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Department of Homeland Security OFFICE OF VITAL STATISTICS Cash Collections Final Report, June 2011 American Samoa Government Territorial Audit Office Robert P. Dantini, CPA, Territorial Auditor E-mail firstname.lastname@example.org P 684.633.5191 Office of Vital Statistics Cash Collections TABLE OF CONTENTS I. Executive Summary....................................................................................... 0 II. Background.................................................................................................. 5 III. Objectives, Scope, and Methodology ........................................................... 6 IV. Detailed Findings and Recommendations .................................................... 7 V. Management’s Response .......................................................................... 11 VI. Corrective Action Plan.................................................................................... VII. Territorial Audit Office Contact Information ..................................................... i I. EXECUTIVE SUMMARY We conducted an unannounced cash count at the Office of Vital Statistics on October 19, 2010. The audit determined whether the Office of Vital Statistics; (1) complied with existing policies and procedures on cash collections, and (2) cash receipts and petty cash transactions were complete, accurate, adequately documented, recorded, and deposited timely and intact. Based on interviews and observations of the Office of Vital Statistics staff as well as examination of the available books, records, and documents, we found that all cash counted was complete, accurate, recorded, and posited timely and intact. Summary Findings: Audit Objective: Does the Office of Vital Statistics comply with Department of Treasury’s approved policies and procedures on cash collections and are those policies and procedures adequate? Finding #1 The American Samoa Government’s Administrative Code does not adequately establish the Department of Treasury’s sole authority for establishing financial rules, policies, and procedures. In our opinion, Treasury should have sole authority for establishing financial policies, procedures and all other internal controls for ASG. Neither Treasury nor Office of Vital Statistics have implemented or updated current policies and procedures over cash collections There is presently no formally established method to efficiently disseminate policies and procedures developed by Treasury to the rest of ASG. Page 1 of 15 Audit Objective: Are cash receipts and petty cash transactions at the Office of Vital Statistic complete, accurate, adequately documented, recorded, and deposited timely and intact? Finding #2 Daily cash collections are not deposited to ASG Revenue Division in a timely manner. One of the cash collections reviewed showed that an off-island personal check was included. OVS does not maintain a log of unused cash receipt numbers that were issued from Treasury. Such log would reduce the risk of collected cash not being recorded. Audit Objective: Are there adequate safeguards to ensure accuracy of the cash intake at the Office of Vital Statistics? Finding #3 Incompatible cash receipting duties are not segregated and multiple cashiers have access to collected cash that is not properly safeguarded. Finding #4 Cash receipts and change funds are not adequately safeguarded during the days’ business activities. Page 2 of 15 Summary Recommendations: Audit Objective: Does the Office of Vital Statistics comply with Department of Treasury’s approved policies and procedures on cash collections and are those policies and procedures adequate? Recommendation #1 Update the American Samoa Administrative Code to clarify that Treasury Department has sole authority to establish financial policies, procedures and internal controls for all divisions of ASG and require a formal approval process and methodology to ensure comprehensive and coordinated management and dissemination of such policies, procedures and controls. It should be noted that the Governor’s Office is drafting proposed legislation, at the time of this writing, to address this finding. The Director of Treasury should: Formally develop a system for establishing, approving and indexing uniform policies, procedures and internal controls for all offices, agencies and departments within ASG. Update comprehensive written policies and procedures over cash collections. It should be noted that Treasury has drafted comprehensive policies and procedures over cash collections but the Treasurer has not yet formally approved them. Ensure that policies and procedures are reviewed periodically according to a predetermined schedule and updated if needed. Changes in policies and procedures should be vetted, formally approved by the Treasurer, dated and disseminated to all ASG departments, offices and agencies. Audit Objective: Are cash receipts and petty cash transactions at the Office of Vital Statistic complete, accurate, adequately documented, recorded, and deposited timely and intact? Recommendation #2 We recommend the Office of Vital Statistics: Transmit each days cash collections to ASG Revenue division in a timely manner (daily). Prohibit acceptance of personal checks drawn on an off-island bank account. Maintain a log of all pre-numbered books of manual receipting forms issued from Revenue division to ensure that all transactions can be accounted for. This log will reduce the risk of theft due to unrecorded cash collections. Page 3 of 15 Audit Objective: Are there adequate safeguards to ensure accuracy of the cash intake at the Office of Vital Statistic? Recommendation #3 The Directors of Treasury and Homeland Security should: Ensure adequate segregation of duties over cash collections, receipting, daily balancing and transmittal to Treasury. These duties should be performed by separate individuals to strengthen accountability and prevent the risk of a cash theft from going undetected. Additionally, only one person should be allowed access to the day’s collected cash prior to daily balancing of cash to receipts and transmittal. Recommendation #4 The Director of Treasury should: Purchase an electronic cash register for the Office of Vital Statistics’ cash collections. Assess the condition and need of cash registers in all cash collection areas within ASG since many other departments face the same issue. Page 4 of 15 II. BACKGROUND We conducted an unannounced cash count at the American Samoa Department of Homeland Security, Office of Vital Statistics (OVS) on October 19, 2010. The collection consist of charges for requested copies of birth certificates, marriage license, death certificates, and identification cards. The Office of Vital Statistics (OVS) is currently under the control and supervision of the Director of the American Samoa Department of Homeland Security per ASCA Section 4.0330 – section 2. It states that OVS is responsible in accurately maintain registers of all marriages, divorces, births, deaths, and adoptions, and such other registers as the Governor or his authorized representative may from time to time designate. In addition, upon request furnish certified copies of such documents and issued marriage licenses per ASCA section 4.1110. All services provided has a different fee assessed by this Office based on the schedule of fees provided. The OVS Laws and Policies requirements for issuance of Birth Certificate or Birth Certificate requests is over 18 years of age can release to the owner of the birth certificate. Under 18 years of age can only be release to the natural parents or legal guardians. A valid state/immigration or passport, or military or American Samoa Government identification card must present for verification. For off-island requests personal checks are not accepted , only money orders or cashier’s checks when birth request are requested from off-island (United States or Foreign Countries). The OVS daily cash collection is deposited directly to ASG Treasury, Revenue Division. The transmittal letter, copies of the receipts and cash are forwarded to Revenue Division for deposit. The Revenue Division then verifies the deposit and issues a deposit receipt as proof of deposit on a daily basis. Page 5 of 15 III. OBJECTIVES, SCOPE AND METHODOLOGY OBJECTIVES The audit was designed to address the following objectives: 1. Does the Office of Vital Statistics comply with Department of Treasury’s approved policies and procedures on cash collections and are those policies and procedures adequate? 2. Are cash receipts and petty cash transactions at the Office of Vital Statistic complete, accurate, adequately documented, recorded, and deposited timely and intact? 3. Are there adequate safeguards to ensure accuracy of the cash intake at the Office of Vital Statistics? SCOPE OF OUR WORK To conduct this limited scope review, we performed an unannounced cash count at the Office of Vital Statistics (OVS) on October 19, 2010. METHODOLOGY To answer the audit objectives, we reviewed documents and controls relevant to the cash collection at OVS. To evaluate the cash receipting operation, we conducted surprise cash counts, reviewed existing cash collection policies and procedures, related accounting, deposits, and receipting reports, verified cash receipts, interviewed the cashier, and evaluated the physical security of collected cash. Our limited scope financial audit was performed in accordance with generally accepted governmental auditing standards established by the Comptroller General of the United States. Page 6 of 15 IV. DETAILED FINDINGS AND RECOMMENDATIONS Audit Objective: Does the Office of Vital Statistic comply with Finding #1 As previously mentioned in prior Territorial Audit Department of Treasury’s Office audit reports, the American Samoa approved policies and procedures Government’s Administrative Code does not clarify on cash collections and are those the Treasurer’s sole authority for establishing policies and procedures financial rules, policies, procedures and internal adequate? controls. The American Samoa Code Chapter 5, Section 4.0506 and Chapter 10, Section 4.1001 (a) and (g) authorizes the Department of Treasury to adopt rules to further the purposes of its powers and duties. Chapter 10, Section 4.1002, (1) authorizes each agency to “adopt rules of practice setting forth the nature and requirements of all formal and informal procedures available, including a description of all forms and instructions used by the agency;” This language has been interpreted to mean that individual departments can establish their own financial rules, policies and procedures. This can create contradictory policies if departmental policy or procedure is in conflict with Treasury’s established policies. Treasury’s financial policies and procedures have evolved over time and have not been given priority attention until recently. Development of entity-wide, uniform financial policies and procedures should be the responsibility of the Director of Treasury. The Treasurer should have sole authority for establishing and promulgating all financial policies, procedures and internal controls for ASG. Establishment of uniform policies, procedures and internal controls enables accountability over transactions. We found that the Office of Vital Statistics has not finalized their cash collection policies and procedures. Current department specific policies are in draft form. Best practices recommend that every government document its accounting policies and procedures. Long-term benefits of having an updated accounting policy manual include safeguarding assets, assigning accountability and providing consistent rules. A well- designed and properly maintained system of formally approving and documenting accounting policies and procedures establishes accountability. It also serves as a useful training tool for staff and facilitates the audit process. In other words, fund custodians and cashiers will better understand their duties and responsibilities. This is particularly important if there is turnover of key staff. Policies should clearly explain the procedures to be followed, establish authorized forms, control of forms and identify who is authorized to carry out various tasks. These elements are imperative to establish and maintain accountability. Page 7 of 15 RECOMMENDATION #1 We recommend that the Governor’s Office develop and propose legislation to clarify that the Treasurer has sole authority to establish financial policies, procedures and internal controls for all operating divisions of ASG and establish a formal approval process and methodology to ensure comprehensive and coordinated management and dissemination of such policies, procedures and controls. It should be mentioned that, at the time of this writing, the Governor’s Office is preparing proposed legislation to address this issue. We further recommend ASG Treasury formally develop a system for establishing and approving uniform policies and procedures for all cash collections within ASG. These policies and procedures when approved, should be numbered, dated and, communicated. In this manner, control is able to be uniformly established by Treasury over all ASG offices, departments and agencies. We further recommend that the Director of Treasury update written policies and procedures over cash collections. Revenues should be properly controlled and safeguarded. Failure to have the appropriate controls in place over cash receipting increases the risk that cash could be misappropriated. It should be noted that, at the time of this writing, Treasury is in the process of drafting and vetting updated policies and procedures for cash collections. This “drafting” has been in process for nearly a year. Until the draft is finally approved by the Treasurer, there is no formal accountability assigned over personnel handling cash transactions. Written policies, procedures and internal controls should be reviewed periodically according to a predetermined schedule and updated if needed. Changes in policies and procedures should be vetted, formally approved by the Treasurer, dated and disseminated to all operating departments. Page 8 of 15 Audit Objective: Are cash receipts and petty cash transactions at the Office of Vital Statistic complete, accurate, adequately documented, recorded, and deposited timely and intact? Finding #2 Our cash count at OVS found: Daily cash collections are not transmitted to ASG Revenue Division consistently in a timely manner. Of the three deposits reviewed, delays were between two and five days. For instance, cash collections on two of the days reviewed (October 15 and 18, 2010) were withheld up to four days at the Office of Vital Statistics and were not yet deposit to ASG Revenue Division. These collections were included in our cash count on October 19, 2010 and deposited to ASG Revenue Division the same day. According to the OVS clerk specialist, who prepares the daily collection for deposit, she was unavailable to deliver the deposit to the Revenue Division since most of the staff members were out of the office. Timely depositing of revenue helps minimize the risk of loss, theft, or misappropriation of funds. The cash collection on October 19, 2010 (transmittal letter no. 250055) showed that an off-island personal check was included. OVS laws and policies prohibit personal checks from off-island. OVS does not maintain a log of pre-numbered cash receipt books issued from Treasury. The absence of this important control feature results in the risk that some manual receipts could be issued when cash is collected, but not recorded. All pre-numbered manual receipts must be accounted for, at all times. This is a good example of why we recommend the use of electronic cash registers as a preferred receipting method whenever practical. RECOMMENDATION #2 We recommend the OVS: Ensure cash collections be Transmitted to ASG Revenue division daily, as is required by existing Treasury policy. Enforce its policy which prohibits acceptance of personal checks from off- island. Maintain a log of cash receipt numbers issued from Revenue division to ensure accountability. Page 9 of 15 Audit Objective: Are there adequate safeguards to ensure Finding #3 accuracy of the cash intake at the Incompatible cash receipting duties are not adequately Office of Vital Statistic? segregated at OVS. Currently, the fund custodian (clerk specialist) collects cash, prepares cash receipts, balances the day’s cash and receipts, prepares the transmittal letter for submittal to ASG Revenue Division. Furthermore, all staff members at OVS have access to “common” collected cash. The most effective way to prevent theft of cash receipts is to segregate the duties of cash handling and recording. When one person controls multiple phases of a transaction, the risk of undetected cash theft increases dramatically. Furthermore, multiple people having unfettered access to money results in a lack of accountability. In this scenario, responsibility cannot be assigned to an individual if there is a shortage or missing funds. Cash collection procedures should specifically attempt to segregate incompatible individual tasks to enhance accountability. RECOMMENDATION #3 We recommend the Director of Treasury develop and establish cash collection policies and procedures which encourage segregating incompatible tasks among staff to promote accountability. It is further recommended that just one person have access to collected, combined cash during the day. Finding #4 Physical safeguarding of cash receipts and change funds could be improved at OVS. Daily cash collections are kept lose and scattered in the Registrar’s office desk drawer. However, the physical safeguarding of cash, checks overnight and unissued receipts for payment forms are kept in a locked filing cabinet and appear adequate. Without adequately safeguarding and securing cash receipts, the risk of theft and misappropriation increases. When feasible, cash and cash items should be physically protected through the use of safes, vaults, locked cash drawers, cash registers and locked metal boxes. Use of an electronic cash register would also improve security over cash receipts. RECOMMENDATION #4 We recommend that ASG Director of Treasury purchase an electronic cash register for the Office of Vital Statistics’ cash collections. We further recommend the Director of Treasury assess the condition and need of cash registers in all cash collection areas within ASG since many other departments face the same issue. Page 10 of 15 V. Management’s Response Page 11 of 15 VI. CORRECTIVE ACTION PLAN REQUEST The Territorial Audit Office (TAO) conducted an exit meeting with representatives of the Department of Homeland Security, the Office of Vital Statistics, Treasury Department and Governor’s Office on ____________________________________________. The purpose of the meeting was to present, review and discuss proposed audit findings and recommendations contained in the preliminary report, with the audited agencies. Although the audit was performed on OVS activities, the other departments were involved as a result of the findings. ASG Code Title 4, Chapter 4.0412 establishes procedures to be followed at the conclusion of an audit. This code section requires that the Territorial Auditor present and discuss with agency officials, proposed findings which may be included in the audit report. The audited agencies are then required to submit a written statement explaining or rebutting the proposed audit findings, including any corrective actions to be taken that are designed to preclude recurrence of adverse findings. The Agency’s response is required to be submitted to TAO within 30 days after receipt of the proposed findings, and subsequently published in the final audit report. TAO’s Policies and Procedures Manual Part II, Chapter 7 requires the submission of a corrective action plan by management of the audited agency(s) within 180 days of the final audit report date. Such corrective action plan should include the timeframe for implementation. Accordingly, it is hereby requested that the aforementioned Departments collaborate on the preparation of the Corrective Action Plan in connection with this audit. The plan should be submitted to TAO 180 days from the issue date of this report. TAO will include the state of progress on corrective action plans which resulted from issued audit reports in its annual report to the Governor and Fono. Page 12 of 15 VII. Contact Information: Territorial Audit Office Office Telephone: 684- 633- 5191 Website: http://americansamoa.gov/departments/tao/territorial-audit- office Waste, Fraud and Abuse Hotline The public can call the Territorial Audit Office at 684- 633- 5191 to report matters involving suspected waste, fraud or abuse of public assets. You can also email TAO at: email@example.com Territorial Auditor – Robert Dantini CPA, PFO Page 13 of 15
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