KAREN E. RUSHING Clerk of the Circuit Court and County Comptroller FOLLOW UP of Fixed Asset Inventory Issued January 2013 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 May 30, 2014
TABLE OF CONTENTS Page Summary and Results 3 Open Conditions and Pending Corrective Action 4 Appendix A Original Audit Report dated January 2013 6 2
Summary and Results Background The purpose of the January 2013 audit of Fixed Asset Inventory was to verify that capital assets recorded in the Sarasota County fixed asset system per the annual physical inventory existed and were accurately counted. The original audit report concluded that the County s fixed asset inventory process, appeared to have adequate controls in place to assure that the annual physical inventory of County assets over $1,000 in cost value, with a useful life in excess of one year, is accurate. In addition, the County s fixed asset inventory process appeared to be in compliance with Florida Rules and Statutes. There were, however, opportunities to improve the annual physical inventory process, as detailed in the Opportunities for Improvement section of the original audit report. Objective The objective of this follow-up audit was to evaluate the observation reported on the Fixed Asset Inventory audit report, dated January 2013 and subsequent corrective actions taken by responsible management. This was achieved by providing independent, objective analysis as well as reasonable assurance that the previous concern has been addressed and appropriate corrective measures implemented. To meet the objective of the follow-up audit, the following procedures were performed: Performed inquiries of County personnel. Reviewed the Capital Assets Property Control Manual. Examined a sample of fixed assets purchased during the period of August 1, 2013 through September 30, 2013. Of a total of 397 purchases, a random sample of forty (40) were selected and tested. Overall Results Based on the results of our follow-up audit procedures, responsible management has not addressed the concern identified in the original audit report. Controls must be implemented to assure fixed asset data provides accurate and timely information to decision makers. The open condition is further described in this report. 3
Open Conditions and Pending Corrective Action The condition identified in the original audit report remains open and continues to require management s attention. Original Audit Report dated January 2013 Verify that asset tags match the serial numbers and equipment models listed on the CMDB report. ~ Status Open Audit Observation: One (1) of 40 assets selected for testing had an asset tag attached to the wrong asset. Identical assets also had the wrong tags affixed; however, none of the items appeared to be missing. As such, it appears that the assets purchased together were tagged as a group without verifying that the appropriate tag was put on the asset with the corresponding serial number. This issue was not detected during the County s fixed asset inventory process. Recommendation: While observing inventory procedures performed by HCA and County personnel, all asset tags and serial numbers were found and matched to those numbers recorded in the fixed assets database. In the June 21, 2012 memo to Department Fixed Asset Designees sent out from the Office of Financial Planning regarding the Fiscal Year 2012 Annual Fixed Asset Inventory Audit preparations, five (5) recommendations were made for preparatory work to assist in making the audit proceed as smoothly as possible. These recommendations included, Verify that asset tags match the serial numbers and equipment models listed on the CMDB report. If this recommendation had been followed the problem condition would have been avoided. The recommendations should be reinforced and followed by all County Departments. 4
Follow-Up Audit dated May 30, 2014 Current Status: The auditor selected a new random sample of forty (40) fixed assets purchased between the period of August 1, 2013 through September 30, 2013, and physically examined each item in order to determine if the asset tags matched the serial numbers and equipment models listed on the CMDB report. Each asset examined had an asset tag affixed to the corresponding piece of equipment. However, of the forty (40) fixed assets tested six (6), or approximately 15%, did not include a Serial Number or Model and five (5), or approximately 13%, reflected inaccurate Serial Numbers or Models in the CMDB report. In order to demonstrate proper control over the custodianship, recording and tracking of fixed assets, the data being collected must be accurate, valid and reliable. Additionally, the recording of fixed asset data must be timely in order for it to be useful in the decision making process. Management Action Plan: The Fixed Assets team has reviewed documentation provided by the Fixed Assets Designees with regard to the five (5) items reported to have an inaccurate serial number or model number. Three (3) items are assigned to EIT. The Serial Numbers for these items were entered in IFAS as reported to the team. A member of the team is working with EIT to ensure the proper Serial Numbers are recorded in the IFAS and as of June 24, 2014 this item has been completed. One (1) item is assigned to Fleet. The Serial Number for this item was entered in IFAS as reported to the team. A member of the team is working with Fleet to ensure the proper Serial Number is recorded in IFAS and in the Fleet system and as of June 24, 2014 this item has been completed. One (1) item, the model number did have two of the characters transposed. Staff has corrected this issue. The Fixed Assets team has reviewed the entire Fixed Assets Database and has found that approximately 29% of assets in the database are missing a serial number, make, model or a combination. The following is the team s corrective action plan: June 30, records missing any of the following (Serial Number, Make, Model) will be sent to the department s Fixed Assets Designee (FAD) requesting the data returned by July 21 July 22, follow-up with FAD Management as required to ensure compliance September 30, all records from this transmittal will be updated with returned information Ongoing maintenance for this item will be as follows: No later than June 30, fully documented and implemented process for monthly reviewing outstanding tag receipts. No later than June 30, Notification of requirement to Fixed Assets Designees and their respective Managers will be sent via email. No later than July 15 Request assistance from Communications for a Did you know notification to all employees sent via communications. 5
Appendix A Original Audit Report Dated January 2013 Summary and Results Synopsis The County s fixed asset inventory process appears to have adequate controls and procedures in place to assure that the annual physical inventory of County assets over $1,000 in cost value with a useful life in excess of one year is accurate and conducted in compliance with Florida Rules and Statutes. One area of exception is identified in Overall Results section of this report. Opportunities to improve the annual physical inventory process are detailed as Opportunities for Improvement. Objectives, Scope and Methodology The objective of this audit was to verify that capital assets recorded in the Sarasota County fixed asset system per the annual physical inventory existed and were accurately counted. The final Capital Management Data Base (CMDB) fixed asset listing was available in November 2012 and included 13,226 items. To meet the objectives of the audit, the following procedures were performed: Performed inquiries of County personnel; Reviewed Fixed Assets Department procedures manual; Obtained a detailed understanding of the County s fixed asset inventory process and the records available; Observed portions of the fiscal year-end fixed asset inventory count performed by the County and its vendor HCA; Selected and tested a sample of fixed assets from the inventory listing and verified physical existence. Selections were made from the five County locations with the greatest number of assets weighted for the number of assets in those five locations. For the sample of 40 assets selected with a combined original purchase cost totaling $188,188: Physically inspected the assets and verified asset tag numbers, models and descriptions, serial numbers, and the asset locations and departments; Utilized records of the Fixed Assets Department and verified that the requirements of Florida Rules and Statutes were met regarding records that must be maintained and the annual physical inventory requirements; Records included support for the date acquired, cost, purchase orders, vendor invoices, and the County payments and other asset records. 6
Overall Results Of the 40 items tested there was one (1) exception. The exception item had a County Asset Tag (with number) attached to a unit with a different Serial Number than the one on the fixed asset listing. In checking further there were other identical items with mismatched tags and serial numbers. It appears that several identical assets were purchased and the tags were placed on the assets without matching the proper tag to the proper serial number. Background The Office of Financial Planning (OFP) Fixed Assets Management maintains records of all fixed assets; property with a total original cost equal to or greater than $1,000 with a useful life in excess of one year. Annually, a physical inventory managed by Fixed Assets Management is conducted of all County fixed assets per Florida Administrative Rule 69I-73.006. For the physical inventory for the fiscal year ended September 30, 2012, the County entered into an agreement with a third party, HCA, to diligently provide all services related to fixed asset inventory audit and reconciliation. This audit included observing a portion of the annual physical inventory activities conducted by personnel of HCA and those County employees working with HCA. This observation included over 15 different locations. Inventory procedures observed (performed by HCA and County employees) appeared well-organized and were performed utilizing barcode scanners and laptop computers. The Fixed Assets Management Department received the completed HCA report of the fixed assets inventory and reconciliation in November 2012. At that point, HCA had classified 136 items as Not Accounted For. The Fixed Assets Management Department began working with the various County department Fixed Asset Designees to make final efforts to locate all possible items before disposal paperwork and Police Reports were prepared and filed on missing fixed assets. These efforts were successful in locating 123 of the Not Accounted For assets and disposal paperwork. Police Reports were prepared and processed on the remaining 13 assets. The final fixed assets listing provided by Fixed Asset Management on November 16, 2012 included 13,226 assets with original costs totaling $148,961,611 and a net book value of $41,935,627. 7
Opportunities for Improvement Condition Observed One (1) of 40 assets selected for testing had an asset tag attached to the wrong asset. Identical assets also had the wrong tags affixed; however, none of the items appeared to be missing. As such, it appears that the assets purchased together were tagged as a group without verifying that the appropriate tag was put on the asset with the corresponding serial number. This issue was not detected during the County s fixed asset inventory process. Opportunity for Change While observing inventory procedures performed by HCA and County personnel, all asset tags and serial numbers were found and matched to those numbers recorded in the fixed assets database. In the June 21, 2012 memo to Department Fixed Asset Designees sent out from the Office of Financial Planning regarding the Fiscal Year 2012 Annual Fixed Asset Inventory Audit preparations, five (5) recommendations were made for preparatory work to assist in making the audit proceed as smoothly as possible. These recommendations included, Verify that asset tags match the serial numbers and equipment models listed on the CMDB report. If this recommendation had been followed the problem condition would have been avoided. The recommendations should be reinforced and followed by all County Departments. Management Response The Fixed Asset Management group will be checking each of the 215 assets that were identical to the one identified in the audit testing. This verification check will include determining a match between the tags and serial numbers as well as a verification that the tags are on the correct assets. 8