By: Libi Uremovic, July 24, 2014 | Original Article at Patch.com
At the 109:15 minute mark Beaumont City Finance Director William Alyward and Council talk about internal controls and hiring an outside auditing firm. Below is the transcript of the conversation, but one sentence explains why they can never have an Internal Controls Audit:
“..The invoices come in, the department heads must have an approval on there for the finance staff will pay it..”
The department heads approving the expenses would be Dillon, Eggars, and Moorjani approving their own Urban Logic invoices, Kapanicas approving his own General Government Management Services invoices, and Alyward approving his own Beaumont Auto/Tire, Moody Construction, and MOKRAY invoices.
Another basic procedure in an internal controls review is verifying Separation of Duties. The Offices of City Clerk, City Manager, and Finance Director are suppose to be three (3) separate entities.
There is an Internal Controls Report included with the Audit that the City has refused to release and Council did not review or request to review. There is no reason to continue to put on a show when Kapanicas and Alyward know they can never allow an outside auditing firm to review the City’s books and/or internal controls.
“…we just instituted after last year’s management report where we bring in a third member from the CFD staff …”
They bring someone in from ‘the CFD staff’. Doesn’t that make everyone feel better..?
July 15 2014 Beaumont City Council Meeting http://www.ci.beaumont.ca.us/index.aspx?NID=212
109:15 Alyward: Internal controls is the plan and method that the city staff uses to save-guard the city assets to make sure that transactions are recorded properly in our financial statements. That, in layman terms, is what that is. So for example; we want to safeguard cash, of course. So Cash comes in, cash goes out. Especially on disbursements; there’s a simple process that we use. The invoices come in, the department heads must have an approval on there for the finance staff will pay it. So you have to have a department head approve it, put an account number on there, then it comes to finance staff. They review that, make sure we’re not double-paying or anything like that, and prior to any payment that comes to me for my review. After that then it’s input into the system by the staff. We have a secondary control where a second staff member will add up the total of the invoices to agree with what the register was with the first staff member inputted. The second staff member verifies the totals and then the third step would be we bring in, we just instituted after last year’s management report where we bring in a third member from the CFD staff that has no, is not part of the financial department at all. They compare the checks to the invoices and they do the mailing out. So, in a nutshell, we try to do what we can with the staff we have to segregate the duties to make sure that disbursements; we follow up a policy on those disbursements to make sure we’re trying not to double-pay and everything’s approved.
Castaldo: Yes, you probably do a great job of double checking your own staff and way of doing it. Now Hartzheim, and I’m just using that what you said, they don’t do an internal controls audit. Can we get somebody, an accounting firm, to come in and double check what you just said so that we can prove to our constituents, to the city, that exactly what you’re doing is correct?
Alyward: Most definitely.
Castaldo: Ok, how do we do that? What is your suggestion, or maybe the council member, other council member’s suggestion on how do we do it?
Berg: You’ve already got set procedures on how to do that?
Alyward: Correct.
113:00 Berg: So maybe my suggestion would be is to put out requests for proposals. The procedure we’ve got ask for them to do a, to review the procedures; how we do it, then do a spot check on say 10% of it, ya know? It’s an indication that they don’t find any errors, and if they do find any concerns then we go back and look and review some more of it. This is an idea, it’s a check and balance here. We might want to do that on a, you could almost do that on a quarterly basis. It would probably be pretty easy to do. I don’t know if that would be something we want to do as an additional control. It’s just a suggestion. It doesn’t look like very much work. It looks easy.
Alyward: That’s exactly what my suggestion was we’re going to, I would like to bring back an RFP for your approval. Attach what the internal controls procedures we’re using now to that, and be part of the RFP, and it’s the correct accounting term for this is a ‘limited procedures review’. It’s not an audit, but we’ll have a limited procedures review of our internal controls procedures. We can bring that back and you guys can comment on the RFP and what’s included in that, including all of our internal controls that we use. Because that’s what they’re going to have to look at.