HomeMy WebLinkAbout2015 Outside Audit Report r
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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.
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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
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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
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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
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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