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COUNTY
UDITOR
FFICE
OF
THE
DIANA ROSAS, M.A.M.
FIRST
ASSISTANT
November 7,
2014
DAlE ATCHLEY, C.PA
COUNTY
AUDITOR
901
LEOPARD STREET RM
304
CORPUS
CHRISTI,
IX
78401
PHONE: (361) 888-0556 FAX: (361)888-0584
ELV
FUENTES
INTERNAl AUDIT
SUPERVISOR
USA DAVIS,
c.w.
EXECUTIVE ACCOUNTANT
Honorable Joe Benavides, Justice
of
the Peace, Precinct 1 Place 1
Honorable Samuel Loyd Neal, Jr., County Judge
Re: Surprise Cash Audit performed on October 30 2014
We conducted this audit under the authority of Local Government Code
115.001
and
115.002.
We performed our
audit in accordance with generally accepted government auditing standards and included inquiries, examination
of
accounting records, and other audit procedures that we considered necessary under the circumstances.
Our
audit period of our testing was for October 24 2014 to October 30,2014. The objectives
of
this audit were to
perform a surprise cash count of funds on site and review cash handling and accounting procedures in place.
To
achieve these objectives, we:
Performed a cash count audit
Interviewed staff
Reviewed
till balance'and daily close out reports
for
the period of October 24, 2014.to October 30 2014
Reviewed cash receipts journal for the period of October
24,2014
to October
30 2014
Background
Judge
Joe
Benavides has served as JPl-1 since
he
was elected in 2013. His average
annual
budget is 222,538.
The average annual amount collected by this court over the past five years is 507,313. He currently has four
full-time employees (including
him)
and one temporary employee.
Conclusion
During the cash count and related review of accounting procedures, we observed the office did perform daily
closeout and prepared daily deposits. The office follows proper procedures to insure county monies are adequately
safeguarded.
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e
also identified three instances where internal controls were below minimum standards. Internal control
standards
establish the minimum level
of
quality acceptable in business operations. Internal controls help
to
ensure compliance with laws and regulations, as well as to help safeguard county assets against waste, loss, and
misuse. The internal control weaknesses present at the time of the audit were separation of duties regarding case
assignments, no printed documentation to verify that change fund
is
counted, and unreceipted mail receipts.
A complete and detailed explanation of each of the findings as well as recommendations for improvement are
presented in the section, Opportunities for Improvement, immediately follows this page. Several
of
the flDdings
require management's attention and a written response is necessary in order to evaluate compliance with your
action plan in the future.
We would like to express our sincere appreciation in providing our office full access and cooperation in order to
complete this audit
Sincerely,
Wx
Dale Atchley, CPA
Nueces County Auditor
cc: Commissioner
Joe
A. Gonzales
/Ms. Elva Fuentes, Internal Audit Supervisor
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Opportunities for Improvement
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,' ' ... UJ'UU.1t;S
cases.
_tit
Internal Control Weaknesses
The Nueces County Fraud Policy states that Every county official/department head shall develop and maintain
an internal control system that is to
be
clearly documented and readily available for examination in compliance
with this Policy. The internal control system should compose five standards: (1) control environment, (2) control
procedures, (3) risk assessment, (4) communication and reporting, and (5) monitoring. Objectives for each
of
these standards are to be identified or developed for each office/department activity and are to be logical,
applicable and complete. Documentation
of
the office/department's internal control system will provide an
organizational structure for management directives, administrative policy, accounting policies, procedures and
manuals, and audit reports.
The internal control standard
1 control environment is
where the environment is set to be committed in adhering
to the organizations policies and procedures and its ethical and behavioral standards.
The internal control standard #2
control procedures
indicates controls are performed at various levels to reduce
risks in achievement
of
fmancial reportiugobjectives. Controls can either be preventive or detective. The intent
of
these controls is different. Preventive controls attempt to deter or prevent undesirable events from occurring.
They are proactive controls that help to prevent a loss. Examples
of
preventive controls are separation
of
duties,
proper authorization, adequate documentation, and physical control over assets. Example
of
detective controls are
reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
ontrol Procedures Separation Duties
Attachment
of
the Fraud Policy states under Control Procedures - (3) a-b Separation
of
Duties states
as
follows:
Separation ofduties may be incorporated into the
job
descriptions. The main point of this is to heighten
awareness of those positions that have full control ofa transaction. Key duties and responsibilities that
show a separation
of
duties are:
a Having the custody of assets having authority to perform the transaction having the
responsibility to record the transaction
and
having the responsibility to reconcile
or
approve the
transaction cannot be performed
by
the same individual. In small offices where an employee is
out
sick
or on vacation and one individual has to perform all duties then a review has to be
completed by upper level management or upon return of the absent employee. Deliberate
procedures must be in place in such situations.
b The process receiving assets and-issuing assets has to be ccn:efully moni tored For example a
P
clerk who receives payments should not be responsible for issuing refunds without having
another person involved in the process.
14 01 Separation of
Duties
We observed that each court clerk has been designated to handle specific case types (Traffic, Juvenile,
Civil). Each clerk has authority in their assigned case type to assess fines/fees, make adjustments, and
Issue n other words, they have full control
of
the case.
and duties involving transactions and events should be separated among
to assessing fmes/fees, adjusting fmes/fees, collecting and receipting payments,
The fewer actions performed by a single employee the greater the
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separation
of
duties, thus the more effective the internal controls are (preventive control). When st ff is reduced,
managements close control and documented review becomes critical (detective control).
Control Procedures - Tzmeliness andPerformance Standards
Attachment I of the Fraud Policy states under Control Procedures - 2) Timeliness and Performance Standards
states:
ll transactions
nd
other significant events are to be promptly recorded clearly documented and
properly classified. Documentation of
a transaction or event should include the entire process or life
cycle ofthe transaction or event including:
a.
The initiation or authorization ofthe transaction or event
b All aspects ofthe transaction while
n
process
c. The final classification in summary records
14-02 Unreceipted Mail Payments
Nueces county accounting procedures requires that money received be deposited by the next business day
upon reaching $300 or by the seventh business day from when the funds were received
i f
less than $300.
Local Government Code 113.022 and Code
of
Criminal Procedures 103.004 state that a county officer
shall deposit the money with the county treasurer on or before the next business day after the date on
which the money was received. f the deadline cannot be met, the officer or person must deposit the
money, without exception,
on
or before the fifth business day after the day on which the money is
received.
t
is the fiduciary duty
of
the officer to safeguard county assets by complying with the state statutes and
county policy. Excessive accumulation of cash increases the risk of loss due to mishandling and theft.
At
the time
of
the audit, there were 20 checks totaling
$
421.25. Ten of the checks were received in
October and ten were received in July, August, and September. The checks for July, August, and
September ranged from
1
-
$ 5.
Most
of
the checks are mostly for civil cases. The office does maintain
a daily log of monies received and is maintained in a binder.
Recommendation: All payments should be timely receipted and deposited in accordance with County and state
statutes (Local Government Code.I13.0l2 and Code oferirrrinalProcedures 103.004).
14-03 Change
Fund
Count Not Properly Documented
All steps of the daily closeout procedure should be clearly documented from beginning to end. A
supervisor'S approval (manual or electronic) implies verification and validation. Proper documentation
provides an adequate trail for review by management and auditors.
This office does not have any documentation on daily closeout work papers indicating that
ll
monies
were counted. This office utilizes the Odyssey system by entering the starting balance (change fund) and
at
the end of the day they count all monies including change fund. This process is followed by most
P
offices we have visited. But the Odyssey system does not provide a detailed printout ofcounted monies.
Recommendation: That a simple calculator tape of the counted monies is attached to each clerks Odyssey
deposit report. The supervisor can then initial the tape so that they verify all monies including change fund were
counted by the clerk (preventive).
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D I A N A R OS AS , M A M .
FIRST ASSISTANT
O F F I C E
O F T H E
C O U N T Y
AUDITOR
E L V A F U E N T E S
I N T E R N A L
A U D I T
SUPERVISOR
D A L E A T C H L E Y ,C P A
LISADAVIS, C I . O .
E X E C U T IV E A C C O U N T A N T
C O U N T Y
AUDI TOR
901 L E O P A R D S T R E E T
R M
304
CORPUS CHRISTI,
T X
78401
P H O N E : (361) 888-0556
FAX:
(361) 888--0584
November21,2014
Honorable
Lany
G . C o x ,
Justice
of
the Peace,Precinct
2
Place 2
Honorable
Samuel
L o y d
Neal,
Jr.,CounlyJudge
R e: SurpriseCash CountA uditperformed on October28, 2014
W e conducted this audit under the authorityo f L o c a lGovemment
Code
115.001and 115.002. W e performed our
audit
in
accordancewithgenerally accepted govemment auditingstandardsand includedinquiries,examination of
accounting records, and other audit proceduresthatwe considered necessary under the circumstances.
The audit covered
the
period
of
October 10, 2014
to
October 29, 2014. The objectives of this audit were
to
perform
asurprise cash count of
funds
on site and review cash handling and accountmg procedures in placeat
timeofthe audit.
T o achievetheseobjectives, we:
Performed a surprise cash count audit
Interviewed staff
Reviewedtillbalance anddailyclose outreportsforthe periodo fOctober 10,2014 to October2 9, 2014
Reviewedcash receiptsjournalf orthe periodo fOctober10,
2014
to October2 9,
2014
Reviewed
102
manual receipts
JudgeLarry C ox has served as JP2-2 since February 1, 1980. Hisaverageannualbudgetis $203,724. Judge C o x
served as presiding judge fo rthe
years
of2010 and
2011.
The
average
annual amount collected by this court over
the
past
fiveyearsis $285,989. He currently hasthreeful ltime employees and one temporary employee.
Overthe last coupleo fyears, this
office
has had turnover.
Clerk
turnover has been one each year fo rthe lastthree
years. The temporarypositionturnover is two tothreetimes every year.
Justiceofthe Peace2-2 Page
1
Background
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Conclusion
Duringthe cash count audit, the first thing noticed was the volume of manual receipts used by this particular
office.
It
appears
thatthis courtusesa higher volume of the manual receipts compared to other courts. The
inabilityto monitor
fhe
volume of manual receipts resulted in variousfindingsincludinga possible theft of
$672,
variances in amounts and
tender
types when transferring receipts to the Odyssey system along
with
delays in
transferring receipts. Due to the fact
that
therewas possible theft,there
w i ll
be a fullaudit scheduled in the
near
future.
Eight
instances wereidentifiedthatintemal controls were belowminimum standards. Intemal controlstandards
establish fhe minimumlevel of quality acceptable in business operations. Intemal controls help to
ensure
compliance
withlaws and regulations, asw ellas to help safeguard countyassetsagainst waste, loss, and misuse.
The intemal control weaknesses
present
at the
tune
of the audit were untimely deposits, untimely receipts, hot
check restitution monies not properly handled, manual receipts not used m sequential order or monitored, no
printed documentation diat change fund isverifiedand manual receipts not properly
filled
out. Other findmgs
include
comminglingo fmoniesforemployee group lotto ticket monieswithcounty monies and money orders not
restrictively
endorsed.
A complete and detailed explanation of each of the findings as wellas recommendations for improvement are
presented in the section, Opportunities for Improvement, immediately
follows
this page. Severalofthefmdings
requiremanagement'sattention and a written response is necessary in order to evaluate compliancewithyour
actionplaninthe future.
We would liketo express our sincere appreciation inprovidingouroffice
ful l
access and cooperation in order to
completefhisaudit.
NuecesCountyAuditor
cc: Honorable
Mike
Pusley,NuecesCounty Commissioner
Pet.
1
Honorable Joe A .Gonzalez,NuecesCounty CommissionerPet.2
Honorable Oscar
O .Ortiz
Nueces
County Commissioner
Pet.3
Honorable JoeM c C o m b ,Nueces CountyCommissioner
Pet.
4
M s.E l v aFuentes, Intemal
A udit
Supervisor
Sincerely.
JusticeofthePeace 2-2
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JusticeofthePeace2-2
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14-01 Cash Missing (ManualReceipts)
There were four instances when manual receipts were not receipted in the Odyssey system. They were
processed by one particularclerkand were mostly cash. These receipts total to be $ 672.00.
There was one receiptthatwas marked out v o i d but also marked pd in
full .
This payment was never
receipted in the case. However, fhe ledger indicates various
subsequent
payments were made after the
date
o f
the manual receipt.
This
prompts further review on this
clerk's
transactions in afUtureaudit.
Recommendation: Management/supervisors must review manual receipts more thoroughly to
verify
receipts
have been transferred to the Odyssey system (preventive control).
Internal
ControlWeaknesses
The Nueces County FraudPo licystatesthat
Ever)'
county official/department head shall develop and maintain
an intemal control systemthatis to be clearly documented and readily available for examination in compliance
with
this
Policy.
The internal control system should compose
five
standards: (1) control environment, (2) control
procedures, (3) riskassessment,(4) communication and reporting, and (5) monitoring. Objectives for each of
thesestandardsare to be identified or developed for each office/department activity and are to be logical,
applicable and complete. Documentation of the
office/departmenfs
intemal control system
w i l l
provide an
organizational
structure for management directives, administrative policy, accounting policies, procedures and
manuals, and audit reports.
The internal control standard 1 control enviromiientis where the environment is set to be committed in
adhering
to the organizationspoliciesand procedures and its ethical and behavioral standards.
Intemal control standard #2con trol procedures is where controls are performed at various levels to reduce risks in
achievement offmancialreporting objectives. Controls can either be preventive or detective. The intent of
these
controls is diflferent. Preventive controlsattempttodeteror prevent undesirableeventsfromoccurring. They are
proactive controls
diat
help to prevent a loss. Examples of preventive controls are separation of duties, proper
authorization,adequatedocumentation, andphysicalcontrol overassets.O nthe other hand, example of detective
controls are reviews, analysis, variance analysis,
reconciliations,
physicalinventories, and self-audits.
internal control standard #5 Twow
^foWng-
is
determining-whether
intemal control is adequately designed, properly
executed and effective. Intemal control is adequately designed and properly executed ifall fiveintemal control
components are present and
flmctioning
as designed.
Monitoring
must be continuous and ongoing sothat
corrective action can be taken ina tunely manner.
Control Procedures: Timeliness and Performan ce S tandards
Attachment I of the Fraud Policystatesunder
Control
Procedures - 2) Timelmess and Performance Standards
states:
All transactions and other significant events are to hepromp tly recorded, clearly docum ented cmd
properly classified. Documentation of a transaction or event should includetheentire process or life
cycleofthe transactionorevent, including:
a. The initiation or authorization of the transaction or event
b. llaspectsofthe transaction while in process
c. The final classification in summa ry records
Justiceofthe Peace 2-2 Page 4
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14 2 UntimelyDeposits
L o c a lGovermnent Code
(L G C )113.022
and Code of
CriminalProcedm-es ( C C P )
103.004
state that a
county officer shalldeposit the money withthe county
treasurer
on or before the next business day after
thedateon whichthemoney was received. If the deadline cannotbemet,theof ficerorperson must
deposit
the
money, without exception,
on or
before
thef i f t h
business
day
after
the
day on
whichthe
moneyisreceived.
Part of the cash audit plan is to examine the lastthreedeposits. Clerksclose their individual tillsevery
day, and then die administrative secretary
preparesa
deposit for all monies collected. One of the
three
depositstestedwasf o rseven (7) business days.
Recommendation:
Deposits be prepared
daily
to
avoid
accumulation of excess monies.
A l l
payments should
be
deposited in accordance withcountypolicyand
state
statutes( L G C113.022 andC C P103.004).
14-03
Untimely Receipting
of Manual
Receipts
to the
Odyssey System
There were ten receipts showing a delay transferring receipts into the Odyssey
w hichrangesfi'om
8
to 10
days. Then,
there
were
three
receiptsthat showed
a
delay
of
31 days
or
more. The two
of
the
three
receipts were cash transactions totaling $627. The third receipt did not indicateatendertype. Mos tof
these
receipts were prepared by the
same
clerk as mentioned
in finding
(14-01).
A l l
thesereceipts should have been transferred immediately into
the
Odyssey system.
Thispresentsan
opportunity forfraud, misuse, theft, orloss. If
there
were questions that delayed fheclerk f r om
fransferring die receipts
to
the Odyssey system,
the
fimds should
be
have been deposited
as a
separate
deposit. As issues get
resolved,
then transfer receipt into the Odyssey system.
Recommendation:As infinding
14-02,
all payments should be deposited in accordance withcounty policyand
state statutes
(L G C
113.022 andC C P103.004).
Control Procedures: Monitoring Adequate and Continuous Supervision
Attachment IoftheFraudPolicy
states
underMonitoringstates:
Adequateandcontinuous su pervisionis acritical component to the prevention
of
fraud. Supervisors are
responsible
for
maintaining operating levels, meeting
or
exceeding goals
and
objectives
and
implementing changes. Some examples of documentationtohave
on
hand
to
show that monitoringis
being performed are:
J W^at evidence exists that supervisory review
has
occurred? Where
in
the process doesasupervisor
sign off and
how
often?
What
do they sign off on?
i.e.
timesheets, performance
reports
exceptions,
etc. ?
14-04
Hot CheckRestitutionMoniesNot Properly Handled
Currently,theprocess ofhandlinghotcheckcasesisnormallythatthedefendant brings inseparate
payment for
tiie
county portion and
a
separatepayment for the merchant. Theseparatepayment for the
merchant is normally payable to the merchant and is receipted
as a
restitution to merchanf type in the
Odyssey systemtodocument thosemonies was received. Thenthecourt wil l mailout thepayment
directlyto the merchant. There are some
cases
where the defendant has the money order payable or has
paidin cashto thecourt. Whenthathappens, italso receipted intheOdyssey system with appropriate
tender
type and deposited. Then the court
requests
a check
f r om
the auditors
office
to be forwarded to
tiie
merchant.
JusticeofthePeace 2-2
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T M s
court has a bank bag
thatholds
checks payable to the merchant. Once a week, the checks are
mailed
tothemerchants.
A tdie
tuneof the audit, diere were two checks payable the Judge Cox and one check
was payabletoJenny Craig. One of
those
checks was dated 4/13/12 had not been receipted;thenext
check
is arefundfromPeter Piperclaimingthecheck they received was not theirs. The money order
payable to Jenny Craigstateditdid not belong to them. There was noindicationoffollow-upaction on
thesemoney orders. These items werei nthe possessiono ftheclerkmentioned infmding
14-01.
Recommendation:
Management/supervisors must review each employees work
to ensure
procedures
are
properlyfollowed.Management/supervisors mustreviewthatchecks submitted to the proper merchant.
14-05 ChangeFund
There is no documentation on
daily
closeout work
papers
indicatingthatal lmonies were counted.
This
departmentutilizesthe Odyssey system toenterthe starting balance (changefimd). Thisseemsto be fhe
norm for mostJPofficeswehave
visited.
Clerkscount their moniesand
enter
theamounts in the
Odyssey system.
But
die Odyssey system
does
not provide a detailed printouto fcounted monies.
Recommendation:
That
simple
calculatortapeo fthe counted monies is attached to each clerks Odyssey deposit
report.
This
wouldprovide foradequatedocumentationthatal lmonies were counted by clerkmcludingchange
fund.
14-06
ManualReceiptsNot
Used
InSequentialOrder or Monitored
Part of the cash audit istotake inventory of manual receipt books on hand. We reviewed the
past
two
years
because
thatis when the new Odyssey software was put m place. We perform random testingto
confirmpayments were transferred (receipted) to the
Odyssey
system.
This office
usesmanual receipts in times when fhe Odyssey system is down or whenthereisaquestion
onthe
case
and the supervisor is not
available.
There is
a
manual receipt book assigned to eachclerk.
It
appearsthatthis courtusesa higher
volumeo f
the manual receipts compared to other courts. There were
129 manual receipts used m the last two
fiscal
years. There were some instances where blank receipts
were not
voided
out and/or
missing
onepart
o f
the3-partreceipt.
We
performedrMidom
testing
o f
receipts on each manual receipt
book.
Randomtestmg
o f
one the clerk's
manual receipt book triggered questions and mdicated some
o f
the receipts had not been receipted into the
Odyssey system.
This
ledto 100% testing on this particular
clerk's
receipts.
Best business practice
is
lhatmanual receipts
be
used
in
sequential dateand number order for easy
reconcilement. Duetothisofficenot having controlormonitoringthemanual receiptshasledtocash
missing(Refer to
14-01).
Recommendation: That manual receiptsbeused one bookat atimeand
ui
sequential order. If areceiptis
inadvertentlyskipped,the unused receiptneedsto be immediately marked V O I Dand not used andinitialedby
supervisor
(preventive control). Just like all voids shouldbemarked
V O ID ,
initialedbysupervisorwitha
reason for
the
void .
Remaining
receipt books should
be
kept in
the
safe. Management must
ensure
receipts
are
properlyutilized. L o c a lGovemment Code103.11indicates the county auditor has authority over receipt books.
The
county auditor canrequestreceipt books be
turned
over
i f
not
utihzed
properly.
Justice o fthe
Peace
2-2
Page6
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Other Manual Receipt Findings
Codeo fCrimmalProcedures( C C P )A r t.103.010.R E C E I PT
B O O K
states:
(b) Anofficerwho collects fines or fees in acrimmalcaseshallgive the person paying the money a
receiptfi -omthe receipt book. The receipt must show: (1) the amount of money paid;(2) thedatethe
money was paid; (3) the style and number of the case in
which
the costs were accrued;(4) the item of
costs;(5)
the name
o f
the person
paymg
the money; and(6) the
of f ic ial
signature
o f
theofficerreceiving
the money.
(c) Instead of a receipt book, eachofficer collectingfmes or fees incriminalcasesfor
die
county may
maintain
the information hsted in Subsections (b)(l)-(5) m a computerdatabase. Theofficer shall
provide a receipt
to
each personpayingafineor fee.
ThefoUovmigare
findings
pertaming to manual receipts:
14-07 Variancesof
Amounts
in Manual andOdyssey
System
Receipts
There werefiveinstances where the amounts shovra on the manual receipt
did
not match the amounts m
the Odyssey computer receipts. Three receipts were combmed
with
an over the counter payment because
the
plaintiff
had not submitted the proper
eviction
filingfee. The other two had unexplained differences.
14-08 Variancesof Tender Type in Manual andOdyssey SystemReceipts
There werethreeinstances inwhichthe manual receipt indicated cash was received but when it was
transferred to the Odyssey system; it reflected either money order or check tender method.
14-09 Manual
Receipts
notCompletelyFilled Out
There were thirteen instances where the receipts were not completely filledout. Four receipts did not
have thedate,threedid not have
fhe
style ofcase,direedidnot have the name
o f
the payer, andthreedid
not have the signature of the clerk acceptmg the money. Two of those instances above had multiple
issues.
Recommendation:That staffneedsbe further trained in the Odyssey system m effort tominimizethe use of
manual receipts.
However,
the
staff
needs
to be trained to
fill
out manual receipts properly and
comply
with
C C P
103.010(b).A l s o , it is recommendedthatthe manual receipt number be referenced in the comment data
field
of
the
Odyssey
computer receipt.
Other Findings
14-10 Commingling of Funds - Lotto TicketMoniesKept inCounty sSafe
Whena
fiduciary,
a person entrusted withthe management of
funds
other than his or her own in tmst
mixes
trust moneywiththatof others, the
fiduciary
iscommmglingfunds and thereby breaching his or
herfiduciaryduty.
A tthe
tuneo f
the audit, monies were not
found
but it
appears
that
staff
keeps monies
collected
for group
lotto ticketsinthe safe.
Recommendation: That itemsthatare not county property be removedfromthe safe. Thatonlycounty property
and monies be kept in the safe. The purpose of the safe is to safeguard countyassetsonlynot personal property.
Managementneedsto ensurefhesafe is usedstrictly for counlypurposes.
JusticeofthePeace2-2
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14-11
Money Order and Check notRestrictivelyEndorsed
Two money orders were not restrictively endorsed upon receipt (Refer to 14-03). To safeguard the
county's
assets,
money orders and checks should be stamped immediately
with
a restrictive endorsement.
Checks
that
are notrestrictivelyendorsed upon receipt are at a
greaterrisk
o f
misappropriation.
Recommendation:
Thata llchecks and money orders be
immediately
restrictivelyendorsed upon receipt.
JusticeofthePeace
2-2
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O F F I C E
O F
D I A N A
R O S A S ,
M A M .
F I R S T
A S S I S T A N T
T H E
C O U N T Y
AUDITOR
D A L E A T C H L E Y , C P A
C O U N T Y
A U D I T O R
901 LEOPARD STREET, RM 304
CORPU S
CHRISTI,
T X 78401
E L V A
F U E N T E S
I N T E R N A L A U D I T S U P E R V I S O R
L I S A D A V I S C I . O .
E X E C U T I V E
A C C O U N T A N T
PHO N E: (361) 888-0556 FAX;(361) 888-0584
October 17, 2014
Honorable Robert Balderas, Justice o fthe Peace Precinct 1, Place 3
Honorable Samuel
L o y d
N e a l ,
Jr., County Judge
R e: Justice o fthe Peace Precinct 1Place 3
A u d it
(JPl-3)
O n the moming ofMonday, October6 2014, the coimty auditor's off ice was notified ofatfaeftthat occurred
during the early moming hours ofSimday, October 5, 2014 at the
B i l l
Bode County
B u i ld i n g .
This
faci l i ty
is
currently occupied by Justice of the Peace Precinct 1 Place 3 (JPl-3) and Constable Precinct
1.
The Corpus
Chr i s t i
Police Department conducted an investigation. On Tuesday, October 7, 2014, the coimty auditor's office
conducted
a
cash audit and a review
o f
the
faci l i ty
to
determme
the loss incurred by the county.
W e
conducted this audit under the authority
o f L o c a l
Govemment Code
115.001
and
115.002.
We performed our
audit in accordance
vrith
generally accepted govermnent auditing
standards
and included inquiries, examination of
accounting records, and other audit procedures
that
we considered necessary under the circimistances.
O ur
audit period of our testing was for October 1, 2014 to October 7, 2014. The objectives of
ihiis
audit were to
determine; the amount ofloss due totheftand related property damage; review security in place to safeguard
county funds and property; perform a cash count of
fiinds
on site; review cash handling and accounting
procedures in place.
T o
achieve
these
objectives, we;
.
_]nspected the
premises;;
Inspected
damage
at the facihty
Performed
a
cash count audit
Interviewed staff
Inventoried
fixed
assets
Reviewed
t i l l
balance and daily close out
reports fo r
the period of 10/1/14 through 10/6/14
Reviewed cash receipts journal for the period of 10/1/14 through 10/7/14
Obtained a copy o fthe police report
Background
The JPl-3
office
is located m the B i llBode County
B u i ld i n g
at 11408 Leopard
Street,
CorpusC h r i s ti ,
T X
78410.
Constable Precinct 1 previously maintained an officespaceat the B i l l Bode B u i ld i n g but has since moved tiie
primary
office
to the Nueces County Courthouse. Currently, the constable utilizes the
space
primarily as
storage.
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The
building was also the secondary otFicefor Commissioner Precinct1, M i k ePusley, but he has moved his
office
to the H i l l t o p Community Center, located across
die street from
the B i l l Bode
B u i ld i n g .
The space
formerlyused by theCommissioneris now used as a secondary ofSce area for the
JPl-3
administrative secretary,
w ho
also maintains a primary workstation in theJPl-3 area.
T he B i l l
BodeB u i ld i n gis managed by thePublicWorks department. The average annual budget for thisbuildiog
is
$ 63,445. There is one employee under this budget.
Judge Robert Balderas has served as X P l -3since he was elected in 2003 and has served as Presiding Judge for the
term of
2005-2007.
His average annual budget is $ 217,549. He currently has four
full-time
employees and two
temporary employees. The average annual amoimt collected by this court over the
pastfive
years is $ 195,382.
T he
county suffered a cash loss of
$300,
whichwastiieapproved change fund amount, as w e llas addition costs
related to damage to property and the
faci l i ty itself
We observed
that
the
loss could
have been avoided if
adequate
building
securities
would
have been put in place at the
B iU
BodeCountyB u i ld i n g .
T he
f i x e dassets
were inventoried andidentified.
During
tibe cash count and related review of accounting procedures, we observed the
office
did
f o l l o w
timely
deposit procedureswhich minimizedthe amount of the cash loss. However, weidentifiedseven Instances where
intemal controls were below minimum standards. Intemal control standards estabhsh the minimum
level
of
qualityacceptable in business operations. Intemal controls help to ensure compliance
with
laws and regulations,
as w e l l as to help safeguard county assets against waste, loss, and misuse. The internal control weaknesses
present at the time of the audit were a lack of separation of duties, insufficientauthorization of reductions in
Odyssey system, insufficient documentation of v o i d authorization in Odyssey system, password integrity
compromised,
clerk ID not adequatelyidentifiedon Odyssey receipts, overpayments are not receipted, and change
f i m dkept in safe during business hours.
A
complete and detailed explanation of each of the
findings
as
w e l l
as recommendations for improvement are
presented in the section.Opportunities for Improvement, immediately
follows
this page. Several of the findings
require management's attention and a written response is necessary in order to evaluate compliancewithyour
action planin the future.
W e
would
l iketo express our sincere appreciation in
providing
our
officef u l l
access and cooperation in order to
complete this audit
Conclusion
Sincerely,
Dale Atchley,
C P A
Nueces CountyAuditor
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14-01 Building notAdequately Secured
The county suffered a loss ofassetsat JPl-3 and damage to property attiie B iU Bode Countybuilding
resulting
from a theft tiiat
occuired
on the early moming of Sunday, October 5. The county's loss of cash
totaled $300 and the costs of
aU
of the
damages
to the
building
and tbe contents
within
have yet to be
detemiined.
Loss
due to theft and destmction of county property are costly to both the county and the taxpayers.
Whena theft occurs, the coimty suffers the immediate loss ofassets(such as cash and property) and the
cost of repairs due to damages. The county also suffers a long term on-going expense as the cost of
insurance may increase as a result
o f
the theft for years to come.
W e observed multiple security issuesthatmay have contributed to the loss incurred.
The B i l lBodebuildinghas four access doors: public, employees, constable, and judge. The public front
entry way is a double-door entry
with
clear glass panels framed in metal
which
hasonlysingle
lock.
H i e
glasspanes of the doors do not have security f i l m to prevent possible burglars from lurking. We also
observed
thatthere
was an approximatelyV2 gap between the two doors
which would allow
sufficient
roomfor any large metaltoolto be used as leverage to break the doors open and gain access.
There is no monitored alarm system on thebuilding, whichprovided ample time forassetsto be taken and
damagesto occur. There is aC C T V system at thisbuilding,but it is notadequateas itdoesnot provide a
clear
visual o f
what is being videoed and the placement
o f
the cameras
does
not monitor
aU entrances
and
exits.
Recommendation:
Measures should be taken to adequately safeguardassetsandfacihty.We recommendthatan
alarm
system be installed. We recommend a security review be performed on the facihty on a regular basis. This
review
w i l l ensuresecurity of the buildingand safety of employees and the public, therefore, minimizing the
future
possibility
ofloss.
Internal
ControlWeaknesses
XherNuecesCounty Fraud P o l ic ystatesthat-"Every county official/department head shall develop and-maintain
an intemal control system thatis to be clearly documented and readily available for examination in compliance
with
this P o l i cy . The internal control system should compose
five
standards: (1) control environment, (2)
confrol
procedures, (3) risk
assessment,
(4) communication and reporting, and (5) monitoring. Objectives for each of
these standards are to be identified or developed for each office/department activity and are to be
l o g i ca l ,
applicable and complete. Documentation of the office/department's intemal control system
w i l l
provide an
organizational
stmcture for management directives, administrative policy, accounting policies, procedures and
manuals, and audit reports."
T b e intemal control standard #1 control environment is where tbe environment is set to be committed in adhering
to the organizationspoliciesand procedures and its ethical and behavioral standards.
T b e
intemal control standard #2
control procedures
indicates controls are performed at various levels to reduce
risks in achievement offinancialreporting objectives. Controls can either be preventive or detective. The intent
o f thesecontrols is different. Preventive controls attempttodeteror prevent undesirable eventsfrom occurring.
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They areproactive controlsthathelpt o prevent a loss.
Examples
o f preventive controls are
separation
o f duties,
proper
authorization,adequate
documentation, and physical control
overassets.
Example o f
detectivecontrols
are
revievi's, analysis,varianceanalysis, reconciliations,physical inventories,an dself-audits.
Control Procedures Separation
of
Duties
Attachment
I
o f
the
Fraud
P o l ic y
states
underC o n t ro l
Procedures
(3) a~b
Separation o f
Duties
states
as fo llovi s:
Separation of duties m ay be incorporated into the job descriptions. The main point of this is to heighten
awareness of those positions that have fiill control of a transaction. Key duties and responsibilities that
show a separation of duties are:
a. Having the custody of assets, having authority to perform the transaction, having the
responsibility to record the transaction and having the responsibility to reconcile or approve the
transaction cannot be performed by the same individual. In small offices where an employee is
out sick or on vacation and one individual has to perform all duties then a review has to be
completed by upper level managem ent or upon retum of the absent employee. Deliberate
procedures mmt be in place in such situations.
b. The process of receiving a ssets and issuing assets has to be carefully monitored. For example a
JP clerk who receives payments should not be responsible for issuing refunds without having
another person involved in the process.
14-02 Separationof
Duties
W e observed.thateach comt cleric has been
designated
to
handle
specific
case
types ( T r a f f i c ,Juvenile,
an d
C i v i l ) .
E ach clerk has authorityi n their assignedcasetypeto assessfines/fees,make adjustments, and
issue receipts.I n other
words,they havef u l l
control o f th e case.
Recommendation:
Responsibilities an d
duties
i n v o l v i n g
transactions
an d
events
should b e separated among
different employeesvvdthrespect to assessingfines/fees, adjusting fines/fees, co l lect ing and
receipting
payments,
an d maintauiingcustody o f the cases.
D i e
responsibility f o r
opening
m a i l should b e assigned to individuals w ho
have n o
responsibility
to
assess
fmes/fees.
T he
fewer actions perfonned
b y a
single
employee
the
greater
the
separation
o f
duties,
thus the more
effective
the
intemal
controls are (preventive
control).
W h en staff is reduced,
managements
close
control an d documentedreview
becomes
critical
(detective
control).
Control Procedures Proper A uthorization
Attachment
I of the Fraud P o l i c y states
under
C o n t ro lProcedures - (1)
Proper
Authorizat ion states"Transactions
an d other significantevent are to be authorized an d executed o n l y by persons acting w i t i iin th e
scope
o f their
authority. Authorizations should be clearly communicated to managers, supervisors an d
employees
an d should
include the sp ecific
conditions
an d terms
under
w h ic hauthorizations are to be
made."
14-03
Insufficient
Authorization
of
Reductions
in
Odyssey
Currently, Odyssey
does
n o trequire an authorizationto
make
a
reduction
in the
fees
assessed, an d
there
is
n o notation from thejudge to approveth e reduction.W h en authorization is not required fo r the reduction
o f
fines
an d
fees,
i t
reduces
the effectiveness
ofthe
intemal controls.
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14-04
Insufficient
Documentationof
Void
AuthorizatiousinOdyssey
Currently at J P l - 3 ,
there
are two clerksthathave the approval rights in Odyssey to v o i d transactions.
Those two clerks have the authority to issue a receipt and v o i d the same transaction. Per interview, the
two clerks stated
that
they get a verbal approval
from
each other tov o i dthe receipt
thattiiey
issued. There
is no written evidence (audit trail) tiiat the autiiorization occurred and this reduces effectiveness of
intemal
controls.
Recommendation:For 14-03 and 14-04, current practices in place should bemodifiedto be in agreement with
county intemal control pohcies. The Odyssey system
needs
to be default
setup
thatthe person who issued the
receipt cannot be the same userwhichapproves (review) the
voiding,
adjusting, or reversing ofthats ^e receipt
(preventive control). It is preferred
that
a supervisor authorize a v o i d , adjustment, or reversal. But it is not
necessary i f a dual-control principle is put in place this waythereis another personconfirmiagthe action in the
event the supervisor is not available.
Control Environment Adhere to County Policies
The intemal control standard
#i control environment
is where the enviromnent is set to be committed in adhering
to the organizationspoliciesand procedures and its ethical and behavioral standards. Managementneedstoassure
tbat
employees are
w e ll
acquainted
with
County and departmental
policies
and procedures
that
pertain to their job
responsibilities.
14-05 PasswordIntegrity
Per
tiie
Nueces County Network CommunicationsP o l i cy ,
Violations
and Prohibited
Used,
3.2.2., it is
strictlyprohibited to "adopt the identity of another person on any electronic message, attempting to send
electronicm a i lanonymously, or using another person's password."
During
interview
w i ti i
staff, it was disclosed
that
passwords have been compromised.
This
compromises
the integrity o f the audit
trail
and the accountability of the system.
This
occurred because the employees
d id not have access to electronic files.
Recommendation: Documents should be saved on a shared network so designated employees w i ll have access
to those
files
as needed. Management-needs to make sureeanpJoyees..are.cross-trained and,_tiiatthej each
have
proper access (with their own sign in) to files needed in effort to perform job duties without compromising
intemal
controls.
14-06 Clerk notAdequatelyIdentifiedonOdyssey
Receipts
System software security controls are an integral part of intemal control activitythat helps ensure
managements directives to mitigate risks. System softw^e security controls provide for assigned access
and documented use of system software. There should be consistency in setting up security roles for
users
and assurancethatsystem output is also consistent.
During
the cash count audit, it was determined
that
at least two of the clerks Odyssey receipts did not
identifythe clerkthatissued the receipt. However, the systemfmancialledger of those
cases
did reflect
the clerk ID on the transactionlineitem.
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Recommendatioii:
Nueces County Information Technology department should be contacted and instructedthat
receipts for
departmentsut i l iz ing
Odyssey bestandardised.
It should be notedthatwhen it was discovered duringtiiecourseoftheauditthatOdyssey was not indicatingthe
clerkID on the receipts of two of the clerks, the staff at
JPl-3
contacted the county's infonnation technology
department
and
this issue has been corrected for
those
two clerks.
Control Procedures Timeliness and Performance Standards
Attachment I of the Fraud Pohcystatesunder ControlProcedures - 2) Timeliness and Performance Standards
states:
All transactions and other significant events are to be promptly recorded clearly documented and
properly classified. Documentation
of a
transaction
or
event should include
the
entire process
or
life
cycle of the transaction
or
event including:
a
The
initiation
or
authorization ofthe transaction
or
event
b.
ll
aspects of the transaction while in process
c. The final classification
in
summary records
14-07
Overpayments
are NotReceipted
Nueces county accounting procedures requiresthatmoney received be deposited by the next business day
upon
reaching $300 or by the seventh business day
from
when the funds were received if less than $300.
L o c a lGovemment Code 113.022 and Code of C r i m i n a l Procedures 103.004statethat"a coimtyofficer
shalldeposit the moneywith the countytreasureron or before the next business day after tiiedateon
which
the money was received. If the deadline cannot be met, the
officer
or person must deposit the
money, without exception, on or before the fifth business day after the day on
which
the money is
received."
It is the fiduciary duty of the officerto safeguard countyassetsbycomplying
with
thestate statutesand
countypolicy. Excessiveaccumulation of cash increases theriskof loss due to
mishandling
and theft.
Currently,theoffice:doesnot receipt overpayments received-bymai l .They contact the defendant
to^notify
tiiem
and instmct them to
pick
up the overpayment. The payment remains in the
office until
defendant
picksit up.
Anotherscenario isthatwhen a defendant brings in a paymentwhichis over the amount due, theoffice
does
not receipt it. They instmct the defendant to bring back the check, money order, or cashier's check
for the correct amount. This is inconvenient for the defendant. The current policy is, if
there
is an
overpayment for $5.00 and under, it becomes county revenue. If payment is $5.00 and over the amount
due, a check is issued to the party tibat overpaid. The Odyssey software is set up for this overpayment
procedure and otiier JP courts are currently
ut i l iz ing
it.
Recommendation: A l l payments should be receipted and deposited in accordance
with
County andstate statutes
( L o c a lGovermnent Code 113.022 and Code ofC r im i n a lProcedures 103.004). In the event
that
an overpayment
isreceived and a refund is due to the payer, it
needs
to be properly receipted in the Odyssey software. Then, an
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order to pay disbursementrequestalso referred to as a
check
requestshould be prepared, an d thensigned by the
judge. T he request and the supporting documentation, including acopy o f receiptindicatingthat a
refund
is due,
shouldb e submitted to the county auditor'so f f i c e .
Control Procedures SafeguardingofAssets
Attachment I of the Fraud P o l i c ystatesunder C o n t r o l Procedures (4)
Safeguarding
o f
Assets (Preventive
and
Detective controls)
states:
What physical controls are in place to protect assets? Who has the keys to the vault and is access to the
vault limited?
Is money left on top of desks unattended?
Restrictions on access to resources will depend upon the vulnerability of the resource and the
perceived risk ofloss, both of which shall be periodically assessed Preventive).
Periodic comparison shall be made between the resources and recorded accountability of the
resources to reduce the risk of unauthorized me or loss and protect against waste and wrongful
acts. The vulnerability and value
ofthe
county resources shall determine the frequency of this
comparison Detective).
14-08 Clerk'sChange
Fund
Keptin
SafeduringBusiness
Hours
T hecurrent practice at the
JPl-3
o f f i ce i stiiat clerks w o u ld
keep
their
change
f i in d in the safe during the
business d ay . A sfunds werereceived an d
change
w as
needed,
th e clerksw o u l d go t o t h e
safe
to put the
money in
then
t i l l an d
make
change as needed. T h i s practice
caused increase
in traffic to and from the
safe,
w h il ecustomers
waited,
w h i ch i n t u m increasedth e customers
exposure
to the lo cation o f the
safe.
I t w as
also
confirmed
that
the
change
fimd iscounted
every
day, but
there
is no documentationassuch o n
theirdailycloseoutworkpapers.
Recommendation:
E a c h
clerk's
designated
change
fundshould
b e
retrieved
from the safeat the
beginning
o f
the
work day and kept in a locked drawer m their
workstation
duringthe day. A t the end o f the
business
dayafter the
till/change fund is reconciled; w e then recommendthat the changefund be retumed to the safe f o rsafekeeping
ovemight. C l erk s should count their change fund at the beginning and end o f their shift t o v er i fy
amount
is
correct
(preventive)-and-needs-to
b edocumented
m-tlieir
daily closeoutwork
papers.
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OFFICE OF
THE
COUNTY
UDITOR
DIANA RoSAS, MAM
ElVA FUENTES
FIRST ASSISTANT
INTER. lAl
AUDIT
SUPERVISOR
D lE ATCHLEY C.PA
LISA DAVIS, I O
COUNlY AUDITOR
EXECUTM ACCOUNTANT
901
LEOPARD STREET,
RM
304
CORPUS
CHRISTI, TX 78401
PHONE: (361) 888-0556
FAX
(361) 888-0584
November
17,2014
Honorable Duncan Neblett, Justice
of
the Peace, Precinct 4
Honorable Samuel Loyd Neal, Jr., County Judge
Re: Surprise Cash Audit performed
on
October 29, 2014
We conducted this audit under the authority ofLocal Government Code 115.001 and 115.002. We performed our
audit in accordance with generally accepted government auditing standards and included inquiries, examination
of
accounting records, and other audit procedures that we considered necessary under the circumstances.
The audit covered the period
9115114
to
10/24/2014
The objectives
oftbis
audit were to perform a surprise cash
count
of
funds on site and review cash handling and accounting procedures in place.
To achieve these objectives, we:
Performed a cash count audit
futerviewed staf f
Reviewed till balance and daily close out reports for the period 9115114 to
10 24 14
Reviewed cash receipts journal for the period 9115114 to
10/24/14
ackground
JP4 is located in the city
of
Port Aransas, Texas. Judge Neblett has been
the
justice of the peace since January 3,
1993. Judge Neblett has managed an average budget of 161,121 and has two full time employees: administrative
secretary and a court clerk. The average overall collections for the past five years are 244,102. From the date
of the last audi t in 2009, cases filed declined by 48.3% and cases disposed declined by 39.65% in comparison to
FY2013. Office of Court Administration (OCA) data is not complete for this court; last report submitted to OCA
was in May 2014. As a result of the decline in court activity, overall collections declined by 39% and revenues
have declined by
21
% from 2009 in comparison to FY2014
This office has had turnover in the last couple of years. The court clerk position has had a new hire each year.
There were
two
new temporary hires in the current year and two new temporary hires in the prior year.
The new Odyssey software was implemented in June 2012. All files from the FullCourt (previous software) were
converted
to
the new Odyssey software. This software has many
of
the same capability as FullCourt as to OCA
reporting, Omnibase reporting, Linebarger collections, etc.
Justice
of the
Peace 4 Cash Audit
Page 1
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The last audit o this office was the investigative audit o December 9, 2009. This audit revealed seventeen
[mdings: six fraudulent [mdings, eight weakness in internal controls, and three general findings. These [mdings
contributed to the theft o 85,532 by the administrative secretary. The case was prosecuted by the district
attorney's office and the employee was convicted in 2014. Loss due to this theft was costly to the county and the
taxpayers. In addition, the county insurance costs increased for five years due to the county being considered a
risk.
onclusion
During this cash audit, a total o fourteen [mdings were noted: eleven weaknesses in internal controls; one was
non-compliance in OCA reporting, and two general [mdings. The internal control weaknesses include: lack o
management review/supervision, administrative secretaIy has full control o office operations, lack
o
separation
o duties, daily closeout documentation not retained, administrative secretary maintains key to clerk's cash box.
passwords are shared, untimely deposits, untimely receipts, administrative secretary does not follow required
Odyssey deposit procedures, monies not kept in safe overnight, and safe which is in need o repair or replacement.
Other [mdings were change fund not utilized and money order and check were not restrictively endorsed.
Internal controls help to ensure compliance with laws and regulations,
s
well as to help safeguard county assets
against waste, loss, and misuse. The level
o
internal controls has weakened even further since the theft audit.
t
clearly indicates a disregard to compliance o audit recommendations, laws and regulations, and county policies.
Red flags on top o the already severely weak internal controls are the drastic decline
in
overall collections and
revenues corresponding to the decline in cases filed and cases disposed since the last audit five years ago.
The [mdings in this cash audit have set the tone for the environment
o
the office. This situation places the county
at an extraordinary risk for history to repeat itself and the county to suffer another substantial loss. A full audit
will be scheduled in the near future.
A complete and detailed explanation
o
each
o
the [mdings as well as recommendations for improvement is
presented in the section, Opportunities for Improvement, which immediately follows this page. Several o the
[mdings require management's attention and a written response is necessary in order to evaluate compliance with
your action plan in the future.
We would like to express our sincere appreciation in providing our office full access and cooperation in order to
complete this audit.
ale Atchley, CPA
Nueces County Auditor
cc: Nueces County Commissioners
Ms. Elva Fuentes, Internal Audit Supervisor
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Opportunities for Improvement
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Internal Control Weaknesses
The Nueces County Fraud Policy states that "Every county officiaVdepartment head shall develop and maintain
an internal control system that is to be clearly documented and readily available for examination in compliance
with this Policy. The internal control system should compose five standards: (1) control environment, (2) control
procedures, (3) risk assessment, (4) communication and reporting, and (5) monitoring. Objectives for each
of
these standards are to be identified or developed for each office/department activity and are to be logical,
applicable and complete. Documentation
of
the office/department's internal control system will provide
an
organizational structure for management directives, administrative policy, accounting policies, procedures and
manuals, and audit reports."
Internal control standard #1 control environment is where the environment is set to be committed in adhering to
the organizations policies and procedures and its ethical and behavioral standards.
Internal control standard #2
control procedures
is where controls are performed at various levels to reduce risks in
achievement
of
fmancial reporting objectives. Controls can either be preventive
or
detective. The intent
of
these
controls is different. Preventive controls attempt to deter or prevent undesirable events from occurring. They are
proactive controls that help
to
prevent a loss. Examples
of
preventive controls are separation
of
duties, proper
authorization, adequate documentation, and physical control over assets.
On
the other hand, example
of
detective
controls are reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
Internal control standard #5
monitoring
is determining whether internal control is adequately designed, properly
executed and effective. Internal control is adequately designed and properly executed if all five internal control
components are present and functioning as designed. Monitoring must be continuous and ongoing so that
corrective action can be taken in a timely manner.
Control Procedures: Monitoring - Adequate nd Continuous Supervision
Attachment I of the Fraud Policy states under Monitoring states:
Adequate nd continuous supervision is a critical component to the prevention offr ud Supervisors are
responsible for maintaining operating levels meeting or exceeding goals nd objectives nd
implementing changes. Some examples of documentation to have on hand to show that monitoring is
being performed are:
1 What evidence exists
th t
supervisory review has occurred? Where in the process does a supervisor
sign off ndhow often? What do they sign offon? i.e. timesheets petformance reports exceptions etc.?
14--01 Lack ofManagement
SupervisioniReview
Lack
of
supervision was a finding in the prior audit. Lack of supervision continues to be an issue wi th this
court. This displays a disregard to prior audit recommendations, the Nueces County Fraud Policy, and
other county policies.
Currently, there is no evidence
of
management review in the daily cash management procedures. This
gives all authority to the supervisor (administrative secretary). The lack of management review increases
the opportunity to commit and conceal fraud. Therefore, represents a high risk to the county overall.
Recommendation
t is imperative that management comply with prior audit recommendations and county
policies. Management should be more involved in everyday cash management review.
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Control Procedures Separation Duties
Attachment I
of
the Fraud Policy states under Control Procedures (3) a-b Separation ofDuties states as follows:
Separation
of
duties may be incorporated into the job descriptions.
The
main
point
of this is to heighten
awareness
of
those positions that have
full
control
of
a transaction. Key duties
and
responsibilities that
show a separation ofduties are:
a Having the custody of assets having authority to perform the transaction having the
responsibility to record the transaction
nd
having the responsibility to reconcile or approve the
transaction cannot be performed by the same individual. In smal l offices where an employee is
out sick or on vacation and one individual has to perform all duties then a review has to be
completed by upper level management
or
upon return of the absent employee. Deliberate
procedures must be in place in such situations.
b
The process ofreceiving assets nd issuing assets h s to be carefully monitored. For example a
P
clerk who receives payments should
not
be responsible
for
issuing refunds without having
another person involved in the process.
14-02 Administrative Secretary has Full Control
n the prior audit, the administrative secretary has breached internal controls by assuming all
responsibilities. Currently, the administrative secreta:ty has the password log-in for the clerk's access to
Odyssey software (Refer
14-06)
and the key to the c lerk's cash box (Refer to
14-05).
With all this access,
an employee has the capability to manipulate the fmancial system, therefore, presenting a high risk for
data integrity to be jeopardized. The previous audit presented this situation and the administrative
secretary was able to manipulate a significant amount of system data.
There s a memo issued to staff written by the administrative secretary prescribing procedures and jo
duties but there is no indication or reference ofmanagement approval.
Recommendation:
t is imperative that management comply with prior audit recommendations and county
policies. Management should be more involved and ensure that supervisor is appropriately supervising staff and
complying with management approved procedures and county policies.
14-03 Lack
o
Separation
o
Duties
This office has been reduced to one staff
at
various times
of
the year due to turnover. There is no
evidence that management has reviewed any
of
the daily operations because there is no documentation
retained
of
closeout (Refer to
14-04).
Since this is a small staffed office, it is important that management closely monitor all aspects
of
the daily
operation.
Recommendation:
Duties and responsibilities involving transactions and events should be separated among
different employees with respect to assessing fines/fees, adjusting fmeS/fees, collecting and receipting payments,
and maintaining custody of the cases. The fewer actions performed by a single employee the greater the
separation of duties, thus the more effective the internal controls are (preventive control). When staff is reduced,
management's close control and documented review becomes critical (detective control).
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14-04 Daily
Ooseout
Work
Papers
not Retained
All steps of the daily closeout procedures should be clearly documented from beginning to end. A
supervisor's approval (manual or electronic) implies verification and validation.
s stated in the written job duties, the administrative secretary is responsible for auditing the daily
closeouts, but there is no evidence of what her process is or that all monies were counted and verified.
Odyssey closeouts and deposit procedures have reports associated with every step. During the audit, the
administrative secretary ran new till reports, which indicates the reports are either not printed or printed
reports are tossed. Destruction of documentation can lead to concealment of fraud.
Recommendation: That Odyssey reports for closeout and deposit procedures be retained for record. Proper
documentation must be kept on file as it provides an adequate trail for review by management and auditors.
In
addition, it is recommended that a simple calculator tape
of
the counted monies be attached to each clerks
Odyssey Deposit Report with the initials of
the supervisor on the tape indicating they verified all monies
including change fund were counted by the clerk (preventive).
14-05
Supenisor Maintains
Key to
Clerk s
Cash Box
It was observed that the Administrative Secretary had the key to the clerk's cash box.
Recommendation: Each clerk keep their cash box key in their possession at all times once it is assigned to them.
Control Environment dhere to County Policies
The internal control standard 1
control environment
is where the environment is set to be committed in adhering
to the organization's policies and procedures and its ethical and behavioral standards. Management must see to it
that employees are well acquainted with county and departmental policies and procedures that pertain to their job
responsibilities.
14-06 Password Integri ty Compromised
Per the Nueces County Network Communications Policy, Violations and Prohibited Used, 3.2.2., it is
strictly prohibited
to
"adopt the identity of another person on any electronic message, attempting to send
electronic mail anonymously, or using another person's password."
During interview with the clerk, it was disclosed that the supervisor knows her Odyssey log-in passwords.
s a result, the integrity
of
the audit trail and the accountability
of
the system have been compromised.
It was further noted that the clerk has only been with the department only a couple of weeks. She was a
transfer from another department. Clerk indicated that she shared her login password with her previous
supervisor also.
Recommendation: Management ensures supervisors and employees are following the Nueces County Network
Communications Policy and that they each have proper access (with their own sign in) in effort to perform job
duties without compromising internal controls. Management may contact Information Technology to request
password change for clerk's log-in passwords.
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Control Procedures: Timeliness andPerformance Standards
Attachment I
of
the Fraud Policy states under Control Procedures - 2) Timeliness and Performance Standards
states:
ll
transactions
and
other significant events are to be promptly recorded clearly documented and
properly classified Documentation of a transaction or event should include the entire process or life
cycle ofthe transaction or event including:
a The initiation
or
authorization ofthe transaction or event
b ll aspects of the transaction while in process
c The
final
classification in summary records
14-07 Untimely Deposits
Local Government Code 113.022 and Code of Criminal Procedures 103.004 state that
a
county officer
shall deposit the money with the county treasurer on or before the next business day after the date on
which the money was received. f the deadline cannot
be
met, the officer or person must deposit the
money, without exception, on or before the fIfth business day after the day on which the money is
received."
Part of the cash audit plan is to examine the last three deposits. Two of the three deposits were for the
administrative secretary's till. One deposit dated 9 3012014 was for transactions dated
9 15 2014
through
9 30 2014
(12 business days). This was an accumulation of
$
3,880.40,
$
691 was cash and $3,189.40
was checks and money orders. The next deposit for the administrative secretary's till was
10 20 2014
for
transactions dated 10 1 2014 through 10 20 2014 (14 business days) which totaled to be $ 805.00, $ 498
was cash and $ 306.10 was checks and money orders.
Untimely deposits were also an issue in the prior audit. The previous administrative secretary would hold
on to monies in effort to apply the various schemes.
Recommendation:
Daily closeout procedures must be followed and deposits prepared in a timely manner. All
payments should be deposited in accordance with County and state statutes (Local Government Code 113.022 and
Code of Criminal Procedures 103.004). It is imperative that management comply with prior audit
recommendations and county policies.
14-08 Odyssey Deposit Procedures not Followed
This office does not follow the Odyssey procedure to document that a deposit has been processed. Staff
had copies of the procedures on hand that were provided to all P staff at the Odyssey training. Following
this procedure is an important tool for deposit analysis. The Odyssey Deposit report is one in which the
supervisor can use for verifIcation against the actual deposit form.
Administrative secretary made a decision to not follow this procedure without management approval.
Recommendation: That the Odyssey Deposit procedures be followed for consistency in reporting for all P
offices.
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14-09 Overpayment Not Receipted
There was one check on hand for $97 that was dated back to 9/11114. The check was being held until a
replacement check for the correct amount is received. The check was not restrictively endorsed (Refer to
14-13) and the pay
to
order line was left blank. Checks not restrictively endorsed can increases the risk of
loss due to mishandling and theft.
Recommendation: All payments should be receipted and deposited in accordance with County and state statutes
(Local Government Code 113.022 and Code of Criminal Procedures 103.004). In the event that an overpayment
is received and a refund s due to the payer, it needs to be properly receipted in the Odyssey software. Then, an
order to pay disbursement request also referred to as a check request should be prepared, and then signed by the
judge. The request and the supporting documentation, including a copy of receipt indicating that a refund is due,
should be submitted to the county audi tor's office.
Control Procedures: Safeguarding Assets
Attachment I
of
the Fraud Policy states under Control Procedures (4) Safeguarding
of
Assets (Preventive and
Detective controls) states:
What physical controls are in place to protect assets? ho has the keys to the vault and is access to the
vault limited? Is money left on top ofdesks unattended?
Restrictions on access to resources will depend upon the vulnerability of the resource and the perceived
risk ofloss, both ofwhich shall be periodically assessed preventive).
Periodic comparison shall be made between the resources and recorded accountability of the resources
to reduce the risk of unauthorized use or loss and protect against waste
nd
wrongful acts. he
vulnerability and value of the county resources shall determine the frequency of this comparison
Detective).
14-10
Cash
Boxes Not
Kept
In Safe Overnight
Currently, both staff member keep their cash box in their locked drawer
at
their desk overnight. This
office does have written office policies which addresses this issue. #6 Cash n Office states, "All monies
located in any desk are to be limited to county funds only. All payments cash or otherwise, are to be
locked securely in the safe when not in the direct care of staff. Monies should be locked up anytime when
left for extended periods of time, inclusive of lunch and office closure. Payments receipted are the
responsibility of receiving clerk until deposited."
Recommendation: That all monies be kept in safe overnight. Locking money bags can be ordered from treasury
for which each employee can lock it and place t in the safe at night.
14-11 Safe In Need of
Repair
or Replacement
The safe s n an adequate location. Currently, the handle comes
off
but combination is still needed to
access it.
Recommendat ion: The safe is n poor condition needs to be replaced in order to better safeguard monies.
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ompliance Finding
14-12 Office of Court Administration (OCA) Reports are Past Due
Section 71.035(b) of the Texas Government Code (GC) states that The council may require a state
justice, judge, clerk, or other court official, as an official duty, to comply with reasonable requirements
for supplying statistics pertaining to the amount and character
of
the civil and criminal business transacted
by the court or other information on conduct, operation,
or
business of his court
or
the office of the clerk
of his court that s within the scope of the functions of the council". In addition, Section 171.2
of
the
Texas Administrative Code (TAC) states that "District clerks, county clerks, justice
of
the peace,
municipal judges shall submit a summary-level court activity report each month to the Office
of Court
Administration (OCA) using the methods required by this chapter no later than 20 days following the end
of the month reported".
In preparing audit reports, it is standard to provide background information including revenues, budget
and statistical information of the office being audited. According to the OCA reporting website, the last
report submitted to OCA was in May 2014.
Recommendation:
That the office file reports immediately to become in compliance with GC 71.035(b) and
TAC 171.2. The Odyssey system has the capability and procedures are in place to expedite this reporting. It is
management's responsibility to ensure required reporting is submitted n a timely manner.
Other Findings
14-13 Change Fund Not Utilized
This office does not use the change fund. They only give change if they have it in their till. Defendants
are asked to bring exact monies. Turning away defendants because they do not have the exact payment
amount may discourage them from coming back. Therefore, a collection effort has failed. A long term
consequence is lower collections and revenues.
Excess cash on hand can lead to possible misuse, loss, or theft.
Local
Government Code Section 103.902 states,
"On
the recommendation
of
the county auditor, the
commissioners court may increase or decrease the change fund at any time".
If this office chooses to not utilize the change fund, then they need
to
inform the county auditor.
Recommendation:
If this office chooses to not utilize the change fund, then the county auditor will recommend
to
the commissioners court that the change fund be turned in.
14-14 Money Order
and
Check
not
Restrictively Endorsed
The administrative secretary had one check
n
her till that was not restrictively endorsed. There was one
money order dated 9/11114 which was unreceipted (Refer to 14-09) and it was not restrictively endorsed.
Recommendation: That all checks and money orders be immediately restrictively endorsed upon receipt.
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D I A N A R O S A S M A M .
FIRST A S S I S T A N T
O F F I C E O F
C O U N T Y
AUDITOR
E L V A
F U E N T E S
I N T E RN A L A U D I T
S U P E R V I S O R
D A L E A T C H L E Y , C P A
L I S A
D A V I S
,
c.i.o.
E X E C U T I V E A C C O U N T A N T
C O U N T Y
A U D I T O R
901 LEOPARD STREET RM304
CORPUS CHRISTI,T X78401
PHONE: 361) 888-0556 FAX:361) 888-0584
November?,2014
Honorable RobertGonzalez,Justice
of
the Peace, Precinct
5
Place 1
Honorable SamuelL o y dNeal,Jr.,CountyJudge
R e:
Surprise
Cash
A u d it
performed on October
29,
2014
W e
conducted this audit under the authority
of L o c al
Government
Code
115.001and 115.002.
W e
performed our
audit inaccordancewithgenerally accepted government auditingstandardsand includedinquiries,examination of
accounting records, and other audit proceduresthatwe considered necessary under the circumstances.
Our audit periodo four testmg wasfo rOctober2 4, 2014 to October2 9,2014. The objectiveso fthis audit were to
perform
a surprise cash count offunds on site and review cash handling and accounting procedures inplace.
Toachievetheseobjectives, we:
Performed a surprise cash count audit
Interviewed
staff
Reviewedtillbalance and
daily
close outreportsforthe periodofOctober 24, 2014 to October2 9, 2014
Reviewedcash receipts
journal
for fhe periodo fOctober24, 2014to October29,2014
Judge RobertGonzalezhas served as JP5-1 since hew elected in 2001. He has served as
presiding
judge
siace
2012. His
average
annual
budget
is $ 212,123.T he judge currently has
fourfull-time
employees(includinghim)
and one temporary employee. Theaverageannual amount collected by this court over thepastfiveyears s
$ 787,193. Thisaverageis high due to a large class action suit against Transunion
involving
69,607
cases
which
was
filed
in this court in
F Y 2 0 1 0 .
This suit brought in $1,740,175 in
local
revenues.
Excluding
this suit, the
averagecollectionsare $
355,631.
The
office follows daily
closeout procedures and
preparesdaily
deposits.
A l l
monies are promptly receipted.
Procedures are inplace toensurecounty monie