03/24/1995 Audit PRELIMINARY AUDIT REPORT
' MONROE COUNTY
PUBLIC LIBRARY TRUST FUND
March 24, 1995
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Prepared by:
Internal Audit Department
Clerk of the Circuit Court
• Danny L. Kolhage, Clerk
Monroe County, Florida
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BRANCH OFFICE CLERK OF THE CIRCUIT COURT BRANCH OFFICE
3117 OVERSEAS HIGHWAY MONROE COUNTY 88820 OVERSEAS HIGHWAY
-- MARATHON, FLORIDA 33050 500 WHITEHEAD STREET PLANTATION KEY, FLORIDA 33070
TEL. (305) 289-6027 KEY WEST, FLORIDA 33040 TEL. (305) 852-7145
ITEL. (305) 292-3550
March 24, 1995
The Honorable Danny L. Kolhage
Clerk of the Circuit Court
' Re: Audit of Monroe County Public Library Trust Fund
Dear Mr. Kolhage:
The Internal Audit Department has prepared a preliminary report concerning an audit of the
' Monroe County Public Library Trust Fund. The audit scope was limited to an examination and
evaluation of the adequacy and effectiveness of the Monroe County's established system of
internal controls related to the creation of the Monroe_County Public Library Trust Fund and
subsequent disbursement of funds for public library purposes, for the period from October 1,
1992 through March 15, 1995.
The Monroe County Library's established system of internal controls is not adequate or effective
to ensure compliance with depository, recordkeeping, and reporting requirements established by
' State and Local laws and regulations or to provide reasonable assurance that cash receipts for
donations, fees, and fines are safeguarded. The internal control weaknesses noted in our audit
do not appear to materially affect the reliability and integrity of financial information,
' The accompanying audit report is provided for your information. Additional copies of the report
will be provided and/or distributed upon your request.
' Sincerely,
Charles J. Mansen, Jr., CIA
Internal Audit Director
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' PRELIMINARY AUDIT REPORT
MONROE COUNTY KEY WEST LIBRARY TRUST ACCOUNT
' TABLE OF CONTENTS
Page#'s
I. Scope and Objectives 1
' II. Methodology 1 - 2
III. Background 2 - 3
IV. Conclusions 3
' V. Audit Findings: •
A The Monroe County Public Library Trust Fund Was Created
' in Violation of Florida Statutes and County Regulations 3 - 4
B. Unauthorized Withdrawals Were Made from the Monroe County
' Public Library Trust Fund 4 - 6
C. Failure to Keep Records of Monroe County Public Library
' Trust Fund Transactions 6 - 7
D. Failure to Provide Records to the Clerk's Finance Department
' for Audit 8
' E. Donations Are Not Adequately Controlled to Prevent Loss
or Misappropriation 8 - 10
F. Misrepresentation of Mileage Incurred on a Travel Voucher 10
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' PRELIMINARY AUDIT REPORT
MONROE COUNTY PUBLIC LIBRARY TRUST FUND
I. Scope and Objectives:
A. At the request of the Clerk of the Circuit Court, the Internal Audit Department has
completed an audit of the Monroe County. The Internal Audit Department limited the
scope of this audit to the period from October 1, 1992 through June 30, 1994.
B. The audit was performed to examine and evaluate the adequacy and effectiveness of
' Monroe County's system of internal controls established to ensure the reliability and
integrity of financial and operating information relating to the receipt and expenditure of
donated funds, to ensure compliance with laws, regulations, policies, and procedures
regarding the creation and use of bank accounts, and to ensure safeguarding of general
revenue and donated funds.
II. Methodology:
' A. The Internal Audit Department examined the following documents:
1. Monroe County Public Library Trust Fund bank statements.
2. Monroe County Public Library Trust Fund deposit and disbursement detail.
3. Florida Statutes relative to the creation and use of bank accounts.
' 4. The Monroe County Code, local ordinances and resolutions.
5. Monroe County Library policies, and procedures.
t 6. Job descriptions for key employees.
7. Donations recorded by the Clerk's Finance Department.
8. Donation lists maintained by the Key West Library.
' 9. Paid travel vouchers and supporting documentation maintained by the Clerk's
Finance Department.
10. Monroe County Public Library employee travel vouchers.
' 11. Monthly Library activity reports.
12. Key West Library vendor files.
13. Minutes of meetings of the Friends of the Library.
' 14. Correspondence files.
B. The following personnel were contacted during the audit to obtain information about the
' creation of the Monroe County Public Library Trust Fund and subsequent deposit and
disbursement of donated funds:
1. The Division Director of Community Services.
' 2. The Director of Libraries.
3. The Library Business Manager.
4. The Head of Library Technical Services.
' 5. Personnel of the Clerk's Finance Department.
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' C. The Internal Audit Department reviewed State and local laws, regulations, policies,
plans, and procedures to gain an understanding of legal requirements and established
' internal controls concerning the authority to create bank accounts and the authority to
deposit and disperse funds.
' D. Requests for identification of all Monroe County Library bank accounts were sent to all
local banks to determine whether any additional bank accounts or savings accounts were
established.
' E. All available records at the Key West Library and the Library Director's office were
searched for supporting documents for deposits and disbursements listed on the Monroe
County Public Library Trust Fund bank statements.
F. Donation lists maintained by the Library Business Manager were compared to donations
' recorded by the Clerk's Finance Department to determine whether all donations received
by the libraries were recorded in the Clerk's official financial records.
' G. The Clerk's Finance Department's records of paid travel vouchers were reviewed to
determine whether any travel expenses were paid by both donation funds and general
' revenue funds.
H. Library activity reports were compared to paid travel vouchers to determine whether all
' library staff travel is reported to the Clerk's Finance Department for reimbursement in
accordance with §112.061 F.S.
III. Background:
A. The Monroe County Public Libraries are currently organized under the Division of
' Community Services. The Library Director reports directly to the Division Director and
until December 1994 was responsible for management of all sections and personnel
within the County Library System. Effective December 1994, the Library Director was
' relieved of financial and personnel duties relating to the Key West Library due to
personnel conflicts. The Library Director currently has only technical service
responsibilities over the Key West Library.
' B. The Monroe County Library also employs a Library Business Manager who is
responsible for financial records and reports of the Library System. The Business
' Manager reported directly to the Library Director before December 1994 and now
reports directly to the Division Director of Community Services.
' C. The Library System includes the May Hill Russell Library in Key West (Key West
Library), the George Dolezal Branch Library in Marathon (Marathon Library), the Helen
Wadley Branch Library in Islamorada (Islamorada Library), and the Key Largo Branch
' Library (Key Largo Library).
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' D. Donations are received by the Key West Library and all branches of the Monroe County
libraries from the Friends of the Library and the general public. Donations are used to
1 supplement Federal, State, and local funding for Library operations and capital outlays.
Donations received by the branch libraries are sent in the form of a money order to the
Library Business Manager. Donations received at the Key West Library are processed
and deposited by the Library Business Manager.
E. All mail addressed to the Library Director is received at the Key West Library and is
forwarded unopened to the Library Director's office at the Public Service Building on
Stock Island. Any donations and other receipts contained within the forwarded mail are
returned to the Library Business Manager at the Key West Library.
' IV. Conclusions:
' A. The Monroe County Library's established system of internal controls is not adequate or
effective to ensure compliance with depository, recordkeeping, and reporting
requirements established by State and Local laws and regulations or to provide reasonable
' assurance that cash receipts for donations, fees, and fines are safeguarded.
' B. The internal control weaknesses noted in our audit do not appear to materially affect the
reliability and integrity of financial information.
' V. Audit Findings:A. The Monroe County Public Library Trust Fund Was Created in Violation of Florida
' Statutes and County Regulations:
Finding(s):
1. The Monroe County Public Library Trust Fund was created without the knowledge and
authorization of the Monroe County Board of County Commissioners (BOCC) and the
Clerk of the Circuit Court, in violation of Florida Statutes and Monroe County
' Resolution#542-1992. On June 15, 1993, the Monroe County Library Director opened
a Monroe County Public Library Trust Fund business savings account with the deposit
of a $1,000 donation check made payable to Monroe County Public Libraries. The
' signature card for the account lists the Library Director and the Library Business
Manager as signers for the account. The Library Director claimed that she was unaware
of the requirements for BOCC approval.
1 In Alachua County vs. A. Curtis Powers, Case No. 51,465, the Supreme Court of
Florida held that the clerk is county auditor, accountant and custodian of all funds of the
' county pursuant to constitutional and statutory provisions. Section 136.08 F.S. states that
the accounts of each and every board and the county accounts of each and every
depository, ... shall at all times be subject to the inspection and examination by the
county auditor.
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�I Resolution#542-1992 authorized the Chairman of the BOCC to sign all warrants, legal
documents and any other necessary papers and documents. Generally accepted internal
. I controls also require that all bank accounts be properly authorized. The Library Director
was not included and was not authorized by law to be included in the Resolution as an
authorized signer of legal documents and any other papers and documents.
IInternal Audit requested identification from local banks of all Monroe County Library
bank accounts to determine whether additional unidentified accounts existed. No
I additional accounts were found; however, the bank responses do not preclude the
possibility of additional accounts being set up under alternate names for Monroe County
or personal accounts.
IRecommendation(s):
1. The Monroe County Code should be amended to provide for the requirement of specific
Iauthorization by the Clerk of the Circuit Court and signature by the Chairman of the
BOCC and the Clerk of the Circuit Court for the creation and closure of Monroe County
bank accounts.
I2. The Clerk of the Circuit Court should inform all local banks that documents required for
the creation of Monroe County bank accounts must be properly authorized by the Clerk
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of the Circuit Court and signed by the Chairman of the BOCC and the Clerk of the
Circuit Court.
3. All County employees should be instructed that no bank accounts may be established for
I Monroe County without the specific authorization of the Clerk of the Circuit Court and
signature by the Chairman of the BOCC and the Clerk of the Circuit Court.
4. Written procedures should be established by the Clerk of the Circuit Court and the
I County Administrator to ensure that proper procedures are followed in establishing bank
accounts.
IAuditee's Response(s)
Auditor's Comment(s)
IB. Unauthorized Withdrawals Were Made from the Monroe County Public Library
Trust Fund:
�Li Finding(s):
1. Funds were withdrawn from the Monroe County Public Library Trust Fund by signature
I of the Library Director in violation of Florida Constitutional requirements. During the
period from June 15, 1993 to November 8, 1994, the Monroe County Library Director
signed for withdrawals from the Monroe County Public Library Trust Fund business
savings account. The Library Director has no Constitutional authority or Statutory
authority to withdraw funds from a County bank account.
I Article VIII, Section 1(d), Florida Constitution states "When not otherwise provided by
county charter or special law approved by vote of the electors, the clerk of the circuit
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' court shall be ex officio clerk of the board of county commissioners, auditor, recorder
and custodian of all county funds."
2. Withdrawals from the Monroe County Public Library Trust Fund by signature of the
Library Director violated Section 129.09 F.S. which forbids the clerk "acting as county
' auditor," from signing illegal warrants and provides both personal and criminal liability
for violation. In Alachua County vs. A. Curtis Powers, Case No. 51,465, the Supreme
Court of Florida ruled that although an appropriation of county funds may serve a county
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purpose, there must be some type of pre-audit review of the disbursement in order to be
sure that the funds will not be used for an unlawful purpose. The Library Director is not
authorized to pre-audit disbursements of County funds and by withdrawing the funds by
' her signature, the Library Director deprived the Clerk of his right to exercise his duties
as County Auditor.
' 3. Withdrawals from the Monroe County Public Library Trust Fund by signature of the
Library Director were not made by checks, were not recorded in the minutes of the
BOCC, and were not signed by the Chairman of the BOCC as required by Section
' 136.06 (1) F.S. This section of the Florida Statutes states that all money drawn from
any depository qualified under the provisions of this chapter shall be upon a check or
' warrant issued by the board or officer drawing the same, said check or warrant, both as
to number and amount, person to whom drawn and purpose for which drawn shall be
recorded in the minutes of the board having ordered the same drawn, and each check or
warrant so drawn shall be signed by the chairman of said board with the corporate seal
thereof affixed.
4. Direct withdrawals from the business savings account by signature of the Library
' Director also violated Section 136.04 of the Florida Statutes, first by subjecting the funds
on deposit to direct withdrawal and second, by withdrawing funds without the approval
' of transfer to a checking account by the BOCC. Section 136.04 F.S. states that funds
in a savings or time deposit account shall not be subject to check without being
transferred to the checking account by order of the board or officer having control of the
' same. Funds were directly withdrawn from the business savings account and without
approval of the BOCC.
' 5. Monroe County Resolutions #361-1994, #451-1993, and #542-1992 authorized the
Chairman of the Board of County Commissioners to sign all warrants, legal documents
and any other necessary papers and documents. The Library Director was not included
' and was not authorized by law to be included in the Resolutions as an authorized signer
of legal documents and any other papers and documents. Generally accepted internal
controls also require that all bank accounts be properly authorized, that all disbursements
I except for petty cash be made by check, and that checks be signed by authorized
individuals.
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LIRecommendation(s):
1. The Clerk of the Circuit Court and County Administrator should establish written policies
I and procedures to ensure that all County employees comply with the requirements of the
Florida Constitution and Florida Statutes concerning custody of County funds and pre-
audit of disbursements.
2. The Clerk of the Circuit Court should inform all local banks that Florida Statutes and
Monroe County prohibit direct withdrawal from Monroe County business savings
accounts and time deposit accounts.
IAuditee's Response(s)
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Auditor's Comment(s)
C. Failure to Keep Records of Monroe County Public Library Trust Fund
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Transactions:
Finding(s):
I1. The Library Director violated Florida Statutes §136.05 and §219.04 by failing to keep
records concerning the deposit of a $1,000 donation check payable to Monroe County
Libraries and subsequent withdrawal of funds for the Monroe County Public Library
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Trust Fund. Internal Audit conducted a search of all available records at the Key West
Library, the Library Directors office on Stock Island, and the Clerk's Finance
I Department for documentation to directly support withdrawals from the business savings
account. No documents such as original receipts were found to adequately support the
withdrawals. The Library Director provided documentation consisting of a letter from
I a vendor dated February 26, 1995 concerning payment of $200.00 in cash for a March
18, 1994 performance, along with a copy of a personal credit card statement containing
a charge to the American Library Association for $68.04.
ISection 136.05 F.S. requires that the BOCC keep an accurate and complete set of books
showing the amount on hand, amount received, amount expended and the balances
I thereof at the end of each month for each and every fund carried by the BOCC. Section
219.04 (1) requires that County officials keep a cash book, or books, recording daily all
receipts and disbursements of public money, either by items or by summaries of itemized
I entries in other records, including machine tapes. Section 219.04 (1) F.S. also states that
the cash book shall be balanced and shall be a permanent record of the office.
Records consisting of copies of bank statements, deposit slips, and withdrawal slips were
not available from the Library Director, but were obtained from the bank by request of
I the Library Business Manager and the Clerk's Finance Department. Supporting
documents for the sole deposit of $1,000 and subsequent withdrawals were not provided
by the Library Director upon request by the Clerk's Finance Department and the Clerk's
Internal Audit Department. The Library Director provided a handwritten list of
- explanations for each of the withdrawals to the Clerk's Finance Department.
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i_J According to Clerk's Finance Department personnel, upon questioning the Library
Director, she stated that the donation check was received by her, at her house, in her
name, from friends ... to be used at her discretion for library business. A letter provided
to the Clerk's Finance Department by the President of the Key West Friends of the
Library does indicate that the donation check was provided through her for a $1,000
I discretionary fund. The Library Director stated to the Clerk of the Circuit Court that she
believed the $1,000 donation check was given to her personally to be used for library
purposes. The Library Director also informed Internal Audit that she believed that the
' donation was for discretionary use and that she was not aware that the funds were
required to be reported. Internal Audit and the Clerk's Finance Department observed
that the check was payable to the Monroe County Public Libraries and should have been
' accounted for and reported in accordance with State and Local laws and regulations, and
generally accepted accounting principles.
' Although the Library Director claimed that the funds were used for training, seminars,
conferences, and purchases of books, as a result of not maintaining records of the
receipt, deposit, and withdrawal of funds for the Monroe County Library Trust Fund,
' Internal Audit is unable to verify whether the funds were disbursed for legitimate Monroe
County Library purposes.
' Recommendation(s):
1. Appropriate written procedures should be established to ensure that all county personnel
' manage cash receipts and cash disbursements in accordance with State and Local laws
and regulations.
2. All county employees who manage cash receipts and cash disbursements should be
' instructed concerning State and Local legal requirements.
3. County employees who manage cash disbursements should be instructed to ensure that
adequate supporting documentation is maintained to provide an adequate and efficient
' audit trail and to support the official business purpose of all County expenditures.
4. All County employees who are responsible for record keeping should be instructed
concerning the record retention requirements established by the Division of Library and
Information Services of the Florida Department of State pursuant to Chapter 257 F.S.
Auditee's Response(s)
1 Auditor's Comment(s)
' D. Failure to Provide Records to the Clerk's Finance Department for Audit:
Finding(s):
1. The Library Director violated Florida Statutes §136.08 failing to provide detailed records
concerning the Monroe County Public Library Trust Fund to the Clerk's Finance
Department for inclusion in Monroe County's financial statements for the years ending
I ! September 30, 1993, September 30, 1994, and September 30, 1995. Section 136.08 F.S.
requires that the accounts of the BOCC and the County accounts of each and every
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Idepository be subject to the inspection and examination by the county auditor.
I The failure to provide records for inclusion in the financial statements of the County
resulted in an immaterial misstatement of revenues and expenditures in relation to the
revenues and expenditures of the County Libraries and the County as a whole; however
I although no other accounts were identified by Internal Audit, other accounts may exist
that are not included on the County's financial statements.
I Recommendation(s):
1. All County employees who manage cash receipts and cash disbursements should be
instructed to forward all financial documents to the Clerk' Finance Department to ensure
Iinclusion in the Official Records and County financial statements.
Auditee's Response(s)
IAuditor's Comment(s)
IE. Donations Are Not Adequately Controlled to Prevent Loss or Misappropriation:
Finding(s):
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1. Internal audit noted differences between donations listed on Library records when
compared to the Clerk's Finance Department records. Interviews with Key West Library
I personnel and examination of Library documents indicated occasional complaints about
lost donations by the donees. Section 219.02 F.S. requires the issuance of a receipt for
each collection of public money, retention of a copy by the person who issues the
I receipt, and establishes the receipt as a public record. Section 136.03 requires each
depository receiving any money to make receipt in triplicate, one copy of which the
depository will carefully preserve and keep, one copy to be given to the person from
Iwhom the money was received, and one copy to be given to the BOCC.
2. Donations received by the branch libraries are converted to a money order for transmittal
I to the Key West Library. As a result, branch library donations, fees, and fines are not
deposited intact which creates a difficult audit trail. The Monroe County Library was
granted an exemption from Administrative Instruction 1013 which required that all cash
I funds received be deposited as quickly as possible, but no later than 3 business days from
receipt.
I 3. Donations are occasionally given by the various Monroe County Friends of the Library
groups directly to Library employees for travel to seminars and conferences. No
evidence of accounting for such funds in the Library records and Clerk's records was
I found. Also, a comparison of paid travel vouchers in the Clerk's Finance Department
records to Library activity reports indicated that travel is frequently conducted and not
reported to the County for reimbursement out of County funds.
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' These practices violated Florida Statute Section 129.06(d), which states that a receipt
of a nature from a source not anticipated in the budget and received for a particular
' purpose, including but not limited to grants, donations, gifts, or reimbursement for
damages, may, by resolution of the board spread on its minutes, be appropriated and
expended for that purpose, in addition to the appropriations and expenditures provided
' for in the budget. Such receipts and appropriations must be added to the budget of the .
proper fund.
' 4. The Library Director's mail is delivered to her office at Stock Island unopened. Any
mail receipts are returned to the Library Business Manager for processing and deposit.
The additional routing and time lag creates additional opportunity for diversion of cash
receipts from legitimate library purposes.
Recommendation(s):
' 1. Written procedures should be established to ensure compliance with Section 129.06 F.S.,
Section 136.03 F.S. and Section 219.02 F.S.
2. The County Administrator should establish and communicate policies and procedures to
' the Friends of the Library groups to ensure that all donations are made payable directly
to Monroe County and are deposited in proper County accounts.
3. County employees who handle cash receipts should be instructed to ensure compliance
' with the Florida Statutes.
4. County policies and procedures should ensure that all cash receipts should be deposited
' intact daily.
5. County policies and procedures should ensure that mail is opened.and cash receipts listed
by someone independent of accounting and reporting cash receipts and at the point of
delivery of the mail.
6. County policies and procedures should ensure that a copy of listings of cash receipts are
provided to a person responsible for Library accounting records for reconciliation to
' validated deposit slips.
7. County policies and procedures should ensure that an individual who is not responsible
for the accounting records prepares and make deposits and provides validated deposit
' slips to the person responsible for accounting.
Auditee's Response(s)
' Auditor's Comment(s)
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F. Misrepresentation of Mileage Incurred on a Travel Voucher:
Finding(s):
1. Internal audit examination of travel vouchers submitted for County reimbursement to
documents maintained at the Key West Library and Library Director's office disclosed
a mileage claim for $68.00 (340 miles at $.20 per mile) from Key West to Miami Beach
and return trip for an American Library Association Conference in June of 1994. A
travel voucher obtained from the Key West Library for another County Library employee
states that the trip was made in the Library Van, a County owned and maintained
vehicle. Section 112.061 F.S. does not permit reimbursement for mileage unless the
vehicle used is a privately owned vehicle.
' Recommendation(s):
1. The County Administrator should determine whether the mileage on the Library
' Director's travel voucher was inappropriate and if inappropriate, recover such payment
from the Library Director.
2. County employees should be instructed that mileage cannot be claimed on the use of
County owned vehicles.
' Auditee's Response(s)
Auditor's Comment(s)
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