Accept Statements of Interest and Resumes for Audit Committee, select members, and convene first official meeting of Audit Committee. Audit Committee should consist of a maximum of three members. (March 2008) UPDATE - Audit Committee members appointed and first Audit Committee meeting held in March 2008. Audit Committee meets regularly.
Business Administrator and Staff to complete 2007 year end accounting and ensure GASB 34 valuation is recorded, if deemed applicable. Record all necessary entries to close books, and provide to auditors for 2007 audit along with footnote disclosures and MD&A (audit field work scheduled for February 2008). Note that there is a very strong possibility due to timing of the issuance of the 2006 audit report (December 2007) and the completion of the 2007 audit (estimated to be completed by April 2008) that some of the issues noted in the 2006 audit will most likely remain for the 2007 audit. (February 2008) UPDATE - Audit completed and reports provided to the township and posted on the website. Many of the same types of issues noted.
Business Administrator to provide detailed remediation plan in writing to Commissioners for each of the items noted in management letter that was part of the 2006 audit along with timeline for implementation and persons responsible (detailed weaknesses identified in Audit firm presentation and findings and Business Administrator response). (February 15, 2008) UPDATE: Business Administrator did not provide detailed remediation plan as requested. Director of Finance will present management response to remedy all internal control comments from the 2007 audit (July 2008).
Hire Director of Finance in oversight role over the Accounting and Finance functions who will be responsible to implement the internal control review recommendations and remedy any issues noted in audit findings as well as implement policies and procedures and best financial practices. Recommendation and vote on position profile and placing of ad for this position to be completed at tonight’s meeting. (March 2008) UPDATE - Director of Finance in place for approximately two months.
Implement Best Practices in Financial Management, including creating detailed policies, procedures, and controls that would address internal control issues, with proper segregation of duties. (2008 ongoing implementation) UPDATE - Due to lack of progress made by Business Administrator to implement written policies and procedures, the township hired an external firm to provide written policies and procedures and walkthroughs of all revenue and expense streams. Walkthrough results and recommendations to be provided by July 2008.
Review 2008 budget and propose additional resources, including independent internal control review and other supporting resources, to ensure Roadmap to Success strategy is achieved. This includes resources needed to implement remediation of 2006 audit issues identified. UPDATE - this step was completed as part of the 2008 budget review process in January 2008. Additional resources for remediation will be proposed by the Director of Finance and incorporating into the 2009 budget proposal.
Review budget approach and development to ensure most accurate model is utilized and capital and strategic plans are created and perform legislative review procedures to ensure proper control of expenses. (2008 ongoing implementation) UPDATE - Director of Finance will be responsible to manage the budget process beginning in August 2008 for the 2009 budget process including the creation of a budget calendar, budget package and files to complete for regular and capital plans, along with rollout and training session to township staff to ensure understanding and buy-in of budget process.
Business Administrator to ensure all accounting and other record keeping software programming concerns are resolved in time for audit field work in February 2008 in order to be able to produce accurate reports and stand alone monthly financial statements. In addition, the Business Administrator should create a calendar of 2008 deadlines. (February 15, 2008) UPDATE - Business Administrator did not resolve all accounting and software concerns in time for audit fieldwork to produce accurate stand alone monthly financial statements or a calendar of 2008 deadlines. Director of Finance will be responsible for the production of accurate monthly financial statements (December 2008) and analysis and calendar of deadlines (July 2008).
Director of Finance and/or Business Administrator to ensure that monthly closing journal entries are prepared so that each month there is an accurate, complete set of stand alone financial statements and proper monthly reconciliation of balance sheet accounts is performed in a timely fashion after month end. (March 2008) UPDATE - Business Administrator did not ensure monthly journal entries were prepared and complete financial statements and reconciliations were performed. Director of Finance will be responsible to ensure accurate monthly accounting (phased in approach from July through December 2008) and analysis (July 2008) is prepared.
Request budget be prepared by month in addition to annually to ensure that monthly financial statement analysis is meaningful. (March 2008) UPDATE - Business Administrator did not provide a budget that included monthly detail as required. The Director of Finance will prepare the 2009 budget (by month) using a bottom up and top down approach, with input from all operational areas to ensure a dynamic and robust budget process and result beginning in August 2008 along with budget calendar and package and follow-up meetings and training.
Implement monthly financial statement variance analysis of actual to budget and prior year with explanation of significant variances. Director of Finance and/or Business Administrator to attend public meetings to answer questions. (beginning with January 2008 month end actuals) Business Administrator did not provide monthly financial statement variance analysis and explanation as requested or attend regular meetings. Director of Finance prepared sample monthly financial statement variance analysis and will begin providing analytical review at July 17th meeting and attend regular meetings to answer questions.
Propose external, independent firm to perform a detailed internal controls and policy and procedures review which provides findings in report form with detailed observations and assessments, specific recommendations for remediation, responsibility, and detailed timeline for implementation based on input from staff. UPDATE - this step can only be done once policies and procedures are in place, controls are in place, and have had sufficient time to operate. Based on delays in progress this timeline has been moved to the last quarter (4thQtr 2008 or 1stQtr 2009).
Implement detailed performance reviews for finance group responsible for implementation to ensure achievement of Roadmap to Success strategy. UPDATE - delayed until most likely the 3rd Qtr 2008 in conjunction with creation of finance group and other township position profiles and performance review process creation.
LMT Financial Remediation Timeline Convene Audit Committee 2007 year end accounting for Audit Provide detailed remediation plan for 2006 audit findings Hire Director of Finance Implement Best Practices in Financial Management Review 2008 budget and propose additional resources Review 2009 budget approach and development strategy Resolve accounting and software concerns for audit field work Provide stand alone financial statements Prepare budget by month in addition to annually Provide monthly financial statement analysis Perform detailed review of internal controls and policy and procedures Implement detailed performance reviews for finance group JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC requested completed delayed
11 adjusting journal entries recorded in 2007 versus 26 in 2006, an improvement from the prior year. One uncorrected misstatement for 2007 deemed to be immaterial. Note that the majority of these entries were for routine transactions, which means that the township should be recording these entries without assistance from the auditors.
Remediation Strategy - Goal of less than 5 audit entries and no uncorrected misstatements for 2008 audit.
A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the Township’s ability to initiate, record, process or report financial data reliably in accordance with accounting principles generally accepted in the USA such that there is more than a remote likelihood that a misstatement of the Township’s financial statements this more than inconsequential will not be prevented or detected.
There was no review and/or approval of changes made to the master accounts payable vendor file by someone other than the accounts payable clerk who was making the changes. Remediation Strategy - A master data control should be implemented that ensures that a person be assigned the responsibility for all master data changes and a system log be kept and change control process be implemented so that all changes are documented, reviewed and approved as evidenced on a change request form and system documentation monitored on a timely basis. The person assigned master data functionality should not have the capability to make any other changes in the Fundations System (August 2008).
There was a lack of timely reconciliations of the accounts payable subsidiary ledger to the general ledger balance. Remediation Strategy - All subsidiary ledgers should be reconciled on a monthly basis and all accounts selected by the Director of Finance for reconciliation should be reconciled on a monthly or quarterly basis and reviewed and approved by Finance Management. A log of all reconciliations should be reviewed and approved by the Director of Finance on a monthly basis. (August through December 2008 phase in of full reconciliation process).
A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
Monthly financial reports reflecting actual and budget results in each major fund were not prepared and distributed to the Board of Supervisors. The Board of Supervisors had access to the computer system if they want to review finances in detail. Remediation Strategy - Monthly financial analysis of actual versus budget for each fund will be prepared beginning at the July 17th meeting and provided to the Board of Commissioners for their review on a monthly basis.
Generally accepted audited standards in the USA require an entity to have the ability to prepare a complete set of financial statements and related footnote disclosures. The Township has chosen to have its financial statements and related disclosures prepared by its independent audit firm as part of the audit process. The Township has not developed the processes required to prepare its own financial statements and footnote disclosures. Remediation Strategy - The Director of Finance will ensure that for the 2008 audit the Township will have the ability to produce complete standalone financial statements, footnote disclosure, and MD&A by moving to a complete monthly closing process (December 2008).
There was inadequate segregation of duties within functions of the utility billing cycle. The billing clerk, who processes billings, could also made adjustments to customer accounts. Remediation Strategy - The Director of Finance will review all finance and accounting related functions, including the billing clerks, and ensure that township wide, the processes of initiating or creating a transaction, approving that transaction, and recording that transaction are separately performed be different individuals remedying any segregation of duties issues by September 2008.
There was no monthly reconciliation of sewer and trash account receivable subsidiary ledgers to the general ledger balances. Remediation Strategy - As noted on previous accounts payable subsidiary ledger response, the Director of Finance should ensure that sewer and trash subsidiary ledgers, all subsidiary ledgers, are reconciled, reviewed and approved on a monthly basis beginning in August 2008.
Identified Control Deficiencies are control comments that were not determined to be significant deficiencies or material weaknesses.
Adjusting journal entries could be prepared and posted by the Treasurer, with no other reviews or approvals. Remediation Strategy - Adjusting and Standard journal entries must be documented on a journal entry form with supporting documentation attached and reviewed and approved by the Director of Finance or Township Manager (if prepared by the Director of Finance). The Director of Finance should review and approve a system listing of all journal entry activity on a weekly basis beginning July 2008.
The Township has not implemented the Capital Asset module of its accounting software. Information concerning historical cost and depreciation of capital assets are maintained on electronic spreadsheets. Remediation Strategy - All Capital Assets will be recorded in the Fundations System and properly depreciated by October 2008.
Property liens for delinquent sewer and trash receivables were not filed on a timely basis. Remediation Strategy - The Director of Finance should review the Sewer and Trash Subsidiary Ledger and Aging Analysis, determine accounts that are uncollectible and propose write-off entry, determine any allowance for doubtful accounts, and then coordinate the recording of the liens on the population that is deemed to be collectible by August 2008.
The general ledger code was not always noted on the invoice or purchase order. Proper classification is essential to ensure that the correct general ledger account is chosen when paying the Township’s bills. Remediation Strategy - The interim policies and procedures, authorization matrix, and bill payment practice should be consistently adhered to which will ensure that all bills submitted for payment include the general ledger code on the invoice or purchase order.
Adopting a comprehensive set of policies and procedures and authorization matrix will ensure a consistent practice is implemented by control area. External firm to be providing recommendations for adoption by July 2008. Written benchmarking and policy resources provided to the township since January 2008. Benchmarking initiatives underway and should continue to be used to garner best practices.
During 2007, the General Fund and the Capital Projects Fund expenditures exceeded appropriations. The Township should have budget monitoring procedures in place when amendments are necessary so expenditures don’t exceed approved appropriations. Remediation Strategy - The Director of Finance and Township Manager should continue to refine the budget monitoring procedures, institute a standard procedure for budget monitoring and amendments, and provide to the Commissioners for review on a monthly basis (July 2008).
Escrow activity is recorded in Quickbooks and then posted to the Fundations Software via a journal entry. Remediation Strategy - The Director of Finance should ensure that all Escrow activity is transferred to the Fundations System by September 2008 and all Escrow transactions recorded prospectively in the Fundations System beginning in October 2008.
We noted that escrow activity is recorded on the cash basis of accounting until year-end. Accounting principles generally accepted in the USA require that this activity be recorded on the accrual basis. Remediation Strategy - Once all of the Escrow activity is recorded in the Fundations System, the Director of Finance will ensure that monthly entries are recorded to ensure that the Escrow activity is recorded on the accrual basis of accounting by October 2008.
Employees should be required to enter a unique password when logging on to their PC each day, and those passwords should be changed regularly (for example, every 90 days). Remediation Strategy - The Township Manager should ensure that unique passwords are provided to each employee and are changed on a regular basis (90 days or less) by July 2008 in conjunction with the creation of a comprehensive IT, risk mitigation, and disaster recovery plan and strategy.
Workstations should be automatically password protected after a set period of inactivity (for example, 10-15 minutes). Remediation Strategy - The Township Manager should ensure that all workstations are automatically password protection after approximately 15 minutes by July 2008 in conjunction with the creation of a comprehensive IT, risk mitigation, and disaster recovery plan and strategy.
There is minimal physical security to prevent IT system intrusion. To provide greater physical security to the servers, a separate, secured server room is recommended. The room should contain:
Dedicated electrical feed (circuit dedicated to computer room).
Controlled environment (air conditioning and humidity controls).
Entrance control (intrusion detection and prevention).
Fire Control (detection and suppression).
Professional cabling system (certified).
Remediation Strategy - The Township Manager should ensure that a comprehensive IT and risk mitigation strategy, as well as a disaster recovery plan, is presented to the Board of Commissioners for review and approval by August 2008. Any immediate risks that are identified should be addressed sooner.
While there have been some time delays and setbacks since the beginning of our appointment, the Commissioners, Township Management, and Staff are dedicated to working together as a team to restore the public trust and move toward best in class excellence.
This will still include taking a proactive, “Best in Class” approach to remedying all of the control and financial issues noted using tools presently utilized for SOX compliant businesses, though there is no compliance requirement for the township. Moving toward a private sector business model will allow for more oversight and accountability.
While there is no way to completely eliminate the risk of fraud occurring, the implementation of this evolved Roadmap to Success strategy will minimize this risk.