BANK ACCOUNT RECONCILIATIONS
Record balances were not fully reconciled to depository balances during the audit period. Monthly reconciliation performed consisted of verifying source documents (quietuses and checks) to deposits and checks clearing depositories each month for each of the City's 18 (EIGHTEEN) bank accounts. However, these reconciled amounts were not totaled and compared to actual cash transactions and balances recorded in the City's records. As a result of undetected errors as of December 31, 2005, the City has $21, 511.00 more in unidentified cash recorded in its records than that being held in its bank accounts.
Indiana Code 5-13-6-1(e) states: "All local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories."
At all times, the manual and/or computerized records, subsidiary ledgers, control ledger, and reconciled bank balance should agree. If the reconciled bank balance is less than the subsidiary or control ledgers, then the responsible official or employee may be held personally responsible for the amount needed to balance the fund. (Accounting and Uniform Compliance Guides Manual for Cities and Towns, Chapter 7.)
It has been our policy to recommend only a minimum number of bank accounts in order to avoid unnecessary bookkeeping and possible errors in charging warrants to bank accounts. So long as an ordinance does not require the keeping of a separate bank account, funds should be consolidated into as few accounts as possible. (Accounting and Uniform Compliance guidelines Manual for Cities and Towns, Chapter 1.)
OVERDRAWN CASH BALANCES
The cash balances of the following funds were overdrawn in 2005:
General $ 743,906.00
Motor Vehicle Highway 472,504.00
Unsafe Building 56,155.00
Indiana Housing Board Rental Rehabilitation 14,776.00
Law Enforcement Continuing Education 633.00
The cash balance of any fund may not be reduced below zero. Routinely overdrawn funds could be an indicator of serious financial problems which should be investigated by the governmental unit. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7.)
The records presented for audit indicated the following expenditures in excess of budgeted appropriations:
FUND EXCESS AMOUNT EXPENDED
General $ 81,136.00
Motor Vehicle Highway 520,248.00
Reserve Liability Insurance 27,359.00
Walking Patrol (?????) 53,319.00
Park Cumulative Capital 11,930.00
Indiana Code 6-1.1-18-4 states in part: "...The proper officers of a political subdivision shall appropriate funds in such a manner that the expenditures for a year do not exceed its budget for that year as finally determined under this article."
TRANSFERS BETWEEN CITY FUNDS
As previously reported, a temporary transfer of $401,348.00 was made during December 2002 from the Economic Development Income Tax fund (EDIT) to the General Fund. In accordance with Indiana Code 36-8-4(b) the Common Council determined an emergency existed and extended the term of the loan for six months beyond the 2002 budget year. This loan was to be repaid no later than June 30, 2003. However, this loan has still not been repaid.
During 2005, the City transferred $114,892.00 from the Riverboat fund to the Drainage fund. Additionally, transfers in the amounts of $265,000.00 and $338,698.00 were made from the Economic Development Income Tax fund (EDIT) to the Ceasar's Donation fund and the Rainy Day fund, repectively.
The City approved resolutions authorizing the transfer of these funds with the intent that these were to be permanent transfers and not required to be returned. Transfers to depleted funds are allowed for cash flow purposes, however, these transfers must be returned to the other fund. The period may be extended for not more than six months beyond the budget year of the year in which the transfer occurred. EDIT and Riverboat funds may be used by a city for any lawful purpose for which money in any of its other funds may be used, i.e., permanent transfers to other funds are not allowed.
Indiana Code 36-1-8-4 concerning temporary transfer states in part:
"(a) The fiscal body of a political subdivision may, by ordinance or resolution, permit the temporary transfer of a prescribed amount, for a prescribed period, to a depleted fund in need of money for cash flow purposes from another fund of the political subdivision if all these conditions are met:...(3) Except as provided in subsection (b), the prescribed period must end during the budget year of the year in which the transfer occurs. (4) The amount transferred must be returned to the other fund at the end of the prescribed period..."
"(b) If the fiscal body of a political subdivision determines that an emergency exists that requires an extension of the prescribed period of a transfer under this section, the prescribed period may be extended for not more than six (6) months beyond the budget year of the year in which the transfer occurs if the fiscal body does the following: (1) Passes an ordinance or a resolution that contains the following: (A) A statement that the fiscal body has determined that an emergency exists. (B) A brief description of the grounds for the emergency. (C) The date the loan will be repaid that is not more than six (6) months beyond the budget year in which the transfer occurs. (2) immediately forwards the ordinance or resolution to the state board of accounts and the department of local government finance."
Indiana Code 6-3.5-7-13.1 states in part: "Economic development income tax funds (EDIT); deposits; uses, ...(3)By a county, city or town for any lawful purpose for which money in any of its other funds may be used.
Indiana Code 4-33-13-6 concerning Riverboat funds states in part: "...(3) may be used for any legal or corporate purpose of the unit, ..."
TRANSFER TO WASTEWATER UTILITY
The City transferred $270,000 from the Economic Development Income Tax Fund (EDIT) to the Wastewater Utility fund during 2005. There was no ordinance resolution authorizing this transfer. Additionally, the monies were not returned during the budget year 2005.
EDIT funds may be used by a city for any lawful purpose for which money in any of its other funds may be used, i.e., permanent transfers to other funds are not allowed.
Since the temporary loan provisions of IC 36-1-8-4 would not apply to funds of a municipally owned utility and there are no statutes authorizing or prohibiting loans from a city or town fund to a municipally owned utility, a home rule ordinance could be adopted authorizing such loans. Such ordinance should list the amount and term of the loan and interest rate, if interest is to be charged. (Cities and Towns Bulletin and Uniform Compliance Guidelines, December 2001)
Indiana Code 6-3.5-7-13.1 states in part: "Economic development income tax funds (EDIT); deposits; uses,...(3) By a county, city or town for any lawful purpose for which money in any of its others funds may be used...."
CAPITAL ASSET RECORDS
The City does not maintain sufficient detailed records of capital assets for the City owned capital assets, which also includes Wastewater Utility owned utility plan in service accounts. The City's capital asset ledger has not been updated to account for adjustments reported in these accounts during prior audits. A sewer expansion project was substantially completed during the current year, but not recorded., Deletions or disposals of capital assets were not recorded. In addition, inventories of capital assets were not taken by all departments so that capital assets on hand could be reconciled back to the capital asset ledger.
Every governmental unit should have a complete inventory of all capital assets owned which reflect their acquisition value. Such inventory should be recorded in the Capital Assets Ledger. A complete inventory should be taken every year for good internal control and for verifying account balances carried in the accounting records. (Accounting and Uniform Compliance Guidelines Manual for cities and Towns, Chapter 7).
During 2005, the following deficiencies were identified concerning the use of credit cards:
(1) The City was using credit cards to purchase items without an approved credit card policy.
(2) Some payments were being made on the basis of the statement or a credit card slip without supporting documentation.
(3) The City incurred, and subsequently paid, finance charges for delinquent payment of credit card invoices.
The State Board of Accounts will not take exception to the use of credit cards of a governmental unit provided the following criteria are observed:
(1) The governing board must authorize credit card use through an ordinance or resolution, which has been approved in the minutes.
(2) Issuance and use should be handled by an official or employee designated by the board.
(3) The purposes for which the credit card may be used must be specifically stated in the ordinance or resolution.
(4) When the purpose for which the credit card has been issued has been accomplished, the card should be returned to the custody of the responsible person.
(5) The designated responsible official or employee should maintain an accounting system or log which would include the names of individuals requesting usage of the cards, their position, estimated amounts to be charged, fund and account numbers to be charged, date the card is issued and returned, etc.
(6) Credit cards should not be used to bypass the accounting system. One reason that purchase orders are issued is to provide the fiscal office with the means to encumber and track appropriations to provide the governing board and other officials with timely and accurate accounting information and monitoring of the accounting system.
(7) Payment should not be made on the basis of a statement or a credit card slip only. Procedures for payments should be no different than for any other claim. Supporting documents such as paid bills and receipts must be available. Additionally, any interest or penalty incurred due to late filing or furnishing of documentation by an officer or employee should be the responsibility of that officer or employee.
(8) If properly authorized, an annual fee may be paid.
(Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
During the review of claims we noted that sales tax was paid on some purchases.
Governmental funds generally are exempt from the payment of sales tax on qualifying purchases. Respective tax agencies should always be contacted concerning tax exemptions and payments. (Accounting and Uniform Compliance Guidelines Manual for cities and Towns, Chapter 7)
In one instance, an employee was reimbursed $90.00 for travel expenses without original receipts being attached to the claim.
Supporting documentation such as receipts, canceled checks, tickets, invoices, bills, contacts, and other public records must be available for audit to provide supporting information for the validity and accountability of monies disbursed. Payments without supporting documentation may be the personal obligation of the responsible official or employee. (Accounting and Uniform Compliance guidelines Manual for Cities and Towns, Chapter 7)
COMPENSATION AND BENEFITS
Six instances were noted where employees received payments during 2005 which were not transacted through the payroll system.
All compensation and benefits paid to officials and employees must be included in the labor contract, salary ordinance, resolution or salary schedule adopted by the governing body unless otherwise authorized by statute. Compensation should be made in a manner that will facilitate compliance with state and federal reporting requirements. (Accounting and Uniform Compliance guidelines annual for cities and Towns, Chapter 7)
TIME AND ATTENDANCE RECORDS
During the review of payroll records it was determined that bi-weekly payments were made to an employee even though time and attendance records were not maintained. Additionally, we noted that the corresponding payroll claims were certified by the responsible official attesting that they had examined the time records for this employee when in fact they had not been presented for their review. Upon inquiry, the employee subsequently presented time records with "estimated" hours worked during 2005.
Officials and employees are required to use State Board of Accounts prescribed or approved forms in the manner prescribed. (Accounting and Uniform Compliance guidelines Manual for cities and Towns, Chapter 7)
DEPARTMENT RECEIPT AND FEES
Receipts and fees collected by the departments listed below were remitted to the Controller less frequently than once a week:
All collections made by any department or person connected with a city or town shall be turned in to the Clerk-Treasurer (or Controller) at least weekly. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 6)
Instances were noted where the Park and Recreation Department collections were deposited later than the next business day.
Indiana Code 5-13-6-1(d) states: "A city (other than a consolidated city) or a town shall deposit funds not later than the next business day following the receipt of the funds in depositories (1) selected by the city or town as provided in an ordinance adopted by the city or the town; and (2) approved as depositories of state funds."
In some instances, General Receipts (Form 352) were not issued by the following departments:
Officials and employees are required to use State Board of Accounts prescribed or approved forms in the manner prescribed. (Accounting and Uniform Compliance Guidelines for Cities and Towns, Chapter 7)
Receipts shall be issued and recorded at the time of the transaction; for example, when cash or a check is received, a receipt is to be immediately prepared and given to the person making payment. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
BAD DEBTS AND UNCOLLECTABLE ACCOUNTS
The City has contracted with Medical Billing Group, LLC for the billings and collections of ambulance service runs. During the year 2005, Medical Billing Group, LLC wrote off $272,285.00 in delinquent accounts it deemed uncollectible. The minutes presented for audit did not indicate that these accounts were presented to the Board of Works for approval. Additionally, documentation was not presented for audit concerning unsuccessful collection procedures prior to adjustments to the records.
The governing body of a governmental unit should have a written policy concerning a procedure for the writing off of bad debts, uncollectible accounts receivable, or any adjustments to record balances.
Documentation should exist for all efforts made by the governmental unit to collect amounts owed prior to any write-offs.
Officials or employees authorizing, directing or executing write-offs or adjustments to records which are not documented or warranted may be held personally responsible. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7.)
DELINQUENT WASTEWATER ACCOUNTS
As of December 31, 2005, delinquent wastewater fees and penalties total $563,538.00 had not been recorded with the County Recorder nor were they certified to the County Auditor which would result in a lien again the property.
Indiana Code 36-9-23-33 states in part:
"(b) Except as provided in subsection (I), the officer charged with the collection of fees and penalties assessed under this chapter shall enforce their payment. As often as the officer determines is necessary in a calendar year, the officer shall prepare either of the following:
(1) A list of the delinquent fees and penalties that are enforceable under this section, which must include the following:
(A) The name or names of the owner or owners of each lot or parcel of real property on which fees are delinquent.
(B) A description of the premises, as shown by the records of the county auditor.
(C) The amount of the delinquent fees, together with the penalty.
(2) An individual instrument for each lot or parcel of real property on which the fees are delinquent."
"(c) The officer shall record a copy of each list or each individual instrument with the county recorder..."
"(e) Using the lists and instruments prepared under subsection (b) and recorded under subsection (c), the officer shall, not later than ten (10) days after the list of each individual instrument is recorded under subsection (c), certify to the county auditor a list of the liens that remains unpaid for collection in the next May..."
SEWAGE DISPOSAL AND SANITATION CHARGES
The City has an ordinance (G-02-12) setting the rates to be charged for sewage disposal. We noted the following noncompliance:
Some customers that should be receiving a minimum bill for sewage disposal were not being billed.
The City has an ordinance (A-01-47) setting the rates to be charged for sanitation collections. We noted the following noncompliance:
1. Some commercial customers are being charged less than the approved commercial rates.
2. Some churches are being billed more than the approved rates established for the churches.
3. Some customers that are required to be billed for sanitation charges are not being billed.
Each governmental unit is responsible for complying with the ordinances, resolutions, and policies it adopts. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7.)