Internal Audit Report

Transcription

1 Internal Audit Report Receipt of Goods & Services Continuous Monitoring As of April 30, 2013 Accounts Payable procedures and processes associated with the receipt of goods and services should be improved in order to address the following concerns: Invoices on Hold ($3,301, as of 4/30/2013) Un-invoiced Received Items ($3,424,290 as of 5/03/2013) Receipt of goods are not recorded in a timely fashion Invoices totaling $891, were paid without proper receiving documentation Internal Audit Services

2 April 30, 2013 Dallas ISD Board of Trustees Lew Blackburn Adam Medrano Eric Cowan Nancy Bingham Elizabeth Jones Mike Morath Dan Micciche Carla Ranger Bernadette Nutall Members of the Board of Trustees Members of the Audit Committee Ladies and Gentlemen: In accordance with the revised FY Audit Plan, we have completed our initial limited scope examination of receiving goods and services. We reviewed the following areas: Handling of invoices on hold Handling of un-invoices receipts Proof of receipt of goods & performance of services While there are opportunities for improvement in the areas of support for the receipt of goods and performance of services, there was no evidence of material weaknesses. The Accounts Payable Department should facilitate and participate in ensuring goods and services have been satisfactorily completed prior to submitting payments. Our findings and recommendations were discussed with management. We have included the responses from management addressing our findings and recommendations. We would like to thank management for the cooperation and courtesies extended to our staff during the conduct of this audit. Sincerely, Alan King, CPA Interim Chief Internal Auditor 2

3 Table of Contents EXECUTIVE SUMMARY... 4 OBJECTIVES, SCOPE AND METHODOLOGY... 4 RESULTS... 5 FINDINGS AND RECOMMENDATIONS... 5 & 6 CONCLUSION

4 EXECUTIVE SUMMARY Based on our continue examination and evaluation of the Accounts Payable operations, we concluded that controls need strengthening in each of the four areas reviewed. Those areas include invoices on hold, uninvoiced receipts, proof of receipt of goods, and proof of receipt of services rendered. The receipt of goods and services are not consistently reflected in Oracle on a timely basis. Therefore the three-way match cannot be completed resulting in payments being delayed thereby creating a need for extensive follow-up by Accounts Payable. There is a need for early involvement in communicating and curing invoices on hold and un-invoice received items with the end users. While the proof of goods received can be more obtainable and receipted, the proof of services rendered is not as evident. Often times the receiver of services rendered has no real evidence that the service has been satisfactorily completed. The following findings were noted: Invoices on hold reports were not timely and consistently worked Un-invoiced received items were not timely and consistently resolved Receipt of goods are not recorded in a timely fashion Invoices for services rendered were being receipted without consistent proof of completion OBJECTIVES, SCOPE AND METHODOLOGY In accordance with the revised FY Audit Plan, we have completed our initial limited scope examination of the accounts payable operations by reviewing January 2013 documents. In addition we reviewed the invoices on hold reports and un-invoiced received reports produced during February 2013 and April The purpose of this limited scope audit was to determine if Accounts Payable procedures to monitor and resolve invoices on hold and un-invoiced received items were adequate and followed. We reviewed selected original invoices and supporting documentation from its entry point to the 3-way matching process, to payment, and posting to the general ledger. In addition we reviewed the following A/P Payable control reports and invoices: Invoices on hold reports by organization Un-invoiced received items reports by organization Receipt of contracted services invoices 4

5 RESULTS FINDINGS AND RECOMMENDATIONS Invoices on hold findings: 1. The invoices on hold report reflect invoices received by Accounts Payable to be processed for payment but cannot be paid because the goods or services have not been receipted in Oracle by the end user. The chart below reflects a summary status of invoices on hold for nine weeks during February 2013 and April Hold Status Date Invoices on Hold Summary Status # of Invoices on Hold $ of Invoices on Hold 02/14/ $4,028, /28/ $4,688, /01/ $4,826, /07/ $6,606, /21/ $7,532, /05/ $11,289, /12/ $2,962, /19/ $1,197, /30/ $3,301, Recommendation: 1.1 Accounts Payable management should investigate the root cause of invoices on hold. They should also develop a plan to systematically reduce the number of invoices on hold and implement a plan to address this problem on an ongoing basis. Management Response: Description of corrective action: Accounts Payable has reorganized the department by organization instead of vendor. This will provide each organization with one point of contact for invoicing instead of talking to each staff member based on vendor. Starting in FY 2014 accounts payable will send out an open encumbrance report to each organization. This report will provide information on which purchase orders are waiting receipt and which orders need to be paid. We are currently contacting suppliers and requesting statements to identify outstanding invoices that have not been sent to accounts payable for processing. Timeline for implementation: October 2013 Identification of specific staff member(s) responsible for implementing correction action(s): Cary Newsome and Paula Adams Un-invoiced received items findings: 2. The un-invoiced received items report reflect goods or services that have been receipted in Oracle by the end user but the invoices have not been received by Accounts Payable for processing payments. 5

6 The chart below reflects a summary of outstanding un-invoiced items for seven weeks during March 2013 and May Un-invoiced Received Items Summary Status Un-invoiced Status Date # of Uninvoiced Items Total Uninvoiced $ s 03/25/2013 6,459 $3,404, /01/ ,068 $3,469, /08/2013 7,095 $3,912, /22/2013 9,713 $3,617, /29/ ,383 $3,578, /01/ ,622 $3,619, /03/ ,947 $3,424, Recommendation: 2.1 Accounts Payable management should investigate the root cause of un-invoiced items. They should also develop a plan to systematically reduce the number of un-invoiced received items and implement a plan to address this problem on an ongoing basis. Management Responses: Description of corrective action: Accounts Payable has reorganized the department by organization instead of vendor. This will provide each organization with one point of contact for invoicing instead of talking to each staff member based on vendor. Starting in FY 2014 accounts payable will send out an open encumbrance report to each organization. This report will provide information on which purchase orders are waiting receipt and which orders need to be paid. We are currently contacting suppliers and requesting statements to identify outstanding invoices that have not been sent to accounts payable for processing. Timeline for implementation: October 2013 Identification of specific staff member(s) responsible for implementing correction action(s): Cary Newsome and Paula Adams 3. A review of invoices on hold for Molina High School, and the Maintenance and HVAC departments revealed the following: A visit to Molina High School disclosed that receipts of goods are not processed in a timely fashion. A discussion with the office assistance and finance person resulted in immediate action being taken. Maintenance was aware of invoices on hold through the use of an automatic notification via Oracle. However it was only after inquiries were made by Internal Audit that action was taken. Using the list provided by Internal Audit, Maintenance begun to address invoices on hold. Using the report provided by Internal Audit, HVAC also begin to aggressively contact the responsible person to bring closure to outstanding invoices that were on hold. Recommendation: 6

7 3.1 Accounts Payable management should contact the end user departments responsible for clearing invoices on hold and un-invoiced received items to determine their awareness and approach to promptly address such items. Management Response: Description of corrective action: Accounts Payable has reorganized the department by organization instead of vendor. This will provide each organization with one point of contact for invoicing instead of talking to each staff member based on vendor. Starting in FY 2014 accounts payable will send out an open encumbrance report to each organization. This report will provide information on which purchase orders are waiting receipt and which orders need to be paid. We are currently contacting suppliers and requesting statements to identify outstanding invoices that have not been sent to accounts payable for processing. Timeline for implementation: October 2013 Identification of specific staff member(s) responsible for implementing correction action(s): Cary Newsome and Paula Adams 4. During the January 2013 review of invoices, an invoice for Education Is Freedom (EIF) was selected for closer scrutiny due to the amount and nature of the contract. It was determined that the administrative assistant had the responsibility of receiving this invoice resulting in payment. However the administrative assistant did not have documentation such as Monthly Reports with daily student sign-in sheets as proof of services performed prior to receiving the invoice. The person authorizing a payment of this amount should have knowledge of the contract requirements. As of April 2013, the district had paid two invoices totaling $445, each. Recommendation: 4.1 Management should develop a process to certify to the receiver that services have been rendered as required by the contract. Management Response Description of corrective action: Dr. Johnson spoke to her administrative assistant about new processes for on June 25 (Dr. Johnson s first day on the job was March 20, 2013). Dr. Johnson received monthly reports via from EIF and all other College Access Program providers. Her administrative assistant will also be copied on those s in the school year. The administrative assistant will review monthly reports and then submit documentation along with invoices for Dr. Johnson s final approval. Timeline for implementation: College Access Program providers for will be selected by high school principals on July 30, New contracts will then be created for each selected vendor, and instructions about submitting monthly reports, signature sheets and other materials outlined in this document will be included in the new contracts. If EIF is selected, the process for approval of invoices will be made as indicated in this report. Identification of specific staff member(s) responsible for implementing correction action(s): Linda K. Johnson 7

8 CONCLUSION The Accounts Payable (A/P) Department should continue to focus on invoices on hold and un-invoiced received items in an effort to cure this problem. Correcting these will also require better monitoring reports to provide more specificity of the problem items and education of the end users on their involvement and responsibility. 8