Loading...
HomeMy WebLinkAboutOCSD - PRELIM DRAFT - 2018 Procard AUP Report.pdf ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW PROCARD PROGRAM FOR FISCAL YEARS 2015-2016 AND 2016-2017 Pre l i m i n a r y Dra f t - 1 - INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES Board of Directors Orange County Sanitation District Fountain Valley, California We have performed the procedures set forth in this report, which were agreed to by the management of the Orange County Sanitation District, Fountain Valley, California (the District), for the fiscal years 2015-2016 and 2016-2017. The District’s management is responsible for establishing and maintaining internal controls over the Procard program to ensure appropriate purchases are made in accordance with the District’s policies and procedures. The sufficiency of these procedures is solely the responsibility of the management of the District. Consequently, we make no representations regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and the results of those procedures are as follows: 1. We will review the District’s purchasing policies and procedures as they relate to purchases utilizing the Procard, including authorizations required to obtain a Procard, records required to substantiate Procard purchases, and authorizations required for purchases. Results: We inspected the following policies and procedures provided by the District: A. Contracts, Purchasing and Materials Management Standard Operating Procedure: Procurement Cardholder Policy 401-1-06, hereafter referred to as the Procard SOP, and B. Purchasing Desktop Procedure, OCSD Procard Administrator Procedures, hereafter referred to as the Desktop Procedures. Summary of Policies and Procedures These policies and procedures included the following elements:  Authorization requirements for an employee to obtain a Procard  Procard dollar limits for single transactions and total monthly transactions by employee category  Authorization requirements for Procard users to exceed the limits noted above, which includes the following: o Email of approval sent by the Division Head to the Procard Administrator o Approval by the Contract, Purchasing, and Material Management Manager Pre l i m i n a r y Dra f t - 2 - Results (Continued): Summary of Policies and Procedures (Continued)  Specifically prohibited purchases with a Procard unless approved, in writing, by the Director of Finance and Administrative Services, which included the following: o Travel-related meals and incidentals (represents IRS per diem) o Cash advancements o Tuition reimbursements o Computer hardware or software (except by Division 250, Information Technology) o Office furniture o Fixed asset purchases o Capital equipment o Items currently stocked in the District’s warehouses o Facilities maintenance and repair services or parts or supplies o Professional services agreements o Public works contracts or agreements o Items established on an active blanket purchase order  Requirements for each Procard user’s monthly reconciliation of the Procard statements utilizing the Procard online software including, but not limited to, the following: o Electronically attaching invoices and packing slips o Completing the expense description that should contain who, what, when, where, and how o Completing the expense account coding  Procedure for the Procard Administrator’s (employee in the Contract, Purchasing, & Material Management Division) review of Procard user’s monthly reconciliation, which includes verification that appropriate supporting documentation was attached for each transaction and all required data fields were completed by the Procard user We noted that no specific approvals, such as invoice manual or electronic signatures, were required for purchases made utilizing the Procard. We utilized these policies and procedures when performing procedures 2 and 3 below. Differences between the District’s Procard SOP and the District’s Desktop Procedures During our review of the District’s policies and procedures over the Procard program, we noted that the Procard SOP states that Procards have a $5,000 limit per transaction and a $5,000 limit per month (per employee). However, the District’s Desktop Procedures states that the standard limits are $5,000 per transaction and $5,000 per month (per employee), but also notes the following exceptions to this policy:  IT staff have a $10,000 single transaction limit and a $50,000 monthly limit  Buyers and Directors have no single transaction limit and a $200,000 monthly limit For the purposes of performing these procedures, we utilized the higher limits noted in the District’s Desktop Procedures. To eliminate confusion between the Procard SOP and the Desktop Procedures, we recommend the District update the policies so the two documents agree. Pre l i m i n a r y Dra f t - 3 - 2. We will review the authorization documents pertaining to Procard issuance and verify all employees who hold a Procard have received the required signatures indicating the appropriate authorization has occurred. Results: Before acquiring a Procard, the user signs the District’s Procard agreement, which is required to be approved by the employee’s Supervisor, Manager, Division Head, and Contract, Purchasing, and Material Management Manager. A template of the District’s Procard agreement is included in Attachment A. Attachment B includes a list of employees and the corresponding single transaction and monthly transaction limits held by District employees as of June 30, 2017. We inspected the authorization documents for all employees included in this listing with no exceptions. In addition, the Procard agreement indicates the single transaction and monthly transaction limits. We compared the limits on the Procard agreement to the limits in the District’s Desktop procedures and noted four Procard users that had limits in excess of the District’s Desktop procedures. However, these Procard limit overages were approved in accordance with the District’s policies and procedures. Therefore, we had no exceptions in performing this procedure. 3. We will select a sample of Procard purchases, based on sample size guidance from the American Institute of Certified Public Accountants (AICPA), and test each purchase for key internal controls related to authorization of Procard purchases. We will also review the purchase for compliance with the District’s policies and procedures regarding Procard use. Statistics of Sample Selected We selected 40 monthly Procard statements from each fiscal year for a total sample size of 80 monthly Procard statements. The sample of 40 monthly Procard statements from fiscal year 2015-2016 resulted in testing 231 individual credit card transactions that totaled $88,898. The sample of 40 monthly Procard statements from fiscal year 2016-2017 resulted in testing 345 individual credit card transactions that totaled $116,053. Key Internal Controls and Compliance Items Tested From our review of the District’s policies and procedures over Procard usage, noted in step 1, we reviewed the following elements for each item selected:  Compared the single transaction and monthly transaction limits noted in the Desktop Procedures and in the employee’s signed Procard agreement to the sample transactions.  Reviewed the goods or services purchased for propriety given the nature of the District’s business.  Inspected invoices and packing slips (in the case of internet purchases) that supported the purchase and verified the vendor, amount, and goods or services purchased agreed to the monthly reconciliation performed by the employee and the monthly Procard statement.  Reviewed the expense description included by the Procard user to determine if it was sufficiently description, which, according to the District’s Desktop Procedures requires indication of who, what, when, where, and how.  Reviewed the expense account selected for reasonableness given the goods or services purchased.  Verified the purchase was not one of the items specifically prohibited by the District’s policies and procedures as noted in procedure 1. Pre l i m i n a r y Dra f t - 4 - Key Internal Controls and Compliance Items Tested (Continued) One key control we noted was the Procard Administrator’s review of Procard user’s monthly reconciliation, which includes verification that appropriate supporting documentation was attached for each transaction and all required data fields were completed by the Procard user. This review is documented electronically in the District’s online software. The Procard user prepares the monthly reconciliation and places a checkmark in a box that communicates the transaction is ready for review. Once the Procard Administrator reviews the transaction, they checkmark a box indicating it has been reviewed. Once all transactions have been checked as prepared by the Procard user and reviewed by the Procard Administrator, the file is electronically forwarded to the Finance Division for payment. The electronic file cannot be forwarded to the Finance Division unless all transactions have the box checked as prepared and reviewed, which is an automated control of the software ensuring that all transactions have bene reviewed by the Procard Administrator. Once the file has been forwarded to the Finance Division and the payment has been processed, the screen showing the checkmark for preparation and review is no longer able to be inspected. Therefore, we were unable to inspect the specific electronic checkmark indicating the Procard Administrator’s review for the sample selected. This control was considered performed since the electronic file was able to be forwarded to the Finance Division for processing the payment. We did perform a walkthrough with the Purchasing Division and inspected this process occurring on a current credit card transaction. The remainder of this section will address any issues we noted when performing the tests noted on the previous page. Results - Exceptions: Division 230 Excluded from the Procard Policy The District’s Procard SOP identifies certain items that cannot be purchased with the Procard as listed in procedure 1, which includes parts and supplies for plant maintenance. During our review of the Procard transactions we noted such purchases made by the Contract, Purchasing, and Material Management Division, Division 230. There were 10 transactions totaling $5,269 noted in fiscal year 2015-2016 and no transactions noted in fiscal year 2016-2017. We inquired with Division 230 if these purchases met the definition of the exception noted in procedure 1 for “facilities maintenance and repair services or parts or supplies”. Division 230 notified us that their Division was excluded from the rules of the Procard SOP and, therefore, they could purchase parts and supplies for plant maintenance. However, during our review of the Procard SOP, we did not note an exclusion of Division 230 to these policies and procedures. We recommend the District either require Division 230 to follow the Procard SOP or modify the Procard SOP to include this exclusion. Purchase of Furniture As noted in the procedure 1, Procards cannot to be used for the purchase of office furniture. During our review of the Procard transactions, we noted the purchase of an awards cabinet for the Plant 2 operations reception area in an amount of $598, which appeared to be office furniture. Per our discussion with the Division 230, the awards cabinet is considered minor furniture and not office furniture and is, therefore, allowable by the Procard policies and procedures. To remove the ambiguity of the definition of office furniture, we recommend the District add some additional language to the Procard SOP that will provide a specific definition of office furniture. Pre l i m i n a r y Dra f t - 5 - Results - Exceptions (Continued): Lack of Supporting Documents - Invoices The District’s Desktop Procedures, Section C, step 12b describes items that should be uploaded by the Procard user during the monthly reconciliation process. Included in those items are the “receipt and packing slip (if applicable) matching the description”. This statement indicates the requirement to electronically attach invoices and packing slips for all purchases. During our review of ProCard purchases, we noted two different circumstances in which an invoice was not attached as support for a purchase:  One employee had two identical purchases from Amazon of $161.70 each that were charged on the same day. We inspected one invoice and one packing slip for one of the purchases, but a second invoice and packing slip was not available for the second purchase. Per our inquiry with the District, there was no refund in future credit card statements for the second charge of $161.70. We were unable to inspect the supporting documentation for the second charge.  One employee made a purchase from Orange County Fast Print for $845.84 for vehicle inspection books for the collections Division. The support for this charge was an email from the vendor containing a quote for the purchase; however, a formal invoice from the vendor was not obtained and retained in the District’s records. This purchase also did not contain a packing slip to verify receipt of the goods. We recommend the District require formal invoices for all purchases. Results - Observations: General Overall Comment Regarding Expense Descriptions The Desktop Procedures require that expense descriptions include who, what, when, where, and how. We did note that all of these items were well documented for purchases that could be considered more sensitive and subject to scrutiny, such as training registrations and purchases for District events and meetings; however, most descriptions for other purchases do not include all of these items. When considering the divisions making the purchases and the items purchased, it may not be necessary to include all of the elements of who, what, when, where, and how in order for the description to be sufficient as noted in some of the more significant areas below. The Information Technology Division often purchases various parts and licenses and do not indicate for whom these items are for or how the items are to be used. Considering that various users could benefit from licenses and parts could be used for various employees, including whom or how the items are to be used may not be necessary. The Plant Operations 1 and 2 Divisions purchase parts and supplies for plant operations maintenance and often did not include where the item was utilized (for which piece of equipment). When taking into account the Division is Plant Operations 1 or 2, this may be sufficient to describe the location. Pre l i m i n a r y Dra f t - 6 - Results - Observations (Continued): General Overall Comment Regarding Expense Descriptions (Continued) Another example is when various supplies are purchased for a Division, such as spoons, forks, and other miscellaneous items and how these items would be used for business purposes was not included in the expense description. Given the nature of the items purchased, it could be assumed that they are for employee use in break rooms or kitchens and the how may be self-explanatory. In addition, when reviewing the expense descriptions we noted that many acronyms are utilized, especially for various conferences and memberships. While we were able to search for these acronyms on the internet and identify the entity or certification to which it was referring, it did take some time and research. For ease of employees reviewing the Procard purchases made in different Divisions, the District should consider requiring acronyms to be identified in the expense descriptions. Movie Tickets for the Benefit of Employees During our review of the ProCard transactions we noted the District purchases discounted movie tickets for the benefit of employees to procure these at the cost to the District and to be distributed for award purposes. In the sample selected, we noted six purchases of bulk movie tickets that totaled $8,914 (for 1,020 movie tickets). Per our inquiry with the District, there are no guidelines or policies directing the tracking or use of movie tickets. A best practice would be for the District to have policies and procedures regarding the tracking and use of movie tickets. Lack of Supporting Documents - Packing Slips The District’s Desktop Procedures, Section C, step 12b describes items that should be uploaded by the Procard user during the monthly reconciliation process. Included in those items are the “receipt and packing slip (if applicable) matching the description”. This statement indicates the requirement to electronically attach packing slips for all applicable purchases. During our review of ProCard purchases, we noted that some employees were diligent in either attaching a packing slip for internet orders or including a reason for a lack of a packing slip in the expense description. However, some employees neither attached a packing slip nor indicated a reason for the lack of a packing slip in the expense description. We noted 151 internet purchases that did not have packing slips electronically attached or contain a reason for the lack of a packing slip in the expense description. To confirm the receipt of internet orders and to follow the District’s policies and procedures, we recommend that employees attach packing slips or indicate a reason for a lack of a packing slip for all internet purchases. Summary of Results and Disclaimer To our knowledge, an external review of the Procard program has not been performed prior to this engagement. We have no significant concerns regarding the Procard program. The items we noted in this report are ways to provide clarification to existing policies and procedures and to improve a program that already contains good processes and controls. Pre l i m i n a r y Dra f t - 7 - Summary of Results and Disclaimer (Continued) This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Procard program. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. Restriction on the Use of This Report This report is intended solely for the information and use of the Orange County Sanitation District Board of Directors and management of the District, and is not intended to be, and should not be, used by anyone other than those specified parties. Irvine, California DATE Pre l i m i n a r y Dra f t ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW PROCARD PROGRAM FOR FISCAL YEARS 2015-2016 AND 2016-2017 ATTACHMENT A PROCARD USER AGREEMENT PROCEDURE #2 Pre l i m i n a r y Dra f t Eff: 11/5/2015 Orange County Sanitation District Employee Procurement Card Agreement 1. This agreement outlines the responsibilities I have as a holder of Orange County Sanitation District’s (OCSD) Procurement Card (Procard). 2. I understand that the Procard is intended to facilitate the purchase and payments of goods and services for the conduct of OCSD business, and is not for my personal use. 3. I understand that I will be responsible for the use of my Procard as outlined in the Contracts, Purchasing and Materials Management Standard Operating Procedure (SOP) and misuse of the Procard, on my part, is grounds for (a) disciplinary measures that may include termination and/or legal action, (b) permanent revocation of the Procard, and/or (c) direct payroll deduction for any unauthorized or personal charges made on the Procard. 4. I understand that all charges will be billed directly to and paid directly by OCSD. I understand that -JPMorgan Chase, NA cannot accept any payment from me directly. 5. I understand the Procard is issued in my name. I will not loan my Procard or Procard number to anyone else. I understand my assigned Procard shall not leave OCSD premises unless utilizing card for District business. I understand that failure to adhere to this requirement will result in removal of the card. 6. I understand that the Procard is the property of the OCSD and, therefore, I may be periodically required to comply with internal control procedures designed to protect OCSD assets. This may include being asked to produce the Procard to verify its existence and providing assistance in an audit review of its use. 7. I understand that I will receive a statement of purchase activity for the statement period. I am responsible for all charges on the Procard (but not for payment), and I will resolve any discrepancies by either contacting the merchant/supplier or -JPMorgan Chase, NA. I understand that I will be required to (i) obtain and retain a copy of the cash register receipt or packing slip, (ii) verify the receipt against the statement, (iii) reconcile online and upload all receipts / packing slips for each transaction for the Procard Administrator, or designated staff member, as determined by the Procard Administrator’s review. 8. I agree to code charges to budget accounts consistent with the types of purchases authorized by the manager(s) for those budget accounts. If by doing so, additional budget authorization becomes necessary, I understand that I am responsible for obtaining any additional budgetary authorization BEFORE the completion of monthly reconciliation. 9. I understand that the Procard must be surrendered if requested by OCSD for any reason and/or upon my termination of employment from OCSD, or change of Division/Department. My signature below indicates that my Supervisor, Manager, Department Head and I have read and understand my responsibilities as a Procard holder, and that I agree to adhere to the guidelines established for the program as outlined in the Financial Management Policy and Procedures, Procard Instruction Manual and this agreement. I also agree to be responsible for my Procard use (as intended by OCSD) and authorize OCSD to deduct charges resulting from my misuse of the Procard, from my paycheck. Employee Name Dept/Div: (Please Print) Employee Signature Date Supervisor Name Dept/Div: (Please Print) Supervisor Signature Date Manager Name ________ Dept/Div: (Please Print) Manager Signature Date Dept. Head Name Dept/Div: (Please Print) Dept. Head Signature Date Purchasing Manager Name Dept/Div: (Please Print) Purchasing Manager Signature Date *NTE Transaction Limit: $5,000.00 *NTE Monthly Limit: $5,000.00 *In accordance with OCSD’s Procurement Card (Procard) Program Policy. Pre l i m i n a r y Dra f t Employee Title Division Monthly Limit Single Transaction Limit Executive Assistant Administrative Services 5,000 5,000 Office Assistant Board Services 5,000 5,000 Administrative Assistant Civil & Mechanical Engineering 5,000 5,000 Administrative Assistant Civil & Mechanical Engineering 5,000 5,000 Office Assistant Collection Facilities O&M 5,000 5,000 Materials Control Supervisor Contract, Purchasing, & Material Management 200,000 - Buyer Contract, Purchasing, & Material Management 200,000 - Buyer Contract, Purchasing, & Material Management 200,000 - Administrative Assistant Contract, Purchasing, & Material Management 5,000 5,000 Purchasing Supervisor Contract, Purchasing, & Material Management 200,000 - Senior Buyer Contract, Purchasing, & Material Management 200,000 - Senior Buyer Contract, Purchasing, & Material Management 200,000 - Buyer Contract, Purchasing, & Material Management 200,000 - Contract/Purchasing Assistant Contract, Purchasing, & Material Management 5,000 5,000 Director of Environmental Svcs Environmental Services - *2,000 * Executive Assistant Environmental Services 5,000 5,000 Lead Mechanic Fleet Services 5,000 5,000 General Manager General Management - *2,000 * Secretary to General Manager General Management 5,000 5,000 Human Resources Assistant Human Resources 10,000 *10,000 * Program Assistant Information Technology 50,000 10,000 Administrative Assistant Information Technology 50,000 10,000 Administrative Assistant Laboratory & Ocean Monitoring 5,000 5,000 Administrative Assistant Plant 1 Operations 5,000 5,000 Administrative Assistant Plant 2 Maintenance 5,000 5,000 Administrative Assistant Plant 2 Operations 5,000 5,000 Administrative Assistant Project Management Office 5,000 5,000 Public Affairs Supervisor Public Affairs 5,000 5,000 Administrative Assistant Public Affairs 10,000 *5,000 Administrative Assistant Resource Protection 5,000 5,000 Administrative Assistant Risk Management/Safety/Security 5,000 5,000 Occupational Health Nurse Risk Management/Safety/Security 5,000 5,000 Employee Title Approval by Division Head Director of Environmental Svcs Director of Environmental Svcs General Manager General Manager Human Resources Assistant Director of Human Resources Administrative Assistant Assistant General Manager FISCAL YEAR 2015-2016 AND 2016-2017 PROCUREMENT CARD (PROCARD) PROGRAM AGREED-UPON PROCEDURES REVIEW ORANGE COUNTY SANITATION DISTRICT * The limit exceeding the thresholds included in the District's "Purchasing Desktop Procedure: OCSD ProCard Administrator Procedures" was approved in accordance with the District's "Contracts, Purchasing and Materials Management Standard Operating Procedure (SOP): Procurement Cardholder Policy" 401-1-06 as follows: PROCEDURE #2 LIST OF EMPLOYEES AND PROCARD LIMITS ATTACHMENT B The following employees held ProCards during fiscal year 2015-2016 and 2016-2017 and had the following limits as of June 30, 2017: Yes Approval by Contract, Purchasing, and Material Management Manager Yes Yes Yes Pre l i m i n a r y Dra f t