Summary
| Report Number:
|
03-029 |
| Report Title:
|
City of
Lake Alfred |
| Report Period: |
FYE
09/30/2001 and Selected Actions Taken Prior and Subsequent Thereto |
| Release Date: |
09/30/2002 |
The results of our financial and operational audit
of the City of
Lake
Alfred,
Florida, for the fiscal year ended
September 30,
2001, and selected
actions taken prior and subsequent thereto are summarized below.
GENERAL MANAGEMENT CONTROLS
Finding No. 1:
Several findings included in the annual financial audit reports have
been reported for several years without correction. These findings related primarily to the
adequacy of the accounting records and procedures.
Finding No. 2:
The City had not established written policies and procedures necessary to
assure the efficient and consistent conduct of accounting and other
business-related functions and the proper safeguarding of assets.
Finding No. 3:
The City had not provided for an adequate separation of duties, or
established adequate compensating controls, in several areas of business
operations.
Finding No. 4:
The City was unable to provide explanations and documentation for many
interfund transfers and receivable/payable balances recorded to the accounting
records.
Finding No. 5:
Procedures for the adjustment of the accounting records through journal
entries did not provide for supervisory review and approval of the entries.
Finding No. 6:
The City’s overall financial condition is showing signs of
deterioration which, if not corrected, could result in a future financial
emergency. In addition to the effects of
inadequate internal controls as discussed throughout this report, factors that
have contributed to this condition, include a lack of targeted fund equity
levels, periodic cash analysis and forecasts, and financial plans.
BUDGETARY CONTROLS
Finding No. 7:
The City did not maintain adequate documentation to support the
estimated beginning fund balances on the 2000-2001 fiscal year budget and did
not amend the budget to include actual beginning fund balances.
Finding No. 8:
Procedures for adoption of the 2000-2001 and 2001-2002 fiscal year
budgets did not provide for compliance with the time constraints for
notifications to the Property Appraiser and advertisement established in
Section 200.065,
Florida Statutes.
Finding No. 9:
The financial records disclosed budget overexpenditures totaling $4.4
million for 201 object levels for the 2000-2001 fiscal year. The City’s total governmental fund
expenditures exceeded the total budgeted expenditures by $199,332.
CASH AND INVESTMENTS
Finding No. 10:
Petty cash fund disbursements were not always adequately documented and
custody of the petty cash funds was not restricted to a specific employee.
Finding No. 11:
The bank accounts were not promptly reconciled during and subsequent to
the 2000-2001 fiscal year and adequate controls had not been implemented to
prevent bank overdrafts.
Finding No. 12:
Accountability for prenumbered payroll checks was deficient in that they
were used out of sequence and, in some instances, were unaccounted for, and
access to them was not adequately restricted.
Finding No. 13:
Contrary to Chapter 717,
Florida Statutes, stale-dated checks totaling $814 and
written-off by the City were not reported or remitted to the Florida Department
of Banking and Finance.
Finding No. 14:
The City could have earned additional investment income of approximately
$30,000 by investing more moneys with the State Board of Administration or the
City’s money market account.
FIXED ASSETS
Finding No. 15: Values reported for fixed assets
were not supported by documentation showing their actual cost or estimated
historical cost.
Finding No. 16:
The tangible personal property records did not provide adequate
accountability over tangible personal property as they did not contain all
necessary information and did not include all property items. Further, some items could not be located or
were not properly tagged.
Finding No. 17:
A physical inventory of tangible personal property had not been
performed since 1999.
Finding No. 18:
Although the City consolidated the Internal Service Fund into the
General Fund, the Internal Service Fund fixed assets were not reported in the
General Fixed Assets Account Group.
Finding No. 19:
The City purchased the Mariana Utilities System from
Polk
County, pursuant to a bid, for $601,000 without
obtaining independent appraisals or other information needed for a
determination of the economic feasibility of the acquisition. The next highest bid for the System was
$251,000 less than the City’s bid.
OTHER ASSETS
Finding No. 20:
The City had not established an inventory system to track the usage,
value, or quantity of transportation inventory items.
LONG-TERM DEBT
Finding No. 21:
The City obtained a temporary bank loan of $1,600,000 as
“bridge” financing for the acquisition, construction, and equipping
of specified projects, including the Mariana Utilities System, and renewed the
loan several times when long-term financing could not be arranged. We found that no rate study had been
performed regarding the Mariana Utilities System; significant resources were
committed prior to obtaining financing; charter provisions related to the
borrowing were violated; unnecessary interest expense was incurred; unnecessary
financing costs were incurred; and related grant reimbursement requests were
not timely filed.
Finding No. 22:
The City obtained funding of approximately $5,800,000 through the State
Revolving Fund Loan Program but did not make adequate provision for loan
repayment and violated loan covenants related to the escrow account, rate
coverage, notification of additional debt, and the Repayment Reserve Account.
Finding No. 23:
The City failed to implement effective controls over other long-term
debt, including a fire truck loan and an administration building loan. Deficiencies related to the calculation of
repayment amounts and incurrence of late payment penalties.
Finding No. 24:
Separate accounts were not maintained in the accounting records for the
various long-term debt issues.
RESTRICTED RESOURCES
Finding No. 25:
Contrary to the Florida Department of Banking and Finance Uniform
Accounting System Manual, special revenue funds were not used to separately
account for several revenue sources that are legally restricted as to the
purposes for which expenditures could be made.
Finding No. 26:
Contrary to Section 336.025(1)(b)3., Florida Statutes, the capital
improvement element of the City’s comprehensive plan did not identify
specific transportation expenditures or projects that would comply with the
restricted uses of the additional $0.05 Local Option Fuel Tax.
CASH CONTROLS AND ADMINISTRATION
Finding No. 27:
Prenumbered receipt forms used to account for collections were not
properly accounted for.
Finding No. 28:
Responsibility for collections was not adequately documented from the
point of collection to deposit due to a lack of: security over the collections;
use of a mail receipts log, immediate application of restrictive endorsements,
and transfer documentation.
Finding No. 29:
The City has not adequately implemented procedures to assure that
collections of record were subsequently recorded to the accounting records and
timely deposited. Several instances of
missing collections were reported to the City’s police department.
Finding No. 30:
Due to problems with the City’s utility billing software and a
lack of review and follow-up of discrepancies in the billing records, the City
was unable to provide explanations for over/short account balances.
REVENUES AND OTHER RECEIPTS
Finding No. 31:
The City had not implemented controls to assure that all citrus fruit
harvested from the City’s citrus groves were properly accounted for and
that corresponding revenues were received timely.
Finding No. 32:
The City’s utility billing and collection procedures, including
those related to supervisory review of accounts, account adjustments,
timeliness of billings, and delinquent accounts, were not adequate to assure
the timely payment of utility bills by users.
Finding No. 33:
Utility deposits were not maintained in an interest-bearing account and
reconciliations between the bank account and the subsidiary records of customer
deposits were not performed.
Finding No. 34:
Fees or charges required by City ordinances for business license fees,
fire inspection fees, sewer system surcharges, and reconnection fees were not
always assessed and collected.
PERSONNEL AND PAYROLL ADMINISTRATION
Finding No. 35:
Documentation evidencing the hiring of personnel was not always
available as applications, personnel action record forms, and payroll deduction
authorizations were not always retained and employment histories were not
verified.
Finding No. 36:
Contrary to Section 112.3135, Florida Statutes, a department head was
responsible for the approval of time reported by a relative who worked
part-time for the City.
Finding No. 37:
Contrary to Section 409.2576, Florida Statutes, several persons hired by
the City were not reported to the State Directory of New Hires.
Finding No. 38:
Contrary to the City’s Personnel Manual and Employee Handbook,
personal evaluation forms were not available to document merit-based pay
adjustments for several employees.
Finding No. 39:
The rate of pay for three employees exceeded the maximum salary ranges
in the Commission approved pay plan and for one employee was below the minimum
salary range.
Finding No. 40:
Pay advances totaling $5,192 were made to 11 employees without
documentation of the reasons for the advances and, in some instances, repayment
of the advances. Article VII, Section 10
of the State Constitution prohibits such advances.
Finding No. 41:
Bonuses totaling $2,760 were paid to employees, but were not reported as
wages or other compensation and subjected to withholding for payment of Federal
income taxes and other employment taxes.
Finding No. 42:
City employees were paid $90,900 for overtime worked, without
documentation of prior authorization, contrary to the City’s Personnel
Manual and Employee Handbook.
PROCUREMENT OF GOODS AND SERVICES
Finding No. 43:
Deficiencies in the control and use of City credit cards provided to two
commissioners, the City Manager, and an employee included lack of guidance on
use of the credit cards; personal use of the credit cards and subsequent
reimbursement contrary to Article VII, Section 10 of the State Constitution;
lending of the credit cards to other employees; and lack of supporting
receipts.
Finding No. 44:
Deficiencies in the procedures for processing disbursements for goods
and services included a lack of signatures and dates for receipt of the goods
or services and failure to issue purchase orders.
Finding No. 45:
Contributions totaling $7,891 were made to the Lake Alfred Chamber of
Commerce without an agreement setting forth the specific purposes for the use
of the money and follow-up procedures to determine such use.
CONTRACTUAL
SERVICES
Finding No. 46:
The City paid $24,050 and $30,466 for the 1998-99 and 1999-2000 fiscal
years, respectively, to an accounting firm without the benefit of a written
agreement.
Finding No. 47:
Payments totaling $157,629 to an accounting firm and an engineering firm
were not adequately supported by detailed invoices.
TRAVEL EXPENSES
Finding No. 48:
Monthly travel allowances totaling $4,850 were paid to the former City
Manager and Interim City Manager without the signed typical month’s
travel statements required by Section 112.061(7)(f), Florida Statutes, and were
not subjected to required withholding for Federal income tax purposes.
Finding No. 49:
In 24 instances totaling $343, meal allowances paid to travelers
exceeded the meal allowance rates established in 112.061, Florida
Statutes. The City had established
higher meal allowance rates by resolution; however, establishment of rates in
excess of those established by that section of law requires adoption of an
ordinance.
Finding No. 50:
Travel expenses paid for City Commissioners and employees were not
always adequately supported to evidence the authorized public purpose of the
travel and to permit a determination of compliance with applicable laws.
Finding No. 51:
The City incurred expenses totaling $5,548 from the Mayor’s Youth
Council (MYC) Board account for travel expenses for eight people to attend a
National League of Cities Conference in Boston, Massachusetts. None of the expenses were supported by travel
expense reports evidencing the public purpose of the trip nor were there
records to document how the trip served the duties and responsibilities of the
MYC. The expenses included an
unreimbursed conference registration fee of $115 for a Wauchula City
Commissioner and $174 for MYC members to attend a basketball game and movies.
COMMUNICATION EXPENDITURES
Finding No. 52:
The City paid an estimated $1,000 in Federal, State, and local
telecommunication taxes from which the City is exempt.
VEHICLE
USAGE
Finding No. 53:
The City assigned seven vehicles to employees on a 24 hour basis without
clearly identifying the necessity and benefits.
Vehicle usage logs were not maintained and the personal use of the
vehicles was not included in the employees’ gross compensation reported
to the Internal Revenue Service.
RISK MANAGEMENT PROGRAMS
Finding No. 54:
The City purchased various insurance coverages for $303,129 without
obtaining bids from insurance providers.
Finding No. 55:
Numerous payments of health and hospitalization coverages for City
employees were remitted past the due date and in one instance coverage was
cancelled due to past due balances.
Finding No. 56:
The City did not complete a required self-audit relating to the Florida
Municipal Insurance Trust risk pool and incurred $7,212 in penalties assessed
by the Trust.
INFORMATION
TECHNOLOGY
Finding No. 57:
Enhancements could be made to controls over computer access and security
in the areas of security awareness, disaster recovery plans, and physical
security.
Finding No. 58:
Late billings to utility customers resulted from the failure to
adequately test a new utility billing application prior to placing the
application in operation.
OTHER MATTERS
Finding No. 59:
The City destroyed bank statements from the 1997-98 fiscal year prior to
completion of the required three-year retention period.
Finding No. 60:
Commission approval of transcribed minutes from Commission meetings was
often not included in the minutes for the subsequent meetings.
The City's response is a part of report No. 03-029 and
is shown as Appendix C.