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HomeMy WebLinkAbout2015 Outside Audit Report r r 'V ;z RECEIVED NOV 2 2 2016 CERTIFIED PUBLIC ACCOUNTANTS September 9, 2016 Southold Town Clerk Honorable Supervisor and Town Board Town of Southold Main Road Southold, NY In planning and performing our audit of the financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southold, New York as of and for the year ended December 31, 2015, in accordance with auditing standards generally accepted in the United States of America, we considered the Town of Southold, New York's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Town of Southold, New York's internal control. Accordingly, we do not express an opinion on the effectiveness of the Town of Southold, New York's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiencies in internal control to be significant deficiencies: PERSONAL SERVICE,TRUSTED ADVICE. ALBRECHT,VIGGIANO,ZURECK&COMPANY,P.0 245 PARK AVENUE,39TH FLOOR 25 SUFFOLK COURT NEW YORK, NY 10167 HAUPPAUGE,NY 11788-'3115 T 212 742 4075 T.631.434.9500 F.631.43-7 4518 WWW avz.conT IOMPI.NO AT NEWOOR 0I-13KR INRRNATIONAI. J Honorable Supervisor and Town Board Page 2 2015-01 RECEIVER OF TAXES—SEGREGATION OF DUTIES(Repeat Finding) Criteria Internal controls should be in place to provide for segregation of duties within accounting functions relating to cash receipts, check signing and bank reconciliations to reduce the risk of potential errors and fraud. Condition We noted a lack of segregation of duties within the Office of the Receiver of Taxes. The Receiver of Taxes is the only authorized check signer, prepares the deposit slips, brings the deposit to the bank, receives the bank statements, and reconciles the bank accounts. Effect Intentional or unintentional errors could be made and go undetected. Recommendation We recommend that the Receiver of Taxes separate these duties relating to the cash receipts and reconciliation cycle to another employee so that no one person handles all elements of a single transaction. We recommend that the Receiver of Taxes duties of preparing the bank deposit, depositing the funds and reconciling the bank statement be assigned to some other employee in order to establish a proper segregation of duties over cash receipts. 2015-02 SEGREGATION OF DUTIES—RECREATION(Repeat Finding) Criteria Although the small size and availability of the Town's recreation department staff limits the extent of separation of duties, we believe certain steps could be taken to separate incompatible duties. Proper segregation of duties states that for each employee, there should be separation of all of the following: 1) physical custody of assets; 2) authorization or approval of related transactions affecting those assets, and 3) recording or reporting of related transactions. Condition During the 2015 audit, we noted a lack of segregation of duties within the recreation department. Employees share in the daily accounting functions, including: access to cash receipts, recording receipts in the department's records and depositing cash receipts into the bank account. Effect Intentional or unintentional errors could be made and go undetected. J F Honorable Supervisor and Town Board Page 3 2015-02 SEGREGATION OF DUTIES—RECREATION (Repeat Finding) (continued) Recommendation We recommend that the recreation department consider separating the accounting functions as described above to mitigate significant risks of error and/or misappropriation of the Town's assets. Such consideration could include one Recreation employee receipting cash receipts and preparing deposit slips, while a second employee could verify cash receipts. This communication is intended solely for the information and use of management, the Town Board and others with the Town of Southold, New York, and is not intended to be and should not be used by anyone other than those specified parties. 06 Albrecht,Viggiano, Zureck&Co., P.C. Hauppauge, New York September 9, 2016 d w.aa CERTIFIED PUBLIC ACCOUNTANTS September 9, 2016_ Honorable Supervisor and Town Board Town of Southold Southold, New York In planning and performing our audit of the financial statements of the Town of Southold (the`Town") for the year ended December 31, 2015,we considered the Town's internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. However, during the audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions regarding those matters. -A separate report dated September 9, 2016 contains our report on significant deficiencies in the Town's internal control.This letter does not affect our report, dated September 9,2016 on the financial statements of the Town of Southold. The accompanying memorandum is intended solely for the information and use of the Town of Southold, management, and others within the administration and is not intended to be and should not be used by anyone other than these specified parties. We will review the status of these comments during our next engagement. We have already discussed many of these comments and suggestions with various Town personnel, and we will be pleased to discuss them in further detail at your convenience, perform any additional study of these matters, or assist you in implementing the recommendations. Very truly yours, V. QO Albrecht,Viggiano, Zureck&Company, P.C. PERSONAL SERVICE.TRUSTED ADVICE. ALBRECHT,VIGGIANO,ZURECK&COMPANY,PC, - -- 245 PARK AVENUE,39TH FLOOR 25 SUFFOLK COURT NEW YORK,IVY 10167 HAUPPAUGE,NY 11188-3715 T:212 792.4075 T-631434.9500 F, 631 434.9518 WWW avz,com IND`c1'f NDF'JT Mf MBOR 01•RKR LN i CR4ATIONAI Town of Southold September 9,2016 Page 2 REVIEW OF CASH RECEIVED AT SOLID WASTE DEPARTMENT Condition During the 2015 audit, we noted that the Solid Waste Management office personnel shares in the daily accounting functions for cash received in the office which includes: access to cash receipts, recording receipts in the software and depositing cash receipts into the bank account. Recommendation We recommend that the Solid Waste Department develop a procedure that would have another employee verify cash collected in the office. CAPITAL ASSET POLICY Observation During the audit, we noted that the Town does not have a formal written capital asset policy. We noted that the Town does have procedures in place to track and record capital assets. Recommendation We recommend the Town develop and adopt a formal written capital asset policy. The policy should set forth the Board's objective to protect the Town's assets from loss, waste or misuse. The policy should designate the person(s) responsible for developing and maintaining the capital asset records. It should set the threshold amount for when an item is to be recorded in the capital assets records. The policy should set time frames for physical inventories and subsequent comparison to recorded capital assets. Procedures and time frames should also be set for comparing capital asset records to insurance policies to ensure that municipal assets are neither over nor under insured. CASH DIS®URESEMENTS, PURCHASING; AND PROCUREMENT Observation The following was noted when testing the Town's cash disbursements and compliance with the Board approved Procurement Policy: i One instance that included two invoices where there was no purchase order where the amount exceeded the threshold for obtaining quotes. • Eight instances which included nine invoices where the purchase orders were dated on or subsequent to the invoice date. ® Two instances that included six invoices where there was no dollar amount listed on the purchase order. ® Eight purchase orders with estimate amounts included which did not match the invoice or the check amount. a Two instances where the Town did not secure quotes or the proper number of quotes for items exceeding thresholds as stated in the Town's adopted procurement policy. r Town of Southold September 9,2016 Page 3 CASH DISBURESEMENTS, PURCHASING AND PROCUREMENT(continued) Recommendation We recommend that the Board ensure that the Town departments are complying with Board adopted policies and the requirements of General Municipal Law. We further recommend that the Town should enforce the system which provides historical information on purchases of similar items that monitor the aggregatlon of purchases by vendor in order to obtain proper pricing on goods and services. We recommend that purchase orders are in place in all instances where required as per the Town's adopted Procurement Policy. UNCOLLATERIALIZED BANK BALANCES—TAX RECEIVER Condition During the 2015 audit, we noted that bank accounts held at two separate banks were not properly collateralized at December 31, 2015. In accordance with the Town's adopted investments policy all deposits and investments held at a bank or trust company that are in excess of the amounts insured under the provisions of the Federal Deposit Insurance Act shall be secured by eligible securities with a third party.As a result, deposits in excess of these limits could be at risk of loss. Recommendation We recommend that the Town and the Receiver of Taxes monitor their deposits to ensure that they are being properly collateralized in accordance with the investment policy in order to avoid the risk of loss. In addition,we recommend possibly amending the collateral agreements to increase the limit of eligible securities used to collateralize the deposits. STALE DATED CHECKS—TAX RECEIVER Condition During our audit, we noted that certain outstanding checks for Tax Receiver accounts were more than one year old. Recommendation To aid in the preparation of bank reconciliations and to reflect an accurate cash balance in the financial statements, all checks outstanding more than six months old should be investigated and written-off and disposed of in accordance with NYS Comptroller guidance. Town of Southold September 9,2016 Page 4 VOID REVIEW PROCEDURES—TOWN CLERK Condition During our audit, we noted that there are no formal procedures in place to review voided transactions which are generated as a result of incorrect permits issued', incorrect fees charged, etc. Recommendation We recommend the Town Clerk reviews and approve all voided transactions and documentation in order to ensure that the voided activity for the day is accurate, reasonable and all supporting documentation regarding the void is retained. These procedures were implemented in 2016. RESIDENTIAL VS NONRESIDENTIAL DOCUMENTATION—TOWN CLERK Condition During our audit, we noted that documentation supporting residential versus nonresidential permits is not retained and reviewed during the daily close procedures. This would alleviate clerks issuing residential permits to nonresidents which would be a loss of revenue to the Town. Recommendation We recommend that copies of the documentation supporting the type of permit issued be retained with the daily cash reports by clerk so it can be reviewed during daily close procedures to ensure that permits are being issued properly. r IZABLTIi A.NEVILLE,MMC Town�� Town Hall,53095 Main Road TOWN CLERK P.O.Box 1179 c Southold,New York 11971 REGISTRAR OF VITAL STATISTICS Fax(631)765-6145 MARRIAGE OFFICER Telephone(631)765-1800 RECORDS MANAGEMENT OFFICER ®� www.southoldtownny.gov FREEDOM OF INFORMATION OFFICER OFFICE OF THE TOWN CLERK TOWN OF SOUTHOLD TOWN CLERK STAFF MEMORANDUM To: Town Clerk Staff Lynda Rudder, Deputy Bonnie Doroski, Deputy Sabrina Born, Clerk Typist From: Town Clerk Elizabeth A. Neville Re: AVZ Audit Deficiency Recommendations Date: November 29, 2016 Attached, please find the AVZ.Report of Audit Deficiencies for the Town Clerk's Office. Please read and follow them carefully in carrying out your daily duties. There were two (2) recommendations. The first one is for VOID Review Procedures which I believe everyone has been following. The second one is "Residential vs. Non-Residential Documentation supporting the issuance of permits. In the past it has not been a practice to keep the documentation. However, now all documentation supporting residential versus non-residential permits issued must be retained with the daily cash reports by clerks so it can be reviewed during the daily close procedures to ensure that permits are being issued properly. Received and read by Date r L N• CERTIFIED PUBLIC ACCOUNTANTS September 9,2016 Honorable Supervisor and Town Board Town of Southold Main Road Southold, NY In planning and performing our-audit of the financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Town of Southold, New York as of and for the year ended December 31, 2015, in accordance with auditing standards generally accepted in the United States of America, we considered the Town of Southold, New York's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Town of Southold, New York's internal control. Accordingly, we do not express an opinion on the effectiveness of the Town of Southold, New York's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. We did not Identify any deficiencies in internal control that we consider to be material weaknesses. A significant deficiency is a deficiency,or a combination of deficiencies, in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. We consider the following deficiencies in internal control to be significant deficiencies: PERSONAL SERVICE,-rRUS'rED ADVICE. ALBRU,11'I,VIGGIANO,1URKICK&COMPANY,RC 245 PARK AVL-NUE,39TH r LOOK 25 SUFFOLK COURT NEW YORK,NY 10167 I-IAUPI'/kLJGI.,NY 11/138-J/15 r.212.792 40/5 P.631 434 9500 r:631 434 9518 www.dvi.c-um vom iv hvvoCR or im M}I,RIJhTiowi Town of Southold September 9,2016 Page 4 VOID REVIEW PROCEDURES—TOWN CLERK Condition During our audit, we noted that there are no formal procedures in place to review voided transactions which are generated as a result of incorrect permits issued, incorrect fees charged, etc. Recommendation We recommend the Town Clerk reviews and approve all voided transactions and documentation in order to ensure that the voided activity for the day is accurate, reasonable and all supporting documentation regarding the void is retained.These procedures were implemented in 2016. RESIDENTIAL VS NONRESIDENTIAL,DOCUMENTATION—TOWN CLERK Condition During our audit, we noted that documentation supporting residential versus nonresidential permits is not retained and reviewed during the daily close procedures. This would alleviate clerks issuing residential permits to nonresidents which would be a loss of revenue to the Town. Recommendation We recommend that copies of the documentation supporting the type of permit Issued be retained with the daily cash reports by clerk so it can be reviewed during daily close procedures to ensure that permits are being issued properly. ELIZABETH A.NEVILLE,MMC �� �� Town Hall,53095 Main Road TOWN CLERK � m P.O.Box 1179 C Southold,New York 11971 REGISTRAR OF VITAL STATISTICS Fax(631)765-6145 MARRIAGE OFFICER �._ �®� Telephone(631)765-1800 RECORDS MANAGEMENT OFFICER ®� , ww Telephone 31)76 -1800 FREEDOM OF INFORMATION OFFICER OFFICE OF THE TOWN CLERK TOWN OF SOUTHOLD TOWN CLERK STAFF MEMORANDUM To: Town Clerk Staff Lynda Rudder, Deputy Bonnie Doroski, Deputy Sabrina Born, Clerk Typist From: Town Clerk Elizabeth A. Neville Re: AVZ Audit Deficiency Recommendations Date: November 29, 2016 Attached, please find the AVZ Report of Audit Deficiencies for the Town Clerk's Office. Please read and follow them carefully-in-carrying out your daily duties. There were two (2) recommendations. The first one is for VOID Review Procedures which I believe everyone has been following. The second one is "Residential vs. Non-Residential Documentation supporting the issuance of permits. In the past it has not been a practice to keep the documentation. However, now all documentation supporting residential versus non-residential permits issued must be retained with the daily cash reports by clerks so it can e.reviewed during the daily close procedures to ens a that perm' s re being issued properly. Received and rea bDate �� ELIZABETH A.NEVILLE,MMC �� - �� Town Hall,53095 Main Road TOWN CLERK P.O.Box 1179 CA Southold,New York 11971 REGISTRAR OF VITAL STATISTICS Fax(631)765-6145 MARRIAGE OFFICER Telephone(631)765-1800 RECORDS MANAGEMENT OFFICER ®� �� www.southoldtownny.gov FREEDOM OF INFORMATION OFFICER OFFICE OF THE TOWN CLERK TOWN OF SOUTHOLD TOWN CLERK STAFF MEMORANDUM To: Town Clerk Staff Lynda Rudder, Deputy Bonnie Doroski, Deputy Sabrina Born, Clerk Typist From: Town Clerk Elizabeth A. Neville Re: AVZ Audit Deficiency Recommendations Date: November 29, 2016 Attached, please find the AVZ.Report of f Audit Deficiencies for the Town Clerk's Office. Please read and follow them carefully in carrying out your daily duties. There were two (2) recommendations. 'The first one is for VOID Review Procedures which I believe everyone has been following. The second one is "Residential vs. Non-Residential Documentation supporting the issuance of permits. In the past it has not been a practice to keep the documentation. However, now all documentation supporting residential versus non-residential permits issued must be retained with the daily cash reports by clerks so it can be reviewed during the daily close procedures to ensure that permits are being issued properly. Received and read by DateI Z � ELIZABETH A.NEVILLE,MMC Town Hall,53095 Main Road TOWN CLERK P.O.Box 1179 Southold,New York 11971 REGISTRAR OF VITAL STATISTICS Fax(631)765-61.45 MARRIAGE OFFICER Telephone(631)765-1800 RECORDS MANAGEMENT OFFICER www.southoldtownny.gov FREEDOM OF INFORMATION OFFICER OFFICE OF THE TOWN CLERK TOWN OF SOUTHOLD TOWN CLERK STAFF MEMORANDUM To: Town Clerk Staff Lynda Rudder, Deputy Bonnie Doroski, Deputy Sabrina Born, Clerk Typist From: Town Clerk Elizabeth A. Neville Re: AVZ Audit Deficiency Recommendations Date: November 29, 2016 Attached, please find the AVZ Report of Audit Deficiencies for the Town Clerk's Office. Please read and follow them carefully in carrying out your daily duties. There were two (2) recommendations. The first one is for VOID Review Procedures which I believe everyone has been following. The second one is "Residential vs. Non-Residential,Documentation supporting the issuance of permits. In the past it has not been a practice to keep the documentation. However, now all documentation supporting residential versus non-residential permits issued must be retained with the daily cash reports by clerks so it can be reviewed during the daily close procedures to ensure that permits are being issued properly. Received and read byA_�Z&�WeL_"Date 11 a9