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HomeMy WebLinkAboutTR-73-89 e TOWN OF NEWCASTLE =' REPORT File - � Res. # By-Law # MEETING: GENERAL PURPOSE & ADMINISTRATION COMMITTEE DATE: September 5, 1989 REPORT #: TR-73-89 FILE #: SUBJECT: AUDIT MANAGEMENT LETTER FOR YEAR ENDED DECEMBER 31, 1988 - RESPONSE RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. That report TR-73-89 be received for information. BACKGROUND & COMMENTS: In response to Council's resolution at the In Camera meeting of July 24th which directed that the correspondence and comments from the auditors be referred to staff for implementation and a report to the General Purpose and Administration Committee (with the exception of the Recreation Boards comment which is to be reported on separately) , the following comments and responses are presented for Council's information and consideration: Note: (Audit comments have been paraphrased for efficiency, and a copy of the original letter is attached) . Comment: Recreation Receipts Recreation receipts are not being sent to the Treasury Department on a timely basis. Response: The Treasury Staff have scheduled an internal control review of the recreational facilities. The cash control procedures will be documented and a recommendation will be made to them in order to improve efficiency with regard to timely transfer of receipts. The recommendations will be followed up on a regular basis in order to confirm compliance with the controls put in place. In the meantime, a copy of the Auditor's comments has been provided to Community Services Department to ensure this problem is immediately addressed internal to the Department. 708 . . .i2 Page 2 TR-73-89 AUDIT MANAGEMENT LETTER FOR YEAR ENDED DECEMBER 31, 1988 - RESPONSE Comment: Tax Registration The Town might consider proceeding with tax registration on properties that have taxes outstanding for more than three years. Response: This procedure will be investigated by the Tax Collector, and the outstanding tax receivable listing will be reviewed to determine the appropriateness of registration for each individual situation. Comment: Minutes There were a few instances where the original minutes were not signed. Response: This was commented upon by the Mayor at the meeting of July 24th, and this situation has been resolved, and has not occurred during the term of office of the current Council. Comment: Reconciliation of Taxes Receivable The final reconciliation of the taxes receivable subledger to the general ledger was not prepared formally, although the receipt transactions have been monitored and agreed to the postings in the subledger. Response: As commented upon in the audit letter, steps have been taken to prepare formal documentation of the reconciliation. Comment: Newcastle B.I.A. The transactions of the Newcastle B.I.A. have not been recorded in any formal type of records. Response: This comment will be directed to the Newcastle B.I.A., and they will be requested to comply with this recommendation. This will result in each of the B.I.A. 's presenting a more standard form of record keeping for review and audit. Comment: Cemetery Plot Sales The cemetery plot sales rate has not been updated since 1986. The rates charged may not have kept pace with related current costs. . . ./3 7 G,9 Page 3 TR-73-89 AUDIT MANAGEMENT LETTER FOR YEAR ENDED DECEMBER 31, 1988 - RESPONSE Response: This comment has been directed to the Community Services Department, who administer all cemetery matters, for their consideration and subsequent report to Committee, if required, regarding the adequacy of the current rates. Comment: Subdivider Lot Levies The lot levy collection could be improved by reformatting the Planning Department's current form for collection of revenues. Consideration should also be given to collection of revenues in the Treasury Department. In addition a formal subdivision levies receivable ledger should be established and maintained by the Planning Department. Response: These comments will be directed to the Planning Department in order that they may liaise with the Treasury Department in order to co-ordinate the lot levy collection and recording. The problem presented by the Treasury's collection of the lot levy revenue is one of manpower. The Treasury staff currently collect all current taxes over the counter, whereas previously these taxes were collected by the Bank. There has been no increase in the compliment of cashiers, and the additional increase in collection and inquiry time will pose a significant problem. This problem and possible solution will be discussed with the Planning Department and may have to be addressed through the budget process in subsequent years. The suggestions with regard to the form change and maintenance of a ledger can be accommodated by the Planning Department in conjunction with the implementation of the personal computer network system, as recommended by the Auditors. Comment: Community and Recreation Boards These Boards should be operating independent of the the Town with regard to their financial transactions in accordance with the Municipal Act. Response: This matter is addressed under a separate report, as requested by the Council resolution of the July 24th In Camera Meeting. . . ./4 7 10 1 Page 4 TR-73-89 AUDIT MANAGEMENT LETTER FOR YEAR ENDED DECEMBER 31, 1988 - RESPONSE Comment: Letters of Credit Due to the volume and amount of Letters of Credit held by the Town, quarterly reports in the format of a Continuity Statement should be set up. Response: This comment has been taken under advisement and will be incorporated into the new systems network. Respectfully submitted, Recommended for presentation to the Committee a ie Marano, rence .6 ots ef f, Treasurer C ief Adm n trative Officer. MM/lb Attachment 711 Deloifte Haskin"ells Bank of Commerce Building 2 Simcoe Street South P.O. Box 800 Oshawa, Ontario L1 H 71\11 (416) 579-8202 (Toronto area 683-9051) Facsimile: (416) 579-8202 Mr. P. Deegan July 24, 1989 Chairman - Finance Committee Corporation of the Town of Newcastle Municipal Offices 40 Temperance Street Bowmanville, Ontario L1C 3A6 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, 1988. 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 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, Attachment cc: Mr. L. Kotseff, M.C.I.P. , Chief Administrative Officer Mrs. M. Marano, Treasurer Ministry of Municipal Affairs United with Samson Belair through Deloltte/Samson CORPORATION OF THE TOWN OF NEWCASTLE Page 1 of 4 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1988 Recreation Receipts We noted during our audit that cash receipts at various recreational facilities are not being sent to the Treasury Department on a timely basis. Delays of up to ten days have occurred between date of receipt at the recreation facility and the date forwarded to the Treasury Department. The delays cause a loss of interest income for the Town and more importantly increases the risk of misappropriation of these funds. We recommend that in future, the Town establish the procedure of having receipts remitted to treasury on a timely basis and that controls be instituted to monitor adherence to this policy. 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 with the Province 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 $90,000. We suggest that consideration be given to proceeding with tax registration procedures on these properties in order to improve cash flow as well as discourage other taxpayers from being delinquent in the payment of their respective realty taxes. Minutes During the review of the Council minutes, we noted a few instances where the original copy had not been signed. All minutes should be signed by the Mayor and Town Clerk. We recommend that, in future, all Council minutes be properly signed on a timely basis. Reconciliation of Taxes Receivable During the current year the taxes receivable subledger was never formally reconciled to the general ledger. While monthly receipts transactions in the general ledger were separately agreed to the dollar value of postings in the taxes receivable subledgers, no overall monthly reconcilation was performed. We recommend that, in future, outstanding taxes receivable as shown in the taxes receivable subledger be formally reconciled to the respective general ledger account balances at each month-end. This procedure will improve internal controls over taxes receivable and minimize the possibility of errors remaining undetected. We understand that steps are currently being taken to implement this procedure. 713 CORPORATION OF THE TOWN OF NEWCASTLE Page 2 of 4 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1988 Newcastle Business Improvement Area (B.I.A.) Upon review of the Newcastle B.I.A. transactions, we noted that no formal bookkeeping records are kept. Financial statements are made directly from the bank statements. We recommend that, in future, standard books of original entry be prepared for this Board on a timely basis. Cemetery Plot Sales Upon review of current cemetery plot sales rate list, it was found that no increase in rates has occurred since 1986. We suggest that a review of rates be completed in order to determine whether rates charged have kept pace with related current costs. Subdivider Lot Levies 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 any one 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. 714 CORPORATION OF THE TOWN OF NEWCASTLE Page 3 of 4 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 1988 Subdivider Lot Levies (continued) We understand that the Planning Department is currently in the process of computerizing its subdivision lot levies records. We suggest that the Treasury Department work Jointly on this project with the Planning Department to require that proper internal accounting controls are incorporated into the new system. Under the current system cash receipts related to planning functions (i.e. subdividers' levies, building permit fees, etc.) are collected initially by the Planning Department and subsequently forwarded to the Treasury Department for formal recording. In order to improve internal controls over cash receipts, we recommend that a system be developed to provide for the payment of all monies directly to the Treasury Department. The payor would then present his paid receipt to the Planning Department to obtain his permit or other approval as required. Community and Recreation Boards The various recreation and community centres are maintaining separate bank accounts outside the control of the Municipal Treasurer. This practice is in contravention of Sections 81 and 82 of the Municipal Act. We recommend that Council consider dissolving the various local boards with the exception of the Orono Arena, Newcastle Arena and the Newcastle Community Hall. The other boards could then become local associations to which the Town could lease the land and facilities at a nominal rent (i.e. at rates to cover the Town's fixed operations costs). This procedure would then allow the Town to comply with the Municipal Act in regard to the small boards, eliminate the need to consolidate their operations into the Town's financial statements and reduce year-end analysis of small board operations by treasury personnel. Since the Orono Arena, Newcastle Arena and the Newcastle Community Hall have a significant amount of operating revenues and expenditures, the Town should look into ways of complying with the Municipal Act without dissolving these boards. 71 CORPORATION OF THE TOWN OF NEWCASTLE Page 4 of 4 COMMENTS ON INTERNAL CONTROL AND ACCOUNTING PROCEDURES FOR THE YEAR ENDED DECEMBER 31 , 1988 Letters of Credit At December 31, 1988, the Town had Letters of Credit on hand totalling approximately $20,300,000. In order to improve control over these Letters of Credit, we suggest that quarterly reports be prepared detailing changes. This report should be sent to the Treasurer, Deputy-Treasurer and the Planning Department Director for their review. A suggested format of the report is as follows: Balance Balance Plan First Second Subdivider Number Quarter Additions Deletions Quarter 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. 716