San Diego County Grand Jury • 2008-2009

Grand Jury Audit of the City of Oceanside with Mainstreet Oceanside, Inc.*

Published: April 09, 2009 23 pages

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⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.

Note: Missing finding numbers detected: F2

Findings and Recommendations 11 findings

2. No overhead cost allocation plan. *

Related Recommendations (1)

The Organization board should immediately begin the budgeting process for the upcoming fiscal year by reviewing current revenue and expenditures and comparing them to the Organizations goals and objectives. Issue (2): The Organization has not established a Cost Allocation Plan for the spreading of overhead costs to each of the programs or events the Organization conducts. The lack of such a plan prohibits the proper allocation of these costs to these programs or events which would skew the overall financial success of the program or event by understating their true costs.

The Organization employs one bookkeeper who is responsible for all accounting, payroll and personnel functions (no succession/cross-training).#

Related Recommendations (1)

Management should immediately begin the process of cross training of the bookkeepers duties to ensure transparency should the bookkeepers position become vacant for any reason. Issue (4): During our review of past independent audits of the Organization we noted comments by the auditors indicating related party transactions. The auditors in both reports (2005 and 2007) that board members provided the Organization with services for which they were compensated. The services provided by the board members included construction, artistic services, graphic arts services, electrical services, painting and t-shirts. Members providing services to the Organization could appear to be a conflict of interest whereby the services provided could have been obtained for a lower cost from other vendors.

Conflict of interest involving board member noted by external auditors (2005 and 2007).#

Related Recommendations (1)

The Organization Board should establish a policy that no current members of the board provide remunerated services to the Organization while currently serving as a board member in order to prevent any conflict of interest. Control Issues The functions of the bookkeeper clearly indicate a proper lack of segregation duties as required by basic accounting principals. During our review of records and interviews we noted the following exceptions to these principals: GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Control Issues (Continued) Issue (5): The monthly bank reconciliations are performed by the bookkeeper who also records all financial transactions in the Organization's financial accounting software. This function would allow the bookkeeper to commit fraud by hiding certain financial transactions.

Segregation of duties: The monthly bank reconciliations are performed by the bookkeeper who also records all financial transactions in the MSO's accounting system.*

Related Recommendations (1)

The monthly bank reconciliations should be performed by someone other than the bookkeeper who is properly trained on how to perform them. Issue (6): Bank statements are given directly to the bookkeeper who also performs the monthly bank reconciliation without review by the Executive Director. The person responsible for maintaining the financial records should not be the one performing the bank reconciliations in order to protect the integrity of the financial records.

Bank statements are given directly to the bookkeeper who also performs the monthly bank reconciliation without review by the Executive Director.# Bank deposits are not made daily. # 7.

Related Recommendations (1)

The monthly bank statements should be directed to the executive director or their designee and not given to the bookkeeper. They should be reviewed by this person to look for any unusual activity. Issue (7): The bookkeeper sets up all new vendors in the financial system without review by upper management. The bookkeeper should not be allowed to set up new vendors since she is also the one who prepares the accounts payable records including issuing of the checks to the vendors. GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Control Issues (Continued)

8. Bookkeeper not taking vacation.#

Related Recommendations (1)

All new accounts payable vendors should be set up in the accounting program by someone other than the bookkeeper to ensure no fictitious vendors are established. These vendors should be approved by management prior to establishment. Issue (8): Invoices received for payment are not reviewed and approved by management prior to payment. This practice could lead to payments to vendors who may not be entitled to payments for various reasons.

Bookkeeper not taking vacation.#

Related Recommendations (1)

All invoices received by the Organization should be reviewed and approved by management before the bookkeeper processes them in the accounting system. Issue (9): Accounts payable checks presented to the check signers do not include supporting documentation for the payment. This practice could allow over or under payments to the vendor or unauthorized payments to the vendor.

Use of a generic receipt book.*

Related Recommendations (1)

Accounts payable checks should include supporting documentation when given to the authorized check signers. Issue (10): Daily bank deposits are not made. The practice of the Organization is to make a deposit once weekly. They use a courier from their bank to transport the deposits to the bank. We were unable to find any agreement that indemnifies the Organization GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Control Issues (Continued) should the deposits be lost or stolen, putting the Organization at financial risk.

F10

Bookkeeper has sole payroll responsibilities.*

Related Recommendations (1)

R10

Bank deposits should be made on a daily basis, when warranted. Should the Organization continue to use the bank courier they should obtain documentation from the bank that any lost or stolen deposits are not the responsibility of the Organization. Issue (11): Cash receipts are not adequately safeguarded. All payments received by the Organization whether they are cash or checks are kept in a cabinet in the front office. Everyone in the office has access to these receipts. Additionally, these receipts are subject to additional theft should the office be broken into. The Organization does have a safe but we were told that it was inconvenient to use due to its location.

F11

The Organization has several Visa and other charge cards assigned to employees, including a contract employee.#

Related Recommendations (1)

R11

The Organization should procure a suitable safe or place the safe in a better location for controlling the daily cash receipts. Management should also limit the number of employees who have access to the daily receipts and petty cash boxes. Issue (12): The bookkeeper is not required to take periodic scheduled vacations. According to the bookkeeper the last time she took a full week off was February 2008.

F12

Contract employee approves part-time employee time cards. # * These findings were independently confirmed by OAAS through observation and testing # These findings were independently confirmed by OAAS through interviews with MSO Staff Office of Audits & Advisory Services County of San Diego FY 2008-09 GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Attachment 1 Report on a Review of the Internal Accounting Controls of Main Street Incorporated Miller Consulting CITY OF OCEANSIDE REPORT ON A REVIEW OF THE INTERNAL ACCOUNTING CONTROLS OF MAIN STREET INCORPORATED James E. Miller Miller Consulting Company For the City of Oceanside January 2009 Oceanside, California 760.435.3864 jmiller@ci.oceanside.ca.us Office of Audits & Advisory Services County of San Diego FY 2008-09 GRAND JURY AUDIT OF THE April 2009 CHIVIEN CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC.FINAL REPORT 11 TABLE OF CONTENTS Scope and Objectives I. 1

Related Recommendations (1)

R12

Mandatory vacations of all accounting staff should be established as part of the Organizations financial policies and procedures. GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Control Issues (Continued) Issue (13): Cash receipt books utilized for providing customers verification of receipt for monies due the Organization are not unique to the Organization and can be purchased at any stationary store. The lack of unique receipts to the Organization could allow any employee to receive payment and issue a receipt from a book that is not Organization purchased and thus allow the abstraction of Organization funds.

Additional Recommendations 5

These recommendations are not explicitly linked to specific findings.

R2

The Organization should conduct a study for allocating overhead costs when developing their budget so it may determine the true cost of each program, event or administrative expense. Issue (3): The Organization employs one bookkeeper who is responsible for all accounting, payroll and personnel functions. The bookkeeper is responsible for maintaining the Organization's accounting system. There is no one within the Organization that is trained in the bookkeeper's duties. Should the bookkeeper be unable to conduct her duties there would be a void in the Organization for performing her duties and could have serious consequences on the Organization's ability to pay bills and record revenues. GRAND JURY AUDIT OF THE April 2009 CITY OF OCEANSIDE CONTRACT WITH Report No. A09-024 MAINSTREET OCEANSIDE, INC. FINAL REPORT Planning Issues (Continued)
R13

They should eliminate the use of paper receipt books. Management should explore the possibility of having the person(s) receiving payments from vendors be entered directly into the accounting system and reconcile the amounts entered to actual receipts on hand. Issue (14): The bookkeeper is in charge of the entire payroll function including adding new employees and terminating employees from the payroll function. These combined duties could allow the bookkeeper to establish "ghost" employees (employees who do not actually exist) in the system and create fictitious payments to these employees.
R14

All new employees and employee terminations should be handled by someone other than the bookkeeper to ensure the integrity of the payroll process. Issue (15): The Organization has several Visa and other charge cards assigned to employees, including a contract employee, who was previously and employee of the Organization. This leaves the Organization April 2009 GRAND JURY AUDIT OF THE Report No. A09-024 CITY OF OCEANSIDE CONTRACT WITH 21 MAINSTREET OCEANSIDE, INC. FINAL REPORT Control Issues (Continued) exposed to unauthorized charges.
R15

Management should review the number of Visa and stationary store charge cards to ensure that they are assigned only to necessary personnel and not to independent Organization contractors. Issue (16): Part-time employee timecards are approved by a contract employee and not a member of Organization management. The lack of Management does not approve all time cards prior to issuing payroll which could lead to unauthorized time paid.
R16

Part-timer employee time cards should not be signed by contract Organization personnel, but signed by a member of Organization management. The executive director should ultimately sign all organization employee time cards prior to the payroll being run.

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.