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Audit Finds Many Government Accounts Not Balancing

Oct. 13, 2004 – An audit report issued this week by V.I. Inspector General Steven van Beverhoudt shows the Department of Finance and several government agencies to be at odds over just how much money exists in various petty cash, imprest and accreditation funds.
The audit, made at the request of Finance Commissioner Bernice Turnbull, shows a $384,000 discrepancy between the DOF records and those of six departments audited. The report covers fiscal years 2003 and 2004.
The purpose of petty cash or imprest funds, van Beverhoudt said, is to facilitate the purchase of sundry goods or services, which must be paid for outside the regular disbursement channels either because of their nature, or urgency. An imprest fund is a larger petty cash fund. An employee managing a fund is called a custodian. Accreditation accounts are funds given to public high schools to facilitate the accreditation process.
Van Beverhoudt said in some cases, his investigation showed DOF records did not match the custodian's records. His initial review indicated that DOF records showed a total of 322 custodians with $3.3 million in petty cash, imprest and accreditation funds outstanding.
He cited six government agencies as an example, where, he said, the discrepancies range from $500 to $290,000.
He cited the Government Employees Retirement System; the Office of Collective Bargaining; the Education Department Substitute Teachers' Pool; Libraries, Archive and Museums department; Environmental Protection Division; and the Police Department.
The slightest difference was in the Libraries division where DOF records show $1,000, and the division's records show $500. The largest difference was in the Police Department where DOF records show $300,000 and the department's records show $10,000 balance, a $290,000 breach.
The report says information on 185, or 57 percent, of the funds was not available. Van Beverhoudt says departmental personnel "did not respond to our requests, or the individual contacted was unaware of such a fund, custodian, and/or the status." By contacting various departments, he said, " we were able to verify 96 accounts as active; 30 accounts as closed; nine accounts as inactive, but not closed; and 185 accounts whose status was not known."
And he came up with some interesting information along the way. Van Beverhoudt cited:
– An instance where the custodian left the department more than 16 years ago, and the current supervisor had never heard of the individual. DOF records note that the custodian retired while awaiting for someone to bring in a check for $200 to close the account, yet there's no indication anyone ever did so and the record is still in active status.
– Several funds were reported as being destroyed by fire, while others were reported as stolen in DOF records. Some of the stolen funds were reported to police, while others were not. The status of these funds was never updated.
Van Beverhoudt recommended that the Finance Commissioner:
– Establish procedures for lost, stolen, inactive and shortages of funds including the handing of the accreditation funds for multiple years.
– Verify that funds reported as "closed" have been reconciled and refunded to the DOF.
– Ensure that funds reported as "not active nor closed" be reconciled and refunded to DOF.
– Research funds reported as "unknown."
– Reconcile the DOF general ledger annually after adjusting for lost, stolen, closed and inactive funds or increases or decreases to fund balances and changes in custodians.
– Computerize the reconciled petty cash/imprest fund records.
– Send out letters annually requesting verification of petty cash, imprest and accreditation funds.
The report suggests that Turnbull get authorization from the Legislature to write off lost, stolen and unrecoverable funds. Turnbull said, and van Beverhoudt agrees, she cannot do this without approval from the Legislature. Turnbull said Wednesday that she would contact the different departments, and then contact the Legislature to implement the authorization.
In response to the report, Turnbull wrote van Beverhoudt that she concurs her department does not have an accurate accounting of funds and custodians. She said that is why the audit was requested.
Turnbull said while she agrees with all van Beverhoudt's recommendations, she takes issue with the number (322) of funds he cited. Van Beverhoudt said Wednesday that Turnbull is probably right; however. all he had to work with were her records. The report notes that 185 accounts couldn't be verified.
Van Beverhoudt said that he thinks the discrepancies are mainly due to "just poor accounting." He said, "For instance, if an account switches from one custodian to another, Finance may open an account in the new person's name and not close the old one."
Turnbull said Wednesday that her staff is working on van Beverhoudt's recommendations.
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