifies that all payments have been received. INVOICE SYSTEM Wolf Pack Meats utilizes a computerized invoice system that was created several years ago by a CABNR employee. The system is programmed with codes to identify the various meat products that are offered for sale and the prices of each. When customers place orders the information is entered into the system where it is stored. Invoices are generated from the system when payment is received from customers. The invoices are used to balance to the amount of the daily deposit. In reviewing the functionality of the system, the following observations were noted. 1. The current invoice system is outdated in that the software it was written in is no longer available for support. As a result, if a major problem occurs with the system it cannot be (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 5 of 16

6 fixed. Further, the system is a stand-alone system, that is, it is maintained on only one computer and backups are stored on-site. All data could be lost in the event of a disaster. We also noted the backups have not been verified in several months to determine whether they are capable of restoring the system. We were informed that department personnel are currently in the process of evaluating point of sale (POS) systems to replace the invoice system and that would be capable of monitoring both sales and inventory transactions. We recommend the department continue to give consideration for acquiring a POS system to help resolve the issues with the current system, as noted above. In addition to sales and inventory transactions, we also recommend that any system purchased be capable of tracking multiple employees log in identifications, include a pricing history application, and contain a daily balancing function. Until this time, we recommend that a procedure be developed that ensures backups of the current system are performed on a regular basis and are stored in a secure off-site location. Correction: A POS system was purchased and the department started using the system on September 16, This system is capable of monitoring both sales and inventory transactions, is capable of tracking multiple employees log in identification, provides a pricing history application and contains a daily balancing function. The system is set up to perform a daily back-up onsite and the CABNR Information Technology department has established a procedure where the system is backed up to the College of Agriculture, Biotechnology and Natural Resources main server located in the Fleischmann Agriculture building via the internet using a secure VPN connection. This backup is performed Monday through Friday at 10:30 a.m. The system is totally automated using script files and the Windows 7 scheduling service so no human intervention action is required. Prevention and Monitoring: The backups are physically verified by the CABNR Information Technology department on a regular basis to assure that they are occurring as scheduled. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 6 of 16

7 2. The department manager logs into the invoice system at the beginning of the work day and remains logged in for the entire day. We were informed that a log in is not required to process sales transactions and that the manager s log in was established to allow him to perform price overrides. As a result, the current practice allows any employee processing sales transactions to perform price changes. We were further informed that individual employee log on identifications could not be created because of limitations of the invoice system. For improved control, we recommend that the department manager only log on to the invoicing system when price overrides are required. Correction: Effective September 16, 2011, each employee has their own log in, password and level of security according to what functions they are allowed to perform on the new POS system. The department manager has been set up with two logins, one which enables him to perform price changes and price overrides and the other one for regular daily business transactions. The system has been set up so that after each transaction the system logs the current user out making it necessary to log in again for any future transactions. Prevention and Monitoring: The CABNR Fiscal Officer will periodically monitor the system security and transaction log. 3. The department maintains a paper copy of the current price list only. Old price lists are destroyed. The invoice system does not maintain historic pricing data. We recommend a printed copy of the price lists be maintained for at least three years so an adequate record of this information is on file. Correction: On July 25, 2011 the CABNR Fiscal Officer advised the department manager to print a copy of the price list and maintain the price list for at least three years. A current price list has been printed and put in a file. Anytime a price change is made a new price list will be printed and put in the file. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 7 of 16

8 Prevention and Monitoring: The CABNR Fiscal Officer will periodically review this file to assure that it is being maintained. Invoice Testing During a review of one month of deposit activity, we noted that a total of 358 sales invoices were generated. Of these, a number of invoices were not included in a deposit during the month reviewed. We were informed that invoices are filed based on the date they are paid. Thus, if an invoice was created on the last day of the month but was not paid until the following month, the invoice would be maintained with the appropriate day s back-up in the following month. We subsequently selected four of the invoices that were not included in a deposit and requested the corresponding deposit dates from Wolf Pack Meats and CABNR Office staff. A deposit date could only be confirmed for one of the four invoices. The department maintains a file of paid invoices which are kept in order based on the date paid. For improved control, we recommend the invoices be maintained in numerical order and that the date and method of payment continue to be noted on the invoices when they are paid. We recommend that an explanation be provided on each invoice that is not paid. Correction: On July 25, 2011 the CABNR Fiscal Officer advised the department manager that all invoices must be maintained in numerical order and that the date and method of payment must continue to be noted on the invoices when they are paid. The department manager was reminded that an explanation must be provided on each invoice that is not paid. On August 29, 2011 the CABNR Fiscal Officer verified that all invoices are being maintained in numerical order and that the date and method of payment or an explanation are included on each invoice. Effective September 16, 2011, the new POS system generates sequential receipt numbers and receipts cannot be printed until payment is received. The system maintains a historical file of all receipts and the CABNR Fiscal Officer is able to produce a receipt report that shows all receipt numbers in numerical order. Prevention and Monitoring: The CABNR Fiscal Officer will run this report monthly to assure all receipt numbers are accounted for. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 8 of 16

9 MEAT INVENTORY On a monthly basis, the department documents the amount of meat inventory that is in stock and available for sale. The counts are not reconciled to changes made to the inventory since the last count was taken for accountability purposes. Changes to the inventory would consist of meat sales, which would reduce the inventory, and additions to the inventory from animal processing. As a result, the current inventory procedures do not provide an adequate process for monitoring the meat inventory of Wolf Pack Meats. We recommend a perpetual inventory system be developed whereby the month end inventory count is reconciled to the previous count by deducting meat sales that occurred during the month and adding inventory from animal processing. Any significant variances should be examined to determine the reason they occurred. We also recommend an independent verification of the meat inventory and related documentation, as described above, be periodically conducted. Correction: The new POS system maintains a perpetual inventory system that will deduct meat sales from inventory as the sale is made and will allow the department to input the new inventory as animals are processed. On September 12, 2011 the current inventory was keyed into the system and an inventory report was produced. Prevention and Monitoring: A physical inventory will be taken at the end of each month and compared to the perpetual inventory in the POS system; all significant variances will be investigated. Starting in July 2011 the CABNR Fiscal Officer periodically conducts an independent verification of the meat inventory. TELEPHONES The telephone service provided for the Main Station Farm (MSF), including Wolf Pack Meats is not included under the university s service plan and as a result is significantly more costly. According to the UNR Telecommunications Services Department, MSF could be added (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 9 of 16

10 to the university s service plan but this would require a considerable initial investment to install the necessary equipment and infrastructure. According to telecommunications department staff, MSF s current telephone service provider could also be requested to conduct a re-rate of its fees which may lower MSF s present rate structure. We recommend that CABNR administration and the UNR Telecommunications Services Department continue to review this matter to determine whether it is cost effective in the longterm to add MSF to the university s telephone system. Until this time, we recommend a rerate of the MSF s telephone rates be requested from the current telephone service provider. Correction: The UNR Telecommunications Services Department provided CABNR administration a rough estimate of the costs to install the necessary equipment and infrastructure to add MSF to the university s telephone system. Based upon the cost analysis that was performed it has been determined that at this time it is not cost effective to add MSF to the university s telephone system. A "re-rate" of the telephone rate was requested and received from the current telephone service provider. The current provider retroactively applied the rate and a credit of $1, was received. We also noted the telephone lines within the Wolf Pack Meats facility do not have any restrictions in place to limit long distance telephone usage. We recommend the department work with the long distance provider and/or the UNR Telecommunication Services Department to determine whether restrictions can be placed on the phones, such as the use of personal identification numbers (PIN s). If this or a similar system cannot be implemented, we recommend the department maintain a log listing long distance calls made, the person making the call, and the purpose of the call. Correction: The long distance provider was contacted to determine whether restrictions can be place on the telephones and it was learned that this is not an option. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 10 of 16

11 Prevention and Monitoring: Effective July 2, 2011 Wolf Pack Meats maintains a log listing long distance calls made, the person making the call, and the business purpose for the call. The CABNR Assistant Fiscal Officer verifies the log with the long distance bill at the end of the telephone billing cycle and any discrepancies are resolved. EQUIPMENT INVENTORY A review of the equipment assigned to Wolf Pack Meats was performed to determine whether items listed on the equipment inventory report were physically present and whether there was other equipment that met the $5,000 reporting threshold that was not included on the report. Of 11 items tested, 9 were located without exception. The following exceptions were noted with the two remaining items. 1. We were informed that one item listed on the equipment inventory report has not been used since it was replaced several years ago. We recommend the department work with the Business Center North (BCN) Purchasing Department to properly dispose or surplus the equipment. Correction: The CABNR Fiscal Officer completed a "Surplus Property Online Pick-Up Form" on July 1, The item has been removed by Business Center North (BCN) Purchasing Department. The CABNR Fiscal Officer sent an on August 26, 2011 to remind the department manager of the UNR surplus property policy, which states, "Purchasing will be notified when property, including equipment, is deemed to no longer be of use to a department". Prevention and Monitoring: The CABNR Fiscal Officer sent an on September 19, 2011 to remind all of the CABNR faculty and staff of the UNR surplus property policies and informing them of the website to use to surplus unused fixed assets that they may be responsible for. The CABNR Fiscal Officer has added this same information to the annual memo that is sent out with the fixed asset list each year when it is time to take physical inventory. 2. One item listed on the equipment inventory report did not have an asset tag. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 11 of 16

12 We recommend a replacement tag be obtained from the purchasing department and affixed to the equipment. Correction: On May 9, 2011 a replacement tag was obtained from the purchasing department and affixed to the equipment. Prevention and Monitoring: The CABNR Fiscal Officer sent an on September 19, 2011 to remind all of the CABNR faculty and staff that all fixed assets must have a UNR Asset tag and if the tag is not legible or is missing that they should order a new tag from the purchasing department. The CABNR Fiscal Officer has added this same information to the annual memo that is sent out when the physical inventories are being conducted to make sure each item has an inventory tag. 3. During this review, a firearm was observed that was not listed on the equipment were noted. inventory report. According to established policy, firearms of all types are to be included in the equipment inventory regardless of cost. We were subsequently informed that it is not known whether the firearm is owned by the university. We recommend the ownership status of the firearm be determined. Once determined, we recommend a decision be made as to whether it needs to be added to the department s equipment inventory. Correction: The firearm has been determined to be inoperable and has been turned over to UNR Police for proper disposal. The department s sensitive equipment inventory was also reviewed and no exceptions PRIOR AUDIT The prior audit of Wolf Pack Meats was conducted for the period of July 1, 1990 through March 31, The audit included a review of the entire Main Station Farm operation, (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 12 of 16

13 including Wolf Pack Meats. Issues noted in the review related to Wolf Pack Meats were concerned primarily with the department s cash controls. All recommendations regarding these issues were implemented, are no longer applicable, or have been addressed in this report. STATEMENT OF REVENUES AND EXPENDITURES The statement of revenues and expenditures provided below is based on the activity within the one state and one self-supporting account that have been assigned to Wolf Pack Meats. The revenue and expenditure information was obtained from the financial accounting system. The statement is provided for informational purposes only. (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 13 of 16

14 Self State Supporting Funds Funds Total Balance, July 1, 2009 $ - $ 143,859 $ 143,859 Transfers In - 11, ,753 Revenues State Appropriations 39,397 39,397 Sales of Educational Activities - 515, ,629 Total 39, , ,026 Transfers Out - - Expenditures Salaries 23, , ,270 Operations 3, , ,237 Equipment 11,753 31,595 43,348 Total 39, , ,855 Balance June 30, 2010 $ 115 $ 86,668 $ 86,783 Balance July 1, 2010 $ - $ 86,668 $ 86,668 Transfers In Revenues State Appropriations 31,145-31,145 Sales of Educational Activities - 262, ,772 Total 31, , ,917 Transfers Out - 11, ,753 Expenditures Salaries , ,228 Operations - 193, ,384 Equipment - 12,087 12,087 Total , ,699 Balance February 28, 2011 $ 30,962 $ 15,171 $ 46, Loan received from a Main Station Farm account for the purchase of a new meat grinder Repayment of loan received from Main Station Farm (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 14 of 16

15 The Internal Audit Department appreciates the cooperation and assistance received from Wolf Pack Meats and the CABNR Dean s Office during this review. Reno, Nevada August 31, 2011 Mary S. Stoltz Senior Internal Auditor Eric Wilber Internal Auditor II Scott Anderson Internal Audit Manager Sandra K. Cardinal Assistant Vice Chancellor for Internal Audit and Risk Management (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 15 of 16

16 Business and Finance Reno, Nevada (775) Fax: (775) Memorandum To: From: Sandi Cardinal, Assistant Vice Chancellor for Internal Audit and Risk Management, NSHE Tom Judy Date: September 26, 2011 Subject: Audit of UNR Wolf Pack Meats The purpose of this memorandum is to transmit response from Agriculture, Biotechnology and Natural Resources to the Audit of UNR Wolf Pack Meats covering the period July 1, 2009 through June 30, I have reviewed and concur with all responses. Attachments c: Ron Zurek, Vice President Administration and Finance (AUDIT COMMITTEE 12/01/11) Ref. A-9, Page 16 of 16