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MANATEE COUNTY CLERK OF THE
CIRCUIT COURT
INTERNAL AUDIT DEPARTMENT
PARKS AND RECREATION DEPARTMENT
GOLF COURSE DIVISION INVENTORY
AUDIT
A U D I T R E P O R T
I. INTERNAL
AUDIT REPORT
A. Background; Purpose/Objectives
...............................................................2
B. Scope; Methodology; Irregularities, Abuse,
or Illegal Acts; Test
of Compliance; Statement of
Internal Control Structure
........3
C.
Management
Team and Management Action Plan
4
D. Management Summary..................................................................
...4
- 5
E. Audit Report Authorization...........................................
.............
5
F. Areas of Improvement and Managements Action Plan...........
....
.
..6
- 8
MANATEE COUNTY CLERK OF THE
CIRCUIT COURT
INTERNAL AUDIT DEPARTMENT
PARKS AND RECREATION DEPARTMENT
GOLF COURSE DIVISION INVENTORY
AUDIT
A U D I T R E P O R T
The Internal Audit Department conducted an inventory
audit of the Parks and Recreation Department Golf Course Division for
the audit period October 1, 1999 through March 31, 2000.
The audit was performed in accordance with Generally Accepted Governmental Auditing Standards, issued by the
Comptroller General of the United States; and the Standards for the Professional Practice of Internal Auditing, issued
by the Institute of Internal Auditors.
BACKGROUND:
The Parks and Recreation Department Golf Course Division
manages the operations of two eighteen hole golf courses for residents
and visitors at the Manatee County Golf Course and the Buffalo Creek
Golf Course. At each course,
the Division operates a golf shop facility.
Sales and purchases of inventory are processed and maintained
by a point-of-sale computer system.
The system also produces monthly reports on inventory, sales
and profits.
PURPOSE/OBJECTIVE:
The audit purpose / objectives included, but were not
limited to, the following:
Ψ
Determine whether adequate
safeguards exist to control physical access over merchandise inventory.
Ψ
Determine whether adequate
segregation of duties exists.
Ψ
Determine compliance with the
County's purchasing procedures.
Ψ
Determine whether adequate
computer controls exist within the point-of-sale system over purchases,
sales, adjustments, reports and security.
Ψ
Determine whether inventory
pricing and marketing strategies being used by the Golf Courses appear
appropriate.
SCOPE:
The scope of the audit included examining on a test
basis evidence supporting the controls implemented by the Golf Course
Division in managing the merchandise inventories for the six month period
ending March 31, 2000.
METHODOLOGY:
Internal control evaluations were accomplished by flow
charting the key operations of this specified area, discussions with
management and staff, observations, and analytical and substantive testing
of individual internal controls. Risk
analysis was used to establish priorities of audit objectives.
IRREGULARITIES,
ABUSE, OR ILLEGAL ACTS:
No indications of irregularities, abuse, or illegal
acts were discovered for the period ending March 31, 2000 in the inventory
audit of the Golf Course Division.
TEST OF COMPLIANCE:
Internal Audit tested compliance with certain laws
and regulations, obtained an understanding of internal controls and
assessed control risk. Tests
performed were limited to the specific areas included in the Purpose/Objective
section of this report and appeared to provide sufficient evidence to
support an opinion on compliance and internal controls for the areas
tested.
Except as noted in our audit report, tested items were
in compliance with resolutions and other policies established by the
Golf Course Division.
STATEMENT
ON INTERNAL CONTROL STRUCTURE:
In planning and performing the inventory audit under
the Golf Course Division for the period ending March 31, 2000, the internal
control structure was considered in order to determine the auditing
procedures for the purpose of this report.
As a result, we noted in the audit report matters involving the
internal control structure and its operations that are considered reportable
conditions under standards established by the U.S. General Accounting
Office, Government Auditing Standards. Reportable conditions involve matters relating
to deficiencies in the design or operation of the internal control structure,
that in our judgment, could adversely affect the organization's ability
to record, process, summarize and report on data consistent with managements
intentions.
Our consideration of the internal control structure
would not necessarily disclose all matters in the internal control structure
that might be reportable conditions, as defined above. In addition, because of the inherent limitations
in any internal control structure, deficiencies in the design or operation
of the internal control structure may exist and not be detected. We believe the conditions identified in our
audit report constitute reportable conditions as previously defined.
MANAGEMENT TEAM AND MANAGEMENT
ACTION PLAN:
A Management Action Plan will be used for each Area of Improvement reported. Management Action Plans are corrective actions with implementation dates developed in cooperation with the Departments Management Team and the Internal Audit Department. The Management Team includes the Director and Interim Director of the Parks and Recreation Department, the Operations Manager, and the Golf Course Division Manager.
MANAGEMENT
SUMMARY:
The Golf Course Division operates
golf shop facilities that sell merchandise inventory using a point-of-sale
computer system designed to record purchases and sales, and maintain
inventory balances. The Division
is in the process of purchasing a new point-of-sale computer system
due to limitations within the current system and the lack of available
upgrades. Management has requested an audit of the current
computer system and the Division's operations as they relate to inventory
controls. Management anticipates
that any control weaknesses noted in the computer system and its operations
will be evaluated and corrected prior to the purchase of the new system.
This report identifies several areas
for improvement in the current computer system and its operations that
can be corrected with the purchase of a new system, the implementation
of additional policies and procedures over the Division's operations,
and by providing access to Manatee Countys finance system. Educating employees on the importance of controls and the proper
use of the systems will be essential.
Internal Audit believes that this report may serve as a management
tool to assist with the purchase of the new system and improve controls
over operations. The following are areas identified for improvement
and addressed by our Management Action Plans:
·
The Golf Course
Division uses a point-of-sale computer system that includes a "Receipt
Entry" component used to record the receipt of merchandise.
Entry into the system appears to be delayed or not entered at
all due to invoices not being obtained timely from which the information
is extracted. When used correctly, the system will produce reliable
sales and profit reports and will provide useful information during
the physical inventory count process. Greater efficiencies can be gained
by providing access to the finance system. Efficiency can also be enhanced by interfacing
the point-of-sale computer system with the finance system. Management will begin working with the Finance
Department and the Information Services Department to provide the golf
courses access and interfacing with the finance system. In addition, procedures will be developed to
ensure the correct use of the receipt entry component of the current
computer system.
(See
Area for Improvement #1 on page 6.)
·
The Golf Course
Division has the ability to make adjustments to the inventory information
contained in the point-of-sale system. Due to limitations within the system, adjustments made to the inventory
information cannot be tracked. Controls could be strengthened by limiting
access to key personnel through
the use of a restricted password. The Management Team through its Management
Action Plan has assigned the Clubhouse Managers specific passwords for
adjusting inventory information. In
addition, procedures will be developed and implemented which detail
the reporting responsibilities and use of adjustments. (See Area for Improvement #2 on page 7.)
·
The golf courses
perform regular physical inventory counts of merchandise on hand.
These counts are compared to the system's quantity on hand.
Follow-up procedures are needed to research and document differences
that occur each month. In addition,
procedures are recommended in reporting inventory differences to Management. The Management Team through its Management
Action Plan will develop and implement procedures to research, document,
and report to management inventory overages and shortages. (See Area for Improvement #3 on page 7.)
·
Discounts are
regularly given on golf shop merchandise in order to promote sales. In addition, discounts are offered to golf
course employees. Resolution
99-223 has not been updated to reflect discount practices currently
in effect. Procedures are needed to ensure discounting
practices are reasonable and applied consistently. The Management Team through its Management Action Plan has discontinued
the practice of offering employee discounts, and is in the process of
revising the current resolution and developing administrative procedures
for the discounting of merchandise. (See Area for Improvement #4 on page 8.)
We appreciate the efforts of Parks
and Recreation Department and the Golf Course Division's management
and personnel in timely addressing the issues raised during the audit
and aggressively seeking solutions to these matters. We believe through the implementation of the Management Action Plans
included in this report, controls will be strengthened, improving operations.
We commend the Golf Course Division for their commitment in providing
quality recreational facilities and services to Manatee County residents.
AUDIT REPORT
AUTHORIZATION:
This audit report has been reviewed and authorized
by:
____________________________________ ___________________________________
Richard
J. Orienti, CIA, CFE
R. B. "Chips"
Shore
Director of Internal Audit Clerk of the
Circuit Court and Comptroller
AREA
FOR IMPROVEMENT #1
Subject: Receipt
of Merchandise Entered into the Point-of-Sale System
The golf courses use a point-of-sale
computer system designed to record purchases and sales, and maintain
inventory balances. The system
includes a "Receipts Entry" component in which received merchandise
is entered into the system. When
purchases are entered, the system automatically updates the quantity
on hand and calculates the average cost.
Manatee County Golf Course For the six-month period reviewed, many instances were noted where
merchandise was received, placed on the sale floor, and subsequently
sold without being entered into the system.
Entry into the system appears to be delayed or not entered at
all due to invoices not being obtained timely from which the information
is extracted. By not entering cost information into the system, reports
on sales and profits are inaccurate and misleading.
Without the quantity information in the system, the numbers included
in the Physical Inventory Report are neither accurate nor useful for
physical count reconciliation. When items are not entered into the system,
an audit trail does not exist to support the receipt of the inventory
items received.
Buffalo Creek Golf Course For the six-month period reviewed, it was noted that the Receipts
Entry system was not used to record the receipt of merchandise. When purchases were received, adjustments were
made to the quantity on hand, and the average cost of each of the items
was estimated. The system does
not have the capability to track adjustments, therefore, an audit trail
did not exist to support the receipt of the merchandise.
As a result, verification of purchases could not be performed
to ensure the accuracy of the information entered into the point-of-sale
system and the reports generated.
The current computer system
is not interfaced with Manatee Countys finance system. If golf course personnel had access to the
finance system, invoice information would be available on-line and the
efficiency of the receipt input process would improve. Additional efficiencies could be obtained if
the point-of-sale computer system interfaced with the finance system,
allowing both systems to share information and eliminating duplication
of input.
Management
Action Plan:
Ψ
Management
will begin working with the Finance Department and the Information Services
Department to begin the process of providing access to the finance system
at the golf courses. This will
allow the golf courses to input and review purchasing information directly
on-line. In addition, management anticipates interfacing
the new point-of-sale computer system with the finance system to increase
operational efficiency. Management
anticipates providing access to the finance system by December 31, 2000.
Interfacing of the new point-of- sale computer system is expected
by June 30, 2001.
Ψ
The Buffalo
Creek Golf Course has begun using the Receipts Entry component of
the point-of-sale system to record the receipt of all merchandise as
of September 1, 2000. In addition,
Management will develop procedures to ensure the correct and consistent
use of the receipt entry component of the computer system.
Procedures will be developed by September 30, 2000.
AREA
FOR IMPROVEMENT #2
Subject: Adjustments to Inventory in the Point-of-Sale
Computer System
The Clubhouse Managers make
corrections/adjustments to the inventory information such as quantity,
cost, and list price, contained in the point-of-sale system. When adjustments are made, the system does
not maintain a record of the change and therefore, the adjustments cannot
be retraced. This was confirmed
with the author of the point-of-sale system software.
In addition, the computer system
requires passwords/authorization codes to adjust the point-of-sale inventory
information. It was noted, however,
that the code for adjusting the inventory information is known by all
of the employees. As a result,
controls over the restriction of unauthorized access does not appear
adequate.
Management
Action Plan:
Ψ
Management
has implemented new passwords to be used specifically for adjusting
inventory information. These
passwords have been assigned only to Clubhouse Managers effective September
8, 2000.
Ψ
Management
will develop and implement procedures that will detail the use of adjustments
and reporting responsibilities. These
procedures will be developed and implemented by September 30, 2000.
Ψ
With the purchase
of the new computer system, Management anticipates the system will have
the ability to track and report any adjustments made to the system. The system is expected to be fully functioning
by March 2001.
AREA
FOR IMPROVEMENT #3
Subject: Periodic Inventory Counts and Reconciliation
The golf courses perform monthly
physical inventory counts and results are recorded into the point-of-sale
computer system. The system
generates a report that compares physical counts to the system's quantity
on hand. The Manager subsequently orders a Physical Update, which changes
the quantity on hand in the system to reflect the physical count.
While the managers do review
and follow-up on some overages and shortages indicated on the Physical
Inventory Report, not all differences are researched or documented with
explanations. The quantities are simply adjusted to reflect what is
physically in stock. There are no follow-up procedures to address the
losses (or gains) that occur each month, or to report the information
to upper management on a regular basis.
AREA
FOR IMPROVEMENT #3
...
Continued
Management
Action Plan:
Ψ
Management
is in the process of developing procedures that would require research
and documentation of inventory overages and shortages. This information will be reported to management on a regular basis.
Implementation is anticipated by September 30, 2000.
AREA FOR IMPROVEMENT #4
..
...
Subject: Discounts on Sales
Resolution R-99-223 allows
for discounts on golf shop merchandise only through the use of coupons
during off-peak seasons. A review
of the sales reports noted that discounts are given regularly on merchandise
sold at both golf courses. Any
employee may give discounts for any amount.
The golf courses do not have any written procedures for providing
the discounts, nor are there any controls in place to restrict and monitor
the discounts given by employees.
Resolution R-99-223 does not
address or authorize discounting merchandise for employees at either
golf course. However, it appears that discounts are given
to golf course employees on merchandise at a price of cost plus 5%.
Management
Action Plan:
Ψ
Management
is in the process of developing administrative procedures for sales
discounts. Implementation is
expected by September 30, 2000.
Ψ
Management
will amend the resolution to allow for the golf courses to give discounts
on inventory merchandise consistent with the administrative procedures. Board of County Commissioners' approval is
expected by November 2000.
Ψ
Management
has discontinued the practice of offering employee discounts effective
September 7, 2000.
