10C Action 2007 0604 - Laserfiche WebLink

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EXIDBIT 4 CITY OF SAN LEANDRO MEMORANDUM DATE: March 21,2007 TO: Fire Ad Hoc Committee VIA: John Jennanis, City Manager Steve Hollister, Assistant City Manager FROM: Jesse Baloca, Finance Direcv Review of Internal Control Procedures SUBJECT: As directed by the Committee, Staff has conducted a review of the internal control processes in place with the Alameda County Fire Department ("Department"). The purpose of the review was to detennine what steps may be in place to prevent the risk of fraud and the process for reporting and investigating potential risk claims. The review involved a study of the Department's Financial Policies and Procedures, a review of the County Auditor~Controller's Manual of Accounting Policies and Procedures (MAPP), a review of the Department's financial statement and independent auditor's report for the year ended June 30, 2003, and an interview with the ACFD Fire Chief and Deputy Fire Chief. The scope of review included those functions where internal controls may be exposed to the highest degree of risk. Cash Flow and Reconciliation The review of cash flow included a review of the Department's checkbook reconciliation process, an inquiry of separate cash accounts and related activity, and the transfers of cash received from the County. In general, cash is pooled with the County Treasurer and is transferred to the Department for payroll and to replenish petty cash. The Department does not have any other cash accounts besides the payroll account and three petty cash amounts, which total approximately $700. Currently, payroll is processed by an outside firm (ADP) and is reviewed and approved by the Department's Payroll Manager. The payroll manager verifies the accuracy ofthe checks processed and disbursed by ADP to the Department's "Pro~business" software reporting system. As noted in the Department's June 30, 2003 independent financial report, an area of concern includes the timeliness that bank reconciliations are completed for the Department's payroll account with the County's general ledger. The effect of this concern is that potential payroll fraud and irregularities may not be detected in a timely manner. The Department has provided assurance that payroll reconciliations are currently performed in a timely manner. During the review of payroll, a specific inquiry was made regarding a one~time payroll check paid to previous Chief McCammon in December 2006. According to current Chief Gilbert, the payment was for bonus compensation and was letter approved by the Board of Supervisors. (See attached Memorandum).