The Civil Process Division Did Not Conduct Timely Reconciliations or Maintain Adequate Records.

Audit found the CPD did not always perform reconciliations of its monthly bank account statements within 30 days, and in some instances up to 960 days late.

Overview

The director of the Norfolk Sheriff’s Office (NSO) Civil Process Division (CPD), who is responsible for preparing and approving the monthly bank account reconciliations, did not always perform them within 30 days of month end. From our sample of 49 account reconciliations completed during our audit period, 28 were untimely in the opinion of the Office of the State Auditor (OSA) because they were not completed within 30 days of month end (they ranged from 1 to 960 days late). Lack of timely account reconciliations may increase the risk of unaccounted-for variances, losses, shortages, or thefts of funds.

Additionally, during our test of contracted vendor payments, we found that NSO’s Finance Department and CPD did not retain electronic copies or hard copies of canceled checks for payments aged less than three years. Therefore, there is no assurance that checks sent to our sample of vendors had been signed by an authorized NSO employee and endorsed by the intended parties.

Authoritative Guidance

Bank reconciliations are an important internal control over the protection of an organization’s assets. They allow an organization to accurately determine its current cash balance, preventing the possibility of overdrafts, and they facilitate the detection and timely resolution of any questionable transactions. Bank statements are provided to organizations monthly, and in OSA’s opinion, it is a best practice to reconcile them to the organization’s accounts within a few, and no more than 30, days from their receipt.

In addition, Section D01-08 of the Massachusetts Statewide Records Retention Schedule Quick Guide Schedule Number 06-18, issued by the Secretary of the Commonwealth, states,

Bank and Cash Records

Retain 3 years.

Documents the handling of any cash transactions, including receipt and deposit of funds posted to the state Comptroller’s systems and accounts. Includes receipt journals, canceled checks, balance books, receipts, bank deposit slips and wire transfers and reports and related correspondence.

Reasons for Issue

According to the director of CPD, in 2017, the Finance Department told the former Sheriff about a large number of uncashed checks from the Witness Fee, Registry, and Refund account. The Sheriff asked the director to look into this issue, and as part of the process, reconciliations from January 2010 onward had to be performed again. This effort contributed to the division’s inability to perform timely account reconciliations of the bank statements during our audit period.

Additionally, CPD did not have documented bank reconciliation policies and procedures or internal controls to ensure that timely reconciliations were performed and canceled checks were retained in accordance with the Massachusetts Statewide Records Retention Schedule.

Recommendations

1. CPD should develop policies and procedures that require monthly reconciliation of its bank accounts and should implement monitoring controls to ensure that these activities are performed in a timely manner.
2. CPD should collaborate with NSO’s Finance Department to develop policies and procedures that require canceled checks to be retained in accordance with the Massachusetts Statewide Records Retention Schedule.

Auditee’s Response

1. Concur. The Norfolk Sheriff's Office ("NSO") Finance Department will work with its Civil Process Division ("CPD") to implement policies and procedures requiring that monthly reconciliations of all bank accounts under CPD control be performed in accordance with a monthly closing schedule. The NSO finance department will develop a monthly closing schedule requiring that bank reconciliations be prepared, reviewed and approved within 30 days of the close of the month. The NSO Director of Finance will designate an individual to review all prepared bank reconciliations prior to being presented for final approval. The NSO Director of Finance will provide the final approval of all bank reconciliations. Bank reconciliations will not be considered complete until approved by the NSO Director of Finance.
2. Concur. CPD will work with its partner financial institutions to ensure that all canceled checks (either hard copy or electronic) are made available on a monthly basis so that they can be retained and are readily retrievable in accordance with the Massachusetts Statewide Records Retention Schedule. A written policy will be developed outlining specific individual roles and responsibilities for obtaining and maintaining these records.

Auditor’s Reply

Based on its response, NSO is taking measures to address our concerns on this matter.

Date published:	February 5, 2020