KAREN E. RUSHING. Unannounced Audit of Petty Cash and Change Funds

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1 KAREN E. RUSHING Clerk of the Circuit Court and County Comptroller Unannounced Audit of Petty Cash and Change Funds Audit Services Karen E. Rushing Clerk of the Circuit Court and County Comptroller Jeanette L. Phillips, CPA, CGFO, CIG Director of Internal Audit and Office of the Inspector General Audit Team William Bousman Internal Auditor/Investigator July 2014

2 TABLE OF CONTENTS Page Summary and Results 3 Opportunities for Improvement and Management Response 5 Appendix A: Internal Control Observations ~ Segregation of Duties 10 Appendix B: Petty Cash and Change Fund Reconciliations 11 Page 2

3 Summary and Results The Clerk of the Circuit Court and County Comptroller s Internal Audit Department and Office of the Inspector General has completed an unannounced audit of the County s petty cash and change funds. The audit was planned and conducted 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 the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The purpose of the audit was to review internal controls, compliance with applicable policies and procedures and reconcile the petty cash and change funds. Background As of June 17, 2014, Sarasota County had fifty-one (51) petty cash and change funds totaling $13,723, located within various departments throughout the County. Chapter 17.2 Petty Cash, of the Accounting Policies and Procedures, provides the policy for establishing and making purchases from a petty cash fund. The document indicates that petty cash funds are established for the purpose of handling cash expenditures of a minor nature and are limited to purchases of $100 or less. Chapter 9.5 Change Funds indicates that change funds are established for the purpose of making change where money is collected during transactions of County business. Objectives, Scope and Methodology In order to assist the County in meeting its stewardship responsibilities for the public assets and resources placed in its trust, an unannounced cash count audit was performed of its petty cash and change funds. The objectives of this audit were to determine if (1) the County s internal controls over petty cash and change funds are operating effectively, (2) the reconciled balance of the fund agrees to the amount recorded on the Certificate and Receipt of Imprest Funds and (3) the Accounting Policies and Procedures are being properly adhered to. To meet the objectives of the audit, the procedures performed included, but were not limited to, the following: Obtained an understanding of the Accounting Policies and Procedures as they relate to petty cash and change funds. Performed inquiries of County personnel. Page 3

4 Evaluated internal controls related to segregation of duties and safeguarding the County s assets; specifically for petty cash and change funds. Reconciled a sample of petty cash and change funds and agreed the balance to the amount recorded on the Certificate and Receipt of Imprest Funds. Identified opportunities for improvement. Overall Results Based on the procedures performed, the County appears to have instances of non-compliance with the Accounting Policies and Procedures. Additionally, there are processes that are not included within the Accounting Policies and Procedures. These areas are detailed in the Opportunities for Improvement section of this report. The following summarizes the result of the audit: Segregation of Duties: Approximately 43% of the petty cash and change funds sampled are not in compliance with the Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds. Reconciliation of Imprest Funds: Five (5) of the twenty-three (23) petty cash and change funds sampled did not reconcile to the amount recorded on the Certificate and Receipt of Imprest Funds. However, only one (1) was short by more than $1. Management Year-End Audits of Petty Cash: Management is not in compliance with the year-end audit requirement of the Accounting Policies and Procedures, Chapter 17.2 Petty Cash. Custodian Retention of the Certificate and Receipt of Imprest Funds: Approximately 65% of the petty cash and change fund custodians are not in compliance with the Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds. Lack of Written Policies and Procedures for Cash Handling Training: The Accounting Policies and Procedures do not require that custodians receive cash handling training. Page 4

5 Opportunities for Improvement The audit disclosed certain policies, procedures, and practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure, or transaction. Accordingly, the Opportunities for Improvement presented in this report may not be all-inclusive of areas where improvement may be needed. Observations and recommendations were made in the following areas: A. Segregation of Duties B. Reconciliation of Imprest Funds C. Management Year-End Audits of Petty Cash D. Custodian Retention of the Certificate and Receipt of Imprest Funds E. Written Policies and Procedures for Cash Handling Training A. Segregation of duties Ensure Compliance with Accounting Policies and Procedures. Observation Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds, both require that "only the person designated the custodian is permitted access" to the petty cash or change fund. The auditor selected a sample of twenty-three (23) petty cash and change funds, representing 45% of the population, and performed an unannounced cash count. Approximately 43% or ten (10) of the twenty-three (23) were accessible by one or more persons other than the designated custodian. See Appendix A: Internal Control Observations. Recommendation Mandate compliance with the Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds. Allow only the designated custodian of the petty cash or change fund to access the fund. Management Response Future cash handling training sessions will reinforce this requirement and will remind staff and their managers that compliance is mandatory. Follow-up discussions will occur with the staff/management teams where current policies and procedures were not followed. Administration concurs with the recommendation and will work with the Finance Department to make edits to the Clerk and Comptroller s Accounting Policies and Procedures, particularly Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds to provide more clarification to the various requirements. These policy changes shall be completed by November 1, Page 5

6 B. Reconciliation of imprest funds Ensure Compliance with Accounting Policies and Procedures. Observation During the unannounced cash count, each petty cash and change fund was reconciled to the amount recorded on the Certificate and Receipt of Imprest Funds. The auditor found that five (5) of the twenty-three (23), approximately 22%, did not reconcile to the certificate. Of the five (5) that did not reconcile, one (1) was short by $31.25 and the other four (4) were over or short by less than $1. See Appendix B: Petty Cash and Change Fund Reconciliations. Recommendation Increase monitoring and oversight and consider modifying the Accounting Policies and Procedures to require that management perform quarterly reconciliations for both petty cash and change funds. Ensure that all custodians report cash overages or shortages in accordance with the Accounting Policies and Procedures, Chapter 9.6 Cash Over and Short. Management Response Administration concurs with the recommendation and will work with the Finance Department to update Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds to bring more clarification to the quarterly management requirement. This will also be communicated and incorporated into future training. Administration will work with the Clerk and Comptroller and make edits to the Accounting Policies and Procedures. These policy changes shall be completed by November 1, Page 6

7 C. Management year-end audits of petty cash Ensure Compliance with Accounting Policies and Procedures. Observation Accounting Policies and Procedures, Chapter 17.2 Petty Cash, requires "that management performs an audit at year-end" of each petty cash fund. The auditor selected a sample of twenty-three (23) petty cash and change funds and performed an unannounced cash count. Of the twenty-three (23) selected, two (2) were petty cash funds. Neither of the funds in the sample had documentation indicating that management had performed a year-end audit for fiscal year and both custodians indicated that a year-end audit was not performed by management. Recommendation In accordance with the Accounting Policies and Procedures, Chapter 17.2 Petty Cash, ensure that management performs an audit at year-end of all petty cash funds. See page 6, Opportunity for Improvement B, for related items. Management Response As with past training sessions, this requirement will be a focus of the training. Administration concurs with the recommendation and will work with the Finance Department and will send reminders of these requirements immediately to all Directors to ensure proper communication. Administration will work with the Finance Department to make edits to the Clerk and Comptroller s Accounting Policies and Procedures, particularly Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds to bring more clarification of the various requirements. The current policy does not recommend or mention any annual audit for the change funds in Chapter 9.5 Change Funds. These policy changes shall be completed by November 1, Page 7

8 D. Custodian retention of the Certificate and Receipt of Imprest Funds Ensure each custodian retains a copy of the Certificate and Receipt of Imprest Funds with the petty cash or change fund. Observation Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds, both state that the custodian shall retain a copy (of the Certificate and Receipt of Imprest Funds) on file. During the unannounced cash count, each custodian was asked to present a copy of the Certificate and Receipt of Imprest Funds for the petty cash or change fund being counted. It was noted that fifteen (15) of the twenty-three (23) custodians, approximately 65%, were unable to present the current, fully executed certificate. Recommendation Consider utilizing current technology to retain the Certificate and Receipt of Imprest Funds and modify the Accounting Policies and Procedures, Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds, to recognize the official document retention system as the primary source for these documents. Management Response Administration concurs with the recommendation and will work with the Finance Department to discuss utilizing the Clerk and Comptroller s iterance of OnBase which currently acts as a document repository. A reminder has been sent to all Directors to ensure that these certificates/receipts are currently held in accordance with the Clerk s Accounting Policies and Procedures. These policy changes shall be completed by November 1, Page 8

9 E. Written policies and procedures for cash handling training Modify the Accounting Policies and Procedures to require cash handling training. Observation During the review of the Accounting Policies and Procedures, it was identified that there is no formal requirement for custodians to receive cash handling training. Recommendation Formalize the training requirement by modifying the Accounting Policies and Procedures to require that custodians receive cash handling training within a reasonable period of time prior to, or immediately after becoming a custodian of a petty cash or a change fund. Management Response Cash handling training has been held in September of 2012 and February of These sessions had over 360 attendees and reinforced all of the current procedures and requirements. A new online training session is now available to all Sarasota County Government employees and will allow for real time training to occur as new employees come in and out of our organization. This training will be available via TRAC as this will allow management to track who has taken the class and when. Administration concurs with the recommendation and will work with the Finance Department to make suggested edits to the Clerk and Comptroller s Accounting Policies and Procedures, particularly Chapter 17.2 Petty Cash and Chapter 9.5 Change Funds to make mention of the suggested annual training which will be available online. These policy changes shall be completed by November 1, Page 9

10 Appendix A: Internal Control Observations ~ Segregation of Duties The table below provides the department and location of the twenty-three petty cash and change funds sampled and counted. The ten petty cash and change funds that were accessible by one or more persons other than the designated custodian are highlighted in blue. See page 5, Opportunity for Improvement A, for the detailed observation. Department Communications Health and Human Services Health and Human Services Libraries and Historical Resources Libraries and Historical Resources Libraries and Historical Resources Natural Resources Office of Financial Management Office of Financial Management Planning and Development Services Planning and Development Services Planning and Development Services Planning and Development Services Public Utilities Public Utilities Sarasota County Area Transit Sarasota County Area Transit Location 1660 Ringling Blvd., Sarasota, FL 2200 Ringling Blvd., Sarasota, FL 5531 Pinkney Ave., Sarasota, FL 100 W Dearborn St., Englewood, FL Tamiami Trl., North Port, FL 100 Coburn Rd., Sarasota, FL 1001 Sarasota Center Blvd., Sarasota, FL 1001 Sarasota Center Blvd., Sarasota, FL 1001 Sarasota Center Blvd., Sarasota, FL 2650 Waldemere St., Sarasota, FL 2050 Adams Ln., Sarasota, FL 326 S. Nokomis Ave., Venice, FL 3445 Rustic Rd., Nokomis, FL 6700 Clark Rd., Sarasota, FL 8918 Midnight Pass Rd., Sarasota, FL 1001 Sarasota Center Blvd., Sarasota, FL 4000 S. Tamiami Trl., Venice, FL 1001 Sarasota Center Blvd., Sarasota, FL 4000 S. Tamiami Trl., Venice, FL 8750 Bee Ridge Rd., Sarasota, FL 4000 Knights Trail Rd., Nokomis, FL 5303 Pinkney Ave., Sarasota, FL st St., Sarasota, FL Page 10

11 Appendix B: Petty Cash and Change Fund Reconciliations The table below provides the department and location of the twenty-three petty cash and change funds sampled and counted. The five petty cash and change with variances are highlighted in blue. See page 6, Opportunity for Improvement B, for the detailed observation. Department Location Over/Under Communications 1660 Ringling Blvd., Sarasota, FL Balanced Health and Human Services 2200 Ringling Blvd., Sarasota, FL Balanced Health and Human Services 5531 Pinkney Ave., Sarasota, FL Balanced Libraries and Historical 100 W Dearborn St., Englewood, FL Balanced Resources Libraries and Historical Tamiami Trl., North Port, FL $0.15 Over Resources Libraries and Historical 100 Coburn Rd., Sarasota, FL Balanced Resources Natural Resources 1001 Sarasota Center Blvd., Sarasota, FL $0.20 Over Office of Financial Management 1001 Sarasota Center Blvd., Sarasota, FL Balanced Office of Financial Management 1001 Sarasota Center Blvd., Sarasota, FL Balanced 2650 Waldemere St., Sarasota, FL Balanced 2050 Adams Ln., Sarasota, FL Balanced 326 S. Nokomis Ave., Venice, FL Balanced 3445 Rustic Rd., Nokomis, FL Balanced 6700 Clark Rd., Sarasota, FL Balanced 8918 Midnight Pass Rd., Sarasota, FL Balanced Planning and Development 1001 Sarasota Center Blvd., Sarasota, FL $0.30 Short Services Planning and Development 4000 S. Tamiami Trl., Venice, FL Balanced Services Planning and Development 1001 Sarasota Center Blvd., Sarasota, FL Balanced Services Planning and Development 4000 S. Tamiami Trl., Venice, FL Balanced Services Public Utilities 8750 Bee Ridge Rd., Sarasota, FL $0.43 Over Public Utilities 4000 Knights Trail Rd., Nokomis, FL Balanced Sarasota County Area Transit st St., Sarasota, FL $31.25 Short Sarasota County Area Transit 5303 Pinkney Ave., Sarasota, FL Balanced Page 11