POLICE DEPARTMENT AUDITOR’S REPORT FISCAL 2006 - 2009

June 21, 2012

Charles H. Ramsey, Police Commissioner Police Department 314 Police Headquarters 8th and Race Streets Philadelphia, PA 19106 We have examined the financial affairs of the Police Department for fiscal years 2006 through 2009 pursuant to the requirements of Section 6-400 (c) of the Philadelphia Home Rule Charter. A synopsis of the results of our work is provided in the executive summary to the report. The conditions giving rise to the findings and recommendations in this report related to fiscal 2006, 2007, and the first half of fiscal 2008 occurred under the administration of the previous Police Commissioner. We discussed our findings and recommendations with your staff at an exit conference and included your written response to our comments as part of the report. Our recommendations have been numbered to facilitate tracking and follow-up in subsequent years. We believe that, if implemented by management, these recommendations will improve internal controls and the effectiveness and efficiency of your agency’s operations. We would like to express our thanks to you and your staff for the courtesy and cooperation displayed toward us during the conduct of our work. Very truly yours,

ALAN BUTKOVITZ City Controller cc:

Honorable Michael A. Nutter, Mayor Honorable Darrell L. Clarke, President and Honorable Members of City Council Members of the Mayor’s Cabinet

POLICE DEPARTMENT EXECUTIVE SUMMARY

Why The Controller’s Office Conducted The Examination Pursuant to the requirements of Section 6-400 (c) of the Philadelphia Home Rule Charter, we examined the financial affairs of the Police Department as part of our audit of the City of Philadelphia’s basic financial statements. The focus of our examination was limited to determining if department management had suitably designed and placed in operation internal controls and complied with any laws and regulations related to its revenue, payroll, other expenditure, cash, accounts receivable, inventory, and fiduciary fund activity.

What The Controller’s Office Found We observed certain internal control deficiencies in the Police Department’s procedures for various phases of its financial operations that management needs to address. The more significant of these deficiencies are listed below. •

Testing of the department’s payroll procedures disclosed errors in the method used to calculate overtime; overtime worked that was not documented in violation of the department’s written directives; weaknesses in posting transactions into the department’s on-line payroll system and approving overtime; a failure to maintain an up-todate list of employees who had access to the payroll system; daily assignment sheets that were not approved; and finally, attendance data that had been posted to the online payroll system without the appropriate supervisory review and approval.

•

Controls over the department’s Confidential Imprest Fund were weak. Fund reconciliations were not submitted to the city’s Finance Office on the proper form, surprise counts were not performed, and one custodian had responsibility for two sub-funds. Additionally, cash was not reallocated when a Narcotics Unit platoon was eliminated.

•

Training-grant billings and collections were not processed in accordance with city procedures. The department did not send copies of its billings and did not direct grantor agencies to remit payments to the city’s Grants Accounting and Administration Unit. Both practices are required by city standard accounting procedures.

•

Millions of dollars held in escrow may have been held in violation of the state’s Unclaimed Property Act, as the department had not analyzed the composition of the funds being held.

Police Department management took corrective action on a number of control deficiencies that we brought to its attention in the prior auditor’s report. Most notably, we observed that (1) cash subfunds were replenished based on usage; (2) delinquent accounts for the Reimbursable Overtime Program were referred to the Law Department on a timely basis; and (3) requisition forms for ammunition issuance at the Firearms Range were properly completed. We commend management for correcting these previously noted deficiencies.

What The Controller’s Office Recommends The Controller’s Office has developed a number of recommendations to address these findings. The recommendations can be found in the body of the report.

CONTENTS

Page INTRODUCTION Background………………………………………………………………………………..1

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS ............................................................3

FINDINGS AND RECOMMENDATIONS Payroll Procedures and Controls Require Modification…… ............................................5 Confidential Imprest Fund Controls Need Improvement ....................…………………..8 Grant Billing and Collection Process Did Not Comply With City Regulations…..........10 Evidence Escrow Fund Not Analyzed For Compliance With State Law… ....................11 Corrective Actions Taken By The Department………………………….. ...…………..11 Cash Funds Were Appropriately Replenished........................................................12 Delinquent Accounts Were Referred to the Law Department on a Timely Basis .......................................................................................................................12 Officers Receiving Ammunition Signed the Requisition Forms ............................12 Source of Charity Fund Contributions Demonstrated……………………. ...........13 Redundant Billing Procedures No Longer an Issue…………………………….....13

AGENCY RESPONSE Charles H. Ramsey, Police Commissioner………………………….. ..........…………..14

INTRODUCTION BACKGROUND Powers and Duties The Police Department was established by the Philadelphia Home Rule Charter to serve as the city’s chief law enforcement agency. Its principal responsibilities include preserving the public peace, preventing and detecting crime, policing streets and highways, and aiding in the administration and enforcement of state laws and city ordinances within the City of Philadelphia. Management The Police Department is directed by a police commissioner who also holds the title of a deputy mayor. The commissioner is appointed by the mayor and is assisted by eight deputy commissioners that oversee various police operations. At the close of fiscal 2009, department management directed a staff of 7,632 employees, 6,787 of whom were uniformed personnel. Most Police Department employees are appointed through the civil service system. Financial Resources For the fiscal years under examination, management of the Police Department was accountable for the following appropriations, estimated revenues and assets: Fiscal Year 2009 Appropriations: General Fund Grants Revenue Fund Aviation Fund Capital Fund Total appropriations Estimated Revenues: Non-Tax Revenue From Other Governments Total estimated revenues Assets (Reported Balances): Personal Property Inventory Agency Funds: Evidence Escrow Fund Charitable Collections Fund Accounts Receivable Materials and Supplies Inventory Imprest Funds Total assets

2008

2007

2006

$524,001,749 25,516,550 13,765,290 29,707,000 $592,990,589

$514,015,714 16,064,880 13,916,182 44,465,000 $588,461,776

$493,497,141 19,442,660 12,826,227 12,981,000 $538,747,028

$480,230,753 22,673,462 11,361,999 15,328,000 $529,594,214

$ 1,770,000 42,777,000 $44,547,000

$ 1,773,000 23,172,000 $24,945,000

$ 2,425,000 24,438,000 $26,863,000

$ 2,707,000 30,473,000 $33,180,000

$42,279,257

$34,223,953

$31,483,006

$29,110,537

10,442,007 18,981 6,637,676 825,257 125,000 $60,328,178

11,561,030 135,920 6,672,978 990,740 125,000 $53,709,621

11,491,924 17,462 5,398,574 1,035,992 125,000 $49,551,958

11,429,982 64,300 2,481,434 1,057,370 125,000 $44,268,623

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INTRODUCTION Internal Control Management has responsibility for establishing and maintaining internal controls to safeguard the financial resources for which it is accountable. Internal controls are designed to (1) prevent or timely detect unauthorized acquisition, use, or disposition of assets; (2) ensure the reliability of financial reporting; and (3) help make certain there is compliance with applicable laws and regulations.

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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

We annually audit the basic financial statements of the City of Philadelphia, Pennsylvania as of and for its June 30 fiscal year end and issue a report thereon. Those statements include financial transactions of various city agencies. We conduct our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we consider the City of Philadelphia’s centralized and agency internal controls over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Philadelphia’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Philadelphia’s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects an agency’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the city’s financial statements that is more than inconsequential will not be prevented or detected by the agency’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by an agency’s internal control.

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C I T Y O F OFFICE

P H I L A D E L P H I A OF THE

CONTROLLER

Our consideration of the Police Department’s internal control over financial reporting was limited to determining if its internal control components for revenue, payroll, other expenditure, cash, accounts receivable, inventory, and fiduciary fund activity were suitably designed and placed in operation during fiscal years 2006 through 2009, and would not necessarily identify all deficiencies in the internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as described above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Philadelphia’s financial statements are free of material misstatement, we perform centralized and agency tests of compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. Our consideration of the Police Department’s compliance with certain provisions of laws, regulations and contracts was limited to tests of revenue, payroll, other expenditure, cash, accounts receivable, inventory, and fiduciary fund activity during fiscal years 2006 through 2009. Grant compliance was tested and reported on as part of our single audit in accordance with Office of Management and Budget Circular A133. Our agency tests disclosed no instances of noncompliance or other matters by the Police Department that are required to be reported under Government Auditing Standards. We noted certain other conditions that are not required to be reported under Government Auditing Standards, but nonetheless represent deficiencies in internal control over financial reporting that should be addressed by management. These conditions are listed in the table of contents and included in the findings and recommendations section of the report. The Police Department’s response to our findings is included in the accompanying agency response section of the report. We did not audit the Police Department’s response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the management of the City of Philadelphia, the Police Department, and City Council and is not intended to be and should not be used by anyone other than these specified parties.

August 19, 2010

GERALD V. MICCIULLA, CPA Deputy City Controller

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FINDINGS AND RECOMMENDATIONS PAYROLL PROCEDURES AND CONTROLS REQUIRE MODIFICATION In terms of number of employees, the Police Department is the largest department in the city. At the end of fiscal year 2009, the department employed 6,787 sworn personnel and 845 civilian employees. The department’s combined work force of 7,632 personnel represents 27% of the city’s total number of full time employees. Considering the magnitude of the work force, and the fact that payroll processing occurs at multiple locations throughout the city, there is a greater risk of errors or irregularities occurring and going undetected. Our testing disclosed: errors in the method used to calculate overtime; overtime worked that was not documented in violation of the department’s written directives; weaknesses in posting transactions into the department’s on-line payroll system and approving overtime; a failure to maintain an up-to-date list of employees who had access to the payroll system; daily assignment sheets that were not approved; and finally, attendance data that had been posted to the online payroll system without the appropriate supervisory review and approval. Errors in the Method Used to Calculate Overtime Our review disclosed that the department is not always in compliance with city policies regarding the calculation of overtime. Civil service regulation number 6.11 states that “For all employees for whom other specific provision has not been made, time worked in excess of eight (8) hours in any work day shall be paid for at the rate of one and one-half (1 ½) times the regular rate of pay.” We noted that two out of six civilian overtime pay computations tested had calculation errors totaling $87. The overtime calculations were in error because the individual preparing the payroll included the two employees’ half-hour lunches as time worked. In both instances, the two miscalculated pays involved clerical and non-shift employees working 37 ½ hours and signing out and back from lunch. City civil service regulation number 6.11 considers the lunch break as unpaid time. Consequently, before these types of employees earn overtime, they must work an additional half-hour in a work day. We considered the errors noted as insignificant; but, in our opinion, given the tough economic times being experienced by the city, any incorrect disbursement of taxpayer funds at all needs to be halted immediately. Recommendation: To comply with civil service regulation 6.11, and to avoid paying employees for overtime not earned, we recommend that management re-train payroll staff in the proper calculation of overtime [11106.01]. Overtime Not Documented in Accordance with Department’s Written Directives In our prior auditor’s report 1 we commented that the Police Department was unable to provide approved documents supporting overtime worked. According to Police Directive 32, when an officer works overtime, that time is to be documented on a printout from the payroll system that is annotated and signed by the officer’s supervisor.

1

Police Department Auditor’s Report, Fiscal 2005

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FINDINGS AND RECOMMENDATIONS

As part of our current examination, we tested the bi-weekly payroll of seven employees and found that overtime worked on eleven out of fourteen overtime occasions was not supported by documented approvals. Also, our current review disclosed that the department’s airport units do not require overtime approvals. The commanding officer of the airport units claimed that they are exempt from obtaining overtime approvals. Recommendation: When approvals are not required or obtained for overtime worked, there exists a higher risk that unauthorized overtime may be erroneously processed and paid. We continue to recommend that management enforce compliance with the overtime documentation requirements of the department’s Directive 32 for all units [11105.12]. Weakness In Recording And Approving Overtime Our prior testing 2 of the Police Department’s processing of overtime revealed that officers often input their own time to the department’s payroll system, and then the payroll would be prepared without the required supervisory approval. During our current testing, we noted the same condition occurring. Four officers, on 16 out of 84 days examined, entered their own time to the DAR (Daily Attendance Record). And again, similar to our prior findings, the payroll was prepared and processed without supervisory approval. On 13 of the 16 occasions, overtime was recorded as having been worked. To minimize the risk of errors or irregularities, it is important to maintain adequate segregation of duties and require supervisory review and approvals of transactions. When employees are permitted to enter their own time into the payroll system and then these transactions are processed without supervisory review and approval, there is an unacceptably high risk for improper payments. Recommendation: To ensure that payroll, including overtime, is being accurately processed, we continue to recommend that management inform supervisors that no one is permitted to input and approve his or her own time, and that payroll will not be accepted for processing without the appropriate supervisory approval [11105.11]. Up-To-Date List of Employees Having Access To Payroll System Not Maintained In our prior report, 3 we noted that the Police Department did not know who had access to its payroll system (the DAR system). We requested a list of all individuals with access to the system, but police management informed us that such a list did not exist. We were told that the city’s information technology department (now referred to as the Office of Innovation and Technology) would have to write a program to generate such a list.

2 3

Ibid. Ibid.

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FINDINGS AND RECOMMENDATIONS

During our current review, we were informed that the Police Department still did not maintain a list of individuals who were authorized to access the system. Moreover, the department had never requested the Office of Innovation and Technology to generate the list. Fundamental to computer security are access controls. Such controls limit or detect inappropriate access to computer resources, including data, equipment, and facilities, thereby protecting them from unauthorized modification, loss, and disclosure. When management is not familiar with who is permitted access to the computer and the level of access granted (for example, read only, modify, delete) it places itself at higher risk for unauthorized disclosure of sensitive information or possibly jeopardizing the integrity of the data. Recommendation: We continue to recommend that management obtain and maintain an up-to-date list of the individuals who have access to the payroll system [11105.13]. Daily Assignment Sheets Not Approved For its sworn personnel, the Police Department does not use conventional payroll documentation such as sign-in sheets, clock cards, or swipe cards. Regular time is typically documented using a roll call process in which attendance is accounted for on daily assignment sheets and then entered into the department’s DAR system. In past reviews, 4 we observed instances where the daily assignment sheets were not approved. Additionally, we found that some of the police units were using alternative assignment sheets, which did not include a supervisory approval line. Our current testing disclosed instances of when assignment sheets lacked supervisory approval for 216 out of 269 sheets we examined. Therefore, in over 80 percent of our test cases, the Police Department was unable to demonstrate compliance with city and Police Department regulations, which both require approval of daily attendance records. Because daily attendance records provide the source of information entered into the payroll system, the fact that they are not approved increases the risk of erroneous or fraudulent data entry. Recommendation: We continue to recommend that management have all reporting units use regulation assignment sheets, and require supervisory personnel to approve and sign-off on these sheets [11101.10].

4

Police Department Auditor’s Reports for Fiscal Years 2001 through 2005

7

FINDINGS AND RECOMMENDATIONS

Attendance Data Entered Into Payroll System Without Appropriate Review And Approval During past reviews, 5 we found instances where the DAR entries entered into the department’s online payroll system were not properly approved – either the entries were not approved at all, or they were approved by the same individual who entered the data. Our current testing disclosed this condition had not improved. For example, our testing of the fiscal 2008 and 2009 payroll records disclosed numerous instances when entries made to the online payroll system were processed without approval of a supervisor. This condition occurred for 28 percent of the employees whose payroll we selected for testing. Also, for 79 percent of our sampled employees, we found numerous instances where the employees’ DAR information had been entered into the system and approved by the same person. When one person both enters and approves payroll transactions, that person has complete control over payroll processing. This is not effective control, as it increases the risk that erroneous and/or unauthorized payroll transactions can occur without being detected. Recommendation: We continue to recommend that management require all reporting units to provide evidence of supervisory review and approval for all DAR entries. This approval should be performed by someone other than the individual entering attendance data into the online payroll system [11101.11]. A possible solution would be to reprogram the payroll system so that the individual performing data entry could not also sign-off as the supervisor. CONFIDENTIAL IMPREST FUND CONTROLS NEED IMPROVEMENT The Police Department maintains a Confidential Imprest Fund (CIF), which is divided into multiple sub-funds and used by the department to make various drug buys in connection with police undercover operations. Our examination of Police procedures involving these funds indicated that controls to account for and prevent misuse of the funds needed to be strengthened. Fund reconciliations were not submitted to the city’s Finance Office on the proper form, surprise counts were not performed, and one custodian had responsibility for two sub-funds. Additionally, cash was not reallocated when a Narcotics Unit platoon was eliminated. Required Fund Reconciliation Form Was Not Used In our prior auditor’s report, 6 we commented that the Police Department was not using the fund reconciliation form required by the city’s Finance Office. Because of this, certain reconciliation details such as the name of the subfund custodian and any overages or shortages were not being reported to Finance. According to Standard Accounting Procedure 7.1.3.a, if a department does not use the required form, it must prepare a spreadsheet that includes the same information on the official forms. During the current engagement, we observed that the sub-fund custodians were preparing 5 6

Ibid. Police Department Auditor’s Report, Fiscal 2005

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FINDINGS AND RECOMMENDATIONS

monthly fund reconciliations with the required information, but these reconciliations were not sent to the city’s Finance Office. According to city finance personnel and our observations, the Police Finance Unit sent the city’s Finance Office only an activity sheet for each sub-fund, which provided dates and amounts for receipts and disbursements pertaining to the fund. Recommendation: We continue to recommend that management submit CIF reconciliations on the form required by the Office of the Director of Finance or on a spreadsheet that lists the same information [11105.04]. Surprise Counts of CIF Assets Were Not Performed In prior year reports, 7 we recommended that management count the CIF assets on a surprise basis. During our current review, Police Department personnel informed us that surprise counts of the CIF assets were still not being performed. Recommendation: To strengthen controls and ensure the integrity of the CIF, we continue to recommend that management periodically count the CIF assets on a surprise basis and verify the authorized amounts reported [11103.24]. CIF Funds: Improvements Made, But Additional Change Needed In our prior auditor’s report 8 we disclosed that some police custodians had responsibility for multiple CIF sub-funds. At one field unit, for instance, we noted multiple sub-funds totaling $34,000. These sub-funds were spread among three custodians, who borrowed and commingled cash when another sub-fund ran low. When one individual has custody of more than a single cash fund, this creates an unacceptably high risk of allowing errors or irregularities to occur and not be readily detected in the normal course of operations. For example, shortages in one fund can be covered using the cash from another. Prior to the completion of our current examination, the department reorganized its Narcotics Field Unit into two divisions. One of the divisions, the North Division, had five sub-funds and four custodians; while a second division, the South Division, had six sub-funds and six custodians. Although the department had decreased the number of instances of when a single individual was handling more than one sub-fund, the North Division still had a custodian with responsibility for two sub-funds. Recommendation: To mitigate the risk of errors or irregularities presented when a single custodian is responsible for more than one sub-fund, we continue to recommend that management 7 8

Police Department Auditor’s Reports for Fiscal Years 2003 through 2005 Police Department Auditor’s Report, Fiscal 2005

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FINDINGS AND RECOMMENDATIONS

restrict custodians to only one sub-fund. If there are not enough personnel at the North Division, management should consider eliminating one of the sub-funds and dividing it up into the other four. This would eliminate the need for a fifth custodian [11105.01]. When Platoon Was Eliminated, Related Cash Funds Were Not Reallocated In our prior auditor’s report, 9 we commented that a reorganization of the Narcotics Unit resulted in a platoon being eliminated. However, cash of $800 assigned to that platoon was not returned to Police Finance for reallocation. Instead, it sat idle, and we were informed that it was considered the “captain’s money.” We recommended that management advise the Narcotics Unit as to what steps to take with CIF cash when platoons or squads are eliminated. Such steps should include the reallocation of cash with a proper paper trail [11105.03]. Through the end of our field work, the sub-fund of the eliminated platoon still remained categorized as the “captain’s money.” No steps had been taken by the department to reclaim the funds from the captain and reallocate them to other CIF sub-funds. Nor, had management advised the Narcotics Unit on how to deal with CIF sub-funds in the future when a platoon or squad is done away with. We were informed that, for the fiscal years under examination, no other platoons or squads were eliminated. Recommendation: We continue to recommend that Police Department management advise the Narcotics Unit on the proper disposition of CIF funds when platoons or squads are disbanded. Moreover, we urge the department to take appropriate steps to ensure proper accountability with respect to the funds which have been categorized by police personnel as the “captain’s money” [11105.03]. GRANT BILLING AND COLLECTION PROCESS DID NOT COMPLY WITH CITY REGULATIONS Our prior review 10 of the Advance Training Unit’s handling of training grant billings and collections disclosed that management was not following the city’s standard accounting procedures. More specifically, the Training Unit did not send copies of its billings nor direct the grantor agency to remit payments to the city’s Grants Accounting and Administration Unit (GAAU). Both practices are required by Standard Accounting Procedure G2-1. Our current review disclosed that both the above conditions continued to exist. By not complying with the city’s accounting procedure, the Police Department increases the risk of lost or stolen checks and causes the city to lose interest income as a result of delaying deposits to the bank. Recommendation: To ensure accurate accounting records, as well as to maximize interest earnings and minimize 9

Ibid Ibid.

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FINDINGS AND RECOMMENDATIONS

the risk of lost checks, we continue to recommend that the Police Department (1) submit copies of all grant billings to the GAAU [11105.05] and (2) direct grantor agencies to mail checks directly to the GAAU [11105.06]. EVIDENCE ESCROW FUND NOT ANALYZED FOR COMPLIANCE WITH STATE LAW The state’s Unclaimed Property Act requires the city to transfer all money to the commonwealth that has been unclaimed for more than five years. To ensure compliance with this law, city regulations require the transfer of all unclaimed money to the Department of Revenue that has remained unclaimed for more than one year. Because state law provides for interest and penalty for failure to comply with the Unclaimed Property Act, we recommended in prior auditor’s reports 11 that Police management analyze its Evidence Escrow Fund to determine whether any portion of the money being held is subject to escheat; and if so, to take the appropriate action required by state law and city regulations. During our current review, management informed us that it analyzed the cases comprising its Evidence Escrow Fund and prepared a report identifying all closed criminal cases with unclaimed cash over five years old. We requested a copy of the report, but as of the last day of our field work a copy of the report was not provided. Management also informed us that for the fiscal years under examination, it did not escheat any unclaimed cash over five years old to the state, or transfer any unclaimed cash, one to five years old, to the city’s Unclaimed Monies Fund. Recommendation: Because the Police Department did not provide us with a copy of its Evidence Escrow Fund analysis and took no action to escheat funds to the state, we continue to recommend that management: •

Institute a policy requiring the analysis of Evidence Escrow money to identify unclaimed funds that pertain to closed criminal cases [11103.14].

•

Immediately transfer to the state all unclaimed amounts over five years old and transfer to the city’s Department of Revenue all unclaimed monies one to five years old [11103.15].

CORRECTIVE ACTIONS TAKEN BY THE DEPARTMENT As part of our current review, we followed up on the conditions brought to management’s attention during our last engagement. 12 We routinely monitor uncorrected conditions and report on them until management takes corrective action or until changes occur that resolve our recommendations.

11 12

Police Department Auditor’s Reports for Fiscal Years 2003 through 2005 Police Department Auditor’s Report, Fiscal 2005

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FINDINGS AND RECOMMENDATIONS

Our follow-up has disclosed that the Police Department made progress addressing several prior issues. We commend the Police Department on its efforts. Corrective action taken by management has made the department more compliant with city policies, strengthened internal controls, and improved accountability. Cash Funds Were Appropriately Replenished We disclosed in our prior auditor’s report that instead of replenishing CIF cash sub-funds based on usage, the field units replenished their cash once a month, regardless of how low the balance became. To ensure the funds were available when needed, we recommended that the field units and the Police Finance Unit replenish the cash sub-funds based on usage and not on the passage of time. During our current examination we analyzed the replenishing process of the CIF cash sub-funds and determined that the field units and the Police Finance Unit had replenished the cash subfunds based on usage. Accordingly, we consider the issue resolved [11105.02]. Delinquent Accounts Were Referred to the Law Department on a Timely Basis During the last engagement, we reviewed the Reimbursable Overtime Program and noted that the department was not referring delinquent accounts to the Law Department on a timely basis. By not seeking legal remedy on a timely basis, lien deadlines could be missed and the right to recover unreimbursed costs through legal channels could be lost. We recommended, to reduce the risk of loss and to improve the chance of collection, that the department begin referring delinquent accounts to the Law Department on a timely basis. Since our last report, the Police Department issued a directive that outlined policies and procedures to ensure accountability and payment for the Reimbursable Overtime Program. Moreover, the department created and implemented a system which now tracks all delinquent accounts. The delinquent bill cycle is run once a month. Customers with balances of over 90 days due were being referred to the Law Department. Accordingly, we consider this issue resolved [11105.07]. Officers Receiving Ammunition Signed the Requisition Forms In our prior report, we commented that police officers requisitioning ammunition at the Firearms Range did not sign the requisition form (material issue slip) authorizing the ammunition issued. Instead, the custodian filled out the requisition and signed as both the person requisitioning and the person issuing the ammunition. This practice was a violation of city accounting procedures. We recommended that the department comply with the city’s accounting procedures and require individuals requisitioning the ammunition to sign the material issue slip. As part of our current examination, we reviewed a sample of fiscal 2008 and 2009 material issue slips for ammunition issuances at the Firearms Range. The proper signatures for issuance and requisition were observed on all slips we examined except for two. These two slips were signed by the authorized issuer but not by the requisitioning officer. We determined these two exceptions to be isolated incidences, and therefore consider this issue resolved [11105.08]. 12

FINDINGS AND RECOMMENDATIONS

Source of Charity Fund Contributions Demonstrated We stated in our prior auditor’s report that the department did not provide receipts for contributions to the Police Charity Fund. Without such documentation, the Police Department had no assurance that the amounts collected were deposited into the fund and it had no way of demonstrating the source of the contributions. We recommended that staff begin issuing receipts for all contributions. During our current engagement we were informed that a computer generated list of names of each employee in a unit, district, or office (unit) is used to record the amount of contribution collected from each employee. These contributions are small cash donations and in lieu of issuing individual receipts, each unit prepares a form which includes the total number of officers and civilians who contributed and the total for each group. The form and cash contributions are forwarded to the Police Finance Unit. The Police Finance Unit prepares a summary, which includes the totals received by each unit. Management has expressed in their response to our prior auditor’s report and during our current review that when conducting fund raising activities it is not feasible to issue individual receipts due to the overwhelming nature of the collections and the amount of paperwork and manpower hours required. Issuing receipts for cash contributions is a fundamental control procedure. Moreover, it provides individuals with support they may need for taking a contribution deduction on their federal tax returns. Although contributors should receive a receipt, in consideration of the department’s expressed concerns and its ability to identify the source of the receipts by unit, we will not continue this recommendation [11105.09]. Redundant Billing Procedures No Longer an Issue We disclosed in our prior auditor’s report that personnel who process billings and subsequent receipts were performing redundant procedures. The accounts receivable clerk posted invoices and payments in both Quickbooks and Excel. The receptionist, when she received checks, recorded them manually and then again recorded them into an Access file. To save time and free up staff for other duties, we recommended that staff enter transactions only once. Since our last report, a new system was instituted and receipts were being sent directly to the Revenue Department for processing. Department personnel informed us that sometimes checks are still sent to the Police Finance Unit; however, the new system has reduced the time dedicated to accounting for the receipts. We reviewed the procedures performed by the receptionist and receivable clerk when recording receipts and noted no redundant procedures. We therefore consider this issue resolved [11105.10].

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