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CM-06-05-117(BGMN) BROCKWAI GERSBACH, MCKINNON & NIEMEIER, PC. CERTIFIED PUBLIC ACCOUNTANTS May 2, 2006 City of Round Rock Round Rock, Texas We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for the City of Round Rock, Texas. We will apply the agreed-upon procedures listed in the attached schedule. Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose. If, for any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. Because the agreed-upon procedures listed do not constitute an examination, we will not express an opinion on the specified elements, accounts or items. In addition, we have no obligation to perform any procedures beyond those listed in the attached schedule. We will submit a report listing the procedures performed and our findings. This report is intended solely for the use of the City of Round Rock, Texas, and should not be used by anyone other than these specified parties. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. We plan to begin our procedures on approximately June 12, 2006 and, unless unforeseeable problems are encountered, the engagement should be completed by July 10, 2006. Cry"1-04-4:5- 11 7 Post Office Box 4083 • Temple, Texas 76505-4083 • 254 773-9907 • Fax 254 773-1570 • wwwtemplecpa.com City of Round Rock Page Two We estimate that our fees for these services will be approximately $ 12,500 — $ 15,000. The fee estimate is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. We appreciate the opportunity to assist you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. If the need for additional services arises, our agreement with you will need to be revised. It is customary for us to enumerate these revisions in an addendum to this letter. If additional specified parties of the report are added, we will require that they acknowledge in writing their responsibility for the sufficiency of procedures. Sincerely, BROCKWAY, GERSBACH, MCKINNON & NIEMEIER, P.C. This letter correctly sets forth the understanding of the City of Round Rock, Texas By: Title: i T l) i -Iv g -E Date: J r ) q-0 Attachment A PARD Internal Control Scope 1. Obtain and review all policies, procedure and related internal control documentation maintained by the City related to cash controls. 2. Assess, based on auditor's professional opinion, the adequacy of such policies, procedures and internal control. Identify, based on auditors' professional opinion, inadequacies in and or opportunities to improve such policies, procedures and internal control. 3. Obtain and review all documentation maintained by the City and the Parks and Recreation department related to the CLASS system user security. 4. Assess, based on auditor's professional opinion, the adequacy of such documentation and procedures for CLASS user security. Identify, based on auditors' professional opinion, inadequacies in and or opportunities to improve such documentation and procedures. 5. Review CLASS system reporting capabilities in regards to: a. Memberships b. Room/facility deposits c. Daily deposits to bank (cash, check, credit card) 6. Visit all locations and evaluate the adherence to policies and procedures. Identify, based on auditors' professional opinion, noncompliance with documented policies and procedures. BLUE SHEET FORMAT DATE: May 15, 2006 SUBJECT: City Manager - May 19, 2006 ITEM: Consider a resolution authorizing the City Manager to execute an engagement letter with Brockway, Gersbach, McKinnon & Niemeier, P.C. for agreed upon procedures related to the Parks and Recreation Department. Department: Finance Department Staff Person: Cindy Demers, Finance Director Justification: The firm will obtain and review policies, procedures and related internal control documentation maintained by the City related to cash controls and to CLASS system and its user security. The firm will review the reporting capabilities of the CLASS system in regards to memberships, room/facility rental deposits, and daily deposits to the bank. Funding: Cost: $12,500 to $15,000 Source of funds: General Operating Budgets Outside Resources: N/A Background Information: N/A Public Comment: N/A Blue Sheet Format Updated 01/20/04 CITY OF ROUND ROCK APPLYING AGREED-UPON PROCEDURES FOR PARD INTERNAL CONTROL Prepared by: Brockway, Gersbach, McKinnon & Niemeier, P. C. �o�y of v�vieu� (BGMN) BROCKWAA GERSBACH, MCKINNON & NIEMEIER, P.C. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES City of Round Rock, Texas We have performed the procedures enumerated below, which were agreed to by the City of Round Rock, solely to assist you with respect to the PARD Internal Control Scope. The City of Round Rock's management is responsible for the internal control. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the City of Round Rock. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Our procedures and findings are as follows: 1. Obtain and review all policies, procedure and related internal control documentation maintained by the City related to cash controls. Done 2. Assess, based on auditor's professional opinion, the adequacy of such policies, procedures and internal control. Identify, based on auditors' professional opinion, inadequacies in and or opportunities to improve such policies, procedures and internal control. Finding: Procedures Manual The PARD office and BACA center currently have no procedures manual. The CMRC has some procedures documented. We recommend that a complete manual be written and updated as needed. This would be beneficial in training new staff or for use when someone is out. The manual should include CLASS operations. 3. Obtain and review all documentation maintained by the City and the Parks and Recreation department related to the CLASS system user security. Done -1- Post Office Box 4083 • Temple, Texas 76505-4083 • 254 773-9907 • Fax 254 773-1570 • wwwtemplecpa.com INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) 4. Assess, based on auditor's professional opinion, the adequacy of such documentation and procedures for CLASS user security. Identify, based on auditors' professional opinion, inadequacies in and or opportunities to improve such documentation and procedures. Findings: Review Access The user access list includes the department heads with all access. We recommend that the access list be reviewed and limit the access to items that are needed. Access/Segregation Currently, the CLASS systems administrator takes payments for classes as a backup, and prepares daily deposits as a backup. She also can and does prepare refunds and can make adjustments. We recommend that the CLASS administrator not perform these duties since she has all access to the system and could delete items or show as a refund and has the ability to take the money and could change the system date which is presently locked. 5. Review CLASS system reporting capabilities in regards to: a. Memberships Finding: Membership Renewals At both BACA and CMRC, no renewal reminders are sent. At CMRC, renewals are caught the next time a member attempts to use the facility. At BACA, there is no method to assure only current members are using the center. We recommend that a form letter be sent out at the beginning of each month for the memberships that expire that month. b. Room/facility deposits -2- INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Finding: Software Setup Currently, the facility rental is not on the software at the PARD office. Manual calendars and books are being used at the PARD office. We recommend that all software locations be set up to include facility rentals. c. Daily deposits to bank (cash, check, credit card) Findings: Access to Safe At the PARD office, currently, three administrative staff and office manager have access to the safe throughout the day. The safe has a combination that is only locked in evenings. The safe is in a locked closet with which the same personnel have access to the key. There is not a safe at BACA. During the day, as deposits are brought from Baca and Pools, they are put in safe which is not locked. We recommend that a drop safe be used for these deposits which only the supervisor would have a key to use when she takes the bags downstairs for the courier. Software Setup Currently, the credit card payments do not break out what the purpose was. They have to be broken out to come up with $ amount of pool fees, etc. Each payment has to be searched and handwritten out daily. We were told that the software has the capability to do this but is not set up currently. We recommend that this be set up ASAP as the current process is time consuming. INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Segregation of Duties At the PARD office, currently, the three administrative staff and supervisor can take collections. The supervisor also posts daily, prepares deposits and can make refunds. In addition, the mail is opened by any one of the personnel. This is true at the BACA center as well. We recommend that the supervisor not take any collections. One employee should open the mail daily, list out the checks received and give to another administrative employee to post into CLASS system. Cash Box Money Last year, while we were at PARD, we were told there was $ 200 in cash box money. Currently, the office manager said they keep $ 150 in the drawer. However, when we watched the deposit, we were told they were $ 40 short because of an error previously. They were requesting an additional $ 40 from finance to get the drawer back to $ 150. Cash box money records should be maintained and reconciled. Forestry Receipts The Forestry department orders their own receipt books. They account for their own sequence. Since the receipts, the log, and the cash come to the Forestry department before going to the office manager for deposit, there is a risk that the receipt and cash could be removed before being deposited. We recommend that the receipts be ordered by the Finance department, the books be logged out several at a time, and the sequence be accounted for by the Finance department. Held Check Policy Currently, if a City employee rents a facility, their deposit is held in the safe until after the event. We recommend that the policy be reviewed. The policy could state that employees are exempt from deposits instead of holding checks. In addition, checks are held for deposits for large events. There was one held check while we were at the PARD office. The office manager said that these checks would not clear so they hold them. We recommend that this policy be reviewed. INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Summary Sheet Currently, the summary sheet columns are frozen. There are different fees collected at each facility. Clay Madsen collects for some items on a consistent basis that are not listed on the summary sheet and have to be `hand' added. We recommend that the sheet be revised to include all the different revenues that would be needed at each location. Stamp Back of Checks Immediately Currently, checks are not stamped for deposit only until the deposit is being prepared the next day. We recommend that a stamp be put up front and checks be stamped immediately when received. Finance Department- Deposit Recording At present, it appears finance is reviewing the detail backup for each deposit. We recommend they only record the summary sheet and match the validated deposit slip to the sheet and to the bank statement. The detail should be reconciled at the time the top sheet is prepared. The detail should be kept at each individual location only. d. Trips/classes Finding: Class Participants/Trip Registrations Currently, classes and trips at the BACA center are not entered in enough detail to facilitate lists corresponding to money collected. We recommend the program and receipt process be modified to work like the CMRC registrations. e. Other items noted Park Land Dedication Funds The PARD department occasionally receives park land dedication funds. They do not know when to anticipate the receipt of these funds. We recommend that a policy be established to allow the PARD department to know when to be expecting such fees. With no policy, the funds could be inappropriately handled and the PARD department would not know that the funds were missing. INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Clay Madsen and BACA Receipt Books The Centers have manual receipt books to be used only if the system is down. The receipt books are not issued from City of Round Rock and sequence is not accounted for. We recommend that the receipts be ordered by the Finance department, the books be logged out one at a time, and the sequence be accounted for by the Finance department. Bid Package Payments Currently, the bid package payments are taken and a manual receipt is used. A log is signed to show who picked up the package. The log is not kept by the office manager. No one accounts for the number sold. We recommend that the receipt number be placed on the sign out log to control the number sold. With the current procedures, the administrative staff has the ability to take the cash. Swim Passes Swim passes are kept at the PARD office in the safe that is unlocked during the day. The tickets are in a tablet of 10 passes. The passes are not numbered nor accounted for. We recommend that the passes be in a locked cash box. They could be kept at one of the admin staffs desk. We also recommend that a log be established. The back of the pass book could be manually numbered when they are received from the printer. A log sheet could be used for the pools to sign out which books are taken. The pools already list the number of passes sold each day. If the pool runs out of pass books, the director could check sales from Shat pool to see if the revenue matched the tickets used. Currently, the passes are recycled when they run out. This is fine, but they could be stapled in groups of ten and reassigned. Cancellation Policy Currently, there is a $ 5 fee to cancel or change. We recommend that the fee be looked at to see if it is adequate for the time it takes the administrative staff. A larger fee may discourage late cancellations. Currently, the person enrolled in a class can attend 4 of 5 days and still get a refund for the last day if they don't like it. We recommend that this policy be reviewed. Other cities and/or YMCA's policies could be reviewed to determine which policy is the best for the City of Round Rock. The current policy also makes the classes smaller because people will cancel on the day of class before it starts. INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) We recommend that there be a policy that you don't get a refund at all if you cancel less than a week before class starts. This would enable people on the waiting list to be contacted and increase attendance. Day Passes at CMRC At present, day passes for $ 1 are used. This is very time consuming and hard to control for the staff. We recommend a monthly pass be the minimum length available. Vending at Clay Madsen Currently, the keys to the vending machines are up front in the register so that any clerk can use when they need too. We recommend that the keys be moved to a secure location and that only the shift leaders have access. We recommend that a security camera be installed at the door where the food inventory is kept. This would lessen the risk of theft of the items. Currently, the vending machine money is pulled every Wednesday at 5:30 am. There are two people present when it is pulled and they carry it to the vault to be counted. However, there is only one person there when it is counted. It is recounted by another person when she arrives and she signs off that she agrees. We recommend that the pull wait until the other person arrives at 7:30 and that they pull it together, count it together and sign off. Security Camera at Clay Madsen Currently, the vending food and the food for the camps are kept in behind locked doors. However, several have access and there has been theft in the past. We recommend that when the security cameras are revamped that a camera be installed at the door to the area where food is stored. Analytic Review We recommend that monthly receipts be periodically reviewed for various categories to assure there are no unusual patterns. INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Point of Sale at PARD Currently, certain items such as sports balls, flags, t -shirts, and pool passes are sold at the PARD office. The PARD office does not have a point of sale terminal and a manual receipt has to be used. In addition, park dedication fees and Games of Texas have to have a manual receipt. We recommend that a point of sale terminal be set up at the PARD office. Passes for Rain Days Currently, the pools use the day passes when it rains and the pool has to be closed. Each patron is given a day pass to return on another day. We recommend that a different pass be printed for rain days so that control over day passes can be maintained. Cash Drawers At the PARD office, currently, the three administrative staff and the office manager use one cash box which is not locked. At BACA only one person has a locked cash drawer. The gift shop has a register with minimal dollars, and only one person enters receipts and deposits funds. We recommend that each of the administrative staff have their own cash box which is locked. The key should be kept on them, (with the bracelet or pin) and only they should have access to their drawer. At the end of the day, the reports should be run by user and each drawer should be counted and balanced separately. Financial Assistance At present, all of the administrators can enter financial assistance in the CLASS system which could provide the opportunity to give away services to unapproved participants. We recommend access be limited to the PARD office supervisor. 6. Visit all locations and evaluate the adherence to policies and procedures. Identify, based on auditors' professional opinion, noncompliance with documented policies and procedures. Procedure: We visited the two pools that were open, the BACA center, CMRC, and the PARD office. -8- INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES (continued) Finding: Since there were limited documented polices and procedures, we found no noncompliance with them. We were not engaged to, and did not conduct an audit, the objective of which would be the expression of an opinion on the PARD internal control. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the City of Round Rock and is not intended to be and should not be used by anyone other than the specified party. Sincerely, BROCKWAY, GERSBACH, MCKINNON & NIEMEIER, P.C. June 15, 2006 . -9-