Limited Scope Fiscal Audit of the General Services Department
The Controller’s Office conducted a limited scope fiscal audit of the General Services Department (GSD) focused on external bank accounts, petty cash, and payroll. We performed surprise cash counts at three locations and evaluated related petty cash internal controls. We also completed a limited payroll review, which entailed verification of hours worked, overtime and bonuses paid during a two-week pay period, to ensure payments to sampled employees were properly supported.
Regarding authorized petty cash funds, we found all of the funds were accounted for; however, we have identified opportunities to improve the oversight of the funds. Our review of payroll also found that controls could be enhanced to ensure overtime and bonus pay is appropriately reviewed and approved.
While GSD has established oversight procedures and processes over the external bank accounts, clarification is needed regarding the allowable expenditures and reimbursements for the building management funds, which are paid through a City contractor. In addition, as Fig Plaza and the Public Works Building are now expected to be occupied exclusively by City tenants, there may be an opportunity to reduce the costs for property management services. Specifically, GSD should re-evaluate if the contracts for property management services, which necessitates the external bank accounts, remains appropriate for the City-owned buildings that are exclusively occupied by City tenants.
These issues are further described in the Observations Section.
Review of Report
We provided a draft report to your Department on December 6, 2017, and the Department was in general agreement with the findings and recommendations. The Action Plan submitted by your Department for implementing the audit recommendations is included as Appendix I of this report. Based on the Department’s Action Plan received on December 22, 2017, we now consider six recommendations (#1.1, #1.3, #1.4, #2.1, #4.1 and #4.2) to be Implemented and two recommendations (#3.1 and #5.1) to be In Progress. Your Department disagrees with Recommendation #1.2 to reduce the Construction Forces’ Petty Cash Fund because doing so would negatively impact the Construction Forces Division. Our recommendation was based on past activities which may have changed in more recent months and the fund is for a fairly nominal amount, $2,500. Therefore, we accept your response and will consider this recommendation to be Not Applicable.
The General Services Department provides support services to City departments. The Department’s key operating programs include the following: Building Maintenance, Construction Forces, Custodial Services, Emergency Management and Special Services, Fleet Services, Fuel and Environmental Compliance, General Administration and Support, Mail Services, Parking Services, Real Estate Services, Standards and Testing Services (Standards), and Supply Management. In FY 2016-17, the Department was authorized for 1,261 full-time equivalent (FTE) positions, with $114.6 million budgeted for salaries, including $2.9 million for overtime.
Observations & Recommendations
Cash Count Observations
We performed surprise cash counts at four GSD locations: the Standards Division, automotive repair facilities at Lopez Canyon and North Hollywood and the Construction Forces Division.
Observation #1: One petty cash fund should be eliminated and another should be reduced; funds were used for non-urgent needs, and physical security over a petty cash fund was not adequate.
We analyzed payroll bonuses and other supplemental payments including bonuses and mileage reimbursements to employees in the Standards Division for a sample of employees during a given pay period.
Observation #2: Materials Testing Technician staff were erroneously paid a bonus.
GSD management should:
2.1 Periodically monitor the list of employees receiving bonuses against time sheets to ensure eligibility.
Observation #3: Overtime was not approved in a timely manner.
GSD management should:
3.1 Require Division directors/managers to certify who verbally approved the overtime and when, and that the overtime was necessary due to an emergency.
Property Management Bank Accounts Observations
In FY 2012-13, the Controller’s Office audited the GSD bank accounts related to CBRE, and recommended executing new contract(s) for managing the buildings that specified the method and components of the City’s payment for property management services provided by CBRE. The prior audit also recommended that once a new contract was executed, GSD should ensure appropriate oversight and monitoring of the contract. The contract has remained the same with funding provided annually.
Bank Account Review and Approval Process
As the contracted property manager, CBRE has the authority to purchase goods and services related to the operation and maintenance of Fig Plaza and the Public Works Building. At Fig Plaza, CBRE is also responsible for paying the parking services operator. Parking revenue is deposited into GSD’s Parking Account which is “swept” into the City’s General Collection account.
Observation #4: Allowable expenditures and reimbursements to the contracted property manager are not clearly defined, and therefore could be questioned.
GSD management should:
4.1 Define expenditures that are allowable petty cash purchases/reimbursements from the bank accounts used by CBRE as the Fig Plaza property manager. Included in the instructions should be a statement on how GSD will determine that cell phone expenses are for conducting City business.
4.2 Ensure CBRE only utilizes vendors on the approved lists associated with their contracts to ensure compliance with the City’s procurement process.
Observation #5: GSD should re-evaluate the need for contracted property management services.