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FOR IMMEDIATE RELEASE
BKD LLP, the City’s internal auditor, has completed audit reports on the City’s vendor and accounts payable data analytics, purchasing card data analytics, purchasing cards program and payroll segregation of duties. The reports were presented at the Feb. 10, March 10 and April 14 City Council Finance & Administration Committee meetings.
The audits are part of an internal auditing plan approved by City Council in April 2020. All City of Springfield audits and other data sets can be viewed at springfieldmo.gov/opendata.
The analysis of vendor and accounts payable data focused on identifying characteristics indicative of fictitious vendor, conflict of interest, inappropriate payment, duplicate payment and unrecorded payment schemes.
Two potential City policy violations were identified regarding employee/vendor matching. They were referred to the City Attorney’s office and corrected.
The analysis of purchasing data focused on identifying characteristics indicative of personal transactions and abuse. One violation of the City’s split purchase policy was identified.
BKD’s objective with this report was to assess the City’s purchasing card program administration to ascertain whether the design and effectiveness of controls were in place and operating in a manner necessary to meet organizational policies and other required guidelines. The dates utilized for testing were July 2019 through June 2020.
BKD issued one finding and two observations and recommendations. A finding is defined as a matter having a direct negative impact on internal control or indicates noncompliance with internal policy, procedure or applicable law or regulation. An observation is an opportunity to enhance efficiencies of operations and may be considered a best practice within the industry.
Finding 1): The City does not have a good tracking mechanism for unauthorized charges that are to be reimbursed by the employee.
The supervisory review process identifies when an employee charged items that are not allowed on their purchasing card, whether intentionally or not. When a charge is identified that is not allowed, the employee is notified that a reimbursement is needed and/or that follow-up is needed with the third-party vendor. From this point forward, the employee is responsible for ensuring that the reimbursement occurs to the City or that the vendor issues a credit for the error.
BKD recommended the City have a designated person and tracking mechanism to track all non-authorized charges until they are reimbursed by the employee or the third-party vendor. This tracking mechanism should be monitored and updated at a standard frequency (i.e. weekly) in order to contact the related employees to provide an update on the payment or discussions with the third-party vendor.
The Finance Department’s accounting services representative responsible for processing expense reports tracks non-authorized charges on an Excel spreadsheet. The spreadsheet includes the cardholder’s name, expense report number, date and amount of transaction, vendor, a brief description of the violation, and the resolution. The resolution includes the employee’s check number when the transaction is reimbursed or a notation that the charge was refunded to the card by the vendor. The spreadsheet is updated on a regular basis as transactions are processed.
Observation 1): Lack of formal documentation of P-card reconciliation (cash to clearing account)
On an annual basis, the P-card administrator reconciles the cash account and P-card clearing account. While the reconciliation is being done, there are several documents or screen prints that must be viewed to evidence what was done.
BKD recommended one document that shows the discrepancies, adjustments, explanations and includes a signoff by the preparer and reviewer to document this reconciliation. This reconciliation should be supported by the documents that are currently being retained to evidence the process.
The Finance Department will create a year-end checklist to document the steps necessary to close out the P-card clearing account and cash clearing account. This checklist will include copies of the reports documenting the ending balances as well as any reconciling items and will include signoffs by the Accounting Services Representative and the Assistant Director of Finance/Comptroller.
Observation 2): Improve efficiency of expense report approval by implementing electronic approval workflows.
Approval of expense reports related to P-cards is currently documented manually with a hard copy supervisor signature. Oracle, which is the City’s financial processing system, has an approval workflow for approval of expense reports that captures an electronic approval with date/time stamp and an audit trail indicating the approval documentation. At the request of the City’s Finance Department, BKD evaluated the electronic approval documentation available in Oracle.
BKD recommends the City discontinue manual hard copy signatures and move to electronic approval of expense reports in Oracle. The Finance Department is preparing to roll out the new electronic reporting process for fiscal year 2022, which begins July 1, 2021.
The objective of BKD’s procedures for this report was to assess the payroll process with a focus on segregation of duties to ascertain whether the design and effectiveness of controls were in place and operating in a manner necessary to meet organizational policies and other required guidelines. The dates utilized for testing were July 2019 through June 2020.
BKD issued two findings and one observation.
Finding 1): Employee master file administration access is not segregated from payroll processing access within Oracle.
BKD’s recommendation is for the City to limit master file administrative access and duties to two or three employees who do not have any payroll processing functions or system access. Individuals who have access to change master file data should not have the ability to process or approve payments being made.
Oracle does not currently have inquiry-only options for all payroll responsibilities. Only those employees who need access to the payroll information have access. The Finance Department will continue to work with the Information Systems Department to develop inquiry-only options that include the reporting and information capabilities needed and will continue to work with BKD to identify potential solutions.
Finding 2): Lack of control to prevent or detect unauthorized changes to the employee master file.
BKD’s recommendation is to create a process to detect unauthorized changes from being made to the payroll master file. BKD will provide the Finance Department with a tool that will compare two versions of the employee master file and flag changes.
Observation 1): Lack of documentation for employee acknowledgement of changes to employee master file.
BKD recommends that employees sign off on all changes to their master employee record to confirm agreement with the changes that directly affect the pay or demographic information of the employee.
Although employees sign most change request forms, Human Resources does accept these forms without employee signatures as long as the department director or acting director signs the form. With the increased number of employees working remotely during the pandemic, accepting forms without employee signatures allows changes to be processed promptly when an employee is not available to sign the document.
In addition, there are other changes to an employee’s record that may include costing or other routine changes that do not require their signature. However, employees are aware of all changes to their records and can view them by accessing their payroll statement or personnel file maintained by Human Resources.
###For more information, please contact Melissa Haase, assistant director of Public Information and Civic Engagement, at 417-536-7648 or [email protected]