City of Los Angeles
Office of the Controller
Audit of Fiscal Operations at the Los Angeles
Department of Animal Services
February 15, 2012
Wendy Greuel
City Controller
TABLE OF CONTENTS
EXECUTIVE SUMMARY……………………………..……..…….………………….……..………2
CONTROLLER’S ACCOUNTABILITY PLAN ………………………………….………………….…9
BACKGROUND, OBJECTIVES, SCOPE AND METHODOLOGY ...………………..…………….....16
AUDIT FINDINGS AND RECOMMENDATIONS ………………..…………….………………….... 23
SECTION I: REVENUE COLLECTIONS & BILLINGS ….….………………………..……….….. 23
SECTION II: PAYROLL & TIMEKEEPING ………………………….….…………………...…….35
SECTION III: INVENTORY MANAGEMENT & PROCUREMENT……………………..........……….40
SECTION IV: CONTRACTING………………………….….……………………………………...46
SECTION V: DONATIONS & MISCELLANEOUS REVENUE………………………….….…….….51
APPENDIX………………………………………...………………………………...……………55
AUDIT OF FISCAL OPERATIONS AT THE LOS ANGELES
DEPARTMENT OF ANIMAL SERVICES
EXECUTIVE SUMMARY
BACKGROUND
The Los Angeles Department of Animal Services (LAAS or the Department) enforces
laws regulating the care, custody, control and prevention of cruelty to animals in the
City. The Department issues dog and equine licenses, offers pet adoptions, runs pet
sterilization programs, and holds educational events. The Department’s mission is to
promote and protect the health, safety, and welfare of animals and people in the City of
Los Angeles.
With the General Manager as chief executive, the Department is under the control of a
five-member Board of Commissioners appointed by the Mayor and confirmed by City
Council. The Commission advocates for people and animals living safely together and
sets policy for the Department. The Commission holds public hearings on critical
issues, identifies priorities to be addressed, and makes recommendations to the Mayor
and City Council.
The Department’s operating budget is primarily funded by the General Fund. For Fiscal
Year (FY) 2011-12, LAAS has 337 authorized positions and an operating budget of
$19.9 million. In addition, the General Fund provided $1.1 million to the Animal
Sterilization Fund to help fund the Department’s spay and neuter programs.
The primary objective of this audit was to evaluate the Department’s overall control
environment that is the rudimentary foundation for the financial health of any
organization. Specifically, we evaluated whether LAAS has adequate controls in place
to mitigate the risks associated with its fiscal processes, including revenue collection
and billing, payroll and timekeeping, donation accounting, purchases, animal inventory
management and contracting.
Our audit did not examine performance information/activities, including how resources
were spent in achieving the Department's goals.
SCOPE AND METHODOLOGY
Our audit was performed in accordance with Generally Accepted Government Auditing
Standards (GAGAS) and covered the period from July 1, 2009 to September 30, 2011.
Fieldwork was conducted between July and November 2011. In conducting our audit,
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we interviewed LAAS management and staff involved in fiscal operations at the
administrative office, as well as field staff and supervisors. We analyzed license, permit
and microchip data for additional revenue opportunities. We also reviewed applicable
City and Department policies and procedures to obtain an understanding of the key
processes involved in the Department's fiscal operations.
SUMMARY OF AUDIT RESULTS
Effective internal controls keep an organization moving towards its objectives and help it
to achieve its mission. Internal controls promote effectiveness and efficiency of
operations and are necessary to safeguard assets and ensure compliance with laws
and regulations.
Our evaluation found lax controls over several financial activities at LAAS, including
revenue collection, contract monitoring, and inventory tracking. The absence of
adequate management controls hinders the Department’s ability to effectively manage
its financial resources and to ultimately safeguard City resources. These issues require
immediate management attention. For example, the Department’s practice of only
billing dog owners who paid their most recent license bills may have contributed to
hundreds of thousands of dollars in potential lost revenue. Lax monitoring of in-house
clinics’ revenue sharing agreements led to a loss of over $40,000 in eligible discounts or
lost revenue. The lack of proper monitoring of microchips led to a $125,000 discrepancy
between revenue reported and amounts that should have been generated based on
microchips implanted for the last two fiscal years.
It should be noted that Department management has recognized the need for
improvement. For example, LAAS has dedicated resources to review records obtained
from spay and neuter surgeries to identify dog owners for future billings. The
Department’s actions should help LAAS strengthen critical internal controls. However,
additional efforts need to be taken, particularly at the shelters. Some of the audit's key
findings are as follows:
□ LAAS does not bill all dog owners in its database for licensing, which has
contributed to a decrease in license renewals. The Department has lost the
opportunity to collect over $1.3 million in potential revenue over the last two
years as a result of not sending renewal notices to all registered dog owners.
The Municipal Code requires any person owning or having custody or control of any
dog over the age of four months to pay an annual license fee. Currently, the
Department charges a $20 license fee for an altered dog (i.e., a pet that is spayed or
neutered), and a $100 fee (plus an additional $235 intact dog permit) for an
unaltered dog. Low income seniors pay a $10 license fee for an altered dog;
however, they must pay the full fee for an unaltered dog.
The Department is not adequately generating potential revenue from dog owner
license renewals. Our audit disclosed that LAAS only sends bills to pet owners who
paid their license fee for the previous year. All pet owners who failed to pay the most
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recent year's bill are dropped from any future billings. This practice appears to have
contributed to a decline in the percentage of the licenses being renewed.
Using FY 2007-08 as a baseline, LAAS should have billed 171,202 potential dogs for
license renewal in FY 2010-11. However, because of its policies to only bill owners
who paid their bills in the prior year, the bills potentially only went to the 107,375
owners. This means the Department did not bill 63,827 (37%) potential licenses. Our
analyses show that this practice contributed to approximately $1.3 million in potential
lost licensing revenue for the past two fiscal years.
□ There is an unexplained discrepancy of $125,000 between actual revenue
generated and amounts that should have been generated based on the
number of microchips implanted into animals during the last two fiscal years.
The City Municipal Code requires that LAAS implant electronic identification devices
(also called a microchip) into the dogs and cats that are being adopted from City
shelters. Each chip has a unique number that is registered with a national database,
along with the pet owner's address and phone number. The microchip information is
used to help reunite lost pets with their owners.
LAAS charges a $15 fee for a microchip as part of the adoption fee. Owners can
also request a microchip for their existing pets for a fee of $25 per microchip. Our
audit found that shelters do not properly account for the microchips allocated to
them. Our analyses of the revenue that should have been generated based on the
number of microchips recorded as either used for animals adopted from the shelters
or requested by owners, in comparison to amounts generated, shows a $125,000
discrepancy. The shelters were unable to explain the discrepancy. There appears to
be a need for Department management to tighten controls over usage and
safeguarding of microchips.
□ The LAAS’ oversight over its contracts is inadequate. Contracts with in-house
veterinarian clinic operators have the same scope of services but have
different revenue-sharing terms. Also, LAAS failed to collect at least
approximately $41,000 of its share of revenues from in-house clinic operators.
The Department has contracts with three in-house veterinarians to provide medical
services on-site at the East Valley, Harbor, West Los Angeles and South Los
Angeles shelters. One veterinarian has a contract for two locations, while the other
two veterinarians operate at one location each. We noted that, while the nature and
scope of services are the same for all three contracts, revenue-sharing terms vary.
The contracts with two of the operators provide that the Department share in
revenues generated from their outside sales and services, while the other operator
only provides the Department with discounts on fees charged for services provided
to shelter animals. With respect to revenue-sharing percentages, for services
provided to shelter animals, one contract contained a 7% revenue-sharing clause,
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while the other had a 10% clause. Staff was unable to explain why there are
different payment/revenue-sharing terms for contracts with similar scope of services.
In addition, our audit found that the operators have not been complying with
revenue-sharing provisions, and the Department has not been following up to collect
appropriate amounts. The Department lost a minimum of $40,855 based on amounts
paid to two operators for shelter animals. Due to the lack of data, the ultimate loss
of revenue share from the operators’ outside services is unknown.
□ The Department does not have a standardized method for tracking employees’
hours worked to ensure they are paid accurately. In addition, several
supervisors can perform both timekeeping and approving functions; these two
functions should be separated.
City departments are expected to process electronic timecards accurately and in a
timely manner. Inaccurate timecards result in inaccurate payroll payments.
Inaccurate or late timecards may also result in further adjustments, emergency
warrants, stopped and cancelled warrants, direct deposit reversals, inaccurate or
adjusted W-2’s, etc. We noted several weaknesses in timekeeping and payroll
processing at the shelters and at the headquarters. The following are some
examples:
Many supervisors do not use any form of sign-in sheets for their staff. This has
made it difficult to track or verify actual time worked by shelter employees to
ensure that each employee is paid accurately for actual time worked. Because
shelters operate on a 24-hour basis, there is a need for continuous staff
coverage, often causing complex scheduling and variance reporting. Lax
controls over tracking employees’ actual time worked could result in inaccurate
payments to employees.
We noted that LAAS shelter supervisors (approximately 20 employees) are given
the role of “approvers” as well as “timekeepers” in D-Time. This allows one
individual to have the ability to both input and approve staff’s time worked and
variances. While we verified that individuals cannot approve their own time, this
practice still presents a risk that one individual could make inappropriate changes
to another employee’s timesheet, and approve it without the change being
detected. Of the 60 electronic timecards that we sampled, 19 (31.7%) were
created or modified and approved by the same individual.
With respect to temporary bonuses, D-Time has not been designed in a manner
that minimizes incorrect payments due to errors or improprieties. When
completing their D-Time for bonuses, shelter employees choose a pay level from
a drop-down menu to indicate how many bonuses they are eligible for during a
shift. Under the current system, the risk of inappropriate bonus payments is
increased because employees are, in effect, allowed to determine their pay.
There is nothing to prevent an employee from choosing a level that would result
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in that employee being paid more than they are entitled to receive (if a supervisor
does not note the error).
□ Controls over the animal inventory tracked by Chameleon are inadequate.
Animal Care Technicians (ACTs) do not consistently perform daily animal
inventories to identify and explain differences between the system records
and the physical count of animals in the shelters. In addition, staff do not
process animal transfers between shelters in Chameleon in a timely manner,
and do not record animals removed from shelters for mobile adoption events
in the System. Finally, the Department does not consistently follow up on
animals in the foster program to ensure they are brought back to LAAS for
sterilization, formal adoption and/or appropriate disposition in Chameleon.
To ensure accountability of animals at each shelter, Animal Care Technicians
(ACTs) are required to inventory the animals under their care once a day. Any
variances noted between the physical count and the LAAS automated tracking
system, Chameleon, should be investigated immediately. We noted that shelter staff
do not consistently perform daily animal inventories, as required. While
representatives at each shelter stated that they perform daily inventories, during our
visits to each shelter, four of the six shelters were unable to demonstrate that it
performed an inventory within the last day.
We also noted that staff do not properly record in the tracking system, the transfer of
animals between shelters, and animals taken to mobile pet adoption events. In
addition, there is no consistent follow up for animals in the foster program. The foster
program allows the public to take home un-weaned animals that are less than eight
weeks old so that the animals can be fostered for a period of eight to twelve weeks.
After this period, animals should be brought back to the shelter to be spayed or
neutered and offered for adoption. However, we noted that a number of animals
under this program have been in foster homes beyond the prescribed time period,
and remain classified as “foster” in the Chameleon system.
Keeping an accurate inventory of the animals in LAAS’ care allows each shelter to
know where they stand on a daily basis and can facilitate timely investigations.
Without periodic physical inventories and proper oversight over transfers for mobile
events and between shelters, it would be difficult for employees to immediately
detect when an animal is missing.
□ Our audit disclosed several other areas where controls need to be
strengthened in order to maximize revenues and protect City assets.
LAAS has not fully utilized several available methods to increase the number
of licensed dogs in the City. These include obtaining dog sale information
from pet stores and breeders, department-sponsored events, and from
veterinarians performing spay/neuter surgeries subsidized by the City.
Increasing compliance would increase revenue as well as better ensure the
health, safety and welfare of animals and residents.
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The Department does not follow-up with businesses that have not renewed
their permits, and we noted 281 businesses with expired permits.
Establishments such as kennels, pet shops, and grooming parlors must
obtain an annual permit from LAAS; a permit is also required for pet shows,
circuses and filming with animals.
The Department's computer system lacks adequate system controls to
prevent transactions requiring payments from being finalized without
recording a corresponding payment in the System. During our audit period,
we noted over 100 adoptions and redemptions were processed without
having a corresponding receipt, resulting in $9,000 in potential lost revenue.
Manual receipts and permits are not properly controlled, which presents a risk
that monies could be misappropriated without detection. We noted four
receipt books that could not be located. Based on our sample, the potential
revenue associated with these missing books, containing 80 individual
receipts, is $3,000.
Shelter managers do not have a listing of fixed assets and equipment
assigned to or installed at their locations, nor do they conduct biennial
physical inventories. Therefore, it would be difficult if not impossible for site
managers to detect when items are missing. Small equipment items issued
to shelter staff are also not adequately tracked or controlled. Upon our
request, field managers conducted a quick inventory and noted 12 cameras
and 11 radios were unaccounted for.
Physical access to supplies needs to be strengthened and supply
procurement should be analyzed. Except for controlled substances (which
are well controlled), shelter staff have access to all medical and other animal
supplies and some shelters do not have locked storerooms. Medical and
supply usage at each shelter has not been analyzed to determine
reasonableness of budgets in relation to their animal population or for
potential standardization and cost-effectiveness.
Shelters do not properly track donations received and could not demonstrate
that all donations were spent only for legitimate business purposes. At some
shelters, cash donations were treated as petty cash for both animal and staff
purposes.
The details of these and other findings are discussed in the audit findings and
recommendations section of this report.
REVIEW OF REPORT
A draft report was provided to LAAS management on January 24, 2012. We discussed
the contents of the report with LAAS management at an exit conference on February 3,
2012. The Department agreed with the report’s findings and stated that during the audit
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and subsequent to our fieldwork, the Department began implementing several of the
recommendations. Department management stated that, through a combination of
changes it initiated and this audit’s recommendations, the Department believes that FY
2011-12 revenues will be significantly higher than the prior year.
Following are examples of actions taken by the Department, as reported by LAAS
management:
• The Department worked diligently to help the City pass an ordinance that will
make it easier to enforce licensing penalties, thereby increasing revenues. In
conjunction with this ordinance, the Department implemented an amnesty
program, which will allow Los Angeles residents to renew dog licenses or to
obtain first-time licenses before March 31, 2012 without penalties.
• LAAS launched a campaign, whereby Department of Water and Power
customers began receiving, with their bills, advertisements encouraging them to
get their dogs licensed. City employees also began receiving messages with
their pay stubs urging them to license their dogs online.
• The Department strengthened controls over payroll and timekeeping, and it hired
a former City employee to assist in developing stringent and comprehensive D-
Time policies.
• A contract employee is developing new microchip policies to ensure they are
properly accounted for. The current microchip contract will expire on April 15,
2012. The vendor selected as part of the next contract will be required to provide
the Department with consecutively numbered microchips. This will assist the
Department with tracking the microchips and ensuring that all revenues related to
sales are properly reported.
• The Department began pursuing the $40,000 in eligible discounts and lost
revenue from in-house clinic operators.
We would like to thank LAAS management and staff for their cooperation and
assistance during the audit.
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CONTROLLER’S ACCOUNTABILITY PLAN
MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
SECTION I – REVENUE COLLECTIONS AND BILLINGS
1. Discontinue its current billing practice and start
sending license renewal notices to all pet owners
in its database. This would necessitate 26 LAAS
reprogramming Chameleon to generate dog
license bills to all potential dog owners, instead of
only those who paid for the most recent year.
2. Implement the new penalty enforcement
procedures to bring more pet owners into 26 LAAS
compliance with licensing laws.
3. Implement proper procedures so that reminder
letters are sent to animal-related businesses,
activities and exhibitions operating in the City 28 LAAS
requiring these businesses to send in pet sales
information, as required by the Municipal Code.
4. Continue its efforts to review records obtained
through these various sources to identify 28 LAAS
noncompliant pet owners for future license billing
and enforcement.
5. Request Amanda Foundation to provide, along
with its invoices, detailed supporting 28 LAAS
documentation to validate services provided and
amounts billed.
6. Implement procedures to timely follow up with
businesses who fail to renew their annual 29 LAAS
permits.
7. Implement adequate procedures to properly track 30 LAAS
microchips allocated to each shelter.
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MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
8. Periodically reconcile the microchip usage
number per Chameleon to actual amounts 30 LAAS
deposited to identify any discrepancies in a
timely manner.
9. Implement adequate program controls in the
Chameleon system to prevent transactions that
require payments from being finalized without
corresponding payments posted to the System.
If Chameleon reprogramming is not feasible, 31 LAAS
LAAS management should periodically generate
and review a report of adoptions (other than New
Hope adoptions) and redemptions entered into
Chameleon without payments associated with
them.
10. Establish procedures to ensure online payments
received are posted to Chameleon at least once 31 LAAS
a week.
11. Ensure the Accounting Section continues to
reconcile deposits reported by each shelter to LAAS
bank records and timely reclassifies collections 32
between the General Fund and other LAAS
special funds, as required by the Administrative
Code.
12. Discontinue using separate receipts for permits
and start issuing miscellaneous receipts (i.e. 34 LAAS
City’s “Gen 30 Receipt” form) for permit fees
received by officers while in the field.
13. Record and track the sequence numbers of
miscellaneous receipts and permits issued in 34 LAAS
Chameleon.
14. Periodically reconcile manual receipts to 34 LAAS
Chameleon to ensure collections are recorded.
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MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
15. Record and periodically account for all receipt
books issued to each shelter. This would include 34 LAAS
ensuring that all previously-issued books are
accounted for before new books are issued.
SECTION II – PAYROLL AND TIMEKEEPING
16. Segregate timekeeping and approving functions LAAS
in D-Time. 37
17. Evaluate the use of sign-in/sign-out sheets or
explore other alternatives to properly track 37 LAAS
shelter employees’ worked hours.
18. Require the Shelter Manager or Director of Field
Operations, instead of Central Payroll staff, to 37
approve shelter employees’ D-Time when the LAAS
employees’ immediate supervisors are not
available.
19. Implement consistent procedures for shelter
supervisors to track and approve employees 37 LAAS
worked, vacation, sick and overtime time.
20. Discontinue using a rubberstamp signature to 37 LAAS
approve Form-41 changes.
21. Require the medical team at each shelter to
validate hours worked by ACTs assigned to the
Medical Section to help with euthanasia, which 39 LAAS
would provide support for a supervisory approval
of temporary bonuses paid.
22. Consult with the Office of the Controller’s PaySR
Team to request separate codes be created for 39 LAAS
each of its temporary bonuses.
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MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
23. Ensure that the Personnel Section promptly
notifies the Payroll Section when employees are 39 LAAS
no longer entitled to “acting pay.”
SECTION III – INVENTORY MANAGEMENT AND PROCUREMENT
24. Require shelter supervisors to perform daily
inventories of animals in their care and
investigate any discrepancy of missing animals LAAS
immediately. Shelter managers should 41
periodically follow up with supervisors to ensure
that inventories and any necessary investigations
are being completed timely.
25. Enforce current policies to follow up with foster LAAS
animals in a timely manner. 41
26. Implement procedures to properly process and
transfer animals to and from shelters to mobile 41 LAAS
pet adoption events, and between shelters.
27. Establish appropriate controls to properly 42 LAAS
safeguard and monitor supplies at the shelters.
28. Provide shelter managers a listing of equipment 43 LAAS
items assigned to their locations to aid them in
monitoring of equipment items.
29. Conduct biennial inventories of all equipment, as 43
required, and reconcile the results with CAMS, LAAS
SOS or internal records.
30. Consult with the General Services Department to
either include the compound formula in the
current City medical vendor contract or initiate a 44 LAAS
request to establish a City agreement for a
supplier of compound formula.
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MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
31. Ensure that all P-cards are recovered and
cancelled once an employee leaves the 44 LAAS
Department.
32. Ensure that Accounting staff review supporting
documentation to ensure that P-card purchases 44 LAAS
made by the staff comply with City policies.
33. Establish a system whereby proposed purchases
are reviewed and approved by appropriate 45 LAAS
supervisory personnel prior to ordering to ensure
purchases are cost effective.
34. Standardize brands of supplies (including 45 LAAS
medical) that shelters can purchase.
35. Periodically review the patterns and volumes of
purchased items to identify inappropriate 45 LAAS
purchases or to ensure that spikes in usage are
justified.
SECTION IV – CONTRACTING
36. Require AVID Identification Systems, Inc. (AVID)
to provide the remaining 47 microchip scanners 48 LAAS
required by its contract.
37. Provide AVID with complete information on
animals impounded so that AVID can update the 48 LAAS
database it maintains for the Department.
38. Ensure future contracts to provide similar
services contain similar terms and conditions, as 48 LAAS
much as practical.
13
MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
39. Pursue the collection of the approximate $40,000
owed from the two clinic operators. 48 LAAS
40. Develop a mechanism to verify and collect the
Department’s share of revenue from in-house 48 LAAS
clinic operators’ outside services.
41. Finalize the letters of agreements and have all
partnering veterinarians with expired agreements 49 LAAS
sign new ones.
42. Maintain documentation related to its contract
evaluation and selection process for every 50 LAAS
contract.
43. Follow up with the Office of the City
Administrative Officer to expedite executing the 50 LAAS
IDEXX contract.
SECTION V – DONATIONS AND MISCELLANEOUS REVENUE
44. Require employees to discontinue spending
donation receipts for staff use, record all cash 52 LAAS
donations in Chameleon, and issue receipts to
donors.
45. Create sub-accounts within the Animal Welfare LAAS
Trust Fund to account for donations received for 52
specific programs or shelters.
46. Strengthen its controls over recording and use of LAAS
in-kind donations and donations received during 52
mobile pet adoption events.
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MAYOR/COUNCIL DEPARTMENT
RECOMMENDATIONS PAGE ACTION ACTION
REQUIRED REQUIRED
47. Require shelters to record all miscellaneous 53 LAAS
revenues in Chameleon.
48. Consult with the Department of General Services
to establish City agreements with vending 53 LAAS
machine owners.
49. Instruct all vendors to make any commission 54 LAAS
checks payable to the City.
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BACKGROUND, OBJECTIVES, SCOPE, AND METHODOLOGY
______________________________________________________________________________
BACKGROUND
The Los Angeles Department of Animal Services (LAAS or the Department) enforces
laws regulating the care, custody, control and prevention of cruelty to animals in the
City. The Department issues dog and equine licenses, offers pet adoptions, runs pet
sterilization programs, and holds educational events. The Department’s mission is to
promote and protect the health, safety, and welfare of animals and people in the City of
Los Angeles.
With the General Manager as chief executive, the Department is under the control of a
five-member Board of Commissioners appointed by the Mayor and confirmed by City
Council. The Commission advocates for people and animals living safely together and
sets policy for the Department. The Commission holds public hearings on critical
issues, identifies priorities to be addressed, and makes recommendations to the Mayor
and City Council.
In its efforts to humanely decrease the number of pets abandoned and euthanized each
year, in 2008, the City Council approved a law that requires all cats and dogs in the City
to be spayed or neutered after the age of four months, with some specific exemptions
allowed. To encourage more spay and neuter surgeries, the Department offers
discounts and free vouchers to low income residents to help them cover the cost of their
pets’ surgeries.
To serve residents throughout the City, the Department operates six animal shelters at
the following locations:
North Central Animal Shelter, located on Lacy Street in Los Angeles, serves
residents in Downtown, East LA, Hollywood, Silver Lake and surrounding areas.
South Los Angeles Animal Shelter serves communities in the South Los
Angeles area.
West Los Angeles Animal Shelter serves the communities of Beverly Hills, Bel
Air, Brentwood, Century City, Laurel Canyon and immediate areas.
West Valley Animal Shelter, located in Chatsworth, serves the communities of
Bell Canyon, Canoga Park, Chatsworth, Encino, Granada Hills and immediate
areas.
Harbor Animal Shelter, located in San Pedro, serves residents of Harbor City,
San Pedro, Wilmington and surrounding cities.
East Valley Animal Shelter, located in Van Nuys, serves Van Nuys, Mission
Hills, Studio City and surrounding areas.
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In July 2011, due to City’s budget constraints, the Council authorized the Department to
enter into an agreement with Best Friends Animal Society to operate its Northeast
Animal Shelter located in the City of Mission Hills. Northeast Animal Shelter was never
opened to the public; it has primarily been used for evidence storage or special
operations since it was completed in Fiscal Year 2008-09.
The map on the next page shows the locations of the City’s shelters.
17
LAAS Animal Shelter Locations
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SHELTER ORGANIZATION STRUCTURE
Based on their duties and functions, employees at each shelter are assigned to clerical,
animal care, animal control, and the medical sections. The following are brief
descriptions of the duties performed by the different sections at each shelter:
The medical section is staffed with a licensed veterinarian and several registered
veterinarian technicians (RVT). RVTs assist veterinarians by performing routine
medical and surgical treatment and preventive care of animals at the animal
shelters, or spay and neuter clinics. They also perform immunizations and
euthanasia-by-injection under the direction of a licensed Veterinarian. They
administer emergency medical treatment to injured animals and maintain the
supplies and equipment of the veterinary facilities. RVTs report to veterinarians
assigned to each facility. All veterinarians report to the Department’s Chief
Veterinarian who has the overall responsibility for medical operations, budgeting,
and staffing.
Animal Control and Law Enforcement – An Animal Control Officer (ACO)
enforces State laws and City ordinances dealing with the care, treatment,
licensing, and impounding of animals within the City. ACOs impound sick,
injured, stray, vicious, or unwanted animals, and also conduct investigations
regarding the humane treatment of animals, and issue permits and citations.
ACOs may collect payments directly from the public while performing their field
duties, primarily for license or permit fees. ACOs prepare reports which may be
used as legal evidence. They report to a supervisor who coordinates their
scheduling, activities and assignments.
Animal Care - Animal Care Technicians (ACTs) are responsible for the general
care and feeding of animals housed in the shelters. ACTs clean and sanitize
animal cages, intake animals, perform periodic inventories of animals in the
shelters, and investigate any missing animals. ACTs may also be assigned to
assist the medical team. Each shelter is staffed with at least two ACT
supervisors to ensure adequate coverage and supervision of ACTs in caring for
animals in the shelters. ACT supervisors order food and supplies needed for
their shelters.
The clerical staff generally perform cashiering duties, which includes processing
all adoptions, redemptions, and other transactions that may involve the
collections of cash. Clerical staff are supervised by a Senior Clerk Typist who
reports to a Shelter Manager. Senior Clerk Typists order office supplies for the
shelter, deposit daily collections, and complete Daily Remittance Reports, which
are forwarded to the Department’s Accounting Section at central headquarters.
A Shelter Manager is responsible for the overall operations of the shelter (other than the
medical operation) and reports to a Director of Field Operations (DFO). LAAS has two
DFOs who oversee three shelters each. While fiscal policies and procedures are
19
formulated by LAAS management and the Accounting Section, because fiscal activities
are generally initiated at the shelter level, shelter supervisors play a vital role in
monitoring controls to ensure that fiscal activities are consistently and effectively being
carried out. The following shows the reporting relationships at the shelters and at the
headquarters.
LAAS Organization Chart
DEPARTMENT FUNDING
For Fiscal Year (FY) 2011-12, LAAS has 337 authorized positions, including a General
Manager and one assistant general manager. LAAS’ FY 2011-12 adopted operating
budget is approximately $19.9 million, which is primarily funded by the General Fund.
Of the Department’s FY 2011-12 $19.9 million General Fund budget, $17.9 million is for
salaries. The remaining budgeted expenditure items are depicted in the chart below.
20
Source: City Budget
In addition to the operating budget, the General Fund provided an additional $1.1 million
in the Animal Sterilization Fund to help fund LAAS’ spay and neuter programs.
OBJECTIVES, SCOPE, AND METHODOLOGY
The primary objective of this audit was to evaluate LAAS’ overall control environment to
determine whether LAAS has adequate controls over its fiscal activities and processes.
The audit focused on evaluating controls over the following key fiscal areas:
Revenue Collection and Billing
Payroll and Timekeeping
Donation Accounting
Purchases
Inventory Management – animals, fixed assets, and medical and other
supplies
Contracting
The audit did not examine performance information/activities, including how resources
were spent in achieving the Department's goals.
Our audit was performed in accordance with Generally Accepted Government Auditing
Standards (GAGAS) and covered the period from July 1, 2009 to September 30, 2011.
The standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions
21
based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
Fieldwork was conducted between July and November 2011. In conducting our audit,
we interviewed LAAS management and staff involved in fiscal operations at the
Department’s administrative office, as well as field staff and supervisors. We analyzed
license, permit and microchip data for additional revenue opportunities. We also
reviewed applicable City and Department policies and procedures to obtain an
understanding of the key processes involved in the Department’s fiscal operations. For
example, we:
Obtained and reviewed State laws, City Codes, and Department policies and
procedures relating to revenue collections, payroll and timekeeping, contracting,
purchases, and animal and other asset inventory tracking.
Visited and performed walk-throughs of operations at all six City-operated animal
shelters to evaluate controls over how staff at each shelter process fees and
donations collected, intake animals and manage inventory, order animal food and
medical supplies, and track temporary bonuses, overtime, sick, vacation hours
and hours worked.
At the administrative office, we reviewed LAAS’ contracting processes and
selected five contracts for detailed review to determine whether the Department’s
selection and monitoring processes are adequate and in accordance with City
guidelines.
For in-house clinic operator agreements, we reviewed payment transactions over
the last two fiscal years to determine whether the operators complied with the
revenue-sharing provisions of their agreements.
Analyzed license, permit and microchip data recorded in the Department’s
Chameleon system to determine whether opportunities exist for additional
revenue collection.
The remainder of this report details our findings, comments, and recommendations.
22
AUDIT FINDINGS AND RECOMMENDATIONS
SECTION I: REVENUE COLLECTIONS & BILLINGS
LAAS collects revenues for dog and equine licenses; pound fees; veterinarian fees;
citations/fines; permits for pet shops, dog kennels and other animal establishments;
adoptions; microchips; and spay and neuter sterilizations. Collections are received from
patrons as walk-ins at the shelters, and from billings for license renewals mailed to pet
owners annually. Pet owners can also pay for licenses or make donations at the
shelters, online, or by mail to headquarters or to a lockbox administered by Wachovia
Bank. The Department also has field officers who can collect cash or checks when
making contact with pet owners.
When animals are adopted, or when medical fees for services such as spay/neutering
are incurred, the citizen pays at the shelter where the animal is located. An invoice is
generated using the Department’s information system called “Chameleon.” After
payment has been made by cash, check or credit card, Chameleon generates a receipt.
In FY 2010-11, the Department generated approximately $3.5 million in revenues, with
49% collected from dog license fees.
Source: City’s Financial Management System
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Each shelter reconciles its collections on a daily basis using the Cash Box Closing
Reports generated by Chameleon, which lists by clerk, each receipt and the amount
charged and collected. The shelter then sends a Daily Remittance Report (DRR) to
LAAS Central Accounting, with transactions and amounts for revenue source accounts
and special fund accounts. Based on the shelter’s DRR, Accounting distributes and
reclassifies some of the revenues related to adoption fees, donations, electronic
identification devices, and spay and neuter fees.
Payments mailed to the lockbox are deposited to the City’s bank account directly, but
the LAAS Licensing Section is responsible for reconciling and posting the payments to
the Chameleon.
This section discusses our findings related to revenue opportunities, billings and
collections, reclassifications and recording of revenues collected that require
improvement.
Dog Licenses
Finding #1: LAAS does not bill all dog owners in its database for licensing,
which has contributed to a decrease in license renewals. Based on
LAAS’ dog license data, the Department has lost the opportunity to
collect over $1.3 million in potential revenue over the last two years
as a result of not sending renewal notices to all registered dog
owners.
Section 53.15 of the Municipal Code requires any person owning or having custody or
control of any dog over the age of four months to pay an annual license fee. Currently,
the Department charges a $20 license fee for an altered dog (i.e., a pet that is spayed
or neutered) and a $100 fee (plus an additional $235 intact dog permit) for an unaltered
dog. Low income seniors pay a $10 license fee for an altered dog; however, they must
pay the full fee for an unaltered dog.
The Department’s Licensing Section processes license receipts, posts them to the
Department’s Chameleon System and mails pet owners their licenses. Licensing is also
responsible for generating and mailing annual notices for licenses and for notifying pet
owners of required vaccinations. These notices are generated weekly using the
Department’s Chameleon database and are mailed before the licenses’ expiration
dates.
Our audit disclosed that LAAS only sends bills to pet owners who paid their license fee
for the previous year. All pet owners who failed to pay the most recent year’s bill are
dropped from any future billings. As a result, the Department is not adequately
generating potential revenue from dog owner license renewals. For example, if during
FY 2010-11, a pet owner disregards or forgets to pay his/her dog license bill, the
Department would not send a license renewal bill to the owner in FY 2011-12. This
practice has contributed to a decline in the percentage of the potential licenses being
renewed, as shown in Table 1 below:
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Table 1
LAAS DOG LICENSE RENEWAL TREND
Subsequent
Potential
Actual Billable Year # of Additional
Total Number of New Potential Licenses Renewal Revenue if 72%
Licenses Licenses Licenses Licenses Renewed % of eligible
(New &
A B C=(A+B) D E =(D/A) licenses were
Renewed)
renewed each
FY 07-08 104,386 year (1)
FY 08-09 108,623 104,386 33,887 138,273 74,736 72%
FY 09-10 107,375 138,273 32,929 171,202 74,446 54% $ 376,658
FY 10-11 110,850 171,202 32,255 203,457 78,295 46% $ 899,409
$ 1,276,067
(1) LAAS increased its dog license fee from $15 to $20 in FY 2010-11. Therefore, to estimate the
additional potential revenue, we used a license fee of $15 for FY 2009-10 and $20 for FY 2010-11.
Source: Chameleon
As Table 1 shows, the Department’s database contained 104,386 registered dog
licenses in FY 2007-08. The database also shows that the Department issued a total of
66,816 new licenses (33,887 + 32,929) during FY 2008-09 and FY 2009-10. This would
indicate that in FY 2010-11, the Department had 171,202 potential dogs in its database
that it could pursue for license renewal. However, since LAAS programmed its
database to only generate bills to owners who paid their bills in the prior year, the bills
potentially only went to the 107,375 (74,446 who renewed in FY 2009-10 plus the
32,929 new licenses). This means the Department did not bill 63,827 (37%) potential
licenses. As illustrated in the table, the rate of renewal has declined from 72% in FY
2008-09 to 46% in FY 2010-11.
While we recognize that achieving a 100% renewal rate may not be practical since
some owners may no longer own their dogs, assuming the Department maintained its
FY 2008-09 72% renewal rate, it would have potentially collected an additional $1.3
million over the last two years.
In addition, during the last three years, LAAS suspended the civil penalty enforcement
for pet owners who failed to pay their license fees, pending Council’s consideration of its
proposal to reduce the penalty amount. During the latter part of our fieldwork, the
Department received Mayor and Council approval to revise the penalty and implement
administrative citation enforcement procedures that would help bring dog owners into
compliance and help increase departmental revenue. LAAS is currently working with
the City Attorney’s office to amend the Municipal Code to reflect the new penalty
amounts and enforcement procedures.
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Before the new penalty enforcement procedures become effective, the Department
plans to run an “amnesty” period to encourage current owners to voluntarily obtain and
renew their pet licenses without paying any penalties. However, before penalties can be
properly enforced, the Department must implement procedures to ensure that all pet
owners are properly notified of amounts they owe.
Recommendations
LAAS management should:
1. Discontinue its current billing practice and start sending license
renewal notices to all pet owners in its database. This would
necessitate reprogramming Chameleon to generate dog license bills
to all potential dog owners, instead of only those who paid for the
most recent year.
2. Implement the new penalty enforcement procedures to bring more pet
owners into compliance with licensing laws.
Finding #2: LAAS failed to use several methods at its disposal to increase the
number of licensed dogs.
Based on the formula developed by the American Veterinary Medical Association, the
number of dogs residing in the City is estimated to be close to 1 million. With the
Department having only 110,000 dogs currently licensed, there is a high number of
unlicensed dogs in the City. Since licensing ensures dogs are properly vaccinated,
increasing dog license compliance would not only increase revenue, it would also help
the Department to achieve its mission of ensuring the health, safety and welfare of
animals and the public.
In our previous audit which was issued in May 2008, we discussed several methods
available to LAAS to increase the percentage of licensed dogs. This includes obtaining
dog sale information from pet stores and breeders, from department sponsored events,
and from veterinarians who perform spay and neuter surgeries subsidized by LAAS.
LAAS has not fully utilized these methods to help identify more unlicensed dogs. These
methods are discussed below:
Dog Sales
Section 53.27 of the LAMC states,
“The owner or operator of any dog hospital or pet shop, and any person engaged
in the business of breeding dogs or a veterinarian who sells, gives away or in any
manner causes the ownership or permanent possession of any dog, whether
over four (4) months of age or not, to be transferred to any person, shall notify in
writing the Department of that fact within five (5) days after the date of such sale
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or transfer. Such notice shall state the kind of dog, the name of such dog, if any,
and the name, address, telephone number and if known, the electronic mail
address, of the person to whom such dog has been sold or transferred.”
The Department could not provide any evidence of referrals received from pet shops,
veterinarians, or breeders. It also does not send out reminder letters to animal-related
businesses to request the required dog sale information that the Department could then
enter into its license database for tracking and generating invoices to pet owners.
Spay and Neuter Data
To encourage more spay and neuter surgeries, the Department provides free and
discounted spay/neuter vouchers for dogs or cats to qualifying City residents. Pet
owners can apply these vouchers toward the cost of surgeries at specific veterinarians.
The veterinarians submit the vouchers in order to get reimbursed for providing spay and
neuter services. This process could also assist the Department in identifying dog
owners who should be billed for license fees.
In order to make it easier for veterinarians to submit their data to the Department for
reimbursement, our 2009 audit recommended that LAAS create a system to allow
veterinarians to electronically submit surgery data on specific animals. Veterinarians
submit vouchers electronically to LAAS in order to get reimbursed for providing spay
and neuter services. After our 2009 audit, the Department developed a web-based
system for the veterinarians to submit vouchers for reimbursement. The system is
known as the “Vet Portal.” The Vet Portal does not interface with Chameleon. The
Department does not review information submitted by veterinarians to identify potential
animals that do not currently have a license.
Amanda Foundation
Under a contract with LAAS, Amanda Foundation operates a mobile clinic from which it
provides free spay/neuter services for animals owned by low income City residents.
This contractor is not required to submit detailed supporting documentation with its
invoices showing the actual services provided to LAAS. The contract was for a
maximum of $500,000 a year for three years.
To request payments, the vendor only submits statements showing how many surgeries
were performed. The statements do not include client and animal information to support
the numbers of surgeries claimed. LAAS has not made any attempts to validate the
reported numbers. Without adequate supporting documentation from Amanda
Foundation, it is difficult to validate whether the services were provided and that
amounts billed and paid are appropriate. Detailed information on the animals who
receive surgeries or their owners would also help LAAS identify animals without current
licenses.
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Subsequent to our fieldwork, LAAS management indicated that it has allocated
resources to input about 9,000 records received through the Vet Portal and Amanda
Foundation into Chameleon, so that potential dog owners can be identified for future
license billings.
Recommendations
LAAS management should:
3. Implement proper procedures so that reminder letters are sent to
animal-related businesses, activities and exhibitions operating in the
City requiring these businesses to send in pet sales information, as
required by the Municipal Code.
4. Continue its efforts to review records obtained through these various
sources to identify noncompliant pet owners for future license billing
and enforcement.
5. Request Amanda Foundation to provide, along with its invoices,
detailed supporting documentation to validate services provided and
amounts billed.
Permits
Finding #3: LAAS failed to follow up with businesses that did not renew their
permits. As of the end of August 2011, there were 281 businesses
with expired permits valued at approximately $75,000.
According to Section 53.50 of the Municipal Code, animal establishments are required
to obtain a permit to operate animal kennels, pet shops, animal grooming parlors, etc. A
permit is also required for pet shows, circuses or filming with animals. All permits
issued by the Department expire one year from the date of issuance, unless revoked or
suspended, or unless the holder of such permit changes the location of his place of
business, sells, or disposes of such business.
Permit processing is handled by the Department’s Permit Section. LAAS has assigned
three animal control officers and a part-time clerk to handle permits Citywide. These
officers are responsible for inspecting facilities to ensure that proper sanitary conditions
exist before a permit can be issued. The Permit Section is responsible for mailing
notices to animal establishments. In FY 2010-11, the Department issued 841 permits
that generated approximately $238,000.
The Permit Section does not follow up with businesses that do not renew their permits,
resulting in potential lost revenue. The Department’s database shows that, as of the
end of August 2011, there were 281 businesses whose annual licenses had expired;
however, the Department did not follow up to determine whether the businesses were
still open. LAAS attributed the lack of follow up to the lack of staffing resources to visit
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these locations to identify whether they were still in business and were required to
renew their permits. We estimate that the Department lost $75,000 in potential revenue
from these 281 businesses.
Recommendation
6. LAAS management should implement procedures to timely follow up
with businesses who fail to renew their annual permits.
Electronic Identification Device (Microchip)
Finding #4: There is an unexplained discrepancy of $125,000 between actual
revenue generated and amounts that should have been generated
based on the number of microchips implanted into animals during
the last two fiscal years.
Section 53.15.5 of the City Municipal Code requires that LAAS implant electronic
identification devices (also called a microchip) into the dogs and cats that are being
adopted from City shelters. A microchip, the size of a grain of rice, is injected under the
animal's skin between the shoulder blades. Each chip has a unique number that is
registered with a national database along with the pet owner's address and phone
number. The microchip information is used to help reunite lost pets with their owners.
The microchip can be read by scanners that are currently used by most animal
organizations and veterinary clinics.
LAAS charges a $15 fee for a microchip as part of the adoption fee. Owners can also
request a microchip be implanted into their existing pets for a fee of $25. LAAS does
not charge New Hope partners for microchips implanted into the animals they adopt.
Microchip collections are required to be deposited into the Electronic Animal
Identification Device Revolving Fund to be used to replenish the Department’s
microchip inventory.
Staff at the administration office orders microchips at least three times a year and
distributes them to the shelters’ medical teams on an as-needed basis. Because the
microchips are susceptible to theft, adequate controls should be in place to ensure that
the devices are properly safeguarded and accounted for. Periodic reconciliation of
usage to actual revenues received for implanted chips would help identify any
discrepancies.
Our audit found that LASS does not properly account for the microchips allocated to
shelters. For example, the Department does not periodically reconcile the usage
number per Chameleon to actual amounts deposited to identify any discrepancies in a
timely manner. Our analysis of the revenue that should have been generated based on
the number of microchips recorded as either used for animals adopted from the shelters
or requested by owners, in comparison to amounts deposited into the Electronic ID
Revolving Fund, shows a significant discrepancy.
29
During FYs 2009-10 and 2010-11, the Department purchased a total of 46,000
microchips at a cost of approximately $446,000. During the same period, Chameleon
shows that the six shelters implanted a total of 45,308 microchips (excluding New Hope
adoptions). Of this amount, 43,075 were used for animals adopted from the shelters
and 2,233 were for owner requested animals. Since LAAS charges $25 to each owner
who requests a microchip and $15 for regular adoptions, at least $701,950 in microchip
revenue should have been generated for the two years 1 based on data in Chameleon.
However, the City’s Financial Management System shows $576,621($269,717 for FY
2010-11 and $306,904 for FY 2009-10) in microchip revenue for the same period, a
discrepancy of approximately $125,000.
The Department indicated that a possible explanation for the difference could be coding
errors committed by staff at the shelters. For example, instead of entering New Hope
adoptions, which do not require payments, the staff may have entered these
transactions as regular adoptions that require payments. While this may account for
some of the discrepancy, there appears to be a need for Department management to
tighten controls over usage and safeguarding of microchips.
Recommendations
LAAS management should:
7. Implement adequate procedures to properly track microchips
allocated to each shelter.
8. Periodically reconcile the microchip usage number per Chameleon to
actual amounts deposited to identify any discrepancies in a timely
manner.
Finding #5: The Department’s Chameleon system lacks adequate system
controls to prevent transactions requiring payments from being
finalized without a corresponding payment posted. In addition,
online collections are not posted to Chameleon in a timely manner.
Ideally, for any transaction that requires a payment, Chameleon should be programmed
with controls to prevent such transactions from being finalized without a payment being
posted to the System. In the absence of such a system control, compensating controls
(such as a periodic reconciliation) should be established to ensure that a payment is
received for every transaction that requires a payment.
Because “adoption” and “redemption” transactions require a fee to be collected, LAAS’
policy requires that clerical staff process these transactions in Chameleon. However,
we noted that employees other than clerical staff have access in Chameleon to
1
(43,075 *15) + (2,233*25) = $701,950
30
disposition or “outcome” an animal as adopted or redeemed. This presents a potential
risk that any employee can essentially “outcome” an animal as “adopted” or “redeemed”
without posting a corresponding receipt. The Department has never required or
performed a reconciliation of outcomes to collections to ensure proper accounting of
funds received.
Since the Department currently does not reconcile actual collections to the different
outcomes (e.g., adoptions and redemptions, etc.), we found a number of instances
where adoption and redemption outcome types were used without corresponding
payments posted. Based on our review of Chameleon reports for FY 2010-11, 106
adoptions and redemptions were processed without having a corresponding receipt
posted, resulting in $9,000 in potential lost revenue.
For license renewal payments via credit cards that were processed through the
Department’s website, we also found that staff do not update Chameleon in a timely
fashion. During our walk-through, we noted a total of 335 online payment transactions,
totaling $6,700, which had not been entered into Chameleon, some of which were over
two months old. Timely update of renewal receipts to Chameleon would prevent
Chameleon from erroneously generating delinquent notices to pet owners who
otherwise have paid their renewal bills.
Recommendations
LAAS management should:
9. Implement adequate program controls in the Chameleon system to
prevent transactions that require payments from being finalized
without corresponding payments posted to the System. If Chameleon
reprogramming is not feasible, LAAS management should periodically
generate and review a report of adoptions (other than New Hope
adoptions) and redemptions entered into Chameleon without
payments associated with them.
10. Establish procedures to ensure online payments received are posted
to Chameleon at least once a week.
Finding #6: Accounting does not reclassify collections on a timely basis and
does not reconcile deposits reported by shelters to amounts credited
by the bank.
The Department initially deposits all collections into the General Fund. Accounting
receives a Daily Remittance Report (DRR) from each shelter, which shows transactions
and amounts for revenue source accounts and special fund accounts.
Various sections of the Administrative Code require LAAS to reclassify and transfer
collections for specific purposes out of the General Fund and into special revenue
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funds. For example, Section 5.199(g) of the Administrative Code requires LAAS to, at
least quarterly, transfer $2 and $7 for each paid dog license for an unaltered dog and
altered dog, respectively, from the General Fund to the Animal Sterilization Fund.
Similarly, all fees collected by the Department for microchips are required to be
transferred to the Electronic Animal Identification Device Revolving Fund. Accounting is
responsible for distributing and reclassifying the revenues related to adoption fees,
donations, electronic identification devices, and spay and neuter fees based on the
shelters’ DRRs.
We noted that distributions/reclassifications of collections (including donations) among
different fund revenue accounts are not performed timely, as required. Without proper
reallocations, funding might not be available in the Animal Sterilization Fund and the
Electronic Animal Identification Device Revolving Fund to pay for needed expenditures.
In addition, at the time of our fieldwork, collections (per DRR’s and deposit slips) had
not been reconciled with the actual amounts posted in Cash Wiz in over five months2.
Without such reconciliations, the Department may not be able to detect any
discrepancies between collections per the shelters’ records and amounts credited by
the Bank in a timely manner.
Subsequent to our fieldwork, LAAS management stated that they are now current on all
necessary re-classifications from the General Fund to other various funds, and have
established procedures to reconcile deposits for each shelter and reclassify funds in a
timely manner.
Recommendation
11. LAAS management should ensure the Accounting Section continues
to reconcile deposits reported by each shelter to bank records and
timely reclassifies collections between the General Fund and other
LAAS special funds, as required by the Administrative Code.
Finding #7: Manual receipts and permits are not properly controlled, presenting
a risk that monies could be misappropriated without detection.
Control logs for manual receipt books showing receipts received and issued should be
maintained centrally and at all locations. Receipt books should be recorded in the
control log when received by each location and when issued to an individual responsible
for cash collections.
2
CashWiz is a cash management tool used by the Office of Finance to automate the cash receipting
process. Amounts deposited by various City locations and offices are uploaded by Wachovia Bank into
the CashWiz on a daily basis. Departments are expected to claim and/or confirm deposit transactions
before they are uploaded into the City’s Financial Management System’s general ledger.
32
A new receipt book(s) should not be issued to a location until a used book(s) is
returned, with all receipts accounted for. The control log should include the date the
receipt book was received, receipt book numbers, name of employee assigned custody
of the book, and the date the used book was returned to the central office.
We found that the Department’s process for accounting for all receipts and permits
issued to shelters could result in a misappropriation of collections without detection.
Miscellaneous Receipts
Generally, LAAS issues Chameleon-generated receipts for payments. However, when
the system is unavailable or when a field officer collects money directly from the public,
manual receipts are issued. The pre-numbered miscellaneous receipt books (City’s
“Gen 30 Receipt” form) are issued by the Administrative Office to each shelter. Each
receipt book contains 20 receipts. Based on our sample of 20 books with copies of
actual completed receipts, each book equates to approximately $750 in collections.
While administrative staff maintain a log to track receipt book numbers issued to each
shelter, LAAS does not periodically reconcile completed manual receipts to Chameleon
in order to obtain assurance that all collections have been entered into the system.
Without this reconciliation, an employee could misappropriate collections without
detection. Although at one location clerical staff annotates the Chameleon receipt
number on each manual receipt providing some assurance that collections related to
the receipts have been properly entered in Chameleon, none of the other facilities
perform this procedure.
In addition, administrative staff do not follow up to ensure all books have been returned
before new books are issued. For the returned books, they do not have any process to
ensure that all collections related to the returned books were accounted for (i.e.
recorded in Chameleon). For the South LA and West Valley shelters, we noted a total
of four receipt books that were issued at least a year ago that had not been returned.
The shelters were unable to locate the missing receipt books. The estimated amount of
revenue associated with the four missing books is $3,000.
Permits and Permit Receipts
The Department issues permits and permit receipt books (which are different from
miscellaneous receipts used for licensing and other payments) to officers assigned to
the Permit Section.
Since a pet store or dog kennel facility inspection is required before a permit can be
issued, LAAS issues a permit receipt to a business owner who has paid for a permit but
is waiting for his or her facility to be inspected. However, since the Department already
uses a miscellaneous receipt (City’s “Gen 30 Receipt” form) for field collections, having
a separate receipt specifically for permits is unnecessary and makes it more difficult to
account for receipts.
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Also, although permit and manual permit receipts are pre-numbered, the sequences are
not tracked to ensure that each permit or permit receipt issued results in corresponding
cash collections. In addition, the Department does not record permit numbers in
Chameleon. Posting permit numbers to Chameleon would allow management to
generate a report that could be analyzed periodically to ensure that all permit numbers
have been accounted for.
Recommendations
LAAS management should:
12. Discontinue using separate receipts for permits and start issuing
miscellaneous receipts (i.e. City’s “Gen 30 Receipt” form) for permit
fees received by officers while in the field.
13. Record and track the sequence numbers of miscellaneous receipts
and permits issued in Chameleon.
14. Periodically reconcile manual receipts to Chameleon to ensure
collections are recorded.
15. Record and periodically account for all receipt books issued to each
shelter. This would include ensuring that all previously-issued books
are accounted for before new books are issued.
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SECTION II: PAYROLL AND TIMEKEEPING
In 2001, the City implemented the Citywide Payroll System Replacement Project
(PaySR) to process payroll and manage personnel information. The PaySR’s
distributed time reporting system, D-Time (implemented beginning in 2008), is used to
electronically collect time information directly from City employees.
In D-Time, the employee enters the number of hours worked into a screen that
resembles a manual timesheet. However, D-Time does not have the capability to track
an employee’s actual time-in and time-out. Supervisors electronically approve their
staff’s time entries. When reporting temporary bonus information, employees may need
to fill in additional information in D-Time. Every two weeks, PaySR generates
paychecks for the employees based on the D-Time entries.
Tracking Employees’ Worked Hours
Finding #8: The Department does not have a standardized method for tracking
employees’ hours worked to ensure they are paid accurately. In
addition, several supervisors can perform both timekeeping and
approving functions; these two functions should be separated.
City departments are expected to process electronic timecards accurately and in a
timely manner. Inaccurate timecards result in inaccurate payroll payments. Inaccurate
or late timecards may also result in further adjustments, emergency warrants, stopped
and cancelled warrants, direct deposit reversals, inaccurate or adjusted W-2’s, etc. We
noted the following weaknesses in timekeeping and payroll processing at both the
shelters and headquarters, which increases the risk of inaccurate payments to
employees and the risk of payroll improprieties.
While Departments generally designate individuals with the capability to approve
and make changes to their subordinates’ electronic timecards, the “approval” and
“timekeeping” functions should be separated. A timekeeper’s role allows an
individual to enter time or make changes to time entered by another employee,
while an approver can only approve an electronic timecard to certify the accuracy
of time entered by staff (either the employee or timekeeper). Timekeepers have
the ability to input time for an employee who is on leave or has failed to enter
their time.
LAAS shelter supervisors (approximately 20 employees) are given the role of
“approvers” as well as “timekeepers” in D-Time. This allows one individual to
have the ability to both input and approve staff’s time worked and variances.
While we verified that individuals cannot approve their own time, this practice still
presents a risk that one individual could make inappropriate changes to another
employee’s timesheet, and approve it without the change being detected. Of the
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60 electronic timecards that we sampled, 19 (31.7%) were created or modified
and approved by the same individual.
According to Shelter managers, once D-time was implemented, many
supervisors discontinued using any form of sign-in sheets to track their staff’s
attendance. This has made it difficult to track actual time worked by shelter
employees to ensure that each employee is paid accurately for actual time
worked. Shelter managers believe that, without a timeclock at each location, it
would be difficult for them to accurately track their staff’s time. If the Department
does not implement timeclocks, it will need to develop alternative methods to
track actual time-in and time-out to ensure employees are being paid accurately.
When immediate supervisors are not available to approve staff’s D-time entries,
Central payroll staff may approve staff’s time instead of the Shelter Manager or
the DFO. However, since payroll staff have no knowledge or any means to verify
the accuracy of actual time worked by staff, it is inappropriate for them to
approve D-Time entries for shelter employees.
According to several shelter supervisors, employees often work overtime (usually
at the end of shifts to accommodate the public) when supervisors are not
available to pre-approve the overtime or confirm that it was worked. Employees
are not required to obtain approval of the overtime from Officers-in-charge, who
are usually available to approve and/or confirm the overtime. Advance approval
of overtime allows managers to control their overtime usage and overall payroll
costs.
At headquarters, the central payroll clerk approves her supervisor’s timecard
whenever the payroll supervisor’s manager is not available. The manager does
not review the payroll supervisor’s timecard ‘after the fact’, when he becomes
available.
Generally, throughout the Department, controls over sick leave, vacation and
absence without leave (AWOL) are weak. Although shelter supervisors indicate
that they use calendars and a monthly schedule to track planned time-off, if
immediate supervisors do not enter appropriate variance codes in D-time, the
employee may be paid as “hours worked.” Although central payroll staff
generates “employees with no hours” reports, payroll staff do not check with
shelter supervisors to determine why there were no hours, which could result in
employees sometimes getting paid “hours worked” instead of sick, vacation or
AWOL.
In cases where payroll staff identify an employee with no hours in D-Time, they
typically enter accumulated leave hours to pay employees, and then make
subsequent adjustments if necessary. This appears inefficient, since most of
these types of transactions are often reversed in subsequent periods.
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Extended paid sick hours (over three days) are not properly authorized.
Approval forms (Personnel Forms 192 and 193s) are not on file for some
employees who received extended sick pay.
Human resources staff typically use a rubber stamp (with the HR supervisor’s
name) to sign completed Form-41 changes whether the supervisor is, or is not
available. HR staff stated that this has been the practice for several years. This
practice presents a risk that human resources staff could make unauthorized
changes to employee records without being detected.
Subsequent to our fieldwork, LAAS management indicated that it is in the process of
revising its D-Time and payroll policies to address these issues.
Recommendations
LAAS management should:
16. Segregate timekeeping and approving functions in D-Time.
17. Evaluate the use of sign-in/sign-out sheets or explore other
alternatives to properly track shelter employees’ worked hours.
18. Require the Shelter Manager or Director of Field Operations, instead
of Central Payroll staff, to approve shelter employees’ D-Time when
the employees’ immediate supervisors are not available.
19. Implement consistent procedures for shelter supervisors to track and
approve employees worked, vacation, sick and overtime time.
20. Discontinue using a rubberstamp signature to approve Form-41
changes.
Temporary Bonuses
While the criteria for receiving bonuses are established in the Administrative Code
and/or MOUs, departments are responsible for establishing adequate controls to identify
employees who are eligible for bonus payments, maintaining sufficient documentation to
support eligibility, and monitoring eligibility requirements on an on-going basis.
Management must also ensure eligibility requirements continue to be met when there
are changes to the employee’s work status (e.g., paid or unpaid leave) or assignment
(e.g., promotion or transferred to another division/department).
Per the Administrative Code and applicable MOUs, shelter employees are entitled to
temporary bonuses for hours worked when acting as a supervisor, when assisting the
medical team in performing euthanasia (only Animal Care Technicians or ACTs), or for
working a night shift (50% of shift must be between 5pm and 8am). For each of these
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three temporary bonuses, an employee is entitled to an additional 5.5% added to their
rate of pay for the eligible hours worked.
Finding #9: D-Time has not been designed in a manner that minimizes incorrect
payments for temporary bonuses due to errors or improprieties.
In D-Time, a pay level (LV) is equivalent to 2.75% of additional pay, which means an
entry of the “2” LV would generate 5.5% (2 x 2.75) in additional pay. When completing
their D-Time, shelter employees may choose a pay level from a drop-down menu for the
bonus. For example, an ACT who works a night shift and assisted the medical team
would code his or her D-Time by selecting a “4” under LV to indicate eligibility for both
the night bonus and euthanasia bonus for the number of hours the employee worked
during that shift, which would have the effect of adding 11% to his/her rate of pay for
those hours worked.
Under the current system, the risk of inappropriate bonus payments is increased.
Employees are, in effect, allowed to determine their pay. For example, there is nothing
to prevent an employee from choosing a level that would result in that employee being
paid more than they are entitled to receive (if a supervisor does not note the error).
Also, as currently designed, D-Time does not always show which bonuses the
employee is “claiming” (e.g., the night shift bonus and the euthanasia bonus in the
above example), making it difficult for the approver to validate the D-Time entries.
Controls would be enhanced if D-Time was designed in a manner that would require the
employee to specify which bonuses he/she is claiming. The employee’s supervisor
would then be in a better position to verify that the employee was entitled to receive
these bonuses prior to approving payment for them, and LAAS management would be
able to determine how much its employees were paid for each type of bonus over a
given period.
Redesigning D-Time for the Department would also minimize the potential for errors.
Based on discussions with both staff and supervisors, several did not have a clear
understanding of how bonuses should be coded in D-Time, indicating a high risk of
inappropriate entry and corresponding payment.
We noted other issues related to the lack of evidence to support the approval of
temporary bonuses, as follows:
For euthanasia pay, the medical teams do not validate hours worked by ACT
employees in the medical section.
For acting pay, there is a lack of communication between the Payroll and the
Personnel Section in order to avoid inappropriate payments. Acting pay is
approved by LAAS’ Personnel Section. However, the employee’s supervisor and
the Payroll Section should be informed of the eligibility period so they can
properly monitor to prevent overpayments.
38
One employee received acting pay for two pay periods before it was eventually
stopped after the Payroll Section determined that the employee was no longer
entitled to the acting pay. The Payroll Section did not detect the payments in a
timely manner because of the lack of communication with the Personnel Section
as to when the employee’s eligibility for the bonus should be terminated.
Although the overpayments were recouped from the employee, they could have
been prevented had the Payroll Section been properly informed by the Personnel
Section and/or the employee’s supervisor. This is also another indication that
supervisors are not clear as to what to look for with respect to temporary bonus
codes on their staff’s D-Time.
Recommendations
LAAS management should:
21. Require the medical team at each shelter to validate hours worked by
ACTs assigned to the Medical Section to help with euthanasia, which
would provide support for a supervisory approval of temporary
bonuses paid.
22. Consult with the Office of the Controller’s PaySR Team to request
separate codes be created for each of its temporary bonuses.
23. Ensure that the Personnel Section promptly notifies the Payroll
Section when employees are no longer entitled to “acting pay.”
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SECTION III: INVENTORY MANAGEMENT & PROCUREMENT
Finding #10: Controls over the animal inventory are inadequate. Animal Care
Technicians (ACTs) do not consistently perform daily animal
inventories to identify and explain differences between the system
records and the physical count of animals in the shelters. In
addition, staff do not process animal transfers between shelters in
Chameleon in a timely manner, and do not record animals removed
from shelters for mobile adoption events in the system. Finally, the
Department does not consistently follow up on animals in the foster
program to ensure they are brought back to LAAS for sterilization,
formal adoption and/or appropriate disposition in Chameleon.
LAAS uses Chameleon to track information related to each animal in the custody of the
Department. This includes their location, license, vaccination information and other
records.
It is critical for LAAS to compare computer inventory records against the actual animals
in each kennel and cage, in foster care, and at offsite adoption locations. To ensure
accountability of animals at each shelter, Animal Care Technicians (ACTs) are required
to periodically inventory animals under their care. According to LAAS field
management, at least once a day, the shelter staff should conduct a physical inventory
of animals and compare the result to Chameleon kennel counts. Any variances should
be investigated immediately. We noted that the Department does not have adequate
controls in place to monitor its animal inventory. Specifically,
Shelter staff do not appear to be consistently performing daily animal inventories,
as required. Representatives at each shelter stated that they perform daily
inventories. However, during our visits to each shelter, four of the six shelters
were unable to demonstrate that it performed an inventory within the last day.
Staff/management from these four shelters stated that they do not maintain
support for the inventory counts.
Chameleon allows a shelter to “receive” an animal without the transferring
location processing the transfer. Once the receiving shelter changes the location
of the transferred animal in Chameleon, the transferring location’s inventory is
also updated. However, to help ensure an accurate inventory at all times, the
transferring location should be required to initiate a transfer in Chameleon prior to
delivering the animals to another shelter.
Shelter staff do not properly track the custody of animals that are removed from
shelters for mobile pet adoption events. There are no specific guidelines on how
to properly account for these animals.
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Staff use “missing” in the animal outcome field as a catch all to explain inventory
discrepancies. Shelters do not always investigate missing animal cases in a
timely manner.
There are no follow-up procedures for the foster program. This program allows
the public to take home unweaned animals that are less than eight weeks old so
that the animals can be fostered for a period of eight to twelve weeks. After this
period, animals are to be brought back to the shelter to be spayed or neutered
and offered for adoption. However, we noted that a number of animals under this
program have been in foster homes beyond the prescribed time period. Ideally, if
an individual is interested in adopting foster animals, the Department should
convert them through the regular adoption process so it can properly remove the
animals from its inventory.
Keeping an accurate inventory of the animals in LAAS’ care allows each shelter to know
where they stand on a daily basis and can facilitate timely investigations. Without
periodic physical inventories and proper oversight over transfers for mobile events and
between shelters, it would be difficult for employees to immediately detect when an
animal is missing.
Recommendations
LAAS management should:
24. Require shelter supervisors to perform daily inventories of animals in
their care and investigate any discrepancy of missing animals
immediately. Shelter managers should periodically follow up with
supervisors to ensure that inventories and any necessary
investigations are being completed timely.
25. Enforce current policies to follow up with foster animals in a timely
manner.
26. Implement procedures to properly process and transfer animals to
and from shelters to mobile pet adoption events, and between
shelters.
Finding #11: Controls over physical access to supplies needs to be strengthened.
According to LAAS’ policies and procedures on “Inventory Control Responsibility,”
procured supplies should be maintained in a locked storage room, area, or cabinet, with
limited access to these storage areas, as necessary, to limit distribution and use for the
intended purposes. It also states that each shelter should maintain the availability of
supplies and ensure that stored quantities are not excessive. In addition, staff should
conduct periodic inventories, assess shelter needs, place orders in a timely manner,
and monitor purchases to ensure shelters remain within budgeted amounts.
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We noted that, except for controlled substances which are locked in a safe, non-medical
staff at each shelter have access to medical supplies. In addition, we noted that
shelters do not complete periodic inventories and some locations do not maintain their
supplies (including animal food and donated supplies) in a locked storeroom. Minimal
control could lead to theft of supplies. The Department should strengthen procedures
and controls to ensure that supply inventories are safeguarded from theft or personal
use. However, the degree of control exercised over the actual supply inventories
should be commensurate with the size and/or dollar value of inventories maintained.
Recommendation
27. LAAS management should establish appropriate controls to properly
safeguard and monitor supplies at the shelters.
Finding #12: Shelter managers do not have a listing of fixed assets and
equipment assigned to or installed at their locations. Therefore, it
would be difficult for site managers to detect when items are
missing.
According to Section 2.4.2 of the Controller’s User Department Manual, each
department should maintain inventory records of equipment in its possession or under
its charge, and any item with an acquisition cost of $5,000 or more and a useful
estimated life of at least three years should be capitalized and entered into either the
Centralized Asset Management System (CAMS), the Service Desk Online System
(SOS) or another authorized system to facilitate inventory tracking.
Also, Section 2.4.1 of the Manual requires a biennial physical inventory of fixed assets
at all department locations to verify the correctness of the inventory records. Upon
completion of the physical inventory, all changes/discrepancies should be annotated on
the inventory listing and reported to management for review and corrective actions.
Physical inventories would help identify any misplaced or missing equipment items.
The Department does not conduct a periodic physical inventory of fixed assets (e.g.,
vehicles, security cameras, x-ray machines) and other equipment such as computers.
Also, during our fieldwork, LAAS management removed guns and ammunition from
shelters, apparently due to lax controls. Without periodic inventories, it is difficult to
identify any misplaced or missing equipment items. LAAS stated periodic inventories
are not conducted due to inadequate staffing resources.
Other than the big-value items assigned to the facilities, each ACO is issued small
safety and other equipment items such as animal control devices, microchip scanners,
cameras, radios, etc. Although these items are not considered to be fixed assets, the
officers are supposed to keep these items with them while on patrol or in their lockers
when they are not on duty. During our walkthrough of shelter operations, several ACO
supervisors did not have a listing of equipment issued to their officers. Upon our
42
request, field management at each shelter conducted a quick inventory and found that
12 cameras and 11 radios were missing.
Recommendations
LAAS management should:
28. Provide shelter managers a listing of equipment items assigned to
their locations to aid them in monitoring of equipment items.
29. Conduct biennial inventories of all equipment, as required, and
reconcile the results with CAMS, SOS or internal records.
Finding #13: LAAS used purchasing cards, instead of an established contract, to
purchase compounded formulas. The Department also did not
cancel purchasing cards issued to former employees in a timely
manner. In addition, purchasing cards are not adequately
controlled, and accounting staff do not always obtain support
documentation for purchases prior to paying the credit card
company.
The City Purchasing Card (P-card) program guidelines provide that the cards only be
used for individual purchases of less than $1,000, with total transactions of not more
than $5,000 per month. The P-card program was established by the City to create a
more efficient, cost-effective method of procuring small-dollar items under $1,000, or for
minor services and repairs. The program is not intended to circumvent the City’s
procurement or purchasing policies and procedures, and P-cards cannot be used for
travel or travel-related items or entertainment. The cards are intended to expedite the
procurement process and reduce petty cash transactions. The guidelines prohibit using
P-cards to purchase medical drugs or supplies.
The Department has a total of 23 City-issued purchasing cards, of which 19 are issued
to staff at the shelters. We noted the following issues related to the Department’s
administration of its P-cards:
Two cards that were issued to former employees had not been cancelled, even
though both employees had left the Department over a month ago. Although we
verified that there were no transactions posted after the former employees left,
the Department should ensure that all credit cards issued to employees are
recovered and cancelled once an employee leaves the Department.
The Department uses P-cards to purchase compounded formula (medical drugs),
instead of establishing formal agreements. LAAS stated that the compound
formula, which is needed to treat small animals, is not available through the City-
contracted vendor. LAAS purchases the formula from one pharmacy, and
spends approximately $20,000 annually. Several individual purchases exceeded
the $1,000 limit.
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Though the Department’s rationale for the purchases is reasonable and it
received Controller approval for these “exceptions” to the policy, given the
volume of purchases it would benefit LAAS to establish an agreement with this
vendor and seek any available discounts.
Accounting staff does not always verify the supporting receipts related to P-card
purchases before processing the payment to the credit card company (US Bank).
The internal policy is to pay the bill immediately in order to avoid penalties and/or
interest charged by the credit card company. While we agree that bills should be
paid timely to avoid penalties, once the payment is made, Accounting should
review supporting documentation submitted by staff to ensure that P-card
purchases are consistent with Citywide guidelines.
Recommendations
LAAS management should:
30. Consult with the General Services Department to either include the
compound formula in the current City medical vendor contract or
initiate a request to establish a City agreement for a supplier of
compound formula.
31. Ensure that all P-cards are recovered and cancelled once an employee
leaves the Department.
32. Ensure that Accounting staff review supporting documentation to
ensure that P-card purchases made by the staff comply with City
policies.
Finding #14: Medical supply budgets are not based on formal usage analyses or
patterns to ensure reasonableness in relation to the animal
population in each shelter. Supply orders are also not always
approved by supervisors.
The Department routinely procures medical supplies, materials, related services and
equipment. Medical supply purchases for the shelters are initiated by the designated
registered veterinary technician (RVT) and approved by Accounting. Our audit
disclosed the following:
With the exception of fatal plus (euthanasia substance), which is centrally
procured and maintained by a supervising veterinarian, medical supply
purchases are not required to be pre-approved by a veterinarian at the shelter or
by any other supervisor.
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Purchases and/or medical supply budgets are not based on any formal usage
analysis or pattern. Actual usage at each shelter has never been analyzed to
determine the reasonableness of budgets in relation to that shelter’s operations
or animal population in its care.
Purchases may not always be cost-effective. Brands of supplies purchased are
not 100% standardized to ensure consistency and cost savings. Different brands
may be purchased by the shelters for the same type of supplies as long as the
vendor carries the brand, regardless of cost.
Without tracking and consistent monitoring of actual medical supply usage and
expenses, it is difficult to determine whether purchases are cost effective and truly
based on need. Also since supply items are prone to loss or theft, tracking patterns of
usage would also help ensure procurement of these items is made for operational
needs.
Recommendations
LAAS management should:
33. Establish a system whereby proposed purchases are reviewed and
approved by appropriate supervisory personnel prior to ordering to
ensure purchases are cost effective.
34. Standardize brands of supplies (including medical) that shelters can
purchase.
35. Periodically review the patterns and volumes of purchased items to
identify inappropriate purchases or to ensure that spikes in usage are
justified.
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SECTION IV: CONTRACTING
Finding #15: LAAS’ oversight over its contracts is inadequate. Contracts with in-
house veterinarian clinic operators have the same scope of services
but have different revenue-sharing terms. Also, LAAS failed to
collect at least approximately $41,000 of its share of revenues from
in-house clinic operators.
LAAS has several personal service contracts. Division 10 of the City’s Administrative
Code contains general requirements for contracting that must be followed by
departments. It discusses the need for departments to collect and maintain evaluative
data on contractor performance such as quality of work product or service performed,
timeliness of performance, and expertise of personnel assigned to the contract.
Departments are expected to have processes in place to ensure adequate monitoring
and compliance.
The following are our observations relating to four LAAS’ contracts that we reviewed:
AVID Identification Systems, Inc.
In order to establish a safe, effective, and accurate method of identifying animals and
their owners, Section 53.15.5 of the Municipal Code requires the Department to implant
each dog and cat adopted from the Department's shelters with an electronic animal
identification device (microchip).
The Department contracted with AVID Identification Systems, Inc. (AVID) to provide
pre-registered tags to implant for the Department’s use and for pets owned by members
of the public who request this service from the Department. The contractor is expected
to provide all scanners, equipment, related supplies, and support needed to implement
and maintain the program.
The contract requires AVID to supply 190 microchip scanners to the Department.
According to the Department’s shelter managers, the shelters only received 143 of 190
scanners that AVID was required to provide. In addition, field staff indicated that a
number of these scanners are not in good working condition. There is no evidence that
the Department followed up with AVID to request or replace these items.
The contract also provides that the vendor maintain an accurate database (on behalf of
the Department) of the animals that have been micro-chipped (regardless of the
microchip manufacturer) including all relevant identifying information about the animals
(description, date of implant, date of death, date of transfer, etc.) and its owner(s). This
is to help facilitate the return of lost animals that may be found by other jurisdictions.
However, LAAS does not consistently provide AVID with complete information on
animals impounded so that AVID can update the database.
46
In-house Clinic Operators
The Department has contracts with three in-house veterinarians to provide veterinarian
medical services on-site at four shelters: the East Valley, Harbor, West Los Angeles and
South Los Angeles shelters. One veterinarian has a contract for two locations while the
other two veterinarians operate at one location each.
The contracts require the operators to provide spay/neuter surgeries for dogs, cats, and
rabbits as requested by the Department and for residents’ privately-owned animals.
The clinics may also offer other related veterinary services and products. The City pays
the contractors for spay/neuter surgeries performed for shelter animals. However, the
contracts require that the operators share their revenues with LAAS. We noted that,
while the nature and scope of services are the same for all three contracts, revenue-
sharing terms vary from contract to contract.
The contracts with two operators provide that the Department share in revenues
generated from their outside sales and services (i.e., other than from referrals from
Department shelters) while the other operator only provides the Department with
discounts on fees charged for services provided to shelter animals.
The revenue-sharing percentages are also different for the three operators. For
example, for services provided to shelter animals, one contract contained a 7%
revenue-sharing clause while another has 10%. Staff was unable to explain why there
are different payment/revenue-sharing terms for contracts with similar scopes of
service. The Department may be perceived as favoring one contractor over another if
terms and conditions for the same scope of services vary from one contract to another.
In addition, our audit found that the operators have not been complying with revenue-
sharing provisions, and the Department has not been following up to collect appropriate
amounts.
For the East Valley and Harbor operator, the contract allows the Department to
take a 10% discount off the invoice amount. Due to an oversight, the
Department did not take the discount for payments made in FY 2010-11. This
resulted in overpayments of $29,067 to the operator.
For the South Los Angeles operator, the Department failed to collect its share of
revenues for FY 2010-11. FY 2010-11 payments to this operator for services to
shelter animals totaled $168,402. The Department’s share equates to 7% or
$11,788. In addition, the contract requires this operator to share 10% of gross
revenue from other services and 50% of its net profit from wellness clinics
provided to the public. This operator has never provided a report of his outside
revenues and has never remitted any amount as the Department’s share.
The contract with the West Los Angeles operator also stipulates revenue-sharing
of the operator’s revenues from Department animals as well as revenues from
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services provided to the public. Although this operator calculates and remits an
amount each month to the Department, LAAS has never verified the accuracy of
the basis for the contractor’s remittances.
The Department lost a minimum of $40,855 based on amounts paid to two operators
for shelter animals. Due to the lack of data, the ultimate loss of revenue share from
the operators’ outside services is unknown.
Recommendations
LAAS management should:
36. Require AVID Identification Systems, Inc. (AVID) to provide the
remaining 47 microchip scanners required by its contract.
37. Provide AVID with complete information on animals impounded so
that AVID can update the database it maintains for the Department.
38. Ensure future contracts to provide similar services contain similar
terms and conditions, as much as practical.
39. Pursue the collection of the approximate $40,000 owed from the two
clinic operators.
40. Develop a mechanism to verify and collect the Department’s share of
revenue from in-house clinic operators’ outside services.
Finding #16: LAAS does not have formal agreements with a number of partnering
veterinarians that perform spay/neuter services for the shelters.
Partnering Veterinarians
Because of the large geographic area served by LAAS, the Department has partnered
with private veterinarians for over 15 years. To supplement in-house clinic operators,
the Department currently partners with 46 private veterinarians to provide spay and
neuter surgeries for animals on behalf of the Department and/or members of the public.
In FY 2010-11, LAAS paid approximately $1.4 million to the partnering veterinarians.
Partnering veterinarians sign a one-year letter of agreement indicating they will abide by
the Department’s policies. Our prior audit recommended the Department enhance its
letters of agreement to include the details of the responsibilities of both the veterinarians
and LAAS.
The Department has yet to finalize enhancements and sign letters of agreement with a
number of partnering veterinarians. The Department needs to ensure that agreements
with outside parties clearly describe pertinent terms and conditions as well as
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obligations of both parties. During our fieldwork, the Department was working to
enhance the letters of agreement with the partnering veterinarians.
Recommendation
41. LAAS management should finalize the letters of agreements and have
all partnering veterinarians with expired agreements sign new ones.
Finding #17: LAAS does not maintain adequate documentation related to its
contract selection and evaluation process. Also, the Department is
not executing contracts in a timely manner.
The Department is required to maintain documentation related to the selection and
administration of these contracts. The General Services Department’s RFP Manual
provides guidelines on bidding for contracts. Some of the requirements of the Manual
state that:
Dedicated files should be maintained for each contract.
All pertinent documentation relating to contract selections should be maintained
within the file (list of recipients and responders of the RFP, proof of
advertisement, evaluation sheets, documentation submitted by the proposers
pertinent to the evaluation, etc.)
LAAS should have all of the preceding information in its records.
As of June 30, 2011, other than the 46 letters of agreements, the Department had 13
formal contracts that are covered by full-City contracts, which are either for one, three or
five-year terms. For some contracts, there is no documentation showing how the
contractors were selected. 3 For example, the Department was unable to show the
criteria used to evaluate the proposers, documentation used to evaluate the proposers’
qualifications (e.g., the proposers’ financial statements and copies of certifications), and
evaluation worksheets to demonstrate that the Department selected the best proposer.
Contract files were not maintained because the staff who was assigned to manage
contracting left the Department. Without adequate documentation, it is difficult for the
Department to show that it consistently follows Citywide guidelines and policies when it
comes to contracting. Adequate documentation helps LAAS demonstrate it selected the
proposer with the best overall value to the City, serves as proof of a fair, impartial
selection process and helps the Department withstand challenges from non-selected
proposers.
3
This exception relates to Clinico (which has a full City contract) and the 46 partnering veterinarians that
were covered by Letters of Agreement.
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The Department is also not executing all contracts in a timely manner. For example,
even though the Board of Animal Service Commissioners approved a proposed contract
with IDEXX for lab services in September 2010, the contract has yet to be executed.
The Department indicated that the IDEXX contract is pending CAO’s approval.
However, LAAS was unable to show that it periodically follows-up with the CAO to
obtain the status. Since Antech’s contract expired on September 30, 2011 and IDEXX’s
contract is not yet executed, the Department was forced to seek a month-to-month
extension of Antech’s contract. As a result, the Department has not been able to obtain
the benefits of the new proposed contract.
Recommendations
LAAS management should:
42. Maintain documentation related to its contract evaluation and
selection process for every contract.
43. Follow up with the Office of the City Administrative Officer to expedite
executing the IDEXX contract.
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SECTION V. DONATIONSAND MISCELLANEOUS REVENUE
Donations
Unrestricted donations can be used for almost any purpose that directly benefits the
receiving department’s programs or activities. However, donated funds should never be
used for parties, awards, conferences or gifts for City employees, unless donors
specifically designate in writing that the funds may be used for that purpose.
Section 1.8.8 of the Controller’s User Department Manual established the following
internal controls for donations received by departments.
Written department donation policy is prepared and approved by a governing
body.
Per written department policy, a responsible party approves donations.
Donations having a monetary value in excess of $5,000 are subject to formal
acceptance by Council.
Donors are recognized in writing, and are properly recorded and accounted for.
Finding #18: Shelters do not properly track donations received. According to
shelter management, donations were treated as petty cash funds
that were used for shelter and non-shelter needs, such as rare
animal foods, birthday cakes, and food for employees.
According to LAAS procedures, clerk typists, animal control officers, animal care
technicians and registered veterinary technicians may accept monetary donations of
$250 or less on behalf of the Department. Monetary donations of $251 or more may
only be accepted by the supervisor on duty. Donations over $1,000 must be referred to
the Director of Field Operations/Shelter Manager prior to acceptance. Receipts should
be issued for all donations, except those received in donation boxes.
All Department staff may accept donations of in-kind items such as newspapers, clean
towels and bedding, unopened pet food, clean cages and carriers, grooming items,
toys, and medical supplies. We noted the following with respect to accounting for
donations at the shelters:
Amounts received through donation boxes were not tracked and reported to
Accounting. As a result, these donations were not properly recorded in the
Department’s donation fund accounts (i.e., Animal Welfare Trust Fund or Animal
Sterilization Trust Fund). Due to the lack of adequate records maintained by
shelters for these donations (generally, neither donation box collections nor
expenses paid by those monies are logged or tracked), we were unable to
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determine how these funds were spent. However, according to shelter
management, donation box collections were treated as petty cash funds that
were used for shelter and non-shelter needs, such as rare animal foods, birthday
cakes, and food for employees.
There was no signage at one facility instructing the public to make checks
payable to the City. Also, we noted a donation check made payable to “cash.”
There are no clear guidelines on how in-kind donations should be tracked and
reported.
Employees do not always issue donation receipts for in-kind donations, as
required by Departmental policy.
The Department does not separate donations for special programs. For
example, under the Department’s STAR program, the public can donate money
to be used towards medical expenses of injured animals and animals with special
medical needs. Funds can also be donated for a specific shelter’s operations.
All donated funds should be tracked separately, and be used to meet the intent of
donors.
The Department does not have policies on how donations received during Mobile
Pet Adoption events (held during weekends or once a month) should be
accounted for and reported.
Shelter managers informed us that they were told by LAAS administration that using
donations as petty cash for shelter (as well as non-shelter) needs was appropriate as
long as they internally track expenses. (The practice of using donations as petty cash
stopped during our audit. Managers are now expected to record and deposit any
amounts they receive.) The Department needs to improve controls over donations
collected to ensure that donations are appropriately used for the benefit of the shelters,
as intended by donors.
Recommendations
LAAS management should:
44. Require employees to discontinue spending donation receipts for
staff use, record all cash donations in Chameleon, and issue receipts
to donors.
45. Create sub-accounts within the Animal Welfare Trust Fund to account
for donations received for specific programs or shelters.
46. Strengthen its controls over recording and use of in-kind donations
and donations received during mobile pet adoption events.
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Miscellaneous Revenues
Finding #19: There is no City agreement for vending machines installed at the six
shelters, and there is no accountability over vendor commissions
or other miscellaneous revenue received.
Each shelter has at least two vending machines installed at their facility. The vending
machine owners pay a monthly commission directly to the shelter. The commission
varies from $25 to $30 per month, and is either paid by cash or check.
There are no contracts or formal agreements with vending machine owners.
Lack of formal agreements regarding vending machines on City property may
result in potential City liability issues.
Vending machine commission checks are typically payable to the shelter
managers and not to the City.
Vending machine commissions are not recorded in Chameleon, and as a result
the commissions are not reported as Department revenues.
Some locations also generate miscellaneous revenues from recycling donated
paper products. These amounts are also not reported as revenue. Instead,
shelters use them as petty cash, and as with donations, these revenues and
associated expenses are generally not tracked. According to several shelter
managers, this approach was acceptable until a few months ago when the
Department’s management ordered the staff not to recycle donated paper
products anymore.
All revenue should be recorded in Departmental accounts. Also, any business
conducted with another entity should be supported by an agreement/contract so that
both parties understand their responsibilities and to minimize disagreements.
The lack of policies and procedures related to miscellaneous revenues could potentially
lead to personal gain for some employees who have been receiving the miscellaneous
revenues but not reporting the amounts received to the Department.
Recommendations
LAAS management should:
47. Require shelters to record all miscellaneous revenues in Chameleon.
48. Consult with the Department of General Services to establish City
agreements with vending machine owners.
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Appendix A
OFFICE OF THE CONTROLLER
AUDIT OF FISCAL OPERATIONS AT THE LOS ANGELES
DEPARTMENT OF ANIMAL SERVICES
Ranking of Recommendations
Finding Description of Finding Ranking Recommendations
Number Code
SECTION I. REVENUE COLLECTIONS AND BILLINGS
1. LAAS does not bill all dog LAAS management should:
owners in its database for
licensing, which has contributed U 1. The Discontinue its current billing practice
to a decrease in license and start sending license renewal notices
renewals. Based on LAAS’ dog to all pet owners in its database. This
license data, the Department would necessitate reprogramming
has lost the opportunity to Chameleon to generate dog license bills
collect over $1.3 million in to all potential dog owners, instead of only
potential revenue over the last those who paid for the most recent year.
two years as a result of not
sending renewal notices to all U 2. Implement the new penalty enforcement
registered dog owners. procedures to bring more pet owners into
compliance with licensing laws.
2. LAAS failed to use several LAAS management should:
methods at its disposal to
increase the number of licensed N 3. Implement proper procedures so that
dogs. reminder letters are sent to animal-related
businesses, activities and exhibitions
operating in the City requiring these
businesses to send in pet sales
information, as required by the Municipal
Code.
N 4. Continue its efforts to review records
obtained through these various sources to
identify noncompliant pet owners for
future license billing and enforcement.
N 5. Request Amanda Foundation to provide,
along with its invoices, detailed supporting
documentation to validate services
provided and amounts billed.
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Finding Description of Finding Ranking Recommendations
Number Code
3. LAAS failed to follow up with
businesses that did not renew U 6. LAAS management should implement
their permits. As of the end of procedures to timely follow up with
August 2011, there were 281 businesses who fail to renew their annual
businesses with expired permits permits.
valued at approximately
$75,000.
4. There is an unexplained LAAS management should:
discrepancy of $125,000
between actual revenue U 7. Implement adequate procedures to
generated and amounts that properly track microchips allocated to
should have been generated each shelter.
based on the number of
microchips implanted into U 8. Periodically reconcile the microchip usage
animals during the last two fiscal number per Chameleon to actual amounts
years. deposited to identify any discrepancies in
a timely manner.
5. The Department’s Chameleon LAAS management should:
system lacks adequate system
controls to prevent transactions N 9. Implement adequate program controls in
requiring payments from being the Chameleon system to prevent
finalized without a transactions that require payments from
corresponding payment posted. being finalized without corresponding
In addition, online collections payments posted to the System. If
are not posted to Chameleon in Chameleon reprogramming is not
a timely manner. feasible, LAAS management should
periodically generate and review a report
of adoptions (other than New Hope
adoptions) and redemptions entered into
Chameleon without payments associated
with them.
N 10. Establish procedures to ensure online
payments received are posted to
Chameleon at least once a week.
6. Accounting does not reclassify
collections on a timely basis and U 11. LAAS management should ensure the
does not reconcile deposits Accounting Section continues to reconcile
reported by shelters to amounts deposits reported by each shelter to bank
credited by the bank. records and timely reclassifies collections
between the General Fund and other
LAAS special funds, as required by the
Administrative Code.
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Finding Description of Finding Ranking Recommendations
Number Code
7. Manual receipts and permits are LAAS management should:
not properly controlled,
presenting a risk that monies N 12. Discontinue using separate receipts for
could be misappropriated permits and start issuing miscellaneous
without detection. receipts (i.e. City’s “Gen 30 Receipt” form)
for permit fees received by officers while
in the field.
D 13. Record and track the sequence numbers
of miscellaneous receipts and permits
issued in Chameleon.
N 14. Periodically reconcile manual receipts to
Chameleon to ensure collections are
recorded.
U 15. Record and periodically account for all
receipt books issued to each shelter. This
would include ensuring that all previously-
issued books are accounted for before
new books are issued.
SECTION II. PAYROLL AND TIMEKEEPING
8. The Department does not have LAAS management should:
a standardized method for
tracking employees’ hours U 16. Segregate timekeeping and approving
worked to ensure they are paid functions in D-Time.
accurately. In addition, several
supervisors can perform both N 17. Evaluate the use of sign-in/sign-out
timekeeping and approving sheets or explore other alternatives to
functions; these two functions properly track shelter employees’ worked
should be separated. hours.
N 18. Require the Shelter Manager or Director
of Field Operations, instead of Central
Payroll staff, to approve shelter
employees’ D-Time when the employees’
immediate supervisors are not available.
N 19. Implement consistent procedures for
shelter supervisors to track and approve
employees worked, vacation, sick and
overtime time.
N 20. Discontinue using a rubberstamp
signature to approve Form-41 changes.
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Finding Description of Finding Ranking Recommendations
Number Code
9. D-Time has not been designed LAAS management should:
in a manner that minimizes
incorrect payments for N 21. Require the medical team at each shelter
temporary bonuses due to to validate hours worked by ACTs
errors or improprieties. assigned to the Medical Section to help
with euthanasia, which would provide
support for a supervisory approval of
temporary bonuses paid.
N 22. Consult with the Office of the Controller’s
PaySR Team to request separate codes
be created for each of its temporary
bonuses.
N 23. Ensure that the Personnel Section
promptly notifies the Payroll Section when
employees are no longer entitled to
“acting pay.”
SECTION III: INVENTORY M ANAGEMENT AND PROCUREMENT
10. Controls over the animal LAAS management should:
inventory are inadequate.
Animal Care Technicians U 24. Require shelter supervisors to perform
(ACTs) do not consistently daily inventories of animals in their care
perform daily animal inventories and investigate any discrepancy of
to identify and explain missing animals immediately. Shelter
differences between the system managers should periodically follow up
records and the physical count with supervisors to ensure that inventories
of animals in the shelters. In and any necessary investigations are
addition, staff do not process being completed timely.
animal transfers between
shelters in Chameleon in a N 25. Enforce current policies to follow up with
timely manner, and do not foster animals in a timely manner.
record animals removed from
shelters for mobile adoption 26. Implement procedures to properly
events in the system. Finally, N process and transfer animals to and from
the Department does not shelters to mobile pet adoption events,
consistently follow up on and between shelters.
animals in the foster program to
ensure they are brought back to
LAAS for sterilization, formal
adoption and/or appropriate
disposition in Chameleon.
11. Controls over physical access to
supplies needs to be N 27. LAAS management should establish
strengthened. appropriate controls to properly safeguard
and monitor supplies at the shelters.
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Finding Description of Finding Ranking Recommendations
Number Code
12. Shelter managers do not have a LAAS management should:
listing of fixed assets and
equipment assigned to or N 28. Provide shelter managers a listing of
installed at their locations. equipment items assigned to their
Therefore, it would be difficult locations to aid them in monitoring of
for site managers to detect equipment items.
when items are missing.
N 29. Conduct biennial inventories of all
equipment, as required, and reconcile the
results with CAMS, SOS or internal
records.
13. LAAS used purchasing cards, LAAS management should:
instead of an established
contract, to purchase 30. Consult with the General Services
compounded formulas. The U Department to either include the
Department also did not cancel compound formula in the current City
purchasing cards issued to medical vendor contract or initiate a
former employees in a timely request to establish a City agreement for
manner. In addition, purchasing a supplier of compound formula.
cards are not adequately
controlled, and accounting staff 31. Ensure that all P-cards are recovered and
do not always obtain support N cancelled once an employee leaves the
documentation for purchases Department.
prior to paying the credit card
company. 32. Ensure that Accounting staff review
N supporting documentation to ensure that
P-card purchases made by the staff
comply with City policies.
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Finding Description of Finding Ranking Recommendations
Number Code
14. Medical supply budgets are not LAAS management should:
based on formal usage analyses
or patterns to ensure N 33. Establish a system whereby proposed
reasonableness in relation to purchases are reviewed and approved by
the animal population in each appropriate supervisory personnel prior to
shelter. Supply orders are also ordering to ensure purchases are cost
not always approved by effective.
supervisors.
D 34. Standardize brands of supplies (including
medical) that shelters can purchase.
N 35. Periodically review the patterns and
volumes of purchased items to identify
inappropriate purchases or to ensure that
spikes in usage are justified.
SECTION IV: CONTRACTING
15. LAAS’ oversight over its LAAS management should:
contracts is inadequate.
Contracts with in-house N 36. Require AVID Identification Systems, Inc.
veterinarian clinic operators (AVID) to provide the remaining 47
have the same scope of microchip scanners required by its
services but have different contract.
revenue-sharing terms. Also,
LAAS failed to collect at least N 37. Provide AVID with complete information
approximately $41,000 of its on animals impounded so that AVID can
share of revenues from in-house update the database it maintains for the
clinic operators. Department.
U 38. Ensure future contracts to provide similar
services contain similar terms and
conditions, as much as practical.
U 39. Pursue the collection of the approximate
$40,000 owed from the two clinic
operators.
U 40. Develop a mechanism to verify and
collect the Department’s share of revenue
from in-house clinic operators’ outside
services.
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Finding Description of Finding Ranking Recommendations
Number Code
16. LAAS does not have formal LAAS management should:
agreements with a number of U
partnering veterinarians that 41. LAAS management should finalize the
perform spay/neuter services for letters of agreements and have all
the shelters. partnering veterinarians with expired
agreements sign new ones.
17. LAAS does not maintain LAAS management should:
adequate documentation related
to its contract selection and N 42. Maintain documentation related to its
evaluation process. Also, the contract evaluation and selection process
Department is not executing for every contract.
contracts in a timely manner.
U 43. Follow up with the Office of the City
Administrative Officer to expedite
executing the IDEXX contract.
SECTION V: DONATIONS AND MISCELLANEOUS REVENUE
18. Shelters do not properly track LAAS management should:
donations received. According
to shelter management, U 44. Require employees to discontinue
donations were treated as petty spending donation receipts for staff use,
cash funds that were used for record all cash donations in Chameleon,
shelter and non-shelter needs, and issue receipts to donors.
such as rare animal foods,
birthday cakes, and food for N 45. Create sub-accounts within the Animal
employees. Welfare Trust Fund to account for
donations received for specific programs
or shelters.
N 46. Strengthen its controls over recording and
use of in-kind donations and donations
received during mobile pet adoption
events.
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Finding Description of Finding Ranking Recommendations
Number Code
19. There is no City agreement for LAAS management should:
vending machines installed at
the six shelters, and there is no N 47. Require shelters to record all
accountability over vendor miscellaneous revenues in Chameleon.
commissions or other
miscellaneous revenue N 48. Consult with the Department of General
received. Services to establish City agreements
with vending machine owners.
N 49. Instruct all vendors to make any
commission checks payable to the City.
Description of Recommendation Ranking Codes
U- Urgent-The recommendation pertains to a serious or materially significant audit finding or control
weakness. Due to the seriousness or significance of the matter, immediate management attention and
appropriate corrective action is warranted.
N- Necessary- The recommendation pertains to a moderately significant or potentially serious audit
finding or control weakness. Reasonably prompt corrective action should be taken by management to
address the matter. The recommendation should be implemented within six months.
D- Desirable- The recommendation pertains to an audit finding or control weakness of relatively minor
significance or concern. The timing of any corrective action is left to management’s discretion.
N/A- Not Applicable
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