San Bernardino County Grand Jury
• 2010-2011
Audit/fiscal Committee Margaret Furman, Chair Alfred J. Dubiel Arnim Belke Dawn Molumphy Allen “Skip” Burt Susan
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 10 findings
F1
In the 2003-2004 Grand Jury report, the Audit/Fiscal Committee addressed the issue of the outdated Financial Management System the county was using (AMS Advantage version 2.1.1), and the problems that will occur if the system was not upgraded. The Grand Jury made this recommendation to the Auditor/Controller- Recorder (ACR) who, in response to the recommendation, was in agreement. (See Attachment #1) In the interviews the Grand jury conducted with the ACR and staff members, there was no opposition to upgrading the system; and in fact, in the years following the report, there were some efforts to upgrade or replace the system. These efforts fell short of the mark due to miscommunications between departments, and budget restraints. The bottom line is, seven years later, the county is still using AMS Advantage version 2.1.1 as its Financial Management System. The Grand Jury is very aware of budgetary problems plaguing the entire nation, from the smallest of villages to the federal level. The county efficiently managing its assets should be very high on its list of priorities. 9
Related Recommendations (4)
R11-03
Acquire the AMS Advantage Version 4.0 System (or the most current version) to upgrade the Financial Management System; and put a procedure in place that mandates periodic updating. (Finding 1)
R11-04
With the acquisition of a new computer system comes the need for additional technical support. Insure employees have the necessary training in order to best operate, and support, the new system. (Finding 1)
R11-05
As a courtesy, the BOS provide the Grand Jury copies of all financial audits completed by state agencies including copies of all replies. (Findings 1, 2)
R11-06
The Board of Supervisors (BOS) increase the authority and scope of the Audit Committee by empowering it to see that the procedures for accounting 21 for funds in federally funded grants is implemented according to the concurrence, agreements, and promises of the Controller’s Office. (Finding 1)
F2
The Grand Jury made an appointment with the Assessor to discuss the nine areas the BOE had pointed out for improvement. We also inquired of the Chief Executive Officer (CEO) as to which office in the county kept a log of the state audits. We were informed that no one is assigned that task because the state audits are random and timing cannot be anticipated.
Related Recommendations (3)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-07
The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2)
R11-08
That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2)
F3
The standards for conducting government internal audits are set by the US Government Accounting Office (GAO) and the Institute of Internal Auditors (IIA). GAO and IIA state that the combination of auditing and controllership responsibilities impair the independence of the audit function and as such disqualify any resulting audit report as not meeting the independence and objectivity standards in fact or appearance. In San Bernardino County, the chief financial officer is the Auditor-Controller. Thus the combination of these two functions does not meet this standard of independence and objectivity. IAS staff agrees that this is a de facto conflict. Statements from more than one member of the auditing staff, reporting on Treasurer’s Investments as of September 30, 2009 and December 31, 2009, stated that “On February 25, 2010 the Board of Supervisors consolidated the elected offices of the Treasurer-Tax Collector and the Auditor-Controller/Recorder. As a result, the auditor, auditee, and subject matter of this report are within the same department”. These reports with this wording were distributed to both the Board of Supervisors and the Grand Jury with apparently no alarm expressed of the conflict the BOS created by allowing the consolidation after the prior Treasurer-Tax Collector vacated his elected office and an elected position was eliminated by assigning the tasks of Treasurer/Tax Collector to the elected position of Auditor-Controller/Recorder. The Grand Jury however, finds this situation problematic.
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-09
The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3)
F4
According to our investigation the IAS performs financial statement audits to develop staff and increase the reliability of the County’s audited financial statements. In two situations internal audits were performed by employees in the 16 office of the Auditor/Controller-Recorder who hold Certified Public Accounting (CPA) credentials; these were printed on county letterhead stating that the audit is an “Independent Auditor’s Report.” On the face of it, this is misleading. An employee has duties to his employer and is directed by the employer; but an independent auditor cannot be obligated in any manner to the client or independence is lost. The words “Independent Auditor’s Report” do not per se make the auditor independent. The Grand Jury commends the IAS department for using an employee with expertise as a CPA to develop staff but there is potential here for misunderstanding of independent functions.
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-10
The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22
F5
Our research of the organization of internal audit departments in other California counties shows that in Ventura and Riverside Counties the internal auditor reports to the Auditor-Controller as we do in San Bernardino County. Twenty-four of the fifty- eight California Counties have combined Assessor-Recorder’s, and at least 10 Counties including Sacramento, Fresno and Santa Clara have combined Auditor- Controller/Treasurer/Tax Collector, functions. It is notable that the Grand Jury found no county where as many important positions are held concurrently by one person as is the case with the San Bernardino County Auditor-Controller/Treasurer/Tax Collector/ and County Clerk. The combining of tasks occurred on the February 25, 2010 consolidation when the offices of Auditor- Controller/Recorder and Treasurer/Tax Collector were made into a single office. While the combination of offices is allowable under Government Code §24300, the Grand Jury finds, in practice, in San Bernardino County the Controller’s Office, not the Auditor’s Office, does the risk assessment that determines which departments are to be audited. This chain of authority may not have been anticipated when the consolidation was deemed to be beneficial to the County. San Bernardino County is not out of the norm in combining the Controller/Auditor function. However, we are not the first Grand Jury to point out the inherent problems in this and to recommend a separation of the Auditor’s function from the 17 Controller’s function. Orange County (OC) has organized an Internal Audit Department that reports directly to the Board of Supervisors and is connected to the Controller’s function. Currently the OC Director of Internal Audit is a CPA and Certified Auditor with numerous professional awards. The recommendation to have the OC top internal auditor removed from the controller’s function came from the 2007-2008 Orange County Grand Jury. That Grand Jury stated that they wanted to ensure the independence of the internal audit function from the direct influence of management. They understood the difficulty of auditing the boss. To accomplish this goal, the OC Grand Jury asked the Board of Supervisors to exercise their authority in California Government Code §25250 (governing financial powers), and §26881, and §26883 (governing clerks and county controllers) for authority to determine who shall conduct biennials audits of County Officers and who shall perform internal audits. Their research concluded that they could reassign internal audit responsibilities to a separate Internal Audit Department that would conduct financial, compliance, and performance audits of all county departments. The San Bernardino County Grand Jury finds that the OC method of separation of the Controller’s function from the Auditor’s function has merit. In OC, the BOS chose to have the head of the Internal Audit Department report directly to them.
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-11
The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5)
F6
Staff in the Internal Audits Section (IAS) was reduced. Three years ago, the IAS had twenty positions, with most of them filled. The current lack of funding impacts all aspects of county government in this era of post 2008 financial-melt-down; and hard decisions need to be made. When budget cuts are required, priorities must be set.
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-12
Audit all County Departments and Special Districts every year. (Finding 6)
F7
The IAS is currently operating with eleven full-time positions. The organizational chart specifically identifies a Chief Deputy Auditor with a secretary, a Management Services Manager, two Systems Accountant Level III, four Systems Accountant 18 Level II, one Accountant Level III, and one Accountant Level II. The positions for another Accountant Level II and a Public Service Employee are vacant due to recent promotions. The IIA’s International Standards for the Professional Practice of Internal Auditing require that the chief audit executive (in San Bernardino this would be the Chief Deputy Auditor) report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. To achieve necessary independence, best practices suggest the chief audit executive should report directly to the Audit Committee or its equivalent. For day to day administrative purposes, the chief audit executive should report to the senior executive of the organization.
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-13
The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7)
F8
Although for FYE 2010 the IAS reviewed department accrual packages designated as high risk by the Controller’s Division General Accounting Section, some internal audits are not being performed. The Grand Jury received a letter from the office of the Auditor/Controller/Treasurer (ACT) explaining why there were no audit reports for the quarter ended September 30, 2010. We were reminded that, “As discussed during our recent meeting, this office has the responsibility to pay employees and vendors, produce financial reports, and perform audits. During times of reduced resources, the first three listed activities are deemed a higher priority. Internal audit activity is deferred much as fixed asset maintenance is for other entities in difficult economic environments.” The Grand Jury received a schedule of audits accomplished for FYE June 2008 and
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-14
The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8)
F9
According to the Auditor-Controller/Recorder/Treasurer/Tax Collector, and County Clerk, in the letter to the Board of Supervisors accompanying the CAFR we learned it is “the responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosure, rests with the County.” Also in the CAFR, we know the role of the outside CPA firm does not include examining the effectiveness of internal control and it does not provide assurances on internal control. This demonstrates that the responsibility for the value of the data rests upon the client. In this case the County of San Bernardino. This conclusion is confirmed in the second page of the letter to the Board of Supervisors in the section under Internal Controls. “The County‘s internal accounting control system exists to provide reasonable, but not absolute, assurance that assets are safeguarded against loss or unauthorized disposition and to provide reliable records for preparing financial statements and maintaining accountability for assets.” According to the Audit Committee charter: Members of the Audit Committee are:
No recommendations for this finding
F10
In San Bernardino County, the role of the Audit Committee is multifaceted. The Audit Committee receives and examines the Single Audit opinion by the outside independent auditing firm including the management letter. Members also review the audit activities of the Auditor-Controller’s office and review the accounting process that develops the Comprehensive Annual Financial Report (CAFR). In that role the Audit Committee would be opining about internal controls and the function of internal audits. The Audit Committee also reviews the Fraud Waste and Abuse hotline. Using an Audit Committee that meets at least on a quarterly basis was the
Related Recommendations (2)
R1
11-07 The Board of Supervisors authorize the Audit Committee to look into the internal controls procedures of all County departments, and other entities for which the BOS sits as the governing body such as the Redevelopment Agency, to determine if upgraded internal controls would benefit these accounting centers. Consideration should be given to implementing uniform standards in all agencies and departments irrespective of whether they are subject to mandated or non-mandated audits. (Finding 2) 11-08 That the BOS authorize the Audit Committee to monitor the property tax allocation schedules of the Property Tax Division in the Treasurer-Tax Collectors Office as this relates to property tax increment payments to or from cities, special districts or redevelopment agencies; and that this monitoring of payments to/from cities or agencies is done each year irrespective of when the State of California conducts its audits. (Finding 2) 11-09 The Board of Supervisors consult with appropriate State Agencies to determine if the combination of the functions of Treasurer-Tax Collector and the Auditor-Controller is compatible with standards of good governance and fiduciary responsibility. A ruling from the State Attorney General be requested to determine if the County violated voter rights when it eliminated the elected office of Treasurer-Tax Collector when it became vacant and subsequently combined the duties of that office with another elected office which appears to create a conflict of interest. (Finding 3) 11-10 The use of the term “Independent Auditor” be reserved for only those audits done by outside firms or agencies and not be used by employees of the county when auditing elements of the County financial systems. (Finding 4) 22 11-11 The San Bernardino County Board of Supervisors enhance and improve the quality, efficiency, and performance of the internal audit function by using their authority to hire a Chief Audit Executive as a Civil Service employee. The independence of the internal audit function will enhance the accountability of the Chief Audit Executive in performing his/her internal financial, compliance, and performance audits. This Chief Audit Executive is to report directly to the San Bernardino County Chief Executive Officer (CEO) for administrative matters and to seek guidance on the scope and performance of the audit function from the Audit Committee. This chain of responsibility is different from the OC model but as we point out elsewhere in this report, in San Bernardino County there already is in place an Audit Committee that reports to the Board of Supervisors. (Finding 5) 11-12 Audit all County Departments and Special Districts every year. (Finding 6) 11-13 The Chief Deputy Auditor report to the County CEO for administrative issues. (Finding 7) 11-14 The Chief Deputy Auditor report to the Audit Committee to inform them of the issues coming up on the audit and look to them for direction and accountability. (Finding 8) 11-15 The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10) Responding Agency Recommendations Date Due Board of Supervisors 11-06 through 11-09 August 30, 2011 11-11, 11-14, 11-15 Auditor/Controller-Treasurer 11-10, 11-12 August 30, 2011 Chief Executive Officer 11-13 September 30, 2011 23
R11-15
The County Board of Supervisors extend an invitation to each year’s sitting Grand Jury to attend the quarterly meetings of the Audit Committee. (Finding 10)
No Responses Found 2
Government entities assigned to respond to this report. No response documents have been linked in our database.
San Bernardino County Board of Supervisors
Elected County Office
San Bernardino County Treasurer-Tax Collector
Elected County Office