OIG No. 21-02: Report of Annual Finance Department Bank Account ReconciliationJoseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
October 6, 2020
Annual Finance Department Bank Account Reconciliations and Summary Report
OIG Audit No. 21-02
August 1, 2019- July 31, 2020 (Bank Reconciliations)
October 1, 2019 - September 30, 2020 (Daily Debit Transaction Reports and Zero-
Balance Accounts)
Upon the discovery of a $3.6 million fraud involving its Treasury and ACH disbursements in the
fall of 2016, the City Administration and Finance Department, among other implemented changes,
hired the independent firm of BOO USA, LLP (BOO) to perform an independent audit. On May
17, 2017, BOO issued a report containing sixty (60) findings with recommendations on how to
mitigate the City's risk exposure on these disbursements, which also affected other Finance
Department functions including payroll and accounts payable.
As a result, the Office of Internal Audit which was subsumed into the Office of the Inspector
General (OIG) on November 1, 2019, was assigned to perform a follow-up review to verify whether
the recommendations made to correct the deficiencies noted had been implemented or were in
the process of being implemented. Although testing found that the specified corrective actions
were being taken, we have continued to (1) review the bank reconciliations performed either
monthly or quarterly by designated Finance Department staff to verify that they were completed
timely and promptly reviewed/approved; (2) confirm that all entries on the Daily Debit Transaction
Report were deemed valid by Finance Department staff; and (3) verify that there is a credit in the
general depository account and a corresponding debit transaction in another City bank account
for all ZBA (zero-balance account) transactions. The results of the testing performed during the
specified periods are summarized below:
Monthly Bank Reconciliations Analysis
Although the actual number of bank accounts may vary, the Finance Department typically
completes approximately 55 monthly bank reconciliations, and also reconciles the Regions Bank
MBPD CID-OAF account on a quarterly basis. Unless otherwise noted, their approved Standard
Operating Procedures (SOPs) state that all bank reconciliations are to be completed within 30
days from the end of the month being reconciled. For example, bank reconciliations for May 2020
are to be completed by June 30, 2020, those for June 2020 by July 31, 2020.
Meanwhile, the approved SOPs also state that Finance Department staff have 45 days following
the end of the month to complete the bank reconciliations for the General Depository or pooled
cash, 5" and Alton Garage, Miami Beach Golf Course and Normandy Shores Golf Course bank
accounts. This includes ten to fifteen days to close the books for the month and 30 days to
complete the preliminary bank reconciliation and identify each bank reconciling item.
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Consequently, the May 2020 reconciliations for these four bank accounts were to be completed
by July 15, 2020, those for June 2020 by August 15, 2020 and so forth.
OIG staff's testing was able to verify that all tested bank accounts were timely reconciled and
reviewed/approved each month except in the following instance: The 5" and Alton Garage's
December 2019 bank reconciliation was completed timely by the Finance reconciler on January
27, 2020, well before its February 15, 2020 due date. However, the date that the designated
Finance reviewer completed his review and approved the bank reconciliation was not listed so
one could not verify that it was finished timely.
Management Response (Finance Department)
While it is in accordance with the SOP to sign and date the bank account reconciliation after the
review is completed, we have added a date field to the bank account reconciliation template to
facilitate greater conformity with the SOP. We have also sent each preparer and reviewer a copy
of the SOP and required each preparer and reviewer to acknowledge they received and read the
SOP.
Validation of Daily Debit Transaction Report Entries
All furnished Daily Debit Transaction Reports generated from the City's operating accounts
between October 1, 2019 and September 30, 2020 properly contained notations indicating that
they were valid transactions according to designated Finance Department staff. Any transactions
that needed to be researched with the bank as to their validity were properly followed up on and
were typically cleared within the next day or two. OIG staff relied solely on Finance Department
staff's transactional reviews and corresponding approvals as no additional testing was performed
to determine their legitimacy.
Review of Zero-Balance Accounts Transactions
A zero-balance account or ZBA can be defined as a checking account in which a balance of zero
is maintained by automatically transferring funds from a master account in an amount only large
enough to cover the checks presented. A ZBA is used to help eliminate excess balances in
separate accounts and to maintain greater control over disbursements.
As part of the Daily Debit Transaction Report, Finance Department staff includes both the debit
an t e corresponding credit of the ZBA transaction. In reviewing these daily transactions for the
twdlv ( 12) month audit period, no exceptions were noted.
ved by:
"GE Mark Coolidge, Chief Auditor
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cc: Jimmy L. Morales, City Manager
John Woodruff, Chief Financial Officer
Allison Williams, Deputy Finance Director
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fax: 305.587.240 l • Hotline: 786.897.111I
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorqenerol.com
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