Loading...
HomeMy WebLinkAboutCC AG PKT 2003-07-28 #H AGENDA REPORT DATE: July 28, 2003 TO: Honorable Mayor and City Council THRU: John B. Bahorski, City Manager FROM: Pamela Arends -King, Director of Administrative Services/Treasurer SUBJECT: Interim Review Management Comment Letter SUMMARY OF REQUEST: Staff requests Council receive and file the fiscal year 2002 -2003 interim review management comment letter. BACKGROUND: Attached is a copy of the interim review management comment letter from Lance Soll & Lunghard, the City's independent audit firm contracted to complete the fiscal year 2002 -2003 audit. During the interim review the auditors consider the City's internal control structure to determine their auditing procedures for the purpose of ultimately expressing an opinion on the City's financial statements. The letter's conclusion states they found the City's accounting records to be in good order except there was one matter brought to our attention in regards to purchasing. During the test of transactions of the City's purchases and accounts payables the auditors found five different disbursements that did not have prior purchase order authorization as the City's purchasing policy requires. All five disbursements were from the Police Department. One disbursement involved an employee purchasing equipment with his personnel credit card and the others were for additional accessories needed for the police vehicles. At the time the transactions occurred, the Finance Department received invoices and warrant requests without the proper purchase order and authorization from the appropriate supervisor, therefore the appropriate supervisor was informed that the Police Department was not following the City's purchasing policy. The Finance Department was told by the Police Department that they would start to follow the City's purchasing policy. Due to the fact the City does not have a purchasing agent working within the Finance Department, the Department relies on the other City Departments to follow the City's purchasing policy to ensure funds are expended in the appropriate manner with the appropriate authorization. The City Department Heads were advised at the beginning of this fiscal year of the importance of following the City's purchasing policy and the consequences of not following the policy. Agenda Item A RECOMMENDATION: Receive and file the fiscal year 2002 -2003 interim review management comment letter. tgr) dete Pamela Arends -King Director of Administrative Services/Treasurer NOTED AND AP' ' ■ VED: / e (...-- John B.:: o • City .lager Lance 2 03 North Brea Boulevard „, Suite 203 SOII & Brea, CA 92821 -4056 � Lunghard (714) 672 -0022 1 U ° ► � LLP Fax (714) 672 -0331 �1 /1 CERTIFIED PUBLIC ACCOUNTANTS www•Islcpas.com pNN1Y 1949.1999 Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C. Soli Fred J. Lunghard, Jr. 1929.1999 June 5, 2003 To the Honorable Mayor and Members of the City Council The City of Seal Beach, California We have completed our interim review of the City of Seal Beach's operations as part of our audit for fiscal year 2002 -2003. This review does not constitute a complete audit as all areas of the City were not examined; however, it does fit into a program which, when completed will allow us to express an opinion on the City's financial statements. In planning and performing our interim review of City operations, we considered its internal control structure in order to determine our auditing procedures for the purpose of ultimately expressing our opinion on the financial statements and not to provide assurance on the internal control structure. However, we noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the City's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. We noted the following reportable conditions, which we would like to bring to your attention. Disbursements The City's purchasing policy requires all disbursements to be supported by approved purchase orders. During our interim testing we found five different disbursements that did not have prior purchase order authorization. All were from the Police Department. MEMBER CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Lance Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS To the Honorable Mayor and Members of the City Council The City of Seal Beach, California One of these disbursements was a reimbursement to an employee that had purchased several different items for the City on their own personal credit card. The other four disbursements were additional accessories needed for police vehicles. We discussed this situation with the Finance Director, and she has requested that all departments follow the City's purchasing policy. In order to support strong internal controls and prevent unauthorized disbursements, we recommend that all purchases be approved before the transaction has occurred and that they conform to the purchase order policy. Conclusion Overall, we found the City's accounting records to be in good order. We would like to thank the City for the assistance provided us during this contact. Should any questions arise about the City's operations, we will be available for discussion. flu, Jee se— Po�/