By: Libi Uremovic | Original Article at patch.com
Macias, Gini O’Connell (MGO) Part II: Review of Internal Controls over Cash Receipts: http://www.ci.beaumont.ca.us/DocumentCenter/View/25841
No Date on Report
Principal Findings:
Significant Internal Control Issues Need Immediate Attention
Finance Department Needs to Improve Overall Controls over Cash Receipts
Finance Department Needs to Improve Overall Controls over Cash Disbursements
The Principal Finding are no surprise considering there is no Finance Department. The two major issues are on page 11:
1: The Method the City Employs to Pay Sales and Use Tax on Purchases May Not be Appropriate:
“When the City makes a purchase from a vendor located outside of the City, a “Resale Certificate” issued to the Beaumont Financing Authority is used to purchase the Item WITHOUT SALES TAX. The City eventually pays the required sales tax by filing a tax return. In effect, this shifts the local portion of the sales tax revenue from the various cities in which the vendor is physically located to the City of Beaumont.”
There are two results from this action: The City of Beaumont is stealing other cities’ sales tax AND the City’s own Tax Revenue recorded on the Financial Statements is false.
2: Payments to Electrical Supply Vendors are not Properly Supported by Documentation:
“Our testing included two payments to electrical supply companies (Graybar and Walter’s Wholesale Electric). The only supporting document for each of these payments was a spreadsheet prepared by Beaumont Electric Inc., lasting the supply company’s invoice date, invoice number, and invoice amount. Te spreadsheet contains an era to list the City’s correspondence “job name”, however, this information was not filled in. The corresponding invoices from the electrical supply company are not included in the documentation the City receives from Beaumont Electric, and there was no City Department Manager approval on the spreadsheets fro these two payments. Under this system, there is no documentation providing evidence that the invoices exist and are for materials used on City projects. this process raised a potential for fraud.
We recommend the City require invoices for all amounts paid, and that those invoices or the summary spreadsheet indicate on which City projects the material are used. We also recommend that the appropriate City Department Manager review the invoices to ensure that the aerials purchased were for City projects.
Alternatively, we recommend that the City consider replacing the practice of paying third-party suppliers with the requirement that Beaumont Electric pay the supplies directly and then invoice the City for materials as they are used.”
There are no city projects. The wholesale supplies are being used in the Developments.
The first Report from MGO is also listed on the City’s website: http://www.ci.beaumont.ca.us/DocumentCenter/View/24408
Councilman Lloyd White specifically requested the Auditors to state the City’s Reserves, but the Auditors did not include a statement on the City’s Reserves in the Report.