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HomeMy WebLinkAboutTR-95-90 TOWN OF NEWCASTLE REPORT File # -'-.0..Lf;5!L:J ~, Res. # By-law # fvEET I t(J : DATE: REPffiT #: SURECT: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE MEETING November 19, 1990 TR-95-90 FILE #: RESPONSE TO AUDIT MANAGEMENT LETTER FOR YEAR ENDED DECEMBER 31, 1989 RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. That report TR-95-90 be received for information. BACKGROUND & COMMENTS Report TR-70-90 was presented to the General Purpose and Administration Committee on July 23, 1990. The report covered the adoption of the December 31, 1989 Financial Statements and also advised Committee that the recommendations contained within the management letter would be reviewed by staff and addressed appropriately. The purpose of this report is to update Committee on the progress of implementation of the Auditor's recommendations with respect to implementation of those procedure which are feasible and pertinent to the Town's current size and nature. A copy of the 1989 Year End Management Letter is attached for reference. The Auditor's comments have been paraphrased in the body of this report for efficiency. Comment: Investments Investment activities are co-ordinated by the Deputy Treasurer. Currently phone transactions regarding investments and rollover of existing investments do not require written approval of the Treasurer for the transaction to take place. Recommendation is for IUI TR-95-90 Paqe 2 the Treasurer to pre-approve all investment transactions. Response: The Deputy Treasurer has been asked to ensure the procedures involved with investments specifically indicate that written approval is required prior to any investment transaction taking place. Comment: Subdivider Lot Levies The lot levy collection could be improved by reformatting the Planning Department's current form and by the Treasury Department being responsible for the receipt of related funds. In addition, the Planning Department should be maintaining a ledger to control the timely collection of lot levies. Response: The Treasury Department will continue to liaise with the Planning Department in order to co-ordinate the lot levy collection and documentation. The Planning Department has been working on the development of a system's program to better identify and control the outstanding lot levies and applicable procedures. Although there may still be some difficulty with the task with regard to the additional manpower requirements to redirect the follow up and collection through the Treasury Department it is anticipated that the new program will assist in the process. Comment: Payroll Cheque Distribution Ideally the internal controls regarding payroll would be strengthened by an employee independent of the payroll function being responsible for checking the payroll. Response: As indicated by the Auditors, in an ideal situation the separation of duties to allow independent checks would strengthen internal controls, however the limitation is the amount of manpower required to put all the "ideal" controls in place. The auditors are aware of the restrictions within which the Town must operate and recognize that implementation therefore is not feasible at this time. Comment: Account Receivable - Invoicing Procedures Specific credit terms should be identified on the face of all non-tax invoices, thereby putting the Town in a good position to charge interest on all late payments. Response: The Purchasing Division of the Treasury Department has been requested to order any new invoices with specific credit terms clearly identified; the rate to be consistent with that currently charged on arrears of taxes. lU2 TR-95-90 Paqe 3 Comment: Museum Boards - Accounting Records The Museum Boards do not maintain formal accounting records or prepare any year-end financial records for the year-end consolidation with the Town's financial statements. Response: The Museum Boards have been notified of the concerns and the additional expense that the Town has incurred because of this. The Town Staff will attempt to co-ordinate the required year-end documentation with the Boards prior to the 1990 year-end. Comment: Cemeteries - Plot Sales Revenue Monthly receipts and records should be submitted to Treasury regarding plot sales revenue. Response: While Treasury staff recognize that ideally the monthly receipt and deposit and subsequent perpetual care investments should be recorded in the Treasury Department, it is again a function of manpower. The receipts are received and recorded in the Community Services department and are very insignificant in terms of the value of money received. Treasury will continue to monitor the value of the revenue and respond accordingly. Comment: Tax Reqistration Tax registration procedures per Section 3(1) of the Municipal Sales Tax Act, should be given consideration in order to collect outstanding realty taxes. Response: Subsequent to the Auditor's comments, Treasury presented a report to Council of the properties which were being considered for registration. The Treasury Staff are proceeding, in consultation with the Town's legal advisor, to have the appropriate actions taken in this regard. Comment: Accounts Receivable - Other There are some minimal amounts of accounts receivable which should be considered for write off. Response: As the Auditor's noted, this situation had been investigated as part of the year-end process and was dealt with as they suggested. I ! TR-95-90 Page 4 Respectfully submitted, Recommended for presentation to the Committee ~~~ranO'-H'BSC' Treasurer Officer MAM/ges ATTACH: 7U4 Deloitte & Touche o Oeloitte & Touche Chartered Accountants Bank of Commerce Building 2 Simcoe Street South P.O. Box 800 Oshawa, Ontario L 1 H 7N 1 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 L1C 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 . j . municipality. Me 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) DELOlTTE & TOUCHE Enclosure cc: Mr. L. Kotseff, M.C.l.P., Chief Administrative Officer Mrs. M. Marano, Treasurer Ministry of Municipal Affairs lU5 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 currep~ 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. IU6 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 determined 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 ipvoices 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. IUl 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 j . A po~tion 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. IU8