HomeMy WebLinkAboutMINUTES - 09191989 - IO.11 1` Board of Supervisors
FROM: INTERNAL OPERATIONS COMMITTEE
011
a
DATE: September 11, 1989 •i1.= = ,- �
SUBJECT: PROPOSED RESPONSE TO THE REPORT OF THE 1988-89 GRAND JURY
ENTITLED "REPORT ON THE 1987-88 INDEPENDENT AUDIT"
Specific Request(s) or Recommendations(s) & Background & Justification
RECOMMENDATIONS:
1. Adopt the following report of our Committee as the Board of Supervisors' response to the Report of the 1988-
89 Grand Jury entitled"Report on the 1987-88 Independent Audit".
2. Remove this item as a referral to our Committee.
BACKGROUND:
On June 13, 1989 the 1988-89 Grand Jury approved the attached report on "Report on the 1987-88 Independent
Audit". On September 11, 1989 our Committee met with Lois Desmond,representing the Auditor-Controller and
members of the 1988-89 and 1989-90 Grand Juries. We reviewed the proposed response suggested by the Auditor-
Controller and County Administrator and discussed the Grand Jury's recommendations with the members of the
Grand Jury and the Auditor-Controller's staff. At the conclusion of these discussions we formulated the following
response,utilizing a format suggested by the Grand Jury in their final report,in which the Grand Jury requested that
written responses to Grand Jury recommendations clearly specify:
A. Whether the recommendation is accepted or adopted.
B. If the recommendation is accepted, a statement as to who will be responsible for implementation and a
definite target date.
C. A delineation of constraints,if a recommendation is accepted but cannot be implemented within the calendar
year.
D. The reason for not adopting a recommendation.
Continued on attachment: YES Signature:
Recom a dati n of 'ounty Administrator Recommendation of Board Committee
A Other:
Signature(s): O SUNNE WRIIH MC PEAK
Action of Board on: September 19, 1989 Approved as Recommended x Other
Vote of Supervisors I HEREBY CERTIFY THAT THIS IS A TRUE
AND CORRECT COPY OF AN ACTION TAKEN
x Unanimous (Absent - ) AND ENTERED ON THE MINUTES OF THE
Ayes: Noes: BOARD OF SUPERVISORS ON DATE SHOWN.
Absent: Abstain:
Attested /9 9
cc: County Administrator Phif Batchelor, Clerk of the Board
Auditor-Controller of Supervisors and County Administrator
Grand Jury
Judge Westover
By �, Deputy Clerk
clvm:eh(io-1 l bo)
This and all future responses to Grand Jury recommendations coming from our Committee will follow this format
as closely as possible.
RECOMMENDATION# 1:
The independent auditor's Letter to Management include a"report card"which clearly shows the status of
corrective actions taken in relation to the past five years' recommendations. A sample drawn from the
independent auditor's Letter to Management in 1983 is appended (Exhibit 3). Such a report should be a
regular part of the Letter to Management.
RESPONSE:
A. This recommendation is approved.
B. The County Administrator's Office will be responsible for implementation of this recommendation.
RECOMMENDATION#2:
The County's written responses to the audit recommendations clearly specify:
a. whether the recommendation is accepted or rejected;
b. if the recommendation is rejected, the reasons for such rejection;
c. if the recommendation is accepted,a statement as to who will be responsible for implementation
and a definite target date;
d. a delineation of constraints, if a recommendation is accepted but cannot be implemented within
the calendar year.
RESPONSE:
A. This recommendation is approved.
B. The County Administrator's Office will be responsible for insuring that all responses to the Grand Jury
follow this format.
RECOMMENDATION#3:
The County Administrator designate a person with responsibility to follow-up and ensure departmental
implementation of corrective actions which are deemed to be necessary and feasible.
RESPONSE:
A. This recommendation is approved.
B. Various staff from the County Administrator's Office will be responsible for insuring follow-up with
individual departments of any corrective actions which are required.
RECOMMENDATION#4:
The following changes in the County's accounting procedures be made:
a. Reconcile the Employee Retirement System cash and investment bank accounts at the end of the
fiscal year.
b. The County Finance System and Retirement System accounts should be reconciled on a monthly
basis.
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c. Improve and make more timely the County Hospital's patient accounts.
d. Improve the Hospital's year-end receivables accounting by providing a settlement account.
e. A monthly reconciliation of the Office of Revenue Collection reports and the general ledger be
made.
f. Prepare the Redevelopment Agency budget on a timely basis and reflect changes as they are made.
g. Implement the Electronic Data Processing Disaster Recovery Plan.
h. Include federal financial assistance revenues and expenditures in the Consolidated Annual
Financial Report (CAFR).
i. Initiate periodic reviews of the Public Facilities Corporation by the County Auditor-Controller.
j. The County Audit Department review the new accounts payable system being implemented.
RESPONSE:
A. a. This recommendation is approved.
b. This recommendation is approved
c. This recommendation is approved.
d. This recommendation is accepted and will be implemented to the extent possible.
e. This recommendation is approved.
f. This recommendation is approved.
g. This recommendation is accepted and will be implemented as funding permits.
h. This recommendation is approved.
i. This recommendation is accepted and will be implemented as funding permits.
j. This recommendation is approved.
B. a. The Employee Retirement System cash and investment bank accounts are being reconciled to their
related general ledger accounts on a monthly basis and have been completed for calendar year 1988. The
Retirement Administrator will be responsible for insuring this continues to occur on a regular basis.
b. Accounts maintained in the County Finance System and the Retirement System are being reconciled on
a monthly basis. The Retirement Administrator is responsible to insure that this continues to occur on
a regular basis.
c. Management has recently purchased a microfilm retrieval and indexing system which will alleviate the
situation in the future. The Health Services Director in responsible for insuring that,in fact,this occurs.
d. The delays referred to in transferring amounts to other payor sources,due to staffing shortages,has been
corrected in all areas except Medi-Cal Share of Cost(SOC)processing. Remittances for Medicare and
Medi-Cal are being worked currently and amounts are being moved to the secondary payor source. Share
of Cost continues to be a problem when the patient does not provide a completed form. Delays are
encountered trying to obtain eligibility and SOC amounts from Social Services. These are not large dollar
amounts and carry the lowest priority for processing. The incorrect coding of accounts will always be
a problem. One hundred percent accuracy in this area is not possible since patients either do not provide
correct information or obtain program eligibility on a retroactive basis. The Health Services Director
will be responsible for insuring that the maximum degree of accuracy is achieved and maintained.
e. The computer company which services the Office of Revenue Collection system has developed an
enhancement for the accounting component of the system. The enhancement should provide ORC with
information and reports needed to resolve our current limitations. It is expected that the enhancement
will be on-line in July 1989. In the meantime, ORC staff will continue to work with the Auditor-
Controller's Office to reconcile the general ledger with the resources available. The Director,ORC will
be responsible for continuing to follow-up on this item.
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f. Pertinent legislation does not specify a date by the budget of the Redevelopment Agency must be adopted.
However, the Auditor-Controller would like to have the budget adopted by August 30 each year. The
Redevelopment Agency staff are working with the Auditor-Controller's Office to develop a financial
management system which will provide the Agency with timely information with respect to expenditures
and budgeted amounts. The Deputy Director of the Redevelopment Agency will be responsible for
continuing to work toward the development and installation of such a financial management system.
g. The Disaster Contingency Plan is a volatile document requiring continual updating. The Planning Group
meets each week and updates to the plan are published each month as hardware and software change.
Staff from the Group are assigned tasks to assist in further refining the documentation and procedures
as new developments arise. Implementation of the complete plan is governed by the funds available for
contracts and staff costs. The Director of Data Processing Services will be responsible for continuing
to update the Plan and implement it as funds can be made available.
h. This recommendation has been completed and no further assignment is required.
i. The Auditor-Controller agrees with the Grand Jury auditors that Internal Audit should spend some time
reviewing the Public Facilities Corporation financial statements. The Auditor-Controller points out,that
this will have to be as time and staff resources permit. The Auditor-Controller will be responsible for
implementing this recommendation as time and staff resources permit.
j. The Auditor-Controller agrees that they should review the new accounts payable system as it is being
implemented. The Auditor-Controller believes that the number and level of staff now assigned to this
task is sufficient. The Auditor-Controller will be responsible for insuring that the number and level of
staff assigned to this task is sufficient.
C. a .N/A
b. N/A
c. N/A
d. N/A
e. N/A
f. It is unclear at this time whether the financial management system will be completed by the end of
the calendar year. Some additional time may be required to complete work on this assignment.
g. Implementation will depend on the availability of funding - which will probably not be available
during the current fiscal year.
h. N/A
i. Implementation will depend on the availability of funding which may not be available by the end of
the calendar year. We would hope that there would be some progress on the implementation of this
recommendation by the end of the current fiscal year.
j. N/A
lll s Y
A REPORT BY
THE 1988-89 CONTRA COSTA COUNTY GRAND JURY
P. 0. Box 1110
Martinez, CA 94553
(415) 646-2345
REPORT ON THE 1987-88 INDEPENDENT AUDIT
APPROVED BY THE GRAND JURY:
DATE:
1 �
PHILIP W.1-SITZMAN, SR.
GRAND JURY FOREMAN
ACCEPTEDF
ORFILING:
DATE: 3 , 9�9
E A.-NESTOVER
JUDGE OF THE SUPERIOR COURT ,
SECTION OF THE CALIFORNIA � lAL CODE
Sec. 933. Findinas and recommendations; com-
ment of governing bcdies, elective officers,
or agency heads
(c) No late:than 90 days after the grand ju.. submits
a final report on the operations of any pub= agency
subject to its reviewing authority, the governing body of
the public agency shall comment to the presiding judge of
the superior court on the findings and recommendations
pertaining to natters under the control of the gove.-ning
body, and every elective county of icer or aztncy head for
which the grand jury has responsibility pursuant to
Section 914.1 shall comment within (50 days to the
presiding judge of the superior court, with an it,formation
copy sent to the board of supervisors, on the findings and
recommendations pertaining to matters under the control
of that county officer or agency head and any agency or
agencies which that officer or agency head supervises or
controls. In any city and county, the mayor shall also
comment on the findings and recommendations. All
such comments and reports shall forthwith be submitted
to the presiding judge of the superior court who impan-
eled the grand jury. A copy of all responses to grand
jury repo,-.,s shall be placed on file with the clerk of the
public agency and the office of the county clerk, or the
mayor when applicable, and shall remain on Elie in those
offices. One copy shall be placed on file with the
applicable grand jury final report by, and in the control
Of the currently impaneled grand jury, where it shall be
maintained for a minimum of five years. (.Added by
Stars 1961, c 1284, § 1. Amended by Stam 1963, c 674,
§ 1; Sras.197d c 393, § 6; Stars 1974, a 1396, § 3;
Stats.1977, a 107, § 6 5tars1977, c 187, § 1; Stars
1980, c. 543, § 1; Sta=1981, c 203, § 1; Sra:s.1982, c
1408, § 5, Stats.1985, c. 221, § 1; Stam]987, c 690,
§ 1; Sraza 1988, c 1297, § 5.)
Forme: § 933, added by Stats.1982, c. 1408. § 6, ar.ended by
Stau.1985,G 2_1 1,§ 2,operative Jar.. 1, 1989,was:_,caled by Stars.1987,
c. 690, § 2.
Former § 933, added by Stars.1959, c. 501, § 2, was repeakd by
Stats.1959. c. 1812, § 3.
h
REPORT ON THE 1987-88 INDEPENDENT AUDIT
r
} ty
of the annual 1987-88 independent audit of the County was a
er to Management which recommended changes in accounting
zedures to improve control of financial transactions.
a grand jury recommends several changes in accounting
:ocedures be made, a "report card" of action taken on past
ears' recommendations be made a part of the annual Letter to
,4anagement and the County administration clearly answer how and
when the recommendations are to be implemented.
The independent auditor stated, " . . .we did not identify any
' condition that we believed to be a material weakness in internal
accounting control. " This is reassuring.
INTRODUCTION
This report has two primary components. The first reviews the
specific findings of Peat Marwick Main & Co. , the Certified
i Public Accountants employed by the grand jury and the Board of
Supervisors to perform an annual, independent audit for the year
1987-88 of a sampling of County departments. The second reviews
the process which is used to correct deficiencies identified in
the course of the County' s annual audits.
FINDINGS
1. Peat Marwick Main & Co. (the independent auditor) presented
an analysis of problems and recommended corrective actions
on a number of accounting procedures as part of their 1988
fiscal year analysis. This analysis is done annually as a
management tool to assist the County in strengthening
accounting procedures. The complete Letter to Management is
appended as Exhibit 2.
2 . The sequence of events in the performance of the independent
audit is as follows:
a. The independent auditor examines the County ledgers by
sending teams to gather information, then reviews the
accounting procedure used by the County. When it finds
what are considered to be procedures that need improve-
ment, it prepares a .Letter to Management for the County
recommending actions to improve deficiencies.
b. As the audit process nears completion, department heads
are invited to attend a meeting with the County Auditor
and independent auditors to discuss identified
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j
procedural deficiencies and proposed corrective
actions. This meeting provides an opportunity for the
auditors to verify/clarify information and to provide
preliminary feedback to the departments whose
deficiencies are to be identified in ' the Letter to
Management. Participation at this meeting is voluntary.
C. The Letter to Management is finalized and sent to the
grand jury and the Board of Supervisors; it is then
referred to the County Administrator' s Office.
d. The County Administrator then sends the relevant
sections of the Letter to each department head with a
request for a written response.
e. The departmental replies are included as part of the
County' s response to the Final Report of the grand
jury.
f. During the audit, the independent auditor inquires
about any corrective action which has been taken in
response to recommendations from the preceding year and
includes this information in the next Letter to Manage-
ment.
3 . In reviewing the written responses to audit recommendations
contained in prior grand jury reports, the grand jury found
a number of responses which were difficult to interpret,
either because they were too technical or insufficiently
explicit. For example, a response might indicate concur-
rence with the recommendation but no indication of when, or
by whom, the recommendation was to be implemented.
4 . A tabulation of the independent auditor' s recommendations
for 1982 through 1988 (Exhibit 1) revealed that some prob-
lems were identified for more than two years; in a very
small number of instances, the same or a similar problem was
identified (and apparently not corrected) for a period of 5
years. While these may be problems which require many years
(or special funds or expertise) to correct, the Letter to
Management does not containenough historical information to
enable the reader to identify long-standing problems, the
progress which is being made to correct these problems
and/or the factors which inhibit such progress.
One example is the recovery of data processing information
in event of disaster. Establishment of a recovery system
was recommended in 1982 but had not been implemented by
1988.
5 . The independent auditor checks each year on the actions
taken to implement the prior year' s recommendations and
reports on these actions in the Letter to Management.
However, the independent auditor has no enforcement
authority and there is no County department or administrator
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Zth designated responsibility for ensuring that recommended
'orrective actions are implemented in a timely fashion.
The 1988 findings of the independent auditor, Peat Marwick
Main & Co. , indicate there is "no material weakness in
internal accounting control."
ONCLUSION
The 1988-89 Contra Costa County grand jury concludes that the
follow-up process for recommendations needs to be strengthened to
ensure that all necessary and feasible corrective actions are
implemented in a timely fashion.
RECOMMENDATIONS
The 1988-89 Contra Costa County grand jury recommends that:
1. The independent auditor' s Letter to Management include a
"report card" which clearly shows the status of corrective
actions taken in relation to the past five years' recom-
mendations. A sample drawn from the independent auditor' s
Letter to Management in 1983 is appended (Exhibit 3) . Such
a report should be a regular part of the Letter to Manage-
ment.
2 . The County's written responses to the audit recommendations
clearly specify:
a. whether the recommendation is accepted or rejected;
.b: if the recommendation is rejected, the reasons for such
rejection;
C. if the recommendation is accepted, a statement as to
who will be responsible for implementation and a
definite target date;
d. a delineation of constraints, if a recommendation is
accepted but cannot be implemented within the calendar
year.
3 . The County Administrator designate a person with responsi-
bility to follow-up and ensure departmental implementation
of corrective actions which are deemed to be necessary and
feasible.
4 . The following changes in the County' s accounting procedures
be made:
-3-
a. Reconcile the Employee Retirement System cash and
investment bank accounts at the end of the fiscal year.
b. The County Finance System and Retirement System
accounts should be reconciled on a monthly basis.
C. Improve and make more timely the County Hospital' s
patient accounts.
d. Improve the Hospital' s year-end receivables accounting
by providing a settlement account.
e. A monthly reconciliation of the Office of Revenue
Collection reports and the general ledger be made.
f. Prepare the Redevelopment Agency budget on a timely
basis and reflect changes as they are made.
g. Implement the Electronic Data Processing Disaster
Recovery Plan.
h. Include federal financial assistance revenues and
expenditures in the Consolidated Annual Financial
Report (CAFR) .
i. Initiate periodic reviews of the Public Facilities
Corporation by the County Auditor-Controller.
j . The County Audit Department review the new accounts
payable system being implemented.
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