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Home My WebLink AboutMINUTES - 06272000 - C117 TO: BOARD far SUPERVISORSContra' 112 �� FROM: «- rC3 William J. Pollacek, Treasurer-Tax Collector ..,.• s CostaE.Jo7C )ATE: June 13 2000 Courcy auB,tEcr: AUDIT REPORT ON THE COUNTY TREASURY :PECIFIC REOUEST(S)OR RECOMMENDATION($)&BACKGROUND AND JUSTIFICATION RECOMMENDATION(S): ACCEPT the audit from the County Auditor-Controller on the activities of the County Treasurer and the Treasury Oversight Committee as required by Government Code Section 27134. ACCEPT the Treasurer's response to the above audit. BACKGROUNDIREASON(S) FOR RECOMMENDATION(S): Per government Code Section 27134 and at the request of the Treasury Oversight Committee, the County Auditor-Controller audited the County Treasury for the period of January 1, 1999, through December 31, 1999. The audit and the County Treasurer's response were reviewed at the Treasury Oversight Committee meeting of May 9, 2000. The County Treasurer and the Treasury Oversight Committee members agreed with the Auditor-Controller's recommendations and Treasurer's response. Copies of the Auditor-Controller's audit and the County Treasurer's response are submitted to the Board of Supervisors for review and acceptance. WJP:CVJ:ceb Attachments a:auditreptjun2000.bos toc-disk 2 NTINUED ON ATTACHMENT: YES SIGNATURE: MMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITT t2P�PRO,OVE OTHER INA RE : Qlzk�_ TION OF BOARD N-- - Jung 17 , �Q 0 a APPROVED AS RECOMMENDED R$ OTHER 'E OF SUPERVISORS I HEREBY CERTIFY THAT THIS 1S A TRUE UNANIMOUS(ABSENT } AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ATTESTED .Tana 2..7 . , ZQQ0 Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF cc: CAO SUPERVISORS AND COUNTY AOMINISTRATOR BY ,DEPUTY Office of COUNTY AUDITOR-CONTROLLER Contra Costa County Martinez, California March 9, 2000 TO: Diane E. Meade, Chairperson, Treasury Oversight Committee FROM: Kenneth J. Corcoran, Auditor-Controller Audit Staff: Joanne M. Bohren, CPA, Staff Auditor( SUBJECT: Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 L SCOPE OF EXAMINATION We have examined the activities of the County Treasurer (Treasurer) and the Treasury Oversight Committee(Committee) as requested by the Committee and as required by Government Cade Section 27134. Our examination covered the period of January 1, 1999 through December 31, 1999, and included such tests and other auditing procedures as we considered necessary to: 1. Determine the extent of compliance with Government Code Sections 27131 through 27132.4 that govern the establishment, membership and meetings of the Committee. . Determine the extent of compliance with Government Code Section 27133 that governs the establishment, review and monitoring of investment policy. 3. Determine the extent to which the quality of the Treasurer's investment portfolio complied with applicable laws and administrative requirements governing investments, including Government Code Sections 53601-53607 and 53546 governing authorized investments and the County's Investment Policy. 4. Determine if internal controls were adequate to ensure the safeguarding of the financial assets under the Treasurer's control. 5. Determine if the Treasurer has contracted with financial entities for investment services and safekeeping and restricted investing transactions to brokers and issuers allowed by the County's Investment Policy. 6. Evaluate the accuracy of the Treasurer's Quarterly Investment Reports. 7. Determine the extent to which investments subject to the Treasurer's control were sold before maturity. Diane E.Meade,Chairperson,Treasury Oversight Committee March 9,2000 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 (continued) H. SUMMARY AND CONCLUSIONS As a result of our examination, we have concluded that in all material respects; 1. The establishment, membership, meetings and other activities of the Committee were in compliance with applicable laws. 2. The establishment, review and monitoring of the County's Investment Policy were in compliance with the law. 3. The quality of the Treasurer's investment portfolio met or exceeded the requirements set forth in applicable laws and in the County's Investment Policy. 4. Internal controls were adequate to ensure the safeguarding of the financial assets under the Treasurer's control, except that investment responsibilities need to be further segregated (see Section III, Finding and Recommendation). 5. The Treasurer has contracted with financial entities for investment services and safekeeping and has transacted investments with eligible brokers and issuers. 6. The Treasurer's Quarterly Investment Reports were accurate as of March 31, 1999, June 30, 1999, September 30, 1999, and December 31, 1999. 7. Our review of investment dispositions subject to the Treasurer's control did not disclose any that were sold before maturity. 2 Diane L Meade,Chairperson,Treasury Oversight Committee March 9,2000 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 (continued) III, FINDING AND RECOMMENDATION Segregation of Duties Condition: Although there has been improvement over previous years, there is still a lack of segregation of duties in the Treasurer's office. The Assistant Treasurer and the Investment Operations Analyst are the two members of the Treasurer's staff who evaluate and select the investments available, initiate and authorize investment ' purchases, prepare investment transaction sheets, and prepare the Treasury Journals that past the transaction to the General Ledger. A third position of Investment Officer was supposed to provide the opportunity of segregating the initiating and authorizing functions from the posting function. However, this position was vacated and remains unfilled. Consequently, the Treasurer's office is still not able to keep these functions separate. Steps were taken to compensate for this situation by having all transactions get a second authorized signature and approval documented on the revised investment transaction sheets put into use in 1999. However, several non-directed investments reviewed did not exhibit this second signature. Criteria: Strong internal controls require adequate segregation of duties to detect errors and help prevent misappropriations. Good business practices include a minimum level of segregation between initiation, authorization, and posting functions. Effect: The risk of loss through undetected error or misappropriation is increased. Cause: Management states that the Treasurer has not had the staffing level necessary to fully segregate duties. While the Treasurer's office hired a new Investment Operations Analyst last year, their Investment Officer terminated and has not been replaced. Consequently, there are days when there is insufficient staff in the Treasurer's office to be able to fully segregate duties. Recommendation: With the Investment Officer position remaining unfilled, a third member of the Treasurer's staff should review the transactions being made(and sign off on the investment transaction sheet) when either the Assistant Treasurer or Investment Operations Analyst are not in the office. When the Investment Officer position is filled, we recommended that the Treasurer segregate the initiating and authorizing functions from the recording function. 3 Diane E. Meade,Chairperson,Treasury Oversight Committee March 9,2000 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 (continued) IV. STATUS OF PRIOR AUDIT RECOMMENDATIONS RECQNMENDATION S'T'AB Timely Reconciliation of ,Bank Account Ne&ded Bank reconciliations are a critical control and This recommendation was implemented. Bank should be given sufficient priority to ensure timely accounts have been reconciled through December completion. If Treasury staffing is temporarily 1999. reduced, the Department should consider temporarily re-assigning someone in the Tax Collector's office or hiring a temporary accounting employee. Segregation of Du#lea Needs Improvement, When both are available, if the Assistant Treasurer This recommendation was partially implemented. or the .Investment Officer initiates an investment, The Investment Officer went on leave in May the other should approve it. This should be 1999 and left County employment in January documented by signature or initials on the 2000. Consequently, the recording function has investment ticket. When one is absent, one of the not yet been separated from the initiating and alternates should review and approve the authorizing function. With the revised investment investments made. With the hiring of the new sheet in use, there is space for two sets of initials Investment Operations Analyst, the Treasury to show authorization. However, ten of 31 non- should segregate the recording of investments directed investments purchased after the May 6, from the initiation and authorization of 1999 implementation date only had one set of investments. initials. The policy is in place, but on days when staff is out, it was not always possible to obtain a second set of initials to show authorization, See Section III, Finding and Recommendation. Treasury Should Notify CoLnmktee When Using Nan-Anoroved Brokers and Dealers The Treasury Oversight Committee should This recommendation was implemented. The list consider an amendment to the Investment Policy of approved brokers/issuers within the Investment that requires the Treasury to notify the Committee Policy was updated twice during 1999. when brokers and dealers are used which are not on the Investment Policy's approved list. The Treasury could include this information in its quarterly investment report. We would like to express our appreciation to the Treasury staff, especially Clarissa Javier, Beverly Rellar and Brice Bins for their assistance and cooperation during this audit. 4 CONTRA COSTA COUNTY TREASURER-TAX COLLECTOR 625 COURT STREET, ROOM 100 MARTINEZ, CA 94553-0063 DATE: April 18, 2000 TO: Chair, Treasury Oversight Committee FROM; William J. Pollacek, Treasurer-Tax Collector SUBJECT. RESPONSE TO EXAMINATION OF ACTIVITIES OF THE COUNTY TREASURER BY THE COUNTY AUDITOR-CONTROLLER DATED MARCH 9, 2000 Section III. FINDING AND RECOMMENDATION Seamation of Duties Condition; Although there has been improvement over previous years, there is still a lack of segregation of duties in the Treasurer's Office. The Assistant Treasurer and the Investment Operations Analyst are the two members of the Treasurer's staff who evaluate and select the investments available, initiate and authorize investment purchases, prepare investment transaction sheets and prepare the Treasury Journals that post the transaction to the General Ledger. A third position of Investment Officer was supposed to provide the opportunity of segregating the initiating and authorizing functions from the posting function. However, this position was vacated and remains unfilled. Consequently, the Treasurer's Office is still not able to keep these functions separate. Steps were taken to compensate for this situation by having all transactions get a second authorized signature and approval documented on the revised investment transaction sheets put into use in 1999. However, several non-directed investments reviewed did not exhibit this second signature. Recommendation: With the Investment Officer position remaining unfilled, a third member of the Treasurer's staff should review the transactions being made (and sign off on the investment transaction sheet)when either the Assistant Treasurer or Investment Operations Analyst are not in the office. When the Investment Officer position is filled, we recommended that the Treasurer segregate the initiating and authorizing functions from the recording function. Response: The Treasurer's Office has not had the staffing level necessary to fully segregate duties. In May, 1999, the Treasurer's Investment Officer took a leave of absence. In January, 2000, the Investment Officer left County employment. Although a Chair, Treasury Oversight Committee April 18, 2000 Page 2 new Investment Operations Analyst was hired in December, 1908, the primary function of the position was to assist the Assistant Treasurer with bonds and short-term borrowings. A recruitment process to hire a new Treasurer's Investment Officer is in place. I expect the position to be filled by June or July, 2000. in the meantime, as recommended, a third staff member reviews all investment transactions. Additionally, there are various controls in place that greatly mitigate the risk of loss. Some of these are: 1) the flow of money in and out of the Treasury is monitored and accounted for daily by at least two to three accounting staff; 2) the Treasury balances its books daily; and, 3) bank activities and transactions are retrieved directly from the bank's data base via computer. These are reviewed, analyzed and verified by more than two accounting staff on a daily basis. WJP:ceb c auditresponse4000.chr tocdisk 1