HomeMy WebLinkAbout02/25/2010 - Workshop Agenda Packet - City Council Mayor Councilmembers
Ben White John Crompton
Mayor Pro Tem James Massey
Dave Ruesink Dennis Maloney
City Manager Katy-Marie Lyles
Glenn Brown Lawrence Stewart
Agenda
College Station City Council
Workshop Meeting
Thursday, February 25, 2010 3:00 p.m.
City Hall Council Chambers, 1101 Texas Avenue
College Station, Texas
1. Presentation, possible action, and discussion on items listed on the consent agenda.
2. Presentation, possible action, and discussion concerning the City Internal Auditor’s Utility Customer
Service Cash Handling Audit Report.
3. Presentation, possible action, and discussion concerning the City Internal Auditor’s Court Cash Handling
and Accounts Receivable Audit Report.
4. Presentation, possible action, and discussion concerning the City Internal Auditor’s Fuel Operations
Follow-up Audit Report.
5. Presentation, possible action, and discussion on an update of the City of College Station FY 10 Budget,
and FY 11 Budget Planning.
6. Presentation, possible action, and discussion regarding activities within the College Station Utilities
Electric Department.
7. Presentation, possible action, and discussion regarding a proposed green building standard for future
municipal facilities in the City of College Station.
8. Council Calendar
March 1 2010 Citizens University at Planning and Development (Council Chambers), 5:30 p.m.
March 2 Council Appointee Evaluations at Admin Conference Room, 5:00 p.m.
March 8 2010 Citizens University at College Station Utilities, 5:30 p.m.
March 9 Epicurean Extravaganzas at Brazos County Expo Complex. 5:30 p.m.
March 10 Annual CSPD Award Banquet at CS Hilton, 6:30 p.m.
March 11 Council Workshop/Regular Meeting, 3:00 p.m. & 7:00 p.m.
9. Presentation, possible action, and discussion on future agenda items: A Council Member may inquire
about a subject for which notice has not been given. A statement of specific factual information or the
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City Council Workshop Meeting
Thursday, February 25, 2010
recitation of existing policy may be given. Any deliberation shall be limited to a proposal to place the
subject on an agenda for a subsequent meeting.
10. Discussion, review and possible action regarding the following meetings: Arts Council of the Brazos
Valley, Audit Committee, Brazos County Health Dept., Brazos Valley Council of Governments, Brazos
Valley Wide Area Communications Task Force, Cemetery Committee, Code Review Committee, Design
Review Board, Historic Preservation Committee, Interfaith Dialogue Association, Intergovernmental
Committee, Joint Relief Funding Review Committee, Landmark Commission, Library Committee,
Metropolitan Planning Organization, National League of Cities, Outside Agency Funding Review, Parks
and Recreation Board, Planning and Zoning Commission, Sister City Association, TAMU Student Senate,
Research Valley Partnership, Regional Transportation Committee for Council of Governments, Texas
Municipal League, Transportation Committee, Wolf Pen Creek Oversight Committee, Wolf Pen Creek
TIF Board, Zoning Board of Adjustments, BVSWMA, Signature Event Task Force, (Notice of Agendas
posted on City Hall bulletin board).
11. Executive Session will immediately follow the workshop meeting in the Administrative Conference
Room.
Consultation with Attorney {Gov’t Code Section 551.071}; possible action. The City Council may seek
advice from its attorney regarding a pending or contemplated litigation subject or settlement offer or
attorney-client privileged information. Litigation is an ongoing process and questions may arise as to a
litigation tactic or settlement offer, which needs to be discussed with the City Council. Upon occasion the
City Council may need information from its attorney as to the status of a pending or contemplated
litigation subject or settlement offer or attorney-client privileged information. After executive session
discussion, any final action or vote taken will be in public. The following subject(s) may be discussed:
a. City of Bryan’s application with TCEQ for water & sewer permits in Westside/Highway 60 area, near
Brushy Water Supply Corporation to decertify City of College and certify City of Bryan
b. Discussion of Legal Issues Regarding: Wellborn Incorporation Request
c. Water CCN / 2002 Annexation / Wellborn Water Supply Corporation
d. Sewer CCN permit requests for Brushy & Wellborn Services Areas
e. Water CCN permit requests for Brushy & Wellborn Services Areas
f. Legal aspects of Water Well, permits and possible purchase of or lease of water well sites
g. TMPA v. PUC (College Station filed Intervention)
h. City of Bryan suit filed against College Station, Legal issues and advise on Brazos Valley Solid Waste
Management Agency contract, on proposed methane gas contract
i. Update on legal proceedings for Grimes County Landfill site and contracts for development of Grimes
County site
j. Weingarten Realty Investors v. College Station, Ron Silvia, David Ruesink, Lynn McIlhaney, and
Ben White
k. Chavers et al v. Tyrone Morrows, Michael Ikner, City of Bryan, City of College Station, et al
l. Rogers Sheridan v. Barbara Schob & Greg Abbott
m. Clancey v. College Station, Glenn Brown, and Kathy Merrill
n. Verizon v. City of College Station
o. Legal Aspects of Brazos Valley Convention & Visitors Bureau Articles of Incorporation and Bylaws
p. Contemplate Litigation, Legal remedies available to abate weeds, rubbish, brush and other unsanitary
matter from a lot in the College Hills residential area.
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City Council Workshop Meeting
Thursday, February 25, 2010
Competitive Matters {Gov’t Code Section 551.086}; possible action: The City Council may deliberate,
vote, or take final action on a competitive matter in closed session. The City Council must make a good
faith determination, by majority vote of the City Council, that the matter is a Competitive Matter. A
“Competitive Matter” is a utility-related matter that the City Council determines is related to the City of
College Station’s Electric Utility Competitive Activity, including commercial information, which if
disclosed would give advantage to competitors or prospective competitors. The following is a general
representation of the subject(s) to be considered as a competitive matter.
a. Power Supply
12. Action on executive session, or any workshop agenda item not completed or discussed in today’s
workshop meeting may be discussed in tonight’s Regular Meeting if necessary.
13. Adjourn.
APPROVED:
___________________________________________
City Manager
Notice is hereby given that a Workshop Meeting of the City Council of the City of College Station, Texas
will be held on the 25th day of February, 2010 at 3:00 pm in the City Hall Council Chambers, 1101 Texas
Avenue, College Station, Texas. The following subjects will be discussed, to wit: See Agenda
Posted this 22nd day of February, 2010 at 2:00 pm
__
E-Signed by Connie Hooks
VERIFY authenticity with ApproveIt
_________________
City Secretary
I, the undersigned, do hereby certify that the above Notice of Meeting of the Governing Body of the City of
College Station, Texas, is a true and correct copy of said Notice and that I posted a true and correct copy of
said notice on the bulletin board at City Hall, 1101 Texas Avenue, in College Station, Texas, and the City’s
website, www.cstx.gov . The Agenda and Notice are readily accessible to the general public at all times.
Said Notice and Agenda were posted on February 22, 2010 at 2:00 pm and remained so posted continuously
for at least 72 hours proceeding the scheduled time of said meeting.
This public notice was removed from the official board at the College Station City Hall on the following date
and time: _______________________ by ___________________________.
Dated this _____day of _______________, 2010.
CITY OF COLLEGE STATION, TEXAS By____________________________________
Subscribed and sworn to before me on this the ______day of _________________,
___________________Notary Public – Brazos County, Texas My commission expires:________
This building is wheelchair accessible. Handicap parking spaces are available. Any request for sign interpretive service must be
made 48 hours before the meeting. To make arrangements call (979) 764-3517 or (TDD) 1-800-735-2989. Agendas may be
viewed on www.cstx.gov. Council meetings are broadcast live on Cable Access Channel 19.
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February 25, 2010
Workshop Agenda Item No. 2
Utility Customer Service Cash Handling Audit Report
To: Mayor and Members of the City Council
From: Ty Elliott, City Internal Auditor
Agenda Caption: Presentation, possible action, and discussion concerning the City
Internal Auditor’s Utility Customer Service Cash Handling Audit Report.
Recommendation(s): Give staff direction to implement the recommendations contained
in the Audit Report.
Summary:
Reason for the Audit: A cash handling audit of the Utility Customer Service Division was
included in the fiscal year 2010 audit plan based on the results of the Citywide Cash
Handling Questionnaire completed in August 2009, results of the Citywide Risk Assessment
completed in October 2007, and findings from previous audit work. On September 24,
2009, the City Council approved the City Internal Auditor’s audit plan.
Background: Utility Customer Services, a Division of the Finance Department, has over
36,000 utility customers. In FY09, the Division collected approximately $120 million in
revenue for the City. Utility Customer Service is also the largest handler of currency in the
City, with approximate currency collections of over $5 million per year.
Audit Scope and Objectives: This audit addresses Utility Customer Service cash handling
policies, procedures, processes and practices. The audit objectives determined:
· The adequacy of procedures to receive, handle, safeguard, and deposit cash,
· The presence of indicators of common cash handling fraud schemes, and
· The existence of unauthorized or other off-book checking accounts at any banks in
the local area.
Audit Results: No cash handling frauds were detected. In addition, no unauthorized bank
accounts were identified. Overall, I found that most Utility Customer Services policies and
procedures aligned with cash handling best practices. However, a few areas of
improvement were identified such as:
· Controls could be strengthened if some duties of the Division’s staff were separated.
· Policies and procedures could be better communicated and practiced.
· Polices should be reviewed relating (1) to non-cash credit adjustments and (2)
support documentation requirements for adjustment approvals.
· A policy prohibiting cashiers from cashing personal checks of city employees should
be implemented.
Attachments: Utility Customer Service Cash Handling Audit Report
5
Cash Handling Audit of
Utility Customer Service
November 2009
City Internal Auditor’s Office
City of College Station
File#: 09-02
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7
Utility Customer Service Cash Handling Audit
Table of Contents
Introduction ................................................................................................................... 1
Utility Customer Service Background ..................................................................... 1
Audit Objectives ...................................................................................................... 4
Scope and Methodology .......................................................................................... 5
Findings and Analysis ...................................................................................................... 6
UCS is in General Alignment with Cash Handling Best Practices ......................... 6
The Duties of Some Employees Could be Better Segregated ............................ 6
Effective Receipting Controls Exist, but Some Practices Could Improve ......... 7
Cash Collection Security Measures Are Adequate .............................................. 9
No Cash Handling Fraud was Revealed ................................................................ 11
No Cash for Check Substitution Schemes were Detected ............................... 11
No Lapping Schemes Were Detected ................................................................ 12
No Account Receivable Schemes Were Detected............................................. 13
No Unauthorized City Bank Accounts Were Identified ....................................... 16
Recommendations .........................................................................................................17
Appendices
Appendix 1 Chief Financial Officer’s Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Utility Customer Service Cash Handling 1
Introduction
The City Internal Auditor conducted this cash handling audit of the
Utility Customer Service Division of the Department of Finance
pursuant to Article III Section 30 of the College Station City Charter,
which outlines the City Internal Auditor’s primary duties.
An internal audit is an objective, systematic examination of evidence
to assess independently the performance of an organization, program,
activity, or function. The purpose of an internal audit is to provide
information to improve public accountability and facilitate decision-
making. Internal audits encompass a wide variety of objectives,
including those related to assessing program effectiveness and
results; economy and efficiency; internal control; compliance with
legal or other requirements; and objectives related to providing
prospective analyses, guidance, or summary information.
A cash handling audit of the Utility Customer Service Division was
included in the fiscal year 2010 audit plan based on the results of the
Citywide Cash Handling Questionnaire completed in August 2009,
results of the Citywide Risk Assessment completed in October 2007,
and findings from previous audit work. On September 24, 2009, the
City Council approved the City Internal Auditor’s audit plan.
Utility Customer Service Background
Utility Customer Service is a division of the Fiscal Services Department
responsible for connecting and disconnecting water and electric
meters, reading those meters, and providing billing and collection
services for the City’s electric, water, wastewater, sanitation and
drainage utilities.
Utility Customer Services has two primary operating areas, meter
services and customer services, which deliver five distinct lines of
business. These lines of business are meter reading, meter connects
and disconnects, call center activities, bill calculation and generation,
and bill collections.
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2 Utility Customer Service Cash Handling
Utility Customer Services has over 36,000 utility accounts consisting
of approximately 35,000 electric and 22,000 water meters that are
read, billed and collected monthly. In fiscal year 2009, Utility
Customer Service collected approximately $120 million in revenue for
the City of College Station. This revenue represents the largest
revenue stream in the City. The customer base consists of
approximately 33,000 residential and 3,000 commercial accounts.
The Division is headed by the Utility Customer Service Manager and
has 28 full-time employees and three part-time employee. The
Manager reports to the Fiscal Services Director. Figure 1 below is the
organizational chart for the Utility Customer Service Division.
Figure 1: Utility Customer Service Division Organization Chart
The Collections Unit is responsible for collecting utility payments
monthly; therefore, most cash handling responsibilities reside in this
business unit (highlighted in blue in the chart above). The Collections
Unit’s customer service representatives primarily function as cashiers
and main responsibilities consist of accepting and processing
payments received from the public at the Utility Customer Service
front counter or drive thru using automated cash registers. With
these cash registers, the cashiers directly input cash receipts activity
into the Cash Receipts application of the City’s automated accounting
system, HTE.
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Utility Customer Service Cash Handling 3
Currently, there are five (four full-time and one part-time) customer
service representatives responsible for working six cash registers.
Generally, three customer service reps work the counter and two
customer service reps work the drive thru at one time. When the
customer service reps are not working at the front counter or drive
thru (cashiering), they answer walk-in customer questions and
process payments received by mail, electronically, or by phone.
A senior customer service representative provides lead direction to
the customer service reps working the cashiers. Her main duties
pertaining to the Collections Unit include reviewing and approving
each cashier’s daily cash receipts reconciliation; safeguarding cash
and cash equivalents, keys, and important documents; and
functioning as a back-up cashier incase of high volume activity.
Several payment options are offered including bank draft, credit/debit
card over the web or phone, night deposit, mail and paying in person.
In fiscal year 2002, Utility Customer Service introduced an interactive
voice response system (IVR) that allows customers with a touch-tone
phone to retrieve automated account information and pay utility bills
by phone. Also in fiscal year 2002, Utility Customer Service
implemented a program which gave customers the ability to access
account information and pay bills over the internet. Table 1 below
describes the customer usage of the various types of payment options
offered by the City.
Table 1: FY09 Payment Method Comparison
Payment Method # of Pmts Amount
Mail 133,898 29% $48,473,800 41%
Internet Payments 149,020 32% 27,709,800 23%
Counter/Drive-Thru 78,494 17% 16,681,300 14%
Bank Drafts 41,994 9% 12,896,200 11%
Phone/IVR 23,651 5% 4,376,300 4%
Night Deposit 16,100 3% 3,654,700 3%
Electronic Pay1 9,679 2% 2,027,000 2%
Other 8,721 2% 3,651,500 3%
Totals: 461,557 $119,470,600
Since the implementation of the internet payment program and IVR,
credit/debit card payments made by customers has steadily
1 Online bill pay system customers setup with their bank to electronically send utility bill payments to the City,
which are uploaded into the City’s financial system.
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4 Utility Customer Service Cash Handling
increased; whereas, currency and check payments have decreased.
Currently, approximately 5 percent of utility bills are paid through
currency, 40 percent through debit or credit cards, and 55 percent by
check. Despite only 5 percent of collections are in the form of
currency, Utility Customer Service is still the largest handler of
currency in the City. Figure 2 below compares the currency receipts
of the City’s cash handling locations for fiscal year 2009.
Figure 2: FY09 Currency Receipts Comparisons (in dollars)
Audit Objectives
This audit addresses Utility Customer Service cash handling policies,
procedures, processes and practices. This report answers the
following questions:
• Does the Utility Customer Service Division have adequate
procedures to receive, handle, safeguard, and deposit cash and
cash equivalents?
• Are there any indicators of common cash handling fraud schemes
that exists within the Utility Customer Service Division?
• Are there any unauthorized or other off-book checking accounts at
any banks in the local area?
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Utility Customer Service Cash Handling 5
Scope and Methodology
This audit was conducted in accordance with government auditing
standards, which are promulgated by the Comptroller General of the
United States. Audit fieldwork was conducted from September 2009
through October 2009.
The audit scope included procedures and practices used by the
customer service representatives of the Utility Customer Service
Division’s Collections Unit to receive, handle, and deposit cash,
checks, and credit card payments at the time of fieldwork.
The audit methods used to complete the audit objectives included:
• Reviewing the work of auditors in other jurisdictions and
researching professional literature to identify best practices for
municipal utility billing and collections.
• Interviewing staff responsible for performing cash handling
oversight functions.
• Conducting data analysis using specialized auditing software to
test for cash handling fraud indicators and system control failings.
• Reviewing cash receipt support documentation, Utility Customer
Service employees’ system functional access authority, the City’s
fiscal policy on cash handling, and Utility Customer Services
procedures.
• Observing customer service representatives perform their
cashiering responsibilities.
• Observing non-cash credit review and approval and receipt
reconciliation processes performed by the Division’s supervisors.
• Performing a surprise cash count of all Utility Customer Service
counter and drive-thru drawers on September 23, 2009.
• Making an inquiry at all banks in the local area for a list of all
accounts in the name of the City.
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6 Utility Customer Service Cash Handling
Findings and Analysis
UCS is in General Alignment with Cash Handling Best Practices
Cash may include currency, coins, checks, money orders, or
credit/debit card transactions. The following are generally considered
to be best practices in cash handling: (1) appropriate segregation of
duties, (2) effective receipting controls, (3) proper security measures
regarding daily balancing and depositing of cash collections, (4) and
sufficient management or officer review. Policies and procedures
were reviewed, key staff was interviewed, system functional access
authority was analyzed and operations were observed to determine if
Utility Customer Service (UCS) exhibited these characteristics.
The Duties of Some Employees Could be Better Segregated
Separation of duty, as a security principle, has as its primary objective
the prevention of fraud and errors. This objective is achieved by
disseminating the tasks and associated privileges for a specific
business process among multiple users. To achieve the highest level
of internal control over the cash handling process, a different person
should be involved in billing/recording, collecting, and reconciling
functions. Figure 3 below illustrates this concept.
Figure 3: Appropriate Cash Handling Segregation of Duties
Independent Party
(Supervisor)
- Reconciliation
Clerk Position
- Billing - No-Bills
- Posting - Shut-Offs
- Adjustments
Clerk Position
- Collecting
- Depositing
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Utility Customer Service Cash Handling 7
Customer Service Representatives are cross trained. Billing,
Call Center, and Collections customer service representatives are
cross trained in order to be capable to work in any of these three
business units. Cross training allows staffing flexibility to better
manage leave and to rearrange staff in the case of unexpected high
volume for a business unit during the day.
Utility Billing employees have functional access to perform
incompatible duties. Customer Service Representatives in all
business units have the authority to enter receipts, enter
adjustments, create and change customer information, bill customer
accounts, create/change delinquency status, and create and close
work orders. As a result, employees who collect cash have the ability
to perform billing and recording duties.
Adjustment review and posting is appropriately typically performed by
the Sr. Customer Service Rep in the Billing Unit. However, the Sr.
Customer Service Reps in the Call Center and Collections Units also
have system access to perform this function. In addition, all three Sr.
Customer Service Reps have system access to post cash receipts and
authorize voided payments.
Procedurally, posting cash receipts and authorizing voided payments
is appropriately performed by the Sr. Customer Service Rep in the
Collections Unit. She also performs the daily balance and review of
each cashier drawer. However, she sometimes performs an
incompatible duty as a back-up cashier during instances of high
volume activity.
Effective Receipting Controls Exist, but Some Practices Could
Improve
The following are generally considered to be best practices in
receipting cash: (1) Official pre-numbered receipts should be used.
(2) Information on receipts should include the payor’s name; purpose
or description of the cash payment; quantity; and unit price, if
applicable; type of cash received (check, currency, etc.); total amount
of cash received; and the signature of the person collecting or
receiving the cash. (3) Checks received should be immediately
restrictively endorsed, “For Deposit Only”. (4) A duplicate receipt
should be provided to the payor for each transaction.
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8 Utility Customer Service Cash Handling
System generated receipts are adequate. Official City of College
Station Utility Customer Service receipts are created by automated
cash registers, which are integrated with the City’s accounting
system. Receipt documentation created by these registers contains
all the necessary features to effectively reconcile processed payments
to accounting records. Figure 4 below is an example of a receipt
cashiers furnish to customers upon payment of a utility bill.
Figure 4: Example of a Utility Customer Service Receipt
Official
Receipt
Cashier
User ID
Payment
Description
Payment
Type
Date of
Transaction
Receipt
Number
Customer
Information
Payment
Amount
Checks received are appropriate endorsed. Based on my
review, I found that when cashiers receive checks for payment they
immediately endorse the check with an official City stamp that
contains the language “For Deposit Only”.
Cashiers are not providing all customers with duplicate
receipts. City cash handling procedures state that cashiers should
always give the customer a receipt. In addition, they state that “each
cashiering location should have a sign encouraging customers to
notify management if they do not get a receipt.” I observed
occasions where customers where not offered a receipt. In addition,
there are no receipt related signs present at the Utility Customer
Service location.
Surprise cash count revealed missing receipt documentation.
I performed a surprise cash count and analytical review of utility
payments on September 23, 2009. During this audit procedure, I
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Utility Customer Service Cash Handling 9
found that several transactions were lacking necessary receipt
documentation. Table 2 on the next page summarizes these findings.
Table 2:
9/23/09 Utility Payments’ Receipt Documentation by Tender Type
Tender
Type
Totals
Transactions
No Receipt but had
a Billing Stub
No Receipt or
Billing Stub
Trans Amount Trans Amount Trans Amount
Check 71 $22,826 39 $15,260 10 $949
Cash 56 8,871 8 1,212 1 30
Credit 28 6,463 8 1,998 3 904
Totals: 155 $38,159 55 $18,470 14 $1,883
Approximately 9 percent of transactions had no receipt
documentation—i.e., no receipt or billing stub accompanied the
payment. Four cashiers were on duty on September 23, 2009 and all
but one had instances where receipt documentation was missing from
their cash drawer. Table 3 below describes these results.
Table 3:
9/23/09 Utility Payments’ Receipt Documentation by Cashier
Cashier
Totals
Transactions
No Receipt but had
a Billing Stub
No Receipt or
Billing Stub
Trans Amount Trans Amount Trans Amount
Cashier1 12 $2,187 5 $994 0 $0
Cashier2 46 9,067 9 2,153 4 934
Cashier3 67 22,060 38 14,789 5 353
Cashier4 30 4,845 3 534 5 596
Totals: 155 $38,159 55 $18,470 14 $1,883
Cash Collection Security Measures Are Adequate
Effective security measures for balancing and depositing cash
collections have the following elements: (1) Cashiers should have a
lockable cash drawer, and it should be secured in a locked safe, to
which access is limited to the employee collecting the cash and a
supervisor. If there is more than one person receiving cash at the
same time, each person should have his/her own cash drawer. (2) All
cash receipts should be balanced daily by comparing the pre-
numbered receipts issued with the actual amount of cash in the
drawer. (3) Deposit should occur at the earliest possible time with all
funds intact. The entire amount of receipts collected must be
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10 Utility Customer Service Cash Handling
deposited so that all collections are posted as receipts to the City’s
accounts. (4) The deposit receipt should be reconciled to cashiers’
receipt documents after the deposit has been made.
Security Measures for Balancing and Depositing of Cash
Collections Are Effective. At the end of each business day,
cashiers reconcile his or her cash receipts. The cashier begins by
printing out his or her cash edit listing report from HTE. This report is
designed to identify and summarize all cash receipts activity
performed by the cashier for the day. After this is done, source
documentation for each type of transaction is totaled (adding machine
tapes are prepared), and reconciled with the edit report by the
cashier. Additionally, currency, coins, checks, and credit card
payments are totaled and compared with like information in the edit
report.
Once this has been done, the Collections Unit Sr. Customer Service
Rep reviews each cashier’s reconciliation to make sure the cash
receipts edit listing reports, cash and cash equivalents, and
supporting source documentation are in agreement. As part of the
review process, the Sr. Customer Service Rep recounts the currency
and coins for each cash drawer to make sure all money is accounted
for. All cash receipts and most support documentation for these
receipts are then placed in a courier bag with a bank deposit slip,
which is locked and placed in the Utility Customer Service safe by the
Sr. Customer Service Rep. The bank bag is picked up the next day by
an armored vehicle to be delivered and deposited into the City’s
Citibank account.
Independent reconciliation is performed by Accounting
Division staff. Each day, an Accountant in the Accounting Division
of Fiscal Services reconciles the daily Utility Customer Service deposit
to the City’s Citibank account statement. She verifies that all deposits
reconcile to accounting records, sales records, and the bank
statement. This step ensures that all cash sales recorded for the day
were properly and timely deposited and correctly recorded in the
City’s accounting system.
Cash drawers are individually assigned and secure. Each
cashier is assigned a cash drawer with a $220 change fund. The
drawers are all locked in the safe overnight. In addition, cashiers can
lock their drawers at their work station.
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Utility Customer Service Cash Handling 11
No Cash Handling Fraud was Revealed
According to the 2006 Association of Certified Fraud Examiners Report
to the Nation on Occupational Fraud and Abuse, approximately 33
percent of occupational fraud target incoming receipts or cash on
hand. The three most common frauds related to cash handling
include: check for cash substitution schemes, lapping schemes, and
account receivable schemes. I performed various audit procedures to
determine the risk that any Utility Customer Service employee is
involved in perpetrating one of these frauds.
No Cash for Check Substitution Schemes were Detected
A check for cash substitution scheme is the number one way funds
are stolen in any cash receipting activity. This scheme is perpetrated
by a cashier who substitutes checks from unrecorded payments for
cash from payments which have been receipted and recorded in the
accounting records. When the cashier places the checks from these
unrecorded transactions in the cash drawer, there is an immediate
overage in the account. To remedy this situation, the cashier merely
removes the displaced cash from the cash drawer. The checks used
in this scheme are almost always received through the mail. These
are high risk transactions because these customers do not ever
expect to receive a receipt. The customer’s account for each
unrecorded transaction is always marked “paid”.
Y N Check for Cash Substitution Scheme Risk Evaluation:
1. Are employee duties appropriately segregated?
2. Are deposits made daily and in the same form received?
3. Does the check and cash composition of the daily bank deposit
agree with the mode of payment indicated on the cash receipts?
4. Are official pre-numbered cash receipts used, which indicate mode
of payment data (i.e.; payment by check or cash)?
5. Does the organization verify daily cash receipt accountability to a
bank-validated deposit slip showing check and cash composition?
6. Does the Division control revenue checks which are received through
the mail by having more than one employee present when the mail
is opened, making a log of the transactions, and then reconciling this
information to daily cash receipt transactions to ensure that all
payments were recorded properly and deposited in the bank?
The fraud detection methods utilized revealed no fraud. In
order to determine if a check for cash substitution scheme was being
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12 Utility Customer Service Cash Handling
perpetrated by a Utility Customer Service employee, I reviewed: (1)
the segregation of duties of key personnel, (2) the check and cash
composition of the daily bank deposit during an unannounced cash
counts and during substantive audit tests of cash receipts, (3) the
records of the numerical series of official pre-numbered receipts to
verify that these receipts are used sequentially (including properly
accounting for all copies of voided documents). Based on this review,
I did not detect any cash substitution schemes.
No Lapping Schemes Were Detected
A lapping scheme is perpetrated by a cashier who issues cash receipts
for customer payments, but subsequently makes no bank deposit, or
a short bank deposit, of the funds. The difference between the total
amount receipted and the lesser amount deposited is stolen.
Cumulative cash shortages over a period of time represent the total
amount of the loss in a lapping scheme. The customer’s account for
each unrecorded transaction is always marked “paid”. Ways
perpetrators conceal the disposition of lapping schemes include:
paying back the amount of the loss, canceling the accountability
established by the cash receipts issued through unauthorized voiding
activity, destroying the supporting documents representing the
accountability for the funds stolen, or reporting a mysterious
disappearance theft of cash receipts.
Y N Lapping Scheme Risk Evaluation:
1. Are employee duties appropriately segregated?
2. Are personal checks of cashiers or other fund custodians not allowed
to be cashed at Utility Customer Service registers?
3. Are there no deposit timing lags from Utility Customer Service to the
City’s bank account?
4. Are deposits made daily and intact?
5. Is there no excessive amount of void cash receipts transactions?
6. Does the check and cash composition of the bank deposit agree with
the check and cash composition of the cash receipts issued?
7. Is there no reported mysterious disappearance of cash receipts?
8. Are official pre-numbered cash receipts used and are none missing?
The fraud detection methods utilized revealed no lapping
scheme fraud. In order to determine if a lapping scheme was being
perpetrated by a Utility Customer Service employee, I conducted
comparative analytical reviews of three fiscal years of utility revenue
streams to determine which areas had unfavorable trends. To
21
Utility Customer Service Cash Handling 13
determine reasons why revenue changed from previous reporting
periods, I interviewed the Utility Customer Service Manager and
confirmed responses obtained from her by using alternative records
and through substantive audit tests. Additional audit procedures to
detect lapping schemes included: unannounced cash count, review of
the timeliness of deposits, review of the check and cash composition
of daily bank deposits, analytical review of voided transactions, and
observations of cash receipting operations. Based on this review, I
did not detect any lapping schemes.
Employees’ personal checks are being cashed by cashiers. I
analyzed payment records over the last three fiscal years for the
presence of personal checks from cashiers and other fund custodians.
Utility Customer Service was the only location that cashes personal
checks of city employees. The Division has a policy that cashiers
should not cash their own checks, but this could not be verified
through existing records. Therefore, the presence of employees’
personal checks in cash drawers increases the risk of a lapping
scheme being perpetrated by a cashier. In fiscal year 2009, 655
personal checks were cashed for over $31,000.
No Account Receivable Schemes Were Detected
In account receivable schemes, an employee steals a customer’s
payment, and then does one of two things in order to conceal the
irregular activity. He or she either writes-off the account, such as
through a “non-cash credit” transaction (i.e.; an account write-off,
adjustment, or cancellation), or lets the account go delinquent (i.e.;
without taking any action). This latter condition usually results in
customer feedback and detection of the scheme, unless customer
feedback is received by the same employee who stole the customer’s
payment. The dishonest employee could then further manipulate the
records to conceal any irregular activity from view by managers.
Y N Account Receivable Schemes Risk Evaluation:
1. Are employee duties appropriately segregated?
2. Does management periodically review exception report listings of all
non-cash credit transactions?
3. Are all non-cash credit transactions authorized and approved?
4. Are all non-cash credit transactions supported by appropriate
documentation for the action?
5. Are delinquent accounts monitored closely?
6. Does the entity maintain an accounts receivable control account?
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14 Utility Customer Service Cash Handling
7. Does the balance in the accounts receivable control account agree
with the total of the customer account balances?
The fraud detection methods utilized revealed no accounts
receivable fraud. In order to determine if an accounts receivable
scheme was being perpetrated by a Utility Customer Service
employee, I did the following: (1) reviewed the segregation of duties
of key personnel, (2) performed comparative analytical reviews of the
last three fiscal years of non-cash credit transactions to identify
correlations between employees and these types of risky transactions,
and (3) observed a Sr. Customer Service Rep perform the non-cash
credit review and approval process. Based on this review, I did not
detect any account receivables schemes.
Adequate support documentation is not required for some
types of adjustments. Late fees are 10 percent the value of the
customer’s bill, and the minimum late fee charged is $3. Utility
Customer Service’s policy is to forgive a customer’s late payment fee
without question under the following two conditions (1) it is the
customer’s first late bill within a twelve month period and (2) the
customer requests for the late charge to be forgiven. Any Customer
Service Rep (including cashiers) can make these types of adjustments
regardless of the amount of the late bill. Adequate support
documentation is not required to demonstrate that the customer
requested the late bill to be forgiven. In these instances, the Sr.
Customer Service Rep who approves the adjustment confirms that the
amount adjusted is correct and checks to make sure that it is the first
time the customer has been forgiven of a late charge within the last
twelve months. Table 4 below provides a breakdown of late fee
adjustments made from the beginning of fiscal year 2007 to the end
of fiscal year 2009.
Table 4: FY07 – FY09 Late Fee Credit Adjustments
Late Fee Credit
Adjustment Range
Transactions Number Transaction Amount
Count Percent Amount Percent
Less than $50 7,142 92.96% $119,974.81 39.83%
$50 to $99.99 250 3.25% 16,818.85 5.58%
$100 to $499.99 209 2.72% 50,008.15 16.60%
$500 to $999.99 45 0.59% 32,867.48 10.91%
$1,000 to $4,999.99 36 0.47% 76,348.64 25.35%
Greater than $5,000 1 0.01% 5,183.79 1.72%
23
Utility Customer Service Cash Handling 15
Customer Service Reps also adjust customers’ bills when customers
explain that their high consumption was due to any type of water
leak. No support documentation is required by the customer to show
that they have fixed the leak before the adjustment is made. For
these types of cases, the Sr. Customer Service Rep who approves the
adjustment verifies that the customer’s consumption is greater than
their historic consumption. Typically, the adjustment is made for half
the billed consumption—as long as half is not less than normal
consumption. For example, a customer has an $800 bill and
consumption of 144,000 gallons; the Customer Service Rep will credit
the customer account for 72,000 gallons, resulting in a $400 credit to
their bill. Table 5 below provides a breakdown of water consumption
adjustments made from the beginning of fiscal year 2007 to the end
of fiscal year 2009.
Table 5: FY07 – FY09 Water Consumption Credit Adjustments
Water Credit
Adjustment Range
Transactions Number Transaction Amount
Count Percent Amount Percent
Less than $50 1688 69.24% $33,749.26 13.39%
$50 to $99.99 395 16.20% $28,351.55 11.24%
$100 to $499.99 326 13.37% $60,339.85 23.93%
$500 to $999.99 17 0.70% $12,438.37 4.93%
$1,000 to $4,999.99 7 0.29% $19,262.00 7.64%
$5,000 to $14,999.99 2 0.08% $18,889.62 7.49%
$15,000 to $29,999.99 2 0.08% $46,721.39 18.53%
Greater than $30,000 1 0.04% $32,388.50 12.85%
Unsupported account adjustments represent the highest risk
of fraud. Unsupported account adjustments eliminate the
accountability for money from real debts owed to the City after
customer payments have been stolen. These adjustments represent
a high risk for fraud, similar to any other kind of negative cash
transaction. Because cashiers have the authority to perform billing
and recording duties, fictitious adjustments made to forgive
customers’ late bills or higher than normal consumption could be done
without detection.
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16 Utility Customer Service Cash Handling
No Unauthorized City Bank Accounts Were Identified
No unauthorized or other off-book checking accounts at any banks in
the local area were identified. Through Chamber of Commerce
records, I identified 48 financial institutions in the local area where
personal and commercial checking accounts can be established. The
City’s official account is with Citibank; therefore, there should not be
any other accounts in the City’s name or any City department’s name
at any of the other 47 financial institutions in the local area. I
contacted each of these financial institutions and received official
verification that no unauthorized City accounts exist.
25
Utility Customer Service Cash Handling 17
Recommendations
Utility Customer Service needs a few slight improvements,
encompassed in the following audit recommendations. Implementing
these recommendations would strengthen internal controls to further
prevent any misappropriation of cash on hand.
1. To strengthen controls, the Collections Unit Sr. Customer Service
Rep should not function as a backup cashier because she
performs the following incompatible duties: reconciles the
cashiers’ end of the day receipts, approves voided transactions,
reviews essential cash control reports, and prepares the daily
collections deposit.
If this separation of duties is not entirely possible, other means of
internal control should be practiced, such as: rotation of duties,
exercising more strict supervision, double-checking work, enforced
vacations, additional training to improve the quality of
performance, and frequent audits.
2. To achieve the highest level of internal control, Utility Customer
Service should consider segregating the duties of customer service
representatives to their essential duties within each business unit.
As a result, Collection Unit employees with the primary
responsibility of collecting cash payments would not have access
to billing and recording functions.
As a mitigating control, Utility Customer Service should at least
restrict cashiers from making credit adjustments over $50.
Approximately 84 percent of credit adjustments made in fiscal
year 2009 were under $50. However, this represented only 25
percent of amount of credit adjustments made in fiscal year 2009.
If an adjustment of over $50 is needed to be made to a
customer’s account, a cashier could call upon the Collections Unit
Sr. Customer Service Rep to make the adjustment (provided she
no longer functions as a cashier).
3. The Department of Fiscal Services cash control policies and
procedures are in alignment with accepted cash handling best
practices. The Utility Customer Service Manager should
periodically communicate these policies and procedures to her
staff along with explaining their purpose and importance. Special
emphasis should be placed on providing receipts to customers and
26
18 Utility Customer Service Cash Handling
retaining receipt support documentation in cash drawers for end
of the day balancing. In addition, each cashier location should
have a sign encouraging customers to notify management if they
do not get a receipt.
4. The Utility Customer Service Manager should implement a policy
prohibiting cashiers from cashing personal checks of city
employees. During the daily balancing process of cash receipts,
the Collections Unit Sr. Customer Service Rep should verify that
no employee personal checks are in the front counter or drive thru
cash drawers.
5. Utility Customer Service should reexamine their customer friendly
policies of forgiving money owed to the City that are a result of
customer mistakes. In fiscal year 2009, Utility Customer Service
made 13,155 non-cash credit adjustments (excluding write-offs)
for approximately $767,000. Legitimate account adjustments in
include: (a) pre-billing adjustments for unusual circumstances,
such as meter reading errors and broken transmission lines or
facilities; and, (b) post-billing adjustments for other miscellaneous
accounting errors noted by both employees and customers for a
wide variety of reasons. In other words, generally accepted
account adjustments are the result of employee errors. A large
number of the account adjustments made by Utility Customer
Service, however, are a result of customer friendly policies of
liberally forgiving customer mistakes (e.g. late payments,
plumbing leaks, etc.).
6. Support documentation should be required for all types of
adjustments in order for the adjustment to be approved and
processed. For example, if Utility Customer Service decides to
continue to adjust customer bills in the case of a plumbing leak,
the customer should be required to furnish documentation that
the leak has been repaired.
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Utility Customer Service Cash Handling 19
Internal Audit Recommendations and Fiscal Services Response:
1. Recommendation: To strengthen controls, the Collections Unit Sr. Customer
Service Rep should not function as a backup cashier because she performs the
following incompatible duties: reconciles the cashiers’ end of the day receipts,
approves voided transactions, reviews essential cash control reports, and prepares
the daily collections deposit.
If this separation of duties is not entirely possible, other means of internal control
should be practiced, such as: rotation of duties, exercising more strict supervision,
double-checking work, enforced vacations, additional training to improve the quality
of performance, and frequent audits.
Response: Management realizes that this recommendation would strengthen
controls. However, there is a fine line between too much control and the inability to
provide efficient, effective service. It would not be prudent to take away cashiering
duties from the Collections Unit Sr. Customer Service Representative as she must
function as a backup cashier when we are short handed. We do concur that other
means of control should be exercised and will develop a plan to address this.
2. Recommendation: To achieve the highest level of internal control, Utility
Customer Service should consider segregating the duties of customer service
representatives to their essential duties within each business unit. As a result,
Collection Unit employees with the primary responsibility of collecting cash payments
would not have access to billing and recording functions.
As a mitigating control, Utility Customer Service should at least restrict cashiers from
making credit adjustments over $50. Approximately 84 percent of credit
adjustments made in fiscal year 2009 were under $50. However, this represented
only 25 percent of amount of credit adjustments made in fiscal year 2009. If an
adjustment of over $50 is needed to be made to a customer’s account, a cashier
could call upon the Collections Unit Sr. Customer Service Rep to make the
adjustment (provided she no longer functions as a cashier).
Response: Management concurs and will develop a policy to restrict the dollar
amount of adjustments made by Customer Service Representatives that handle cash
to $50.00. Any adjustments over $50.00 will be made by a Senior Customer Service
Representative that does not have cash handling duties.
3. Recommendation: The Department of Fiscal Services cash control policies and
procedures are in alignment with accepted cash handling best practices. The Utility
Customer Service Manager should periodically communicate these policies and
procedures to her staff along with explaining their purpose and importance. Special
emphasis should be placed on providing receipts to customers and retaining receipt
support documentation in cash drawers for end of the day balancing. In addition,
each cashier location should have a sign encouraging customers to notify
management if they do not get a receipt.
28
20 Utility Customer Service Cash Handling
Response: Management concurs and has implemented this recommendation. Staff
has been instructed to always print a computer generated receipt so that one can be
retained in their cash drawer and the other can be presented to the customer.
Management will be revising policies and procedures to include this. Signs will be
placed in the lobby and drive through areas encouraging customers to notify
management if a receipt is not given.
4. Recommendation: The Utility Customer Service Manager should implement a
policy prohibiting cashiers from cashing employee personal checks of City
employees. During the daily balancing process of cash receipts, the Collections Unit
Sr. Customer Service Rep should verify that no employee personal checks are in the
front counter or drive thru cash drawers.
Response: Management concurs and will cease cashing personal checks of City
employees.
5. Recommendation: Utility Customer Service should reexamine their customer
friendly policies of forgiving money owed to the City that are a result of customer
mistakes. In fiscal year 2009, Utility Customer Service made 13,155 non-cash credit
adjustments (excluding write-offs) for approximately $767,000. Legitimate account
adjustments in include: (a) pre-billing adjustments for unusual circumstances, such
as meter reading errors and broken transmission lines or facilities; and, (b) post-
billing adjustments for other miscellaneous accounting errors noted by both
employees and customers for a wide variety of reasons. In other words, generally
accepted account adjustments are the result of employee errors. A large number of
the account adjustments made by Utility Customer Service, however, are a result of
customer friendly policies of liberally forgiving customer mistakes (e.g. late
payments, plumbing leaks, etc.
Response: Management concurs and will reexamine these policies. A policy will be
written that will give guidelines for processing adjustments to customer accounts.
6. Recommendation: Support documentation should be required for all types of
adjustments in order for the adjustment to be approved and processed. For
example, if Utility Customer Service decides to continue to adjust customer bills in
the case of a plumbing leak, the customer should be required to furnish
documentation that the leak has been repaired.
Response: Management concurs and will work with IT to find a solution that could
include scanners or electronic signatures that could be utilized by Customer Service
Representatives that handle cash to receive documentation or signatures before
making adjustments.
29
February 25, 2010
Workshop Agenda Item No. 3
Court Cash Handling and Accounts Receivable Audit Report
To: Mayor and Members of the City Council
From: Ty Elliott, City Internal Auditor
Agenda Caption: Presentation, possible action, and discussion concerning the City
Internal Auditor’s Court Cash Handling and Accounts Receivable Audit Report.
Recommendation(s): Give staff direction to implement the recommendations contained
in the Audit Report.
Summary:
Reason for the Audit: A cash handling audit of the Municipal Court Division was included in
the fiscal year 2010 audit plan based on the results of the Citywide Cash Handling
Questionnaire completed in August 2009, results of the Citywide Risk Assessment
completed in October 2007, and findings from previous audit work. On September 24,
2009, the City Council approved the City Internal Auditor’s audit plan.
Background: Municipal Court, a Division of the Finance Department, collects in excess of
five million dollars per year. Approximately $1.3 million of these collections are in the form
of currency—which is the second highest currency collections in the city.
Audit Scope and Objectives: This audit addresses municipal court cash handling and
accounts receivable policies, procedures, processes and practices. This report answers the
following questions:
· Does the Municipal Court Division have adequate procedures to receive, handle,
safeguard, and deposit cash and cash equivalents and is the Court in compliance
with those procedures?
· Does the Municipal Court properly manage and record receivables to ensure that
receivables recorded in the City’s financial records are complete?
· Does the Municipal Court utilize adequate collection efforts to collect monies owed to
the City?
Audit Results: Municipal Court policies, procedures, and practices are in alignment with
cash handling and accounts receivable best practices. In addition, the Court utilizes
adequate collection efforts to collect fines and fees owed to the city. However, previous
court administrations’ accounting practices resulted in accounting irregularities in the
account receivable balance and the bond account. Court staff is currently working to
resolve these issues.
Attachments: Court Cash Handling and Account Receivable Audit Report
30
Cash Handling & Accounts Receivable Management
Audit of the Municipal Court
January 2010
City Internal Auditor’s Office
City of College Station
File#: 10-01
31
32
Municipal Court Audit
Table of Contents
Introduction ................................................................................................................. 1
Municipal Court Background ................................................................................. 1
Audit Objectives ..................................................................................................... 5
Scope and Methodology ......................................................................................... 5
Findings and Analysis .................................................................................................... 7
Cash Handling Best Practices have been Implemented ....................................... 7
The Duties of Court Employees Are Appropriately Segregated ........................ 7
Municipal Court Utilizes Effective Receipting Controls ..................................... 8
Cash Collection Security Measures Are Adequate ............................................. 9
AR is Properly Managed but Accounting Corrections are Needed ..................... 12
Court Related Receivables are Properly Managed .......................................... 12
Previous Accounting Practices and System Failings Corrupted Records........ 14
Recommendations ....................................................................................................... 16
Appendices
Appendix 1 Municipal Court Cross Functional Flow Chart . . . . . . . . . . . . . . . . . . . . . . 17
Appendix 2 Chief Financial Officer’s Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
33
34
Municipal Court 1
Introduction
The City Internal Auditor conducted this cash handling and account
receivable management audit of the Municipal Court Division of the
Department of Finance pursuant to Article III Section 30 of the
College Station City Charter, which outlines the City Internal Auditor’s
primary duties.
An internal audit is an objective, systematic examination of evidence
to assess independently the performance of an organization, program,
activity, or function. The purpose of an internal audit is to provide
information to improve public accountability and facilitate decision-
making. Internal audits encompass a wide variety of objectives,
including those related to assessing program effectiveness and
results; economy and efficiency; internal control; compliance with
legal or other requirements; and objectives related to providing
prospective analyses, guidance, or summary information.
A cash handling audit of the Municipal Court Division was included in
the fiscal year 2010 audit plan based on the results of the Citywide
Cash Handling Questionnaire completed in August 2009, results of the
Citywide Risk Assessment completed in October 2007, and findings
from previous audit work. On September 24, 2009, the City Council
approved the City Internal Auditor’s audit plan.
Municipal Court Background
Municipal Court is a division of the Fiscal Services Department that is
responsible for the collection and disposition of approximately 30,000
plus traffic, parking, state law and city ordinance violations per year.
The Division is managed by the Court Administrator who reports to
the Assistant Finance Director, and has twenty full-time employees
and one part-time employee. These employees staff the three
primary business units at the Municipal Court: Customer Service,
Warrants, and Collections. In addition, the Teen Court Coordinator
administers the City’s Teen Court Program that helps develop the
youth of the City. The Juvenile Case Manager is in charge of
maintaining the juvenile and minor docket. The Municipal Court
35
2 Municipal Court
Judge is independent of the Court Administrator and reports directly
to the City Council. Figure 1 below is the organizational chart for the
Municipal Court Division.
Figure 1: Municipal Court Division Organization Chart
Court Administrator
Customer Service
Supervisor City Marshal
Customer
Service Rep
Team Leader (2)
Customer
Service Rep (5)BailiffDeputy City
Marshal (3)
Assistant
Collections
Coordinator
Payment
Compliance
Rep (2)
Collections
Supervisor
Teen Court
Coordinator
Staff AssistantJuvenile Case
Manager
The Customer Service Unit is comprised of Customer Service
Representatives who work the front counter and employees who
service the public over the phone. Front counter employees have
cashiering responsibilities and accept and process citation payments
received from walk-in patrons using automated cash registers. With
these cash registers, the cashiers directly input cash receipts activity
into JEMS, the City’s Municipal Court information system. Customer
Service Representatives are also responsible for reviewing citations
for correctness, preparing non-contested cases for pre-trial, entering
jail arraignment cases, and processing the mail.
Municipal Court’s warrant activities include a City Marshal, two fulltime
Deputy City Marshalls and one part-time Deputy City Marshal. The
Marshals serve the Municipal Court’s capias pro fine and failure to
appear warrants. One fulltime Deputy City Marshal and the part-time
Deputy City Marshal provide security for the Court. Municipal Court’s
security requires citizens to walk through a metal detector and scan
belongings through an ex-ray machine to ensure the safety of citizens
36
Municipal Court 3
and staff. City Marshals clear approximately 1,300 to 1,400 warrants
per year by arrest, contact by telephone or in person, resulting in the
collection of approximately $800,000 per year.
Municipal Court’s Collection staff includes a Collections Supervisor, an
Assistant Collections Coordinator and two Payment Compliance
Officers. This portion of the staff works closely with the City
Marshals. Collections follow a citation that has been filed with the
Court by the College Station Police Department, Code Enforcement or
Parking Enforcement to ensure collection and disposition of the
citation. Collections create approximately 1,500 to 1,900 warrants
per year. These collection efforts are responsible for approximately
40 percent of Municipal Court’s collections. Collections personnel are
also responsible for placing defendants in the failure to appear
program, submitting cases to the external collection agency, issuing
failure to appear warrants, entering jail arraignment cases, and
conducting administrative hearings for civil parking cases.
The Municipal Court Division collects a variety of fees and revenue,
which include:
· Traffic, parking, city ordinance or penal violation fines –
adjudicated and administrative fines relating to violations of state
and City of College Station statutes and ordinances.
· Point of service fees – these are cost-based fees for materials and
services provided by the Division to petitioners.
· Administrative and/or mandatory court fees – these fees imposed
by operation of law or by the discretion of the Judge, relating to
adjudicated matters within the Municipal Court’s jurisdiction.
Generally, fines and adjudicated monetary penalties are for violations
of law, while fees are charges for the cost of services rendered by the
Court. The Municipal Court’s largest revenue stream is for traffic fines
and fees.
Municipal Court collects the state fees that are payable to the State of
Texas. JEMS is designed to separate and disburse court related
payments based on state mandated criteria. Each day, court
transactions are summarized in disbursement batches and uploaded
into the City’s accounting system, HTE. The Accounting Division of
37
4 Municipal Court
the Fiscal Services Department remits this money on a monthly basis
to the State Comptroller’s Office.
Municipal Court offers several methods of payment including payment
plans negotiated by the two Payment Compliance Officers, credit card
payments over the internet, in person or by calling into the Court by
telephone. The Court has a drop box at their location for payments
as well as documentation that may be turned into the Court for
dismissal of citations. The Municipal Court accepts checks, cash,
money orders and credit card payments from MasterCard, Visa and
Discover.
Municipal Court collects in excess of five million dollars per year.
Approximately $1.3 million of these collections are in the form of
currency. Figure 2 below compares the currency receipts of the City’s
cash handling locations for fiscal year 2009.
Figure 2: FY09 Currency Receipts Comparisons (in dollars)
38
Municipal Court 5
Audit Objectives
This audit addresses municipal court cash handling and accounts
receivable policies, procedures, processes and practices. This report
answers the following questions:
· Does the Municipal Court Division have adequate procedures to
receive, handle, safeguard, and deposit cash and cash equivalents
and is the Court in compliance with those procedures?
· Does the Municipal Court properly manage and record receivables
to ensure that receivables recorded in the City’s financial records
are complete?
· Does the Municipal Court utilize adequate collection efforts to
collect monies owed to the City?
Scope and Methodology
This audit was conducted in accordance with government auditing
standards, which are promulgated by the Comptroller General of the
United States. Audit fieldwork was conducted from December 2009
through January 2009.
The audit scope included procedures and practices used by municipal
court staff to receive, handle, record, deposit, and collect cash,
checks, and credit card payments at the time of fieldwork.
The audit methods used to complete the audit objectives included:
· Reviewing the work of auditors in other jurisdictions and
researching professional literature to identify best practices for
municipal court cash handling, recording, and collections
functions.
· Interviewing staff responsible for performing cash handling,
recording, and collection oversight functions.
· Conducting data analysis using specialized auditing software to
test for fraud indicators and system control failings.
39
6 Municipal Court
· Reviewing cash receipt support documentation, municipal court
employees’ system functional access authority, the City’s fiscal
policy on cash handling, and municipal court procedures.
· Observing customer service and payment compliance
representatives perform their cashiering and financial recording
responsibilities.
· Observing non-cash credit review and approval and receipt
reconciliation processes performed by the Division’s supervisors.
· Performing a surprise cash count of all municipal court cash
drawers on December 29, 2009.
· Observed the method by which citations are created, processed
and flow from the Police Department information system to the
Municipal Court information system to determine if the billing
system is effectively designed (i.e. complete, accurate and timely
billing).
· Reviewing municipal court case records and observing work
performed by court staff to determine compliance with written
policy and procedures.
· Identified and reviewed applicable reporting mechanisms and the
effectiveness of the reports utilized by the Court to manage
receivables and optimize collection efforts.
40
Municipal Court 7
Findings and Analysis
Cash Handling Best Practices have been Implemented
Cash may include currency, coins, checks, money orders, or
credit/debit card transactions. The following are generally considered
to be best practices in cash handling: (1) appropriate segregation of
duties, (2) effective receipting controls, (3) proper security measures
regarding daily balancing and depositing of cash collections, (4) and
sufficient management or officer review. Policies and procedures
were reviewed, key staff was interviewed, system functional access
authority was analyzed and operations were observed to determine if
the Municipal Court exhibited these characteristics.
The Duties of Court Employees Are Appropriately Segregated
Separation of duty, as a security principle, has as its primary objective
the prevention of fraud and errors. This objective is achieved by
disseminating the tasks and associated privileges for a specific
business process among multiple users. To achieve the highest level
of internal control over the cash handling process, a different person
should be involved in billing, payment processing, collection activities,
and approval and reconciliation functions.
Appropriate municipal court segregation of duties is an
effective physical control. College Station police, code
enforcement, or parking enforcement officers create billings through
writing tickets for traffic, parking, city ordinance, or penal violations.
Customer Service Representatives are responsible for cashiering
duties related to processing court fines and fees. Payment
Compliance Representatives are responsible for collection activities
such as monitoring accounts receivables, establishing payment plans
for eligible defendants, activating warrants, issuing failure to appear
citations, maxing fines or placing defendants in OmniBase1 (which
places holds on defendants’ drivers’ license). Daily reconciliations of
cash receipts to cash on hand are performed by both Customer
Service Representatives and municipal court supervisors. In addition,
only municipal court supervisors or the Court Administrator can
1 OmniBase Services of Texas maintains and administers the central database for the cities and counties
contracted to use the Department of Public Safety's Failure to Appear Program.
41
8 Municipal Court
approve voided transactions. Figure 3 below describes the Municipal
Court’s segregation of duties.
Figure 3: Municipal Court Segregation of Duties
Mail processing procedures could be improved. Customer
Service Reps working as cashiers are permitted to open and process
the mail without supervision. The mail checks are then included in
their cash drawer and reconciled to daily cash receipt transactions to
ensure that all payments were recorded properly and deposited in the
bank. To best mitigate the risk of theft through a check for cash
substitution scheme, Customer Service Reps functioning as cashiers
should not open and process the mail. Alternatively, more than one
employee could be present when the mail is opened and recorded.
During my observations of this process, I noted an instance where a
defendant who owed $140 in court related fines sent two checks in
the mail totaling $280. The Customer Service Rep simply returned
one of the checks. The proper procedure in this situation should have
been to receive both checks into the JEMS system, recorded as
revenue—then issue a refund through the City’s financial information
system and a refund check generated through the Accounting
Division.
Municipal Court Utilizes Effective Receipting Controls
The following are generally considered to be best practices in
receipting cash: (1) A duplicate receipt should be provided to the
payor for each transaction. (2) Checks received should be
42
Municipal Court 9
immediately restrictively endorsed, “For Deposit Only”. (3) Official
pre-numbered receipts should be used. (4) Information on receipts
should include the payor’s name; purpose or description of the cash
payment; quantity; and unit price, if applicable; type of cash received
(check, currency, etc.); total amount of cash received; and the
signature of the person collecting or receiving the cash.
Cashiers provide duplicate receipts to those who make
payments at the Court. City cash handling procedures state that
cashiers should always give the customer a receipt. Based on my
observations and review of municipal court procedures and other
support documentation, cashiers provide duplicate receipts to those
who pay their court fines or fees at the Municipal Court.
Checks received are appropriately endorsed. Based on my
review, I found that when cashiers receive checks for payment they
immediately endorse the check with an official city stamp that
contains the language “For Deposit Only”.
System generated receipts are adequate. Municipal Court
official receipts are created by automated cash registers, which are
integrated with the Court’s information system (JEMS). Receipt
documentation created by these registers contains all the necessary
features to effectively reconcile processed payments to accounting
records, such as
· Information identifying the document as an official city receipt,
· The system generated pre-numbered receipt number,
· The mode of payment (i.e. cash, credit card, check, etc.),
· The date of the transaction,
· Information identifying the payor (i.e. name and address),
· Information identifying the clerk who processed the payment,
· The case number for easy support document retrieval,
· A description of the payment, and
· The payment amount and account balance.
In addition, these receipts are automatically numbered by the
information system in sequential order.
Cash Collection Security Measures Are Adequate
Effective security measures for balancing and depositing cash
collections have the following elements: (1) Cashiers should have a
lockable cash drawer, and it should be secured in a locked safe, to
which access is limited to the employee collecting the cash and a
43
10 Municipal Court
supervisor. If there is more than one person receiving cash at the
same time, each person should have his/her own cash drawer. (2) All
cash receipts should be balanced daily by comparing the pre-
numbered receipts issued with the actual amount of cash in the
drawer. (3) Deposit should occur at the earliest possible time with all
funds intact. The entire amount of receipts collected must be
deposited so that all collections are posted as receipts to the City’s
accounts. (4) The deposit receipt should be reconciled to cashiers’
receipt documents after the deposit has been made.
Security Measures for Balancing and Depositing of Cash
Collections Are Effective. At the end of each business day,
Customer Service Rep cashiers reconcile his or her cash receipts. The
cashier begins by printing out his or her daily cash listing report from
JEMS. This report is designed to identify and summarize all cash
receipts activity performed by the cashier for the day. After this is
done, source documentation for each type of transaction is totaled
(adding machine tapes are prepared), and reconciled with the cash
listing report by the cashier. Additionally, currency, coins, checks,
and credit card payments are totaled and compared with like
information in the cash listing report. The cashier has a fellow
employee verify their reconciliation before they secure their cash
drawer in the Municipal Court safe overnight.
The next day, one of the two court supervisors or the Court
Administrator reviews each cashier’s reconciliation to make sure the
cash receipts listing reports, cash and cash equivalents, and
supporting source documentation are in agreement. As part of the
review process, the supervisor recounts the currency and coins for
each cash drawer to make sure all money is accounted for. All cash
receipts and most support documentation for these receipts are then
placed in a courier bag with a bank deposit slip, which is locked and
placed in the Municipal Court safe until an armored vehicle arrives to
deliver and deposit cash collected from the previous day into the
City’s Citibank account.
Independent reconciliation is performed by Accounting
Division staff. Each day, an Accountant in the Accounting Division
of Fiscal Services reconciles the daily court deposit to the City’s
Citibank account statement. She verifies that all deposits reconcile to
accounting records, payment records, and the bank statement. This
step ensures that all cash sales recorded for the day were properly
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Municipal Court 11
and timely deposited and correctly recorded in the City’s accounting
system.
Cash drawers are individually assigned and secure. Each
Customer Service Rep is assigned a cash drawer with a $100 change
fund. The drawers are all locked in the safe overnight. In addition,
cashiers can lock their drawers at their work station. A petty cash
fund of $200 is also secured in the safe. These cash funds are
centrally monitored and correspond to authorize funds amounts
recorded in the Accounting Division of Fiscal Services.
Additional positive audit findings were noted. Based on my
review, the following audit findings related to physical controls over
cash handling functions were noted.
· Deposits are made daily, intact, and in the same form received.
· The check and cash composition of the daily bank deposit agrees
with the mode of payment indicated on the cash receipts.
· Personal checks of cashiers, fund custodians, or other city
employees are not allowed to be cashed at court registers.
· There are no deposit timing lags from court deposits to the City’s
bank account.
· Voided receipts are approved by supervisors who do not accept
payments or issue receipts. Voided receipts adequately document
the reason for the void.
· Court personnel that handle cash are trained on how to recognize
counterfeit currency and utilize counterfeit pen detectors for large
currency bills received.
· Security cameras are strategically placed in the lobby area of the
Municipal Court. The Court Administrator is able to monitor all
cashiers from her desk through a live video feed. The Court
Administrator can also review historical footage from the cameras.
· Daily, court personnel and Accounting Division personnel
independently verify that all payments have been properly posted
into the City’s financial system.
· Reports are generated both daily and monthly to reconcile daily
transaction processing as well as monthly activity. Overage and
shortage reports are also kept and monitored by management.
· Checks returned for not sufficient funds are monitored by court
management, appropriate reversal entries are made, and the
cases are subjected to the Court’s collection processes.
· No unexplained anomalies in court revenue patterns were found.
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12 Municipal Court
AR is Properly Managed but Accounting Corrections are Needed
Currently, the Municipal Court properly manages and records
accounts receivables resulting from citations or other court related
revenue sources. In addition, the Court utilizes adequate collection
efforts to collect monies owed to the City. Prior accounting practices
and JEMS system glitches; however, have led to data integrity issues
regarding historical court case records. As a result, the value of court
related account receivables is not known. In addition, the balance of
the bond account can’t be accurately determined.
Court Related Receivables are Properly Managed
Proper management of accounts receivables is an essential
accounting function. To be achieved an organization must be able to
estimate the realizable value of its accounts receivables, effectively
process transactions, encompass proper authorization, and sufficiently
manage delinquent accounts. Based on my review, I found that
Municipal Court properly manages and records current accounts
receivables resulting from citations or other court related revenue
sources.
Current practices enable the Court to estimate the realizable
value of recent receivables. The net realizable value of court
related accounts receivables are determined by having the Municipal
Court adjudicate the case and issue an order as to the amount of
fines and fees due. Final determination of the net realizable value of
the receivable is accomplished when the amount is paid. Each
violation also has a unique case identification number and undergoes
a process for substantiation should the individual plea not guilty or
simply does not pay the fine or fee.
Appropriate transaction processing related measures are
present. Citations are uniquely numbered, time, and date stamped
and remitted daily for processing. In addition, the system is set to
apply appropriate fines and fees if violations are not paid when due.
Court orders establishing the amounts due are timely entered into the
system (which establishes the legal receivable) and payments are
entered into the system at the time of payment. Daily, payments
processed in JEMS are reconciled to the bank deposit and revenue
recorded in JEMS is reconciled with the City’s financial system.
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Municipal Court 13
Receivable authorization is defined and appropriate. All fines
and fees are defined and authorized by state law or through city
ordinance. Responsibilities and authorizations for recording of
receivables is defined, communicated and understood. The Division
has formal policies and procedures for all court processes and these
policies and procedures are observed.
The Court utilizes adequate collection efforts to collect
monies owed to the City. Unlike other receivables, court related
accounts receivable are not written off due to the legal nature of the
receivable. To increase the likelihood of collecting on all accounts;
the Municipal Court has developed a well defined and effective
process for collecting delinquent accounts. Delinquent accounts are
monitored closely and effective reporting tools are utilized to assess
collection activity. To increase collections, the Court also negotiates
payment plans for qualified defendants.
When civil or criminal citations are unpaid after 10 days, Payment
Compliance Reps mail these defendants notifications warning them of
pending warrants for their arrest if they do not contact the Court and
make arrangements to pay their fines. If the citation is still unpaid
after 30 days, the defendant is charged with a Failure to Appear
citation and the fine is increased to the maximum allowed by state
law. If a defendant is charged with Failure to Appear, not only will
the Court issue a warrant but the defendant will be reported to the
DPS Omnibase system. Once the defendant has been reported to
Omni, the DPS will not allow him or her to renew their Texas driver's
license. In addition, if the defendant’s license expires while an Omni
hold is in place their driving privileges are suspended, putting him or
her at risk of being arrested and jailed on a charge of driving with a
suspended license. For defendants who have an out-of-state driver’s
license, after 60 days, the account is turned over to the City’s outside
collection agency.
In addition to the collection efforts mentioned above, the Municipal
Court conducts two warrant roundup and amnesty programs per year.
The Municipal Court holds a warrant amnesty period for
approximately two weeks, where local residents can pay off Class C
misdemeanor fines without an additional warrant fee. Once the
amnesty period has passed, local authorities begin a roundup period
of actively pursuing those with warrants.
47
14 Municipal Court
Previous Accounting Practices and System Failings Corrupted
Records
The accounting practices of previous court administrations in
conjuncture with information system failings led to some accounting
record errors. As a result, accounting corrections need to be made on
several aged receivables in order to accurately estimate the value of
court related accounts receivables. In addition, accounting
corrections to the bond account are needed to reconcile municipal
court records to the City’s official financial records.
The balance of court related accounts receivable is not
known. Based on my review there are at least three causes for the
uncertainty in the balance of accounts receivable: (1) prior
processing and accounting of defensive driving cases, (2) prior
processing and accounting of deferred disposition cases (i.e. cases
that may be dismissed if the defendant meets probationary
requirements set by the Court), and (3) information system errors.
There are errors in several historical defensive driving cases because
the previous court process for handling these cases caused negative
account receivable balances to occur. For defensive driving, the
defendant is required to pay upfront the citation’s fine and any
associated fees. In the past, if the defendant completed the
defensive driving course and met all the other terms of their
probation, court staff would reverse the citation and fines resulting in
an erroneous negative account receivable balance. Currently, the
Court may dismiss the citation (not the fine) from the defendant’s
records upon successfully completion of the course and probationary
terms.
The way deferred disposition cases were handled in the past also
caused errors in account receivables. When requesting deferred
disposition, defendants would pay the original fine amount. At the
same time court staff would increase the fine to the maximum
allowed by law, resulting in a balance owed by the defendant if they
did not complete the terms of their probation. There were several
instances where previous court personnel did not remove the account
receivable balance from defendants who successfully met the terms of
their probation. As a result, accounts receivable was erroneously
overstated in these instances.
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Municipal Court 15
The Court Administrator provided documentation of several JEMS
system produced errors. I also interviewed Department of
Information Technology staff to confirm that JEMS system glitches
have caused several transactional related problems. Based on my
review, JEMS system glitches could have caused additional historical
accounting problems and errors related to court related accounts
receivable.
The bond account balance in JEMS does not reconcile with
the general ledger balance. As of December 2009, the bond
account balance in the general ledger is approximately $48,000
greater than the balance found in JEMS.
When requesting deferred disposition, the Court collects a special
expense fee. The state portions of this fee are disbursed and
remitted to the State. The remainder of this money is collected but
remains as a payable (in the bond account), until the deferral period
is completed2. Once the deferral period is over, the payable should
be disbursed; however, there have been instances when this did not
occur resulting in the difference in bond account in JEMS and the
general ledger.
During the course of the audit, I was provided with evidence that
there has been significant work completed by both the Court and
Accounting staff to address this issue. For example, the balance of
the bond account at the end of fiscal year 2008 was over $580,000;
in fiscal year 2009 the balance was under $200,000.
2 According to state law, the Municipal court was not allowed to disburse the deferred special expense
fee until the end of the deferral period. Effective September 1, 2009, a new ruling was issued allowing
municipal courts to collect and disburse the special expense fee prior to the end of the deferral period.
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16 Municipal Court
Recommendations
Overall, the Municipal Court has adequate procedures to receive,
handle, safeguard, and deposit cash and cash equivalents. In
addition, receivables are currently being properly managed and
recorded and collection efforts are effective. As a result, the audit
revealed few changes that need to be made in order to strengthen
controls related to the audit scope and objectives. However, the
audit did reveal the following:
1. The Municipal Court Administrator should change mail processing
policies and procedures to restrict Customer Service Reps
functioning as cashiers from opening and processing payments
received through the mail. Alternatively, more than one employee
should be present when the mail is opened and payments from
the mail are recorded.
2. The Municipal Court Administrator should be able to accurately
estimate the net realizable value of court related accounts
receivable. To accomplish this goal, the Court Administrator
should research historical cases with an accounts receivable
balance to determine their accuracy and then make necessary
adjustments to the JEMS system along with appropriate journal
entry adjustments to the general ledger.
3. The Municipal Court Administrator and Accounting Division staff
should continue to investigate cases with account receivable
balances due to deferred disposition expense fees in order to best
reconcile the JEMS bond account balance to the general ledger’s
balance. Perfect reconciliation is likely not to occur given the age
of some of these records; therefore, adjusting journal entries may
need to be made to balance the account going forward.
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Municipal Court 17
Appendix 1: Municipal Court Cross Functional Flow Chart
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18 Municipal Court
Appendix 2:
The Chief Financial Officer’s Response to the Audit Recommendations
1. The Municipal Court Administrator should change mail processing policies and
procedures to restrict Customer Service Reps functioning as cashiers from opening and
processing payments received through the mail. Alternatively, more than one employee
should be present when the mail is opened and payments from the mail are recorded.
Response: Management concurs. The Municipal Court Administrator will implement a
policy either restricting the person who processes the mail from cashiering that day or
requiring two people to process the mail.
2. The Municipal Court Administrator should be able to accurately estimate the net
realizable value of court related accounts receivable. To accomplish this goal, the Court
Administrator should research historical cases with an accounts receivable balance to
determine their accuracy and then make necessary adjustments to the JEMS system
along with appropriate journal entry adjustments to the general ledger.
Response: Management concurs. The Municipal Court Administrator will continue to
research historical cases to determine their accuracy and make necessary adjustments
to the JEMS system along with appropriate journal entries to the general ledger.
3. The Municipal Court Administrator and Accounting Division staff should continue to
investigate cases with account receivable balances due to deferred disposition expense
fees in order to best reconcile the JEMS bond account balance to the general ledger’s
balance. Perfect reconciliation is likely not to occur given the age of some of these
records; therefore, adjusting journal entries may need to be made to balance the
account going forward.
Response: Management concurs. The Municipal Court Administrator and Accounting
staff will continue to investigate cases holding bonds on file and create adjustments to
reconcile the bonds in the JEMS system to the bonds on the general ledger. Municipal
Court Administrator will investigate cases cleared by deferred disposition that continue
to show an outstanding balance. Municipal Court Administrator will continue to work
closely with our software vendor, PCSS, to perfect the purge function which will
eliminate most of the problems with old cases.
52
February 25, 2010
Workshop Agenda Item No. 4
Fuel Operations Follow-up Audit Report
To: Mayor and Members of the City Council
From: Ty Elliott, City Internal Auditor
Agenda Caption: Presentation, possible action, and discussion concerning the City
Internal Auditor’s Fuel Operations Follow-up Audit Report.
Summary: The follow-up audit report summarizes the fuel operations audit
recommendations, management’s responses, and the audit follow-up findings—which
describe how city management has implemented the auditor’s recommendations.
Audit Results: Department of Public Works management concurred with all seven audit
recommendations. After the completion of all audit tests, I found that three
recommendations were fully implemented and four recommendations were partially
implemented. However, Public Works currently has plans in place to fully implement the
four recommendations that were partially implemented.
Attachments: Fuel Operations Follow-up Audit Report
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Page 1
TO: Audit Committee Members
FROM: Ty Elliott, City Internal Auditor
DATE: February 5, 2010
SUBJECT: Fuel Operations Follow-up Audit Report
The fuel operations follow-up audit was conducted in accordance with the fiscal year 2010 audit plan.
This audit report summarizes the fuel operations audit recommendations, management’s responses, and
the audit follow-up findings (which describe how city management has implemented the auditor’s
recommendations). This audit was conducted in accordance with government auditing standards, which
are promulgated by the Comptroller General of the United States.
1. Audit Recommendation: The Director of Public Works should instruct the Fleet Buyer to verify
that the invoiced unit cost corresponds with the contract price documented in the city’s fuel
agreement with Brenco. There are four steps to verifying the contract price. (1) Obtain t he Oil Price
Information Service (OPIS) publication for Hearne, TX. (2) Verify that the date on the OPIS
publication matches the order date documented on the invoice and the transaction log. (3) Identify
the UBD rack average rates for unleaded (UNL) and diesel (ULS) on the OPIS publication, and add
the appropriate markup rate based on the gallons delivered. (4) Compare the unit costs identified in
step three to the unit costs on the invoice.
Management Response: Management concurs with the recommendation and will instruct the
Fleet Buyer to verify that the invoiced unit price corresponds with the contract price.
Audit Follow-up Finding: I interviewed the Fleet Buyer and observed her perform her duties
related to purchasing and receiving of fuel. Based on my review, she now verifies fuel contract prices
by performing the steps outlined in the recommendation above.
2. Audit Recommendation: The Director of Public Works should direct Fleet personnel to do a
thorough evaluation and cleanup of the data in both the fuel management system (Phoenix) and the
equipment file in the city’s financial system to ensure that the data is accurate and corres ponds to
one another. Former employees and current employees, who no longer have a need to fuel city
vehicles or equipment, should have their fuel pump authorization deactivated from the Phoenix
system. In addition, non misc fuel cards that are not assigned to current city equipment or vehicles
should be deactivated in the Phoenix system.
TY ELLIOTT
City Internal Auditor
telliott@cstx.gov
CITY INTERNAL AUDITOR’S OFFICE
1101 TEXAS AVENUE
COLLEGE STATION, TEXAS 77842
TEL: (979) 764-6269
FAX: (979) 764-6377
AUDIT COMMITTEE
Councilmember Lawrence Stewart
Councilmember James Massey
Mayor Ben White
54
Page 2
Management Response: Management concurs with the recommendation and will direct that the
data in the fuel management system and city’s financial system be cleaned up as described to ensure
that the data is accurate in both systems.
Audit Follow-up Finding: In conducting the Fuel Operations Audit, I found 8,934 transactions for
137,105 gallons of fuel recorded in the fuel management system (Phoenix) that was missing from the
city’s financial system (HTE). Fleet Services has made several improvements to correct this problem
such as: performing daily fuel transactions imports from Phoenix into HTE, reconciling these
transactions on a daily basis, and conducting significant data cleanup in both Phoenix and the
equipment file of HTE.
I reviewed all fuel transactions between 7/1/09 and 12/31/09 found in the Phoenix and HTE
databases. I found that the transactions in the two systems completely reconciled. Therefore , I
conclude that the measures that Fleet personnel have taken to ensure that the data is accurate and
corresponds to one another have been effective.
Fleet personnel have also reduced the number fuel cards for equipment, miscellaneous fuel cards,
and drivers authorized to obtain fuel at city fueling stations. The table below summarizes these
results.
Equipment
Cards
Driver
Authorization
Misc
Cards
As of March 2009 504 1,141 59
As of January 2010 474 699 41
Difference 30 442 18
Percent Reduction 6% 39% 31%
According to Fleet personnel, a significant clean-up of the data in the Phoenix system was conducted
shortly after the release of the audit report. However, I found there are no procedures in place to
periodically identify and deactivate fuel authorization from individuals who no longer have a need to
use city fueling stations. As a result, I found 37 authorized fuel users who are no longer employed
by the City. In addition, I found 62 authorized users who have not obtained any fuel at city fueling
stations within the last 6 months. At least two authorized fuel users have vehicle allowances. When
I interviewed these two employees they did not know they were authorized to obtain fuel at city
fueling stations.
3. Audit Recommendation: The Director of Public Works should direct Fleet staff to activate the fuel
management system’s odometer reasonability control for all fuel cards. Prior to this control being
implemented, Fleet should develop a communications plan to instruct all fuel users about the
importance of entering correct odometer readings and to communicate the proper fueling
procedures. Once odometer reasonability controls are implemented, Fleet should consider using
odometer entries to calculate miles per gallon or cost per mile in order to track driver and vehicle
efficiency.
Management Response: Management concurs with the recommendations and will direct the
implementation of the fuel management system’s odometer reasonab ility controls for vehicles after
meeting with fleet coordinators from each department to develop a training and informational
program.
Audit Follow-up Finding: Odometer reasonability controls have been partially implemented.
Odometer reasonability ranges should be set based on vehicles’ fuel economy and fuel tank capacity.
Although odometer control ranges have been set for all vehicles, reasonability ranges are not always
based on vehicles’ fuel economy and fuel tank capacity. For example, a 2004 Ford Crown Vic has a
55
Page 3
tank capacity of 20 gallons and an estimated fuel economy of 14 miles per gallon. Therefore, a
logical odometer reasonability range for a Crown Vic could be 1 to 280 (20 × 14).
Current system settings also allow fueling after a user enters three odometer readings that fall
outside of the reasonability range—which functionally bypasses the odometer reasonability control.
As a result, city fuel pump users continue to enter incorrect odometer readings . Consequently, Fleet
is currently unable to take advantage of system tools to track driver and vehicle efficiency and better
schedule preventative maintenance.
Fleet has develop a communications plan to instruct all fuel users about the importance of entering
correct odometer readings and proper fueling procedures. However, formal training and
communications have not yet been given to all users —an additional cause for the continued incorrect
odometer entries.
4. Audit Recommendation: The Director of Public Works should direct Fleet personnel to activate
the fuel management system’s quantity restriction controls for all fuel cards. Quantity restriction
should be set to match a vehicle's tank size. Therefore, Fleet staff should verify that tank capacity
data recorded in the city’s financial system’s equipment inventory file is complete and accurate prior
to implementing quantity restriction controls. The Phoenix system also has the ability to set daily and
monthly fuel quantity limits for fuel cards. Daily and monthly limits should be set in accordance with
cardholder needs in order to prevent users from circumventing quantity controls by fueling multiple
times within the same day or more than reasonable within a month. Therefore, Fleet staff should
work with department fuel users and conduct a fuel usage analysis to identify appropriate daily and
monthly fueling limits to be placed on fuel cards.
Management Response: Management concurs with the recommendation. Fleet staff will be
directed to work with departmental fleet coordinators to conduct a fuel usage analysis to determine
appropriate fueling limits and implement the fuel management system’s quantity restriction controls
as described for all fuel cards.
Audit Follow-up Finding: Quantity, daily, and monthly fueling limit controls have been partially
implemented. Quantity, daily, and monthly fueling limits have been set for all vehicles and drivers.
However, quantity limits do not always correspond with fuel tank capacity. In addition, daily and
monthly limits are sometimes set artificially high, rendering the control ineffective.
5. Audit Recommendation: The Director of Public Works should direct Fleet staff to monitor
miscellaneous fuel card usage by employee and supply users’ supervisors with miscellaneous fuel
card usage reports. Department supervisors should be instructed by Fleet to use these reports to
help them identify possible instances of inappropriate fuel use. Fleet staff should also conduct an
analysis of miscellaneous card use. This analysis should identify the following: (1) potential
unmetered equipment that can be assigned to each miscellaneous fuel card, (2) reasonable monthly
limits that can be placed on each miscellaneous card based on the historical use of unmetered
equipment appropriate to be fueled with the card, (3) who uses miscellaneous cards and determine if
these users are appropriate for the card’s intended use, and (4) the miscellaneous cards that s hould
be deactivated from the system.
Management Response: Management concurs with the recommendation. Fleet staff will be
directed to work with departmental fleet coordinators to conduct miscellaneous fuel card usage
analysis as described to identify possible instances of inappropriate fuel use and to take actions to
prohibit inappropriate fuel card activity.
Audit Follow-up Finding: Fleet’s current miscellaneous fuel card usage monitoring procedures are
adequate to identify possible instances of inappropriate fuel use. Fleet staff has also performed the
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necessary analysis to identify the miscellaneous cards that should be deactivated from the system
and these cards have been removed.
6. Audit Recommendation: The Director of Public Works should direct Fleet staff to draft fueling
procedures to be distributed to current authorized users, and provide these instructions to every new
user.
Management Response: Management concurs with the recommendation and will direct the fleet
staff to draft fueling procedures to be provided to all authorized users and to new users added to the
system.
Audit Follow-up Finding: Fleet staff has drafted fueling procedures to be distributed to current
authorized users, and these instructions have been provided to every new user.
7. Audit Recommendation: The Director of Public Works should direct Fleet staff to conduct an
analysis to determine the overhead cost of administering fuel and develop an overhead rate that
reflects those costs. In addition, the equipment inventory file should be examined to ensure that all
vehicles and equipment are assessed the same overhead rate.
Management Response: Management concurs with the recommendation and will direct the Fleet
staff to determine the overhead cost for administering the fuel system and establish an overhead rate
that accurately reflects those costs. The Fleet staff will examine the equipment inventory to ensure
that all vehicles and equipment are assessed the correct overhead rate.
Audit Follow-up Finding: Fleet staff has conducted a reasonable analysis to determine the
overhead cost of administering fuel and developed an overhead rate of six percent that reflects these
costs. However, the equipment inventory file has not yet been updated to ensure that all vehicles
and equipment are assessed the six percent overhead rate.
57
February 25, 2010
Workshop Agenda Item No. 5
Update on FY 10 Budget and FY 11 Budget Planning
To: Glenn Brown, City Manager
From: Jeff Kersten, Chief Financial Officer
Agenda Caption: Presentation, possible action, and discussion on an update of the
City of College Station FY 10 Budget, and FY 11 Budget Planning.
Recommendation(s): Staff recommends the City Council receive the report and
provide any desired direction.
Summary: Staff will be presenting an update on the status of the FY 10 Budget and
an update on the planning for the FY 11 Budget. This update will include a status
report key revenue streams. Based on current revenue estimates it will be
necessary to make reductions to the FY 10 budget in order to keep ongoing revenues
in balance with ongoing expenditures.
Staff will present some preliminary recommendations on how to address this budget
shortfall. Staff will also discuss the impacts this will have on the FY 11 budget
process.
Budget & Financial Summary: Information will be presented at the workshop
meeting.
Attachments:
58
February 25, 2010
Workshop Agenda Item No. 6
Update on Activities within CSU Electric
To: Glenn Brown, City Manager
From: David Massey, Director of Electric Utilities
Agenda Caption: Presentation, possible action, and discussion regarding activities within
the College Station Utilities Electric Department.
Recommendation(s): N/A
Summary: Briefing on the status of various projects and programs within the Electric
Utility including the Street Light Monitoring System, Dowling Road Substation, and our
latest Energy Programs.
Budget & Financial Summary: N/A
Attachments:
59
February 25, 2010
Workshop Agenda Item No. 7
City of College Station Green Building Standards
To: Glenn Brown, City Manager
From: Chuck Gilman, Director of Capital Projects
Agenda Caption: Presentation, possible action, and discussion regarding a proposed
green building standard for future municipal facilities in the City of College Station.
Recommendation(s): Staff recommends a specific standard be established to set the
minimum design standards for new facilities that are derived from other green building
programs and organizations that do not typically apply to municipal facilities.
Summary: There are numerous organizations that have established green building
programs, building codes, and design criteria defining a green building, such as the U.S.
Green Building Council - Leadership in Energy and Environmental Design (LEED) for New
Construction and Major Renovations, International Code Council - National Green Building
Standard, LEED Neighborhood Development, etc. Each of these programs has similar
elements and standards, but all differ in many areas. Additionally, some of these programs
and standards were developed for a specific type of commercial construction and were not
intended to be applied to municipal buildings such as fire stations, wastewater laboratories,
scale houses, etc. Unfortunately, there is not a specific standard for municipal facilities.
Additionally, one specific program or standard may not meet all of the expectations of the
City of College Station.
Therefore, Staff is recommending that a standard be developed from many of the existing
programs and criteria to meet the expectations of the City of College Station that is
compatible with facilities serving a municipality. Staff will also seek input and direction from
the Green College Station Technical Taskforce in the development of this standard before
returning to City Council for approval.
Budget & Financial Summary: N/A
Attachments: N/A
60