Prevent. Protect. Prepare.
Pat McCrory, Governor / Kieran J. Shanahan, Secretary
MEMORANDUM
TO:Mr. Lewis Adams, Assistant Judicial Division Administrator
Judicial Division2
FROM:Timothy D. Harrell
DATE:April 25, 2013
SUBJECT:Audit of Judicial District 16, #5160
Internal Audit has completed a Change of Command Audit of Judicial District 16. The audit report and a completed Certificate of Responsibility are attached.
The purpose of the audit was to evaluate the effectiveness of the systems of management control by:
reviewing and appraising the adequacy, accuracy, and soundness of accounting, financial, and operating controls
determining the extent of compliance with established policies and procedures
determining the extent to which assets and resources are accounted for and safeguarded
We thank you and your staff for your assistance and cooperation during this audit. If you have questions or need further assistance, please contact our office.
TH/ks
Attachments
cc:Audit File #5160
Mr. Lewis Adams
April 25, 2013
Page 1
ec:Bennie Aiken
W. David Guice
Tim Moose
Anne Precythe
Larry Williamson
Kim Williams
Marvin Mervin
Jean Burke
Joan Taylor Saucier
Roberta Morgart
Council of Internal Auditing
TABLE OF CONTENTS
I...... EXECUTIVE SUMMARY 1
II...... INTERNAL AUDIT RATING SCALE 3
III.FINDINGS AND RECOMMENDATIONS...... 6
A.ACCOUNTS PAYABLE AND PROCUREMENT...... 6
B.FIXED ASSETS...... 6
C.TELEPHONES...... 7
D.TRAVEL AND OTHER REIMBURSEMENTS...... 8
E.CONTROL OF FIREARMS...... 8
F.MISCELLANEOUS...... 9
i. executive summary
The Judicial District 16 office of Community Corrections (CC) is located in Lumberton, North Carolina. The District has sixty-nine employees and seven units serving Robeson, Hoke, and Scotland counties. District 16 supervises approximately 3,440 probationers and parolees.
Internal Audit conducted a Change of Command Audit of the District office November 5–8, 2012. The audit was requested by CC Management due to the assignment of a new Judicial District Manager (JDM). The previous audit was completed in October 2009.
The scope of our audit included a review of Accounts Payable and Procurement, Fixed Assets, Telephones, Travel and Other Reimbursements, Control of Firearms, and Miscellaneous (Operating Stamps and Blood Borne Pathogens) areas.
Our audit disclosed no exceptions, strong internal controls, and a knowledgeable staff in the Accounts Payable and Procurement,Travel and Other Reimbursements, Control of Firearms, and Miscellaneous areas.
A few exceptions, minor in nature, were noted in the Fixed Assets and Telephones areas. In the Fixed Assets area, three items needed updates and changes on the Equipment Report. The Annual Fixed Asset Inventory report for 2011 had not been properly signed. Also, a copier could not be located during our physical inventory. In the Telephones area, the cellular telephone charges on the EBills were not consistently approved by the cell phone holder and their supervisor.
These appraisals are reflected in the Internal Audit Rating Scale and the Findings and Recommendations included with this report.
We held an exit conference on December 10, 2012, to inform District Management of our findings and recommendations. The following were present.
- Kim Williams, Division 2 Administrator
- Sharon Phillips, Judicial District Manager
- Debra Gonzaga, Office Assistant
- William Lowry, Internal Auditor
- Karen Staab, Internal Auditor
During the audit, we provided District personnel with schedules and documentation as needed to serve as supporting information to facilitate corrective action.
The Judicial District Manager acknowledged agreement with all findings and recommendations.
In addition to our normal distribution, we may send excerpts from this report to other DPS managers, as we deem appropriate.
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II. Internal Audit Rating Scale
Change of Command Audit
Community Corrections Judicial District 16
#5160
Listed below are the major areas examined in this audit and overall ratings assigned by auditors. Major areas are comprised of individual categories as listed on the following pages. Ratings given to categories or major areas are not averages. Ratings are based on standard audit procedures, and reflect the auditors’ assessment of the facility’s performance in various categories. The risk associated with individual findings is a large component of this assessment and may significantly impact a rating.
Rating Scale Guidelines
1 -No exceptions, strong internal controls, staff appears knowledgeable
of policies and prescribed procedures
2 -Meets expectations, a few exceptions minor in nature
3 -Some improvement needed to strengthen controls or minimize risks
4 -Below expected performance level, significant improvement needed
Overall Rating
Rating
Accounts Payable and Procurement /1
Fixed Assets /2
Telephones /2
Travel and Other Reimbursements /1
Control of Firearms /1
Miscellaneous /1
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II. Internal Audit Rating Scale
Rating Scale Guidelines
1 -No exceptions, strong internal controls, staff appears knowledgeable
of policies and prescribed procedures
2 -Meets expectations, a few exceptions minor in nature
3 -To minimize risk, some improvement needed to strengthen controls
4 -Below expected performance level, significant improvement needed
Accounts Payable and Procurement
/ 1 / 2 / 3 / 4- Separation of Duties
- Direct Processing (DC-702) Purchases
- Procurement Card (P-Card) Purchases
- Purchase Orders
- NCAS/E-Procurement Security Access
Fixed Assets
/ 1 / 2 / 3 / 4- Separation of Duties
- Annual Fixed Asset Inventory
- Quarterly Laptop Inventory
- Inventory Controls
- Changes, Updates, and Follow-up
- Transfers and Disposition of Assets
- Vehicle Mileage and Maintenance Records
Telephones
/ 1 / 2 / 3 / 4- Internal Controls
- Review and Approval
- Cellular Phone Procedures
Travel and Other Reimbursements
/ 1 / 2 / 3 / 4- Mileage Reimbursement
- Allowance for Meals, Lodging, and Other
- Complete and Accurate Documentation
- Signatures and Approvals
Control of Firearms
/ 1 / 2 / 3 / 4- Inventory Control
- Approved Memorandum Receipts
- Follow-up and Resolution of Problems
- Separation of Duties
Miscellaneous
/ 1 / 2 / 3 / 4- Operating Stamps
- Blood Borne Pathogens
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IIi. FINDINGS and recommendations
A.ACCOUNTS PAYABLE AND PROCUREMENT
Purchase orders were initiated in the Division office and District personnel had no authority or responsibility in this area. We reviewed the District’s procedures used for local purchases processed on Direct Processing Forms (DC-702s) and Procurement Cards (P-Cards) for compliance with the DPS Fiscal Policy and Procedure Manual at .2600. No exceptions were noted.
B.FIXED ASSETS
We conducted a 24 percent test count of fixed assets, valued at $1,000 and over, to provide assurance that assets were properly accounted for. We performed additional testing to verify internal controls and to ensure compliance with the DPS Fiscal Policy and Procedure Manual at .2700 and CC Policy and Procedure Manual at Chapter B Section .1000. Our sample included high-risk items such as computers and radios. Copies of all schedules relative to our physical inventories were provided to facility personnel. The following exceptionswere noted.
1.Updates and Changes
Condition: Our test count of fifty-three equipment items disclosed three (6%) items requiring updates and changes. Corrective action was needed to add serial number, obtain duplicate tag and to replace an asset tag with correct information.
Criteria: All equipment should be properly identified on the Equipment Report and tagged to facilitate control over the assets and to improve the effectiveness of the report. [Reference: .2710 A.2.]
Cause: Staff informed DPS Auditors that the updates and changes were a lack of oversight with previous inventories that were taken.
Effect: Inaccurate identification of assets may cause a loss of accountability of assets and make conducting a physical inventory more difficult and time consuming.
Recommendation: When conducting an inventory of equipment, care should be taken to ensure a complete and accurate description of each item is included on the Equipment Report. Any exceptions to physical inventories should be noted and forwarded by separate memorandum and accompanied by the proper forms to the Controller’s Office, Equipment Control Section and Internal Audit. Corrective action was initiated during our audit.
2.Annual Inventory Report not Properly Signed
Condition: The Annual Fixed Asset Inventory Report for year 2011 was not signed by the individuals who conducted the physical inventory or by the Judicial District Manager (JDM).
Criteria: Upon completion of the physical inventory and resolution of all discrepancies, the disinterested parties that conducted the physical inventory, along with the Facility Head or designee, shall sign the certification at the end of the Annual Fixed Asset Inventory Report. [Reference: .2710 A.5.]
Cause: The Office Assistant informed DPS Auditors that she was unaware the Annual Fixed Asset Inventory Report had not been properly signed.
Effect: Failure to properly obtain signatures for the Report increases the risk of loss and unreliable inventory records. Unauthorized transactions may go undetected by Management if reports are not properly signed. The signatures also help to ensure that duties are properly segregated.
Recommendation: The JDM should implement procedures to ensure that all parties involved in the inventory process sign the Fixed Asset Report before it is submitted to the Equipment Control Section.
3.Missing Equipment
Condition: One Mita Copier could not be located during our physical inventory.
Criteria: Section Management should make every effort to ascertain the location of assets that are considered to be missing. After all reasonable efforts to locate the missing assets have been exhausted, a Missing Asset Form (DC-518) should be completed and sent to the Controller’s Office for any missing equipment. The SBI 78 form should be completed in its entirety and e-mailed to Internal Audit as soon as possible, but no later than 10 days after discovery. [Reference: .2711 A. and State Property Incident Reports Memorandum, dated January11, 2013, from Secretary KieranShanahan]
Cause: The Office Assistant informed DPS Auditors that she thinks the copier had been surplused years ago and the paper work had been misplaced.
Effect: Failure to maintain accurate accountability of assets increases the risk of loss or theft of departmental assets.
Recommendation: The JDM should implement procedures to ensure staff performs a complete and accurate inventory. Any item identified as missing after this attempt should be noted in a memorandum, accompanied by a DC-518, to the Controller’s Office with a copy to Internal Audit. Section Management should ensure the Form SBI 78 is completed for all missing assets and e-mailed to Internal Audit. Corrective action was taken during our audit.
C.TELEPHONES
We reviewed internal controls over telephones and cellular phones assigned to the section for compliance with the DPS Fiscal Policy and Procedure Manual at .2400 and .3200, and CC Policy and Procedure Manual at Chapter B, Section .0500. We examined telephone records for the months of June,July, and August 2012 for evidence that charges were reviewed for appropriateness. The following exception was noted.
Review of Cellular Telephone Charges
Condition: Thecellular telephone charges on the EBills were not consistently approved by the cell phone holder and their supervisor.
Criteria: EBill pages should be printed by cellular telephone numbers and distributed to the corresponding cellular phone users. The cellular phone user should review and certify their cellular phone charges are valid and accurate by signing each page. Once cell phone charges have been verified and signed by each employee, the Section Head or their designee should sign the cellular telephone bill approving the charges. [Reference: .2404 A.3.e.]
Cause: Our Audit identified wheresome supervisors were unaware of this requirement.
Effect: Failure to thoroughly review and approve the Section’s cellular telephone bills could result in unauthorized cellular telephone charges to the Section.
Recommendation: Section Management should ensure cellular telephone charges are thoroughly reviewed and approved each month. Cellular telephone charges should be signed or approved as defined in the criteria above.
Note: Over 2000 smart phones were deployed to Community Corrections (CC) personnel between May and July 2012. During the process of ordering and deploying the new phones, some phones were not assigned to the proper locations within CC. Therefore, these locations had not received the correct telephone bills for several months. It was also noted that DPS Purchasing maintained a database of cell/smart phones but not all of the new phones had been updated in the database at the time of our audit. Community Corrections Management and Purchasing were aware of these issues and had taken some corrective action. It is important that each section continue working on the corrective actions identified to ensure that these issues are resolved.
D.TRAVEL AND OTHER REIMBURSEMENTS
We examined reimbursements to employees for the period January 1, 2012 through October 31, 2012, to determine accuracy and compliance with the DPS Fiscal Policy and Procedure Manual at .1400 and .4000. No exceptions were noted.
E.CONTROL OF FIREARMS
We conducted a 100 percent physical inventory of firearms to provide assurance that all firearms were properly accounted for. We performed additional testing to verify internal controls and to ensure compliance with the DPS Fiscal Policy and Procedure Manual at .1700 and CC Policy and Procedure Manual at Chapter B, Sections .0904 and .0905. Copies of all schedules relative to our physical inventory were provided to District personnel. No exceptions were noted.
F.MISCELLANEOUS
We examined certain administrative and health and safety issues for procedural compliance. We verified the accuracy of postage stamp receipts, issues, and current physical inventory. A sample of employee medical jackets was reviewed for documentation of Blood Borne Pathogens shots and training. No exceptions were noted.
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