0 | Unannounced Audit of Petty Cash and Change Funds February 2016 111 Karen E. Rushing Clerk of the Circuit Court and County Comptroller Office of the Inspector General Sarasota County, Florida Unannounced Audit of Petty Cash and Change Funds November 2024
1 | Unannounced Audit of Petty Cash and Change Funds November 2024 Contents Executive Summary 2 Background and Objectives 3 Opportunities for Improvement and Management Responses 5 Audit Services Jeffrey Lilley, CPA, CIG Director of Internal Audit and Inspector General Auditor Bradley Warner, CFE, CIGI, CIGA, CGI Senior Internal Auditor/Investigator Auditor Eleanor Connell Internal Auditor/Investigator Please address inquiries regarding this report to Jeffrey Lilley, by e-mail at jlilley@sarasotaclerkandcomptroller.com or by telephone at (941) 650-0948. This and other reports prepared by the Office of the Inspector General are available at http://www.sarasotaclerk.com/inspector-general/inspector-general-audit-reports.
2 | Unannounced Audit of Petty Cash and Change Funds November 2024 Executive Summary As part of the Annual Audit Plan, the Clerk of Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General conducted an independent, unannounced continuous audit of Petty Cash and Change Funds. Continuous Audits have narrowly defined scopes, are conducted on a recurring basis to identify risks and test controls, and result in timely notification of gaps and weaknesses. The audit found that Accounting Policies and Procedures are not being followed consistently throughout the County in regards to: • Receipts for Deposit of County Funds and Deposit Ticket Processing • Comingling of Imprest Funds • Safeguarding of County Assets Non-compliance with Accounting Policies and Procedures result in a higher risk of misappropriation of cash and cash equivalents, as well as inadequate records of who is accountable for such transactions.
3 | Unannounced Audit of Petty Cash and Change Funds November 2024 Background and Objectives The Clerk of the Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General has completed an unannounced continuous audit of the County’s Petty Cash and Change Funds. The audit was planned and conducted in conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The purpose of the audit was to review compliance with applicable policies and procedures and perform unannounced reconciliations of petty cash and change funds. Background The Internal Audit Department (IAD) completed an unannounced audit of the County’s change funds in February 2022, identifying five opportunities for improvement. In that audit, a sample of 17 of the 34 change funds, totaling to $9,778, were tested for compliance with the Accounting Policies and Procedures, Chapter 17.2 Petty Cash, and Chapter 9.5 Change Funds. Chapter 9.5 Change Funds indicates that change funds are established for the purpose of making change where money is collected during transactions of County business. Chapter 17.2 Petty Cash provides the policy for establishing and making purchases from a petty cash fund, indicating that petty cash funds are established for the purpose of handling cash expenditures of a minor nature that are limited to purchases of $100 or less. It was noted that of the 34 active, County funds, there were no Petty Cash funds issued to custodians at the time of that audit. Unannounced cash counts and cash control evaluations are continuous audits performed by the Internal Audit Department. In accordance, an unannounced cash count was completed in September 2024, which included 17 of the 32 active Petty Cash and Change Funds, located within various departments throughout the County, totaling a listed amount of $5,200 in existence at the time. Please note that while 3 of the 32 County funds are currently labeled as Petty Cash, those funds were beyond IAD's jurisdiction to audit and therefore were unable to be considered for the random sample pool.
4 | Unannounced Audit of Petty Cash and Change Funds November 2024 Objectives, Scope and Methodology In order to assist the County in meeting its stewardship responsibilities for the public assets and resources placed in its trust, an unannounced audit was performed of its petty cash and change funds. The objective(s) of this audit were to determine if: 1) The internal controls over petty cash and change funds are operating effectively, 2) Departments are in compliance with the Accounting Policies and Procedures, and that the 3) Reconciled balance of funds agreed to the amount recorded on the Certificate and Receipt of Imprest Funds. To meet the objective(s) of the audit, the procedures performed included, but were not limited to, the following: • Obtained an understanding of the Accounting Policies and Procedures as they relate to Petty Cash and Change Funds. • Performed inquiries of County personnel. • Evaluated internal controls related to segregation of duties and safeguarding the County’s assets, specifically for petty cash and change funds. • Reconciled a random sample of 17 out of 32 Imprest Funds and compared the balance to the amount recorded on the Certificate and Receipt of Imprest Funds. • Reviewed Cash Management training records maintained by Human Resources. • Analyzed various Receipts for Deposit of County Funds to determine the processing time and overall compliance with the Policies and Procedures for cash deposits from County funds. • Identified Opportunities for Improvement.
5 | Unannounced Audit of Petty Cash and Change Funds November 2024 Opportunities For Improvement and Management Responses The audit disclosed certain policies, procedures, and/or practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure, or transaction. As a result of the audit, observations and recommendations identified below are related to these Standards: International Professional Practice Framework Standards (2017) • (Standard 2110) Communicating risk and control information to appropriate areas of the organization, and • (Standard 2130.A1) The effectiveness of controls related to operations and programs, and compliance with policies and procedures. The Opportunities for Improvement presented in this report may not be all-inclusive of areas where improvement may be needed. There were three (3) Opportunities for Improvement identified as a result of the audit: 1. Receipts for Deposit of County Funds and Deposit Ticket Processing 2. Comingling of Imprest Funds 3. Safeguarding of County Assets
6 | Unannounced Audit of Petty Cash and Change Funds November 2024 1. Receipts for Deposit of County Funds and Deposit Ticket Processing Observation Starting from the date that each sampled fund's unannounced cash count was conducted, the Internal Audit Department, IAD, obtained the previous two weeks of Receipt for Deposit of County Funds forms that were for cash deposits only. If a fund had not made any cash deposits within the 14-day time frame, the 3 most recent Receipt for Deposit of County Funds forms, with cash deposits, were utilized for testing. In total, there were 39 Receipt for Deposit of County Funds forms that were identified and analyzed for the 17 sampled Imprest Funds. During the review and testing of the Receipt for Deposit of County Funds (RFDCFs), IAD noted various deviations comprised of: • 1 sample with a deposit ticket that included two separate cash amounts received on different dates, leaving the deposit ticket to not be completed until four (4) business days after the first deposit was received, and • 3 samples, all at the same location, had RFDCFs that were "received/uploaded" to the Finance Department more than 6 business days from when the custodian first received the cash for deposit Accounting Policies and Procedures Chapter 9.2, Business Center Receipt, Balance, and Deposit of Cash, lists that "management is responsible for ensuring cash and checks are deposited daily" (Policy 4) and that the Receipt for Deposit of County Funds should be prepared "no later than the next [business] day" (Procedure 7). Chapter 9.2 also requires that each Receipt for Deposit of County Fund form be submitted with a completed bank deposit ticket and supporting documentation related to the cash deposit, like receipts, system generated reports, and/or cash register tapes. Compliance is required unless instructed otherwise by department operating procedures approved by OFM and the Finance Department. Recommendation IAD recommends to review and closely adhere to Chapter 9.2 of the Accounting Policies and Procedures with each fund. • Preparing the Receipt for Deposit of County Funds form "no later than the next [business] day" from when the cash deposit is received • Ensuring the RFDCFs are submitted to the Finance Department within a timely manner. Management Response We are in agreement with the recommendations. Results of findings have been communicated to the management team and staff where adherence to policies and procedures were not followed. We will continue to emphasize the annual Cash Management training, which includes the timing requirements as specified within Accounting Policies and Procedures Chapter 9.2, Business Center Receipt, Balance, and Deposit of Cash.
7 | Unannounced Audit of Petty Cash and Change Funds November 2024 2. Comingling of Imprest Funds Observation During an unannounced cash count, IAD noted that one custodian had their fund split in half between two lock bags. Management informed IAD they had split the fund in half to have a Petty Cash and a Change Fund. No formal updates were made through the appropriate channels to document the split of the fund, and the Certificate and Receipt of Imprest Fund Form still officially designates the fund as just a Change Fund, not a Petty Cash fund. Accounting Policies and Procedures Chapter 9.5 Policy 4/ Chapter 17.2 Policy 2 states that “individual change and petty cash funds must be established if both are required at the same location. They must never be commingled”. Recommendation IAD informed management that it was against protocol to have the fund split and/or commingled between a Change Fund and Petty Cash without making a formal update with and to the Certificate and Receipt of Imprest Fund Form. The fund should only be operating as a Change Fund, as intended. If a Petty Cash Fund is found to be desired at this location in the future, a separate fund, with its own Certificate and Receipt of Imprest Fund Form, must be created in accordance with the current Accounting Policies and Procedures. Management Response We are in agreement with the recommendation. Follow-up discussions have occurred with the staff and management teams where current adherence to policies and procedures were not followed. Going forward, the identified imprest fund will operate solely as a Change Fund, as intended.
8 | Unannounced Audit of Petty Cash and Change Funds November 2024 3. Safeguarding of County Assets Observation During each unannounced cash count, IAD observed various internal controls related to the safekeeping of the County’s assets (Imprest Funds) and identified one concern of: • Lock box/Imprest Fund keys free in an “accessible” drawer at two separate locations Accounting Policies and Procedures (Chapter 9.5 Policy 4) states, "only the person designated [as] the custodian is permitted access to the fund", unless otherwise documented in an approved departmental policy and procedure. If the Imprest Funds/ County assets are not well secured, it could lead to potential issues of theft, misuse, and/or unclear custodian accountability for/to the fund. Recommendation To ensure the proper safeguarding of County assets, mandate compliance with Accounting Policies and Procedures (Chapter 9.5, Procedure 4) requiring the Change Fund cash to be stored “in a locked bag in a secure location, [such as a] safe/vault or a locked filing cabinet with limited access”. Management Response We are in agreement with the recommendation. Management is taking steps to ensure that change funds are stored in a secure location with limited access.
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