The quagmire auditors found when they recently looked at the collections system at the Lieutenant Governor’s Office was in large part indicative of what was going on at Finance when the remaining portion of the territory’s property tax system transitioned over in 2008, according to officials.
Completed late last month, the 23-page report from the V.I. Inspector General’s Office reviewed collections system operations during fiscal years 2008 and 2009 and ultimately found that poor monitoring, supervising and reporting standards led to an “understating” of collections in FY 2009 to the tune of $94,265. The report also describes a disconnect between managers, collectors and cashiers, along with various accounts of a malfunctioning Enterprise Resource Planning system – the database containing most of the government’s records, including personnel and financial information.
“We found that: supervisory personnel at Finance and the Lieutenant Governor’s Office were not performing regular onsite visits and review of the collection process; there were weaknesses in internal control procedures relative to: (a) accurate and timely recording of transactions; (b) the use and accountability of receipt books; (c) review and effective monitoring of revenues; (d) segregation of collector duties; and collection methods and processes varied among sites and collectors,” according to the report.
Though the report references collections in general, it largely focuses on the property tax system, the collection portion of which was previously housed under Finance but was shifted to the Lieutenant Governor’s Office in June 2008. Speaking recently with the Source, Lieutenant Gov. Gregory R. Francis said when the section moved over there were some notable issues and Finance did not provide guidance on how to deal with them, while concrete policies for running the collections operations did not exist.
Along with noticing that some of the employees were doing double duty – meaning they were doing the research on the bills and certifying payment – Francis said when he came on board as the head of the agency, he noticed there were “boxes of bills” that were being returned unclaimed.
“We had to determine who paid and who didn’t,” he said. Streamlining the system to make it more efficient has been ongoing, and Francis said the agency has had to “clean up a lot of old records” ever since the ERP replaced the government’s old financial management system. Meanwhile, issues with the receipt books have been cleaned up, emphasis has been placed on properly training employees on how to use the ERP and there has been a “separation of duties” for employees that were once performing two jobs, he added.
The report says both Finance and the LGO share responsibility and includes recommendations at the end for each agency head. The last page of the report concludes that the issues – save for two requests for documentation from Finance showing that a new monitoring system, along with a set of policies, governing collections is in place – have been resolved.
The first section, under findings, titled “management control,” shows the disconnect between the LGO and Finance. While Finance did not monitor collection activities at the LGO and “made no effort” to conduct onsite reviews or inspections of colletion operations, neither did LGO officials issue procedures for handling deposits, shortages, overages or revenue collections other than property taxes, the report said.
Meanwhile, supervisors at the LGO didn’t review collections activities to make sure all revenues were posted to the ERP system, according to the audit. While most collections were entered during fiscal years 2008 and 2009, auditors noted $94,265 worth of exceptions attributed to a collector’s failure to input the revenues into the system, Finance’s failure to close out the collector’s “daily batch” posting or, in one instance, a collector “erroneously” adding $600 to a posting.
“During the audit we enquired about the $81,382 of collections that were not posted for several collection days in November and December 2008,” the report said. “The collector subsequently made the postings in December 2009, a year after the revenues were actually collected, thereby causing the revenues to be reported and overstated in FY 2010.”
Another section of the report looks at the LGO supervisors, and says that the employee on St. Croix didn’t “adequately monitor” collections during fiscal years 2008 and 2009, while the supervisor on St. Thomas-St. John was monitoring but “failed to ensure” that $67,082 collected when the ERP was “inoperable” was eventually posted into the system.
The report also found:
• St. John collectors changed their collection policies based on information they were given by other LGO employees and without authorization from their supervisor. For example, the audit notes that collectors on the island were not charging less than $100 in interest on property tax bills because they were told by other employees that the office was no longer doing so;
• Collectors at the different LGO locations were issuing different types of manual receipts verifying payments from customers or continued to use the old receipt books used by Finance before the transfer;
• Receipt books were not being monitored by the collections supervisor;
• Collectors on St. Croix were not issuing ERP receipts to customers because the machine that prints the receipts was inoperable for two months. During that time the collectors also did not enter those payments into the ERP system. Tthe report notes, however, that LGO managers have said they were not aware at the time the machines were “inoperable;"
• Collectors, instead of supervisors, were signing in or initialing bank deposits before they were picked up and sent to the bank, while the log book in which the deposits were recorded were also being returned to the collectors after being processed by the bank;
• The LGO did not verify that all employees handling the cash were bonded, or approved, by Finance;
• Daily reconciliations were not being performed by collectors; and
• Finance officials did not have the same kind of access to the ERP and various financial details relating to the collections system as the collectors themselves.
In his response letter, Gov. John deJongh Jr. concurred with the findings of the report and said that both agencies will be, or have already, taken action to “solidify their internal controls relative to revenue collections and systematically reporting.”
Responses to the audit from the Finance side say that the director of Treasury will head the monitoring of the government’s collections process and regular inspections of collectors and will work with the Finance commissioner to develop policies and procedures governing the collections process.
As for the Lieutenant Governor’s Office, Francis said efficiency and standardization are the keys to moving ahead. According to responses included in the report, all receipts, deposit slips and reports have been standardized, while procedures have been put in place so that only supervisors can contact Finance to request manual receipts.
Supervisors also will be the only ones able to initial bank deposits before they’re sent to the bank, and are responsible for distributing the receipt books and balancing the cash every day, according to the response included in the audit.