HomeMy Public PortalAboutExhibit MSD 11A20 Miscellaneous Revenue Review Dec 2010Exhibit MSD 11A20
Metropolitan
St. Louis
Sewer District
Miscellaneous
Revenue Review
December 6, 2010
Metropolitan St. L0. is Se v °eu District
Table of Contents
Executive Summary 3
Detailed Observations & Recommendations 7
Management Acknowledgement 10
Appendix:
A - Contents of the Observations & Recommendations 11
Executive Summary
t. Louis Sewer District
Background
Miscellaneous Revenue encompasses several general ledger accounts, including
rent revenue, waste hauler permits, pretreatment permits, reimbursement of
District costs, other reimbursements and miscellaneous income. These
accounts are used for funds that do not currently have separate accounts in
the general ledger, but are accounted for in Miscellaneous Revenue.
Audit Objectives & Scope
The objectives of this engagement were to:
• Evaluate the District's accounting for miscellaneous incoming funds to
determine whether these amounts are properly accounted for; and,
• Evaluate whether other accounts should be created to account for
incoming funds.
This review was limited to revenue received during the periods from July 1,
2008 through June 30, 2009 and from July 1, 2009 through June 30, 2010.
Approach & Methodology
To accomplish the audit objectives, Internal Audit:
• Obtained and reviewed documentation such as trial balances, detailed
general ledger account listings, policies and procedures, ordinances, and
other pertinent documents.
• Conducted testing of certain accounts to determine overall compliance
with accounting procedures.
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The accounts reviewed were as follows:
it. Louis Sewer District
Account
Description
Account
Number
Fund
2009 Amount
2010 Amount
Rental Revenue
46300
4103
$ 211,469.02
$ 264,339.96
Waste Hauler
Permits
43450
1101
$1,274,743.45
$1,460,349.38
Pre -Treatment
Permits
43500
1101
$ 103,858.15
$ 99,375.93
Reimbursement of
District Costs
44205
1101
$ 82,268.80
$ 8,338.69
Reimbursement of
Easement,
Advertising, etc
44210
1101
$ 221,766.35
$ 181,669.52
Sale of Scrap
44215
1101
$ 5,413.63
$ 1,166.06
Other
Reimbursements
(Immaterial - no
review)
44220
1101
$ 49.88
$ 48.90
Miscellaneous
Income
44245
1101
$ 328,263.02
$ 108,138.25
Sale of Fixed
Assets
49100
1101
$ 150,023.00
$ 233,833.91
Conclusions and Summary of Observations and Recommendations
Overall, accounting for miscellaneous revenue was appropriate.
Recommendations to assist MSD in strengthening its procedures, improving its
processes and meeting its overall strategic objectives were provided to
Management in the following areas:
1.1 Miscellaneous Revenue Account used to Account for Sale of Real Estate.
1.2 Reimbursement of District Costs Account used to Account for
Construction Loan Repayments
1.3 Scrap Recycler is not Compliant with Contract Terms Pertaining to
Documentation
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�%t . L o u i s S e w e r D i s t r i c t
T h e s e i t e m s a r e d i s c u s s e d i n d e p t h i n t h e D e t a i l e d O b s e r v a t i o n s a n d
R e c o m m e n d a t i o n s s e c t i o n o f t h i s r e p o r t .
E n g a g e m e n t N a m e : M i s c e l l a n e o u s R e v e n u e R e v i e w
F i e l d w o r k C o m p l e t i o n D a t e : N o v e m b e r 2 3 , 2 0 1 0
A u d i t R e p o r t i n g D a t e : N o v e m b e r 3 0 , 2 0 1 0
I n i t i a l I n h e r e n t R i s k : L o w
O v e r a l l A u d i t R a t i n g : S a t i s f a c t o r y
I s s u e
R i s k
R a t i n g
D i r e c t o r
M g t R e s p o n s e
A c t i o n D a t e
A m u n i c i p a l i t y i s
r e p a y i n g a
c o n s t r u c t i o n l o a n .
T h e s e p a y m e n t s
a r e e n t e r e d i n t o
t h e
R e i m b u r s e m e n t o f
D i s t r i c t C o s t s
a c c o u n t i n t h e
g e n e r a l f u n d a n d
t h e n m o v e d t o a
N o t e s R e c e i v a b l e
a c c o u n t i n t h e
c o n s t r u c t i o n f u n d .
L o w
J a n
Z i m m e r m a n
M a n a g e m e n t a g r e e s w i t h
t h e a s s o c i a t e d
r e c o m m e n d a t i o n . T h e
a c c o u n t i n g m e t h o d u s e d
i s a s c u r r e n t l y c o n f i g u r e d
i n t h e O r a c l e f i n a n c i a l
s y s t e m . M a n a g e m e n t w i l l
r e e v a l u a t e t h i s
c o n f i g u r a t i o n t o a d d r e s s
t h i s i s s u e .
6 / 3 0 / 2 0 1 1
T h e s c r a p r e c y c l e r
i s n o t s u b m i t t i n g
t h e r e q u i r e d
i n f o r m a t i o n p e r
c o n t r a c t w i t h h i s
c h e c k s .
L o w
J a n
Z i m m e r m a n
P u r c h a s i n g r e q u e s t e d t h i s
i n f o r m a t i o n f r o m t h e
s c r a p r e c y c l e r . I t w a s
r e c e i v e d o n N o v e m b e r 1 2 ,
2 0 1 0 . M a n a g e m e n t
c o n s i d e r s t h i s i s s u e
a d d r e s s e d .
1 1 / 1 2 / 2 0 1 0
I n t e r n a l A u d i t g r a t e f u l l y a c k n o w l e d g e s t h e c o o p e r a t i o n o f A c c o u n t i n g d u r i n g
t h i s a u d i t . I n t e r n a l A u d i t w a s n o t r e s t r i c t e d f r o m a c c e s s t o i n f o r m a t i o n t o
c o m p l e t e t h e a u d i t . A c c e s s t o a l l d e p a r t m e n t a l r e c o r d s a n d p e r s o n n e l w e r e
p r o v i d e d b y M a n a g e m e n t a s r e q u e s t e d .
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it. Louis Sewer District
DETAILED OBSERVATIONS AND RECOMMENDATIONS
1.1 Reimbursement of District Costs Account used to Account for
Construction Loan Repayments
Observation/Finding:
A municipality is repaying a loan for the construction of a tunnel and part of a
plant in Arnold, MO. The loan payments are made quarterly in the amount of
$275,124.72. These amounts are entered into the Reimbursement of District
Costs general ledger account 44025, general fund 1101. The loan payments
are then moved to a notes receivable account in the construction fund,
according to the Accountant One in the Accounting Department. According to
information received from the Accounting Department, the ECIS system will
not create an audit trail if these payments are applied directly to the
construction fund. Therefore, the payments are taken in through the general
fund, Reimbursement of District Costs Account, and then moved to a Notes
Receivable account in the construction fund. Applying the Notes Receivable
payments from the City of Arnold in the Reimbursement of District Costs
Account overstates that account. Without journal entries and account
adjustment it is not possible to see what has actually been reimbursed to the
District for advanced costs.
Risk Rating / Exposure: Low
Recommendation:
We recommend that the District create an account specifically for notes
receivable payments in the general fund that can be used to create the audit
trail for these amounts. With a separate account, the Accounting Department
can have a clearer audit trail in the Reimbursement of District Costs account.
Manager/Response with implementation date:
Management agrees with the associated recommendation. The accounting
method used is as currently configured in the Oracle financial system.
Management will reevaluate this configuration to address this issue.
Tentative implementation date: 6/30/2011
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t. Louis Sewer District
1.2 Reimbursement of District Costs Account used to Account for
Construction Loan Repayments
Observation/Finding:
Account 44215, Fund 1101, is used for the sale of scrap. Shapiro Metals has
the current contract for recycling scrap collected at various sites throughout
the District's service area. When a dumpster is filled, the facility will call
Shapiro Metals to come out and switch out the dumpster with an empty one.
Shapiro then takes the dumpster to its facility, sorts and weighs the metals and
then pays the District according to the index in the AMMI publication for that
week.
When Shapiro Metals submits their check to the District through the cashier,
they are required by contract to include date of collection, check number for
payment, description of the materials collected, copies of the dated weight
tickets, a photocopy of the pricing page from the AMMI publication for that
week, price per gross ton, total amount of payment and the location from
which the material was picked up. A second copy is of the packet is to be sent
to Purchasing.
It was noted that the checks from Shapiro Metals do not include the required
information. In fact, from the beginning of the contract with Shapiro Metals,
they have not included this information with any of their payments to the
District. Additionally, the contract with Shapiro Metals was extended even
though they have not been in compliance with the original contract. When
notified of this deficiency, the Purchasing Agent immediately contacted Shapiro
Metals and requested the required information going back to the beginning of
the contract in FY09. Shapiro Metals responded that they would comply.
Without the required information being forwarded to the appropriate parties,
the District has no way of knowing what they are being paid for, how much
scrap is being collected, what type of scrap is being collected and from where
the scrap is collected. It is not possible for the District to do any analyses of
scrap, such as which facility produces the most scrap, what types of scrap is
being collected, or where the scrap is coming from (i.e., special projects,
normal scrap, etc.).
Recommendation:
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t. Louis Sewer District
We recommend the Purchasing Agent continue in her efforts to collect the
required information from the scrap recycler. We further recommend that the
Purchasing Agent monitor contract compliance to ensure that contracts are
adhered to.
Manager/Response with implementation date:
Purchasing requested this information from the scrap recycler. It was received on
November 12, 2010. Management considers this issue addressed as of 11/12/2010.
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t. Louis Sewer District
Management Acknowledgement
I have reviewed the report including management responses. I agree with the
observations and recommendations, unless otherwise indicated, and will take
the appropriate measures and responsibility for implementing the corrective
actions with the specified timeframes.
Process owner's signature
Jan Zimmerman, Director of Accounting
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t. Louis Sewer District
Appendix A —
Contents of the Observations & Recommendations
The following is an overview of the content for the observations and
recommendations contained in this report.
• Observation: Presentation of key operational and/or service issue.
• Exposure & Risk Rating: Assessment of the issue implications and value
assignment of likelihood and impact of the identified issue / risk: The three
categories are as follows:
High: Observations that pose a significant risk to the District
Moderate: Observations that pose a moderate risk to the District
Low: Observations that pose a minor risk to the District
• Recommendation: Suggestions to assist management in formulating an
action plan to address the issue / risk.
• Management Response: To be submitted to Internal Audit Services within
10 business days of receipt of final draft report by assigned stakeholders.
Internal Audit will present this information to the District's Audit Committee
until the issue / risk is resolved or sufficiently mitigated.
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