1.
Municipal Accounting Threats &
Revenue Opportunities
Mark Moses
Director of Finance Services
Maze Live – July 27, 2017

2.
AGENDA
Focus on internal control
breakdowns that impact:
• Integrity of financial reporting
• Revenue collections

3.
The COSO model defines internal control as
“a process, effected by an entity’s board of
directors, management and other personnel,
designed to provide reasonable assurance of
the achievement of objectives in the
following categories:
• Effectiveness and efficiency of operations
• Reliability of financial reporting
• Compliance with applicable laws and
regulations”

4.
Why Important?
• Financial Consequences
• Poor internal controls reflect
on management and finance
• You are responsible

5.
#1 Control over revenues
▪ Rogue billing/intercepted payments
▪ Ability to adequately analyze revenues
▪ Consequences
▪ Embezzlement
▪ Missed billings
▪ Would you know if someone were
intercepting payments; or if some
revenues were not being collected?

6.
▪ How are they integrated with GL
▪ Regularly reconciled? (e.g., a/r, deposits)
▪ Consequences
▪ Embezzlement
▪ Misstated financials
▪ How certain are you that your subsidiary
systems (utility, class registration,
building permits) are properly reported?
#2 Control over subsystems

7.
 Can employees collect cash and bypass
reporting/deposit process?
 Is cash secure?
 Is the system tested (e.g., surprise audit,
mystery shopper)?
 Would missing cash ever be discovered?
(golf course, pool, tennis courts)
#3 Cash receipts

8.
▪ Inability to produce full grant inventory
▪ Loss of funds due to insufficient spending
or timely reimbursement requests
▪ Audit findings
▪ Repayment of grant funds
▪ Do you have central oversight, or at least
coordination of all grants?
#4 Grant Oversight

9.
 Rules are increasingly complex
 Requires coordination between benefits
administration and payroll
 Requires knowledge of what payments to
employees are reportable
 Do you properly report cash payments,
group life insurance, take-home vehicles,
health club reimbursements?
#5 Benefits reporting on W-2s

10.
#6 Purchasing card review
▪ Importance of supervisor’s review
▪ knowledgeable of purchase rationale
▪ not a rubber stamp
▪ Periodic audits required to maintain confidence
in card controls
▪ Would you know if items purchased were not
delivered to your agency?

11.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
#7 Consultants /intermediaries

12.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
▪ Continuing disclosure (bond covenants)
#7 Consultants /intermediaries

13.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
▪ Continuing disclosure
▪ Third party administrators (WC, Gen Liab)
#7 Consultants /intermediaries

14.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
▪ Continuing disclosure
▪ Third party administrators
▪ County assessor (special taxes)
#7 Consultants /intermediaries

15.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
▪ Continuing disclosure
▪ Third party administrators
▪ County assessor
▪ Report preparation (SCO report, Streets)
#7 Consultants /intermediaries

16.
▪ Importance of reviewing work of those on
whom agency relies for revenues
compliance
▪ Continuing disclosure
▪ Third party administrators
▪ County assessor
▪ Report preparation
▪ Rate consultants (utility, development fees)
#7 Consultants /intermediaries

17.
▪ Importance of reviewing work of those on
whom agency relies for revenues compliance
▪ Continuing disclosure
▪ Third party administrators
▪ County assessor
▪ Report preparation
▪ Rate consultants
▪ District tax administration (special taxes, fees)
#7 Consultants /intermediaries

18.
▪ Importance of reviewing work of those on
whom agency relies for revenues compliance
▪ Continuing disclosure
▪ Third party administrators
▪ County assessor
▪ Report preparation
▪ Rate consultants
▪ District tax administration
▪ Benefit design (health plans, retirement programs)
#7 Consultants /intermediaries

19.
You can delegate work;
You can delegate tasks;
You cannot transfer responsibility
▪ Is someone accountable for verification of
the work of outside agents?
#7 Consultants / intermediaries
(continued)

20.
#8 Control over refunds
▪ Subject to abuse if basis for refund is not
reviewed or properly documented
▪ Business license, code enforcement, developer
deposits, class cancelations (intangible)
▪ Are there adequate controls over and
verification of customer refunds?

21.
#9 Contract Authority
 Monitoring contract not-to-exceeds
 Payments not on purchase orders – brokers,
attorneys, software support (particularly on
older systems)
 Would you know if there were attempts to
spend beyond authorized NTEs?

22.
Challenges
 Internal controls not well understood
 Not a priority until something bad happens
 Not generally considered when resources
are being allocated or reduced

23.
Recommendations
 Document issues and note consequences
 Make resolving IC issues part of your workplan
 Educate CM & Council on their roles in IC
 Ensure that IC are part of the criteria used
when business processes are evaluated

24.
Mark Moses – 650-587-7300 x47
mmoses@rgs.ca.gov