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HomeMy WebLinkAboutTR-70-90 TOWN OF NEWCASTLE REPORT File # /05'1/6 ' Res. # By-Law # MEETING: SPECIAL GENERAL PURPOSE AND ADMINISTRATION COMMITTEE MEETING DAlE: July 23, 1990 (8:30 a.m.) REPqU #: TR-70-90 FILE #: ~CT: 1989 AUDIT REPORT' AND RELATED MANAGEMENT LETTER RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. That report TR-70-90 be received; and 2. That the Financial Statements for the year ended December 31, 1989 be adopted, 3. That recommendations contained in the management letter be reviewed by staff and addressed appropriately. BACKGROUND & COMMENTS The 1989 year end has now been completed and Mr. Lawrence Martin of Deloitte & Touche is in attendance to present this Report. Any queries with respect to the Audit and the Management Letter should be directed to his attention at this time. Staff have reviewed the comments and recommendations contained in the Management Letter and with Council's concurrence will incorporate same. It is staff's opinion that while valid, many of the comments reflect the fact that the internal control a~d operations are now at a level of sophistication to allow the audit to concentrate on areas of concern that are important but perhaps not of the magnitude they have been in the past. Ma ie A. Marano, H.BSc. Treasurer Recommended for presentation to the Committee \, ,';0", "/ \ j / .. /' /l hi" /'1' . ( ) f \.;{.,/\\/i,j"'" <." ,if \', ,A. La~rence E. Kotseff Chief Administrative Officer Deloitte & Touche o Deloitte & Touche Chartered Accountants Bank of Commerce Building 2 Simcoe Street South PO. Box 800 Oshawa, Ontario L1H7N1 Telephone: (416) 579-8202 (Toronto area 683-9051) Telecopier: (416) 579-3388 Mr. P. Deegan Chairman - Finance Committee Corporation of the Town of Newcastle Municipal Offices 40 Temperance Street Bowmanville, Ontario LIC 3A6 July 18, 1990 Dear Mr. Deegan: We have completed our examination of the consolidated financial statements of the Corporation of the Town of Newcastle for the year ended December 31, 1989. Our examination included a review of the system of internal controls and accounting procedures. The attached comments, which we present as a result of our review, should not be construed to represent the result of a detailed systems review, but are observations made during the normal course of our examination. We have noted continuing improvement in the records and accounts of the municipality. We feel the attached suggestions will further enhance the accounting procedures and internal controls of the Corporation. However, they should be considered in context with the municipality's overall system of internal controls and accounting procedures which we consider, based on our review, to be good. We would like to take this opportunity to thank the staff of the Town of Newcastle for their excellent assistance and co-operation during our audit. We would be pleased to discuss any of these comments and suggestions further with you. If we can be of assistance in the implementation of any of these recommendations, please do not hesitate to contact us. Yours very truly, (Signed) DELOITTE & TOUCHE Enclosure cc: Mr. L. Kotseff, M.C.I.P., Chief Administrative Officer Mrs. M. Marano, Treasurer Ministry of Municipal Affairs CORPORATION OF THE TOWN OF NEWCASTLE Page 1 of 3 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1989 Investments Currently, the Deputy-Treasurer is responsible for investing the Town's general fund and reserve funds surplus cash. Written approval is required and obtained prior to any investment decisions with the exception of rollovers of existing investments or when transfers are accomplished through telephone contact with representatives of the municipality's main bank. We recommend, that in future, all investment transactions including rollover and direct transfers be approved by the Treasurer. This would improve internal control over cash and provide a separate check to monitor compliance with Town policy regarding limits placed on certain types of investments and amounts to be invested with any single institution. Subdivider Lot Levies Accounts Receivable Records: The current lot levies collection system is adequate, but internal controls over these collections should be strengthened. Under the current system, it is difficult to determine how much in lot levies is still owing for anyone development at a specific date. In order to improve the documentation of expected revenues from subdivider agreements, we recommend the creation of a new form. This form should be completed by the planning department when each new subdivider agreement plan number is approved and would include the following information: Plan number; Owner; Property description; Lot levies required and method of payment: Cash-in-lieu of land; Performance guarantee; Occupancy deposit: Engineering and inspection fees; and Other. This form should be forwarded to the treasury department in order to facilitate monitoring collections of amounts due under these agreements. In addition, a formal subdivision levies receivable ledger should be established to control the timely collection of these monies. CORPORATION OF THE TOWN OF NEWCASTLE Page 2 of 3 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1989 Payroll Cheque Distribution Due to manpower constraints, the payroll clerk is responsible for the initial preparation of the payroll, which is prepared by the bank payroll service bureau, as well as for the distribution of the related payroll cheques. Internal controls would be strengthened if someone independent of the payroll function received the cheques directly from the bank and agreed them to the "bank detail edit list" as well as to the approved net pay amount per the payroll journal for the related period. Once it has been deter~ined that no deviations were present, the cheques should be given directly to the department heads for distribution. Account Receivable - Invoicing Procedures The Town's accounts receivable invoices, other than tax bills, do not include specific credit or payment terms. Although the amounts are not significant in total, there currently is no interest being charged on late payments. We suggest that the credit terms should be clearly printed on the face of all invoices in order to promote the timely collection of cash. By having the terms of payment clearly documented, the Town will be in a good position to charge interest on late payments. The applicable interest rate to be charged must be clearly disclosed on all invoices issued in order to be able to legally collect the interest. Museum Boards - Accounting Records At the present time, the museum boards do not appear to have formal accounting records. In addition, formal working trial balances were not prepared for these boards by their staff. This situtation resulted in significant extra external audit time being spent in this area during the current year-end audit. We suggest, that in future, formal bookkeeping records be maintained by these boards on a monthly basis, and a formal trial balance be prepared for year-end financial statement preparation. CORPORATION OF THE TOWN OF NEWCASTLE Page 3 of 3 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1989 Cemeteries - Plot Sales Revenue Information necessary to record monthly plot sales revenue is not prepared on a timely basis. The sales information is forwarded to the treasury department quarterly on an informal memo basis. In addition, year-end sales cut-off is not always accurate. We suggest, that in future, cemetery plot sales be reported to the treasury department on a formal basis and recorded in the general ledger monthly. Tax Registration Section 3(1) of the Municipal Sales Tax Act, 1984 provides for all property with related taxes outstanding for more than three years to be registered for tax collection purposes. We noted that the Town has not recently registered any properties under this Act. At year-end, taxes receivable over three years old amounted to approximately $135,000. We suggest that consideration be given to proceeding with tax registration procedures on these properties as soon as possible in order to improve cash flow as well as discourage other taxpayers from being delinquent in the payment of their respective realty taxes. Accounts Receivable - Other A portion of the Town's accounts receivable includes several amounts which arose in 1987 and prior years. A total of $11,397.50 of accounts receivable has been outstanding for at least two years. Each individual account should be investigated. If collectability is not reasonably assured, then the uncollectible accounts should be written off. We understand that this situtation has been investigated since the year-end.