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Accept the Auditor-Controller’s Internal Audit Division’s Countywide Fixed Assets Internal Control Review as of June 30, 2023
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Auditor-Controller’s Office (ACO) recommends the Board of Supervisors accept the Countywide Fixed Assets Internal Control Review as of June 30, 2023.
SUMMARY:
Pursuant to the ACO Internal Audit Division’s FY2024/25 Audit Plan, the ACO reviewed the fixed assets inventory process. The review was conducted in conformance with the International Standards for the Professional Practice of Internal Auditing as developed by the Institute of Internal Auditors.
The objective of the review was to determine if internal controls over the fixed assets inventory process are appropriate to provide complete and accurate record keeping while mitigating the risks of asset loss and non-compliance with applicable laws, regulations, and codes. The scope of the ACO review focused on annual inventory process and department internal controls for the year ending June 30, 2023.
In any system of internal controls inherent limitations exist which may result in errors or irregularities occurring and not being detected. Limitations may include, but are not limited to, resource constraints, management override, and circumvention of internal controls by collusion. Accordingly, the review would not necessarily identify and disclose all weaknesses.
The Fixed Assets Internal Control Review identified two findings and one opportunity for improvement. Additional details on the fixed asset inventory process and the findings are included in Attachment A.
FINANCIAL IMPACT:
The acceptance of the report has no financial impact.
DISCUSSION:
Departments are required to submit an annual certification of their fixed assets as of June 30th to the ACO. County fixed assets are tagged with a barcode, with exceptions for items that are not feasible to tag. Departments scan the barcodes to verify fixed assets at year-end. The ACO works with departments to properly account for any missing items.
The ACO collected information about the process through interviews with County staff and review of existing policies and procedures. The ACO confirmed a sample of certifications were submitted timely, a sample of fixed assets were tagged and in County possession, a sample of assets observed were included in the department’s certification, and that a year-end reconciliation was conducted.
The ACO review identified the following findings and opportunity for improvement:
Finding 1 - The Department of Resource Management had one destroyed asset that was not disposed of properly.
Resource Management included an asset in inventory that was damaged in an accident. The asset was disposed of between the time of inventory and the ACO review without processing the proper paperwork for disposal. Resource Management plans to provide training and to update procedures for responding to damaged assets.
Finding 2 - The Department of General Services did not conduct inventory of the Surplus Property Program (Surplus).
Surplus stores and sells assets that are no longer needed for county business and may have a resale value. Surplus was not included in the inventory of fixed assets. General Services plans to include Surplus in future inventories.
Opportunity for Improvement - The ACO inconsistently conducts site visits.
A Master Internal Control Review from 2015 included a recommendation for the ACO to perform physical inventory verifications. The process was implemented; however, it was not applied consistently. As an example, the ACO did not perform any physical inventory verifications for the FY2022/23. The ACO plans to conduct random site visits periodically throughout the year.
ALTERNATIVES:
The Board of Supervisors could elect not to accept the report. This alternative is not consistent with sound public policy and is therefore not recommended.
OTHER AGENCY INVOLVEMENT:
The Departments of Resource Management and General Services have reviewed and accepted the report.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION