PERFORMANCE AUDIT City of Santa Fe, NM
PERFORMANCE AUDIT City of Santa Fe, NM
INTRODUCTION Liza Kerr Internal Auditor City of Santa Fe, New Mexico
Certified Internal Auditor Certified Public Accountant Certified Information System Auditor Master of Business Administration
2
WHY FALSE ALARM MONITORING 99% OF THE ALARMS IN THE CITY WERE FALSE ALARMS Costs to the City were significant, 2 patrol officers to the alarm site,45 minutes per call, 1.5 hours * $22.84 average salary = $34.26 per call.
Diversion of SFPD resources – officers responding to
calls are unable to assist in other areas.
3
FALSE ALARM ORDINANCE Responsibilities and Requirements False Alarm Owners, Registration of alarms, and associated fees and fines,
Escalating fee scale per false alarm incident (first two are
waived after the 6th it is $300 per incident).
False Alarm Companies Licensing, Reporting, and Fees, Fines and Penalties for Noncompliance. 4
ADMINISTRATION Hiring of an experienced contractor Professional Services Agreement, PSA
Payment terms to the City are 32% of revenues collected, No authority to collect money,
Contract was up for renewal – were they doing their job?
In-house administrator Duties and responsibilities, Level of authority – i.e. this is a staff level employee.
5
HELP!
What tools do you use to find your direction? Where do you start when you know nothing about the topic you have to audit?
6
METHODICAL APPROACH What tools do you use to find your way? The City of Santa FE IA department is a Yellow Book shop, i.e. we follow Government Auditing Standards. We also incorporate the Institute of Internal Auditor’s Practice Advisory 2200-1, Engagement Planning into the planning process. Planning, planning, planning, Scope, Objectives, Methodology! 7
OBJECTIVES Gain an understanding of and test the services
provided by the 3rd party administrator as stipulated in their PSA; Gain an understanding of and test the requirements as stipulated in the false alarm ordinance(s), and applicable standards; and Determine if internal controls exist and are effective regarding this process.
8
QUESTIONS TO BE ANSWERED Is there a reduction in the number of false alarms? Does this correlate to more availability of officers? Is the program able to sustain itself with revenues
generated? Is the 3rd party administrator meeting the terms of their contract?
9
Executive Summary 1)
2)
3)
There is a reduction in the number of false alarms, There is a corresponding reduction in the patrol officer’s expenses. Revenue collected results in a positive net income for FY 12/13.
Note: Salary expense was not allocated to the program until FY 13/14. See appendix at the back of the audit report for more comprehensive results.
Summary
FY 9/10
FY 12/13
Difference
% Difference
Revenue
$64,446
$173,762
$109,316
169.62%
Expense
$0
$2,948
$2,948
100.00%
Expense (Patrol Officers)
$233,550
$152,526
-$81,024
-34.69%
Total Exp.
$233,550
$155,484
-$78,066
-33.43%
Net Income
-$169,084
$18,279
$187,363
110.81%
6,817
4,452
-2,365
-34.69%
Operations
Total # of Calls
10
Lack of Ownership, Cohesion and Oversight Original Condition
Resolution
The various issues in this audit illustrate lack of ownership/leadership, cohesion, and oversight for administering the false alarm monitoring system effectively.
Status - Cleared Newly assigned Deputy Chief of Police is assuming leadership role. He is providing leadership, guidance and support to ensure success of the program. This is formally documented in the newly drafted policies. The staff administrator is responsible for day to day activities, but is now supported by a chain of command.
Internal administration was pushed down to a staff level employee.
11
Lack of Formally Documented Policies and Procedures Original Condition
Resolution
There were no formal written policies and procedures defining daily, weekly or monthly activities or the roles and responsibilities of various departments and of the third party administrator.
Status – Repeat and Modified
Formal policies have been drafted; however, they is no evidence of written procedures.
12
Collections Not Actively Pursued Original Condition
Resolution
The accounts receivable balance for
This remains an open issue.
the false alarm monitoring system on 10/17/2013 was $876,720. Of this balance $635,325 or 73% is greater than 180 days old. In discussions with City and third party administrator staff we were told that they had been directed not to pursue collections as the City was in the process of implementing a citywide collection effort. These directives are several years old and while they appear to be well intended the effect is that the balances have continued to grow while waiting for the City to move forward with these efforts.
Action is required by the
governing body to pursue collections. To date they are unwilling to do this.
13
Appeals Not Processed Timely Original Condition
Resolution
Based on the test work performed, we found that 3 of the 25 randomly selected appeals had not been processed by the City.
This finding is still waiting for a decision from the legal department to address the appeals that were not heard timely. A new process has been implemented that resolves it on a go-forward basis.
14
AR Balance Not Recorded in the City’s General Ledger Original Condition
Remediation
We found that the City is not recording the false alarm monitoring system accounts receivable balance and related entries (such as allowance for doubtful accounts) in the general ledger. The stated balance at 09/30/2013 was $876,720.
The City has recorded a receivable of $659,637, with a corresponding allowance for doubtful accounts of $404,990.
15
Lockbox balance not recorded in General Ledger Original Condition
Remediation
Payments for false alarm fees and fines are made to a lock box. This Wells Fargo lock box had a balance of $53,291 on 09/30/2013. We found that the balance per bank for the lock box was not recorded in the City’s general ledger.
Balance is now recorded in the general ledger.
16
Billings Are Not Always Accurate Original Condition
Resolution
In summary, many difficulties were encountered due to the Ordinance requiring a $10 per day charge for a late report.
Ordinance is being rewritten to change the fine for a late report to $100 per month after a 5 day grace period.
According to the 3rd party administrator there was only a 2.55% collection rate on the billing for alarm companies while the collection rate of all other billed items exceeds 55%.
Third party administrator corrected several underlying issues making it easier to read invoices.
17
ONE DOWN!
Get out there and have FUN. Life’s a journey – enjoy the ride!
18
INTRODUCTION Liza Kerr Internal Auditor City of Santa Fe, New Mexico
Certified Internal Auditor Certified Public Accountant Certified Information System Auditor Master of Business Administration
2
WHY FALSE ALARM MONITORING 99% OF THE ALARMS IN THE CITY WERE FALSE ALARMS Costs to the City were significant, 2 patrol officers to the alarm site,45 minutes per call, 1.5 hours * $22.84 average salary = $34.26 per call.
Diversion of SFPD resources – officers responding to
calls are unable to assist in other areas.
3
FALSE ALARM ORDINANCE Responsibilities and Requirements False Alarm Owners, Registration of alarms, and associated fees and fines,
Escalating fee scale per false alarm incident (first two are
waived after the 6th it is $300 per incident).
False Alarm Companies Licensing, Reporting, and Fees, Fines and Penalties for Noncompliance. 4
ADMINISTRATION Hiring of an experienced contractor Professional Services Agreement, PSA
Payment terms to the City are 32% of revenues collected, No authority to collect money,
Contract was up for renewal – were they doing their job?
In-house administrator Duties and responsibilities, Level of authority – i.e. this is a staff level employee.
5
HELP!
What tools do you use to find your direction? Where do you start when you know nothing about the topic you have to audit?
6
METHODICAL APPROACH What tools do you use to find your way? The City of Santa FE IA department is a Yellow Book shop, i.e. we follow Government Auditing Standards. We also incorporate the Institute of Internal Auditor’s Practice Advisory 2200-1, Engagement Planning into the planning process. Planning, planning, planning, Scope, Objectives, Methodology! 7
OBJECTIVES Gain an understanding of and test the services
provided by the 3rd party administrator as stipulated in their PSA; Gain an understanding of and test the requirements as stipulated in the false alarm ordinance(s), and applicable standards; and Determine if internal controls exist and are effective regarding this process.
8
QUESTIONS TO BE ANSWERED Is there a reduction in the number of false alarms? Does this correlate to more availability of officers? Is the program able to sustain itself with revenues
generated? Is the 3rd party administrator meeting the terms of their contract?
9
Executive Summary 1)
2)
3)
There is a reduction in the number of false alarms, There is a corresponding reduction in the patrol officer’s expenses. Revenue collected results in a positive net income for FY 12/13.
Note: Salary expense was not allocated to the program until FY 13/14. See appendix at the back of the audit report for more comprehensive results.
Summary
FY 9/10
FY 12/13
Difference
% Difference
Revenue
$64,446
$173,762
$109,316
169.62%
Expense
$0
$2,948
$2,948
100.00%
Expense (Patrol Officers)
$233,550
$152,526
-$81,024
-34.69%
Total Exp.
$233,550
$155,484
-$78,066
-33.43%
Net Income
-$169,084
$18,279
$187,363
110.81%
6,817
4,452
-2,365
-34.69%
Operations
Total # of Calls
10
Lack of Ownership, Cohesion and Oversight Original Condition
Resolution
The various issues in this audit illustrate lack of ownership/leadership, cohesion, and oversight for administering the false alarm monitoring system effectively.
Status - Cleared Newly assigned Deputy Chief of Police is assuming leadership role. He is providing leadership, guidance and support to ensure success of the program. This is formally documented in the newly drafted policies. The staff administrator is responsible for day to day activities, but is now supported by a chain of command.
Internal administration was pushed down to a staff level employee.
11
Lack of Formally Documented Policies and Procedures Original Condition
Resolution
There were no formal written policies and procedures defining daily, weekly or monthly activities or the roles and responsibilities of various departments and of the third party administrator.
Status – Repeat and Modified
Formal policies have been drafted; however, they is no evidence of written procedures.
12
Collections Not Actively Pursued Original Condition
Resolution
The accounts receivable balance for
This remains an open issue.
the false alarm monitoring system on 10/17/2013 was $876,720. Of this balance $635,325 or 73% is greater than 180 days old. In discussions with City and third party administrator staff we were told that they had been directed not to pursue collections as the City was in the process of implementing a citywide collection effort. These directives are several years old and while they appear to be well intended the effect is that the balances have continued to grow while waiting for the City to move forward with these efforts.
Action is required by the
governing body to pursue collections. To date they are unwilling to do this.
13
Appeals Not Processed Timely Original Condition
Resolution
Based on the test work performed, we found that 3 of the 25 randomly selected appeals had not been processed by the City.
This finding is still waiting for a decision from the legal department to address the appeals that were not heard timely. A new process has been implemented that resolves it on a go-forward basis.
14
AR Balance Not Recorded in the City’s General Ledger Original Condition
Remediation
We found that the City is not recording the false alarm monitoring system accounts receivable balance and related entries (such as allowance for doubtful accounts) in the general ledger. The stated balance at 09/30/2013 was $876,720.
The City has recorded a receivable of $659,637, with a corresponding allowance for doubtful accounts of $404,990.
15
Lockbox balance not recorded in General Ledger Original Condition
Remediation
Payments for false alarm fees and fines are made to a lock box. This Wells Fargo lock box had a balance of $53,291 on 09/30/2013. We found that the balance per bank for the lock box was not recorded in the City’s general ledger.
Balance is now recorded in the general ledger.
16
Billings Are Not Always Accurate Original Condition
Resolution
In summary, many difficulties were encountered due to the Ordinance requiring a $10 per day charge for a late report.
Ordinance is being rewritten to change the fine for a late report to $100 per month after a 5 day grace period.
According to the 3rd party administrator there was only a 2.55% collection rate on the billing for alarm companies while the collection rate of all other billed items exceeds 55%.
Third party administrator corrected several underlying issues making it easier to read invoices.
17
ONE DOWN!
Get out there and have FUN. Life’s a journey – enjoy the ride!
18
