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IS YOUR COURT AT RISK?
An Auditors Perspective on Basic but NecessaryInternal Controls
How to Review Your Monthly Report
2015 New York State Magistrates Association ConferenceNiagara Falls, New York
MATTHEW POST
Bachelor’s degree in accounting and a Master’s Degree in Business
Administration.
Previously worked as an accountant for a publicly traded company, analyzing
financial statements and assessing credit risk.
Internal auditor with the OCA Internal Audit Services unit for eight years, and has been an in-charge auditor, auditing Town and Village Courts for the past six years.
Certified Internal Auditor and Certified Fraud Examiner.
JOAN CASAZZA
Bachelor’s degree in accounting, Master’s Degree in Public Administration.
Previously worked as an internal auditor for three years with the NYS Police
and has been with the OCA Internal Audit Services unit for the past six years.
Experience auditing Town and Village Courts and is currently serving as an
Internal Control Liason.
Certified Internal Auditor, Certified Government Auditing Professional and holds certifications in Risk Management Assurance and Control Self-Assessment.
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HON. DAVID S. GIDEON
Hon. David S. Gideon currently presides as Town Justice in the Town of DeWitt, New York; a suburb of Syracuse. Judge Gideon formerly presided as an Acting City Court Judge in the Syracuse City Court. Judge Gideon graduated from Syracuse University in 1979 with a Bachelor of Science Degree, with a dual major in Biology and Psychology; thereafter receiving his Juris Doctor Degree from Western New England College, School of Law in 1982 where he was a member of the Legal Fraternity of Phi Delta Phi. Judge Gideon is a lifelong resident of the DeWitt, New York community and currently is employed as the Principal Law Clerk to the Hon. James C. Tormey, Administrative Judge for the Fifth Judicial District. In particular, Judge Gideon is Special Counsel to the Town and Village Courts in the Fifth Judicial District, coordinating and implementing the Action Plan for the Justice Courts within the District. Judge Gideon was admitted to the New York State Bar and the United States District Court, Northern District of New York in 1984. Judge Gideon currently serves as a senior faculty member for the Office of Justice Court Support, Town and Village Court Education Program, having also appeared as a panel member in its statewide satellite broadcasts. Judge Gideon is also an instructor for the Onondaga County Bar Association Continuing Legal Education Program. Judge Gideon is a Past President of the Onondaga County Magistrates Association and currently serves as a Director of the New York State Magistrates Association.
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NYS Magistrates Association - Annual MeetingTown and Village Justice Court Training
Is Your Court at Risk? An Auditor’s Perspective on Basic, but Necessary Internal Controls and How to Review Your Monthly AC1030 Revenue Report
This one hour training will include an in-depth look at what Justices can expect when being auditedand internal controls that should be in place to limit the Court’s risk for loss or theft of Court funds.In addition, these controls, when implemented, will help establish and provide an environment foreffective internal controls where discrepancies and irregularities will be identified sooner andresolved timely.
I. Introduction
• Course Overview/How to Review Your Monthly AC1030 Revenue Report
II. What to Expect When Being Audited and How Implementing Procedures TodayWill Benefit Your Court Tomorrow and During an Audit
• What to expect when selected for an audit; Control Environment/Fiscal Responsibilities; Availability of Records; Interviews/Observations/Requests
III. Basic Internal Controls to Help Minimize Risk at Your Court
1. Separation of Duties 2. Receipt Process 3. Computer Controls & Security Over Data and Information Systems 4. Reconciliation Procedures 5. Recordkeeping Practices/Requirements
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MONTHLY REVIEW OF STATE REPORTCHECKLIST
_______________, ______Month Year
Reviewed by: ____________________
___Step 1 Review/Approve Misc. Civil Payments.
___Step 2 Verify Amounts transferred to AC-1030.
___Step 3 Review/Approve Parking Payments.
___Step 4 Verify Amounts transferred to AC-1030.
___Step 5 Review/Approve AC-1030.___< Check all pages sequenced.___< Verify all information included - case numbers, etc.___< Verify correct dispositions, fines and surcharges; reductions.___< Note any/all resolutions for discrepancies on printed AC-1030.___< Note reasons for dismissals on printed AC-1030.___< Verify copy numbers and transfer to AC-1030.
___Step 6 Review/Approve Bank Deposit Slips.___< Check all pages sequenced.___< Cross-check names on deposits to AC-1030.___< Note Deposit Total amount.
___Step 7 Review/Approve Cashbook Report by Receipt Number.___< Check all pages sequenced.___< Cross-check names on Cashbook Report to AC-1030.___< Verify beginning receipt number picks up from prior month last receipt number.___< Sequence receipt numbers.
___< Review/Visually confirm missing receipt numbers/voids.___< Confirm voids properly annotated (reason, signature, date) and attached to receipt
book copy by staple.___< Note verification on printed Cashbook Report copy.
___< Add total fines, civ-fee, schg, bail, other; should equal Total received amount.___< Cross-reference Total received amount to Deposit Total amount in Step 6 above.
___Step 8 Review/Approve Cashbook Report by Date.___< Check all pages sequenced.___< Cross-check names on Cashbook Report to AC-1030.___< Verify beginning receipt number and check number; picks up from prior month last
receipt number and check.___< Sequence receipt numbers and check numbers.___< Review/visually confirm missing receipt numbers and check numbers/voids.___< Confirm all voids properly annotated (reason, signature, date) and attached to receipt
book copy/check study copy by staple.
Page 1 of 2
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___< Note verification on printed Cashbook Report copy.___< Note check number and amount to be sent to Town Comptroller/CFO on Cashbook
Report final page.___< Add total fines, civ-fee, schg, bail, other; should equal “Total of all accounts this period
including checks.”___< Verify math - “Total deposits this period,”less “Total checks this period” equals “Total of
all accounts this period including checks.”___< “Total deposits this period” should match Deposit Total amount in Step 6 above.___< Add “Bail applied this period” with “Reportable money received this period;” Total
should equal amount being tendered to Comptroller/CFO from last page on AC-1030.
___Step 9 Review/Approve Bail Activity Report.___< Total all checks; note amount on printed Bail Activity Report.___< Total Applied Bail; note amount on printed Bail Activity Report.___< Total Bail Poundage, Forfeitures, etc.; note amounts on printed Bail Activity Report.___< Total of above categories must equal “Bail withdrawal this period.”___< Total checks must equal “Total checks this period” in Step 8 above.___< Total Added Bail, which must equal “Bail deposits this period.”___< Verify/check math to arrive at “Bail account balance end of period.”___< As a double-check,
Deposit Total amount in Step 6 aboveminus “Bail Deposits this period”plus [“Bail withdrawal this period” minus “Total checks this period.”]equals amount being tendered to Comptroller/CFO from last page on AC-1030.
___< Review bail being held for errors, exoneration or transmittal as unclaimed funds toComptroller/CFO.___< Total Bail Held should equal “Bail account balance end of period.”
___Step 10 Cross-reference Cashbook Report by Receipt Number and by Date totals regarding bail totals vs.“Bail withdrawal this period” amounts in Step 9 above.___< Total of [Cashbook Report by Receipt (fines, civ-fee, schg and other)] plus [“Bail
withdrawal this period” amounts in Step 9 above minus checks] should equal [CashbookReport by Date (fines, civ-fee, schg and other)], which also equals amount tendered toComptroller/CFO from last page on AC-1030.
___Step 11 Review/Approve DWI/AUO Entry Report and DWI/AUO Disposition Reports
___Step 12 Reconcile Bank Statement - Review/Approve.___< Reconciled Bank Balance must equal “Bail account balance end of period” in Step 9
above or you have missing money.
April 2013
Page 2 of 2
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146 – Justice Court Handbook
Appendix 9 – Monthly Checklist for Review of Justice Court Records
Name of Municipality:
Period Reviewed: Through
Name of Justice:
Review Performed By: Date
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Appendices – 147
Monthly Checklist for Review of Justice Court Records
Month of ______________
Cash Book Reconciliation (Accountability) at End of Month
The amounts on deposit in the court bank accounts (adjusted bank balance) are the following:
Bank Balance – End of Month
Add: Cash on Hand- deposited 1st day of Next Month (deposit in transit)
Deduct: Outstanding Checks – Month End
Adjusted Bank Balance – Month End ***
Cash Book Balance at Month End is determined as follows:
Amount Due to the State Comptroller (or CFO)
Bail
Other - Identify
Total Cash Book Balance- Month End ***
*** Adjusted Bank Balance should agree with total Cash Book Balance at month end.
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148 – Justice Court Handbook
Monthly Checklist for Review of Justice Court Records
Yes No Cash Book Summary
► Does the Amount Due to the State Comptroller (or to the Chief Fiscal Offi cer) agree with the Monthly Report to be submitted?
○ ○
► Does the amount shown as bail agree with the list of bail held for pending cases? ○ ○► Does the amount shown for other categories agree with the supporting information? ○ ○
Issuance of Receipts
What was the beginning receipt number for this month?What was the ending receipt number for the previous month?
Receipts should be issued in numerical sequence. The ending receipt number from the previ-ous month should be one number lower than the beginning receipt number for this month. For example, if the ending receipt number for the previous month is 256 then the beginning receipt number for this month should be 257. If they are out of sequence, please explain.
► Were receipts issued in numercial sequence during the month? ○ ○
Bank Deposits
Review the bank statements, canceled checks and deposit slips for month and compare with accounting records.
► Do deposits agree with cash collections shown in the accounting records? ○ ○► Are deposits made within 72 hours of collection (exclusive of Sundays and holidays)? ○ ○
Disbursements
► Does the check to the State Comptroller (or to the Chief Fiscal Offi cer) agree with the Monthly Report?
○ ○
► If invoice billing is used, do checks agree with the supporting information? ○ ○► Do bail return checks agree with supporting case information? ○ ○
Overall Evaluation
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<Date> Hon. <Town/Village Supervisor/Mayor> <Address> <Address> <Zip> Re: Request for Annual Audit and Review. Dear <Supervisor/Mayor>: Pursuant to UJCA 2019-a; a copy of which is enclosed herewith for your reference, the records and dockets of the <Town of/Village of _______> Court are now available for examination and review by the auditing board of the <Town/Village>.
Kindly contact the court clerks to schedule an appropriate time for review.
Additionally, upon acceptance of the final audit report by the Town Board, kindly provide our office with a copy of the same for our records, along with a certified copy of the Town Board resolution accepting the same and a copy of the blanket undertaking bond policy and declaration page covering the judges and court clerks.
Very truly yours, Hon. <______> Hon. <_______>
<initials>/<typist intials> cc: <cc: to each Board Member and Town/Village Comptroller/Chief Fiscal Officer>
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Presenters:Matthew Post, CIA, CFE Senior Internal Auditor – UCS Internal Audit Services
Joan Casazza, CIA, CGAP, CRMA, CCSAInternal Control Liaison – UCS Internal Audit Services
New York State Unified Court System
New Justice TrainingSeptember 29, 2015
basic, but necessary internal controls
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Today’s Agenda:
1. Control Environment
2. Recordkeeping Practices
3. Separation of Duties
4. Receipt Process
5. Reconciliation Procedures
6. Computer Controls and Data Security
7. UJCA '2019-a
8. Reviewing Your AC1030 Report
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Fiscal Responsibilities
•You are subject to the Fiscal Responsibility Guidelines established by the Office of the State Comptroller. ▫ See the Justice Court Handbook
▫ http://www.osc.state.ny.us/localgov/pubs/jch.pdf
Control Environment• Refers to the “Tone at the Top”
• Encompasses Awareness, Integrity and Ethical Values, Assignment of Authority and Responsibility
• Justices are responsible for implementing and maintaining the internal control system
• Ability to identify and willingness to correct internal control weaknesses
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Control Environment
• The foundation of operational efficiency
• Internal control structure determines your Court’s ability to detect or prevent errors and irregularities
• A strong control environment lowers the risk for funds to be misappropriated (i.e. lost or stolen)
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Next Topic
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Recordkeeping PracticesGeneral Recordkeeping Requirements for Town and Village Justice Courts are found in the Handbook, Appendix 8
• Discusses the minimum requirements (e.g. maintaining case files, cash books, receipts)
• Discussed in more detail, tomorrow with OSC
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Recordkeeping PracticesData Integrity: • Verifying information from source documents (e.g.
tickets, receipts and case files) has been entered accurately and completely into the cashbook.
• Any discrepancies should be investigated as they could indicate moneys could have been collected and not receipted and/or recorded.
• For example, manual receipt 5001 was issued for $250 for John Doe on 2/15/14. Did you verify this payment and the disposition was accurately recorded?
• This process is part of your monthly reconciliation requirements. (i.e. reconciling case files to the case management system)
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Recordkeeping PracticesData Integrity continued: • Original data should not be altered or deleted
once it has been posted. (Handbook p.25)
• If absolutely necessary to change the data, it should be made by someone other than the person who originally entered the data and the type of change should be logged with the date and person who approved the change.(Handbook p.25)
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Next Topic
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1111
Separation of Duties
An effective system of internal control provides that no one person should be responsible for the handling of a transaction from beginning to end.
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Separation of Duties
Many courts have one Justice with either no clerk, a part time clerk, or one full time clerk.
• Separate the duties to the extent possible. You may need to coordinate with the District Office.
• The court clerk should not be responsible for all functions with little or no oversight by the Justice.
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Separation of Duties
To the extent possible, the following duties should be separated between court staff:
• Collect (e.g. receipting of fines, surcharges, bail)
• Initiating and Review of Voids/Adjustments• Deposit• Recording Payments in Accounting Records• Disbursements (e.g. return of bail, monthly revenue, overpayments)
• Recording in Case Management System• Bank Account Reconciliation
Separation of Duties
Please refer to Separation of Duties Handout:
• Example of Two Person Court
• Example of Three Person Court
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Separation of Duties
Inadequate separation of duties greatlyincreases the risk of:
• Loss or Theft of Court funds
• Undetected Errors and/or Irregularities
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Next Topic
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Receipt Process• Justices are required to issue acceptable
receipt forms to acknowledge collection of all moneys paid to the court. (Handbook p74)
Receipt Requirements
Overpayments, Underpayments, Bail
• Press-Numbered Receipts (At Least Duplicate)
• Computer Generated Receipts (Software Limitations)
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Receipt Process
•Common Weaknesses:▫ Courts do not always issue acceptable
receipts
▫ Receipts are not inventoried1. What is the population of the receipts available?
2. Are your receipts issued in consecutive numeric sequences?
3. Have you accounted for all of your receipts and reconciled them to your cashbook?
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Receipt Process
•Control Weaknesses cont’d.▫ Not all monies collected are
receipted1. Overpayments, partial payments
▫ Voided and adjusted receipts
▫ Promptly endorsing, recording and depositing payments
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2020
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2121
2222
Receipt Process
Voids vs. Adjustments▫ Once a receipt has been issued
to the defendant, it can no longer be voided and an adjusting entry is required.
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Receipt ProcessAdjusting Entries:
▫ The court realizes a mistake was made on an electronic receipt after it was saved in the system.
DO NOT DELETE THE RECORD
Make an adjusting entry!!
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Receipt ProcessAdjusting Electronic Receipts:
1. Make an adjusting second entry (negative amounts) to reverse the original incorrect receipt.
2. Make a third entry to record the receipt correctly.
3. Document in the case file and/or case management system what transpired.
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Receipt ProcessVoiding Manual Receipts:
▫ A defendant pays $50 cash and the clerk issues a manual receipt and incorrectly records the amount as $150.
▫ If the Clerk notices the mistake before the receipt is handed to the person….
▫ The receipt should be VOIDED.
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Receipt ProcessVoiding Manual Receipts:
1. Write the word “VOID” across the face of the receipt.
2. Keep both copies of the receipt (the individual’s and the court’s).
3. Create a new receipt with the correct information.
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Receipt ProcessVoiding Manual Receipts Cont’d:
4. Provide the individual with a new, correct receipt.
5. Record what transpired in the case file and/or management system.
6. Cross reference the two receipts above.
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Receipt ProcessAdjusting Manual Receipts:
▫ A defendant pays $50 and the clerk issues a manual receipt, incorrectly recording the amount as $150.
▫ The clerk notices the mistake after the receipt is handed to the person and the person leaves the court.
▫ An ADJUSTING ENTRY should be made.
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Receipt ProcessAdjusting Manual Receipts:
1. Document what transpired on the court’s copy of the receipt that was incorrectly issued.
2. Create a new receipt with the correct amount referencing the original receipt to the correcting receipt number.
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Receipt ProcessAdjusting Manual Receipts:
3. Maintain both copies of the correct receipt.
4. Document in the case file and/or case management system what transpired.
5. Adjust the cashbook as necessary.
6. Issue a fine letter to the defendant, describe what happened.
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Receipt Process• Voided and Adjusted Receipts:
Support and Review▫ Voided receipt forms should identify the name
of the person who processed and approved the void and the reason for the void should be documented.
▫ Adjusting entries should identify the same information in the case management system.
▫ Both should be reviewed periodically.
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Next Topic!
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3333
Accountability and Reconciliation
• Courts should:
1. Compare cash book balances to adjusted bank balances at least monthly. (Handbook p79)
2. Compare cash on hand to liabilities (i.e., outstanding bail and unremitted fines/surcharges/civil fees).
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EXAMPLE #1 – Comparing Cashbook to Adjusted Bank Balance
Cashbook Balance:
Adjusted Bank Balance:
March 2013 Revenues: 135,000
Ending Bank Balance as of 3/31/13: 185,250
Open Bail as of 3/31/13: 50,000 Add:
Total Cashbook Balance: 185,000
Deposit in Transit 4/02/13 250
Deduct:
Outstanding Checks 500
Adjusted Bank Balance: 185,000
Accountability and Reconciliation
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EXAMPLE #2 - Performing the Reconciliation
Ending Bank Balance as of 3/31/13: 185,250
Add:
Deposit in Transit 4/02/13 250
Deduct:
March 2013 Revenues 135,000
Open Bail as of 3/31/13: 50,000
Outstanding Checks 500
Reconciled Balance: 0
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Accountability and Reconciliation
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Accountability and Reconciliation
• Common Things We See:
▫ Courts do not verify that cashbook balances are accurate and complete.
▫ Reconciliations are not adequate or complete.
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Accountability and Reconciliation
• Common Things We See:
▫ Bank service fees are incurred and never resolved.
▫ Court funds inherited from previous Justices are not reconciled or processed in accordance with the Handbook.
▫ It’s easier to find a $50 error in the month you are reconciling, rather than reviewing several months or years worth of transactions.
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Accountability and Reconciliation• Reconcile Monthly:
▫ Cash could be misappropriated (stolen or lost) without detection!
▫ Errors and Irregularities will not be identified and resolved in a timely manner.
▫ Separation of cash related duties!
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Next Topic
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Computer Access ControlsWHY do you need them?
• Cash collection and recordkeeping often occur at the same time.
• Restricting access to the electronic records becomes important for transparency and accountability over transactions.
• Access to confidential information.
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Computer Access Controls
• Formal procedures for granting and reviewing access to Court data.
• Restrict access by using unique, user-specific passwords and/or IDs.(Handbook p.24)
• Password strength needs to be emphasized and should be complex in nature.(Handbook p.24)
• Access permissions should match job duties.(Handbook p.24)
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Computer Access ControlsServer Access:
• Justices should consult with appropriate personnel (e.g. IT Administrator) to ensure folders/files shared on a network are secured and accessible to only authorized personnel.
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Computer Access ControlsEffects of inadequate access controls:
• Court personnel are sharing passwords or User IDs (lack of accountability)
• Not revoking access to users who have separated from service.
• Court personnel have access rights to functions they are not supposed to (e.g. access to delete receipts/cases).
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Computer Access ControlsMore effects of inadequate access controls:
• Not knowing who has access; are unauthorized personnel viewing/distributing confidential and sensitive information without your knowledge?
• Groups/Users with access to Court folders/files should be periodically reviewed.
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Data Security• All electronic data should be backed up
periodically.(Handbook p.25)
• Software patches should be installed timely.
• Software patches help address vulnerabilities (e.g. without patching, malicious individuals could modify or delete sensitive information or infect the computer with a virus which could go undetected).
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Access to Court Records
Privileged, confidential and sensitive Court information (DOB, SS#, sealed cases) should be limited to authorized Court personnel.
• Paper case files, accounting files, and data back-ups should be stored in a secure location, accessible to only authorized personnel.
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Next Topic
UJCA ' 2019-a Compliance Uniform Justice Court Act – § 2019-a – Justices’ criminal records and docket (Handbook p.108)• It shall be the duty of every such justice, at least once a
year and upon the last audit day of such village or town, to present his records and docket to the auditing board of said village or town or cause same to be examined and a report thereon submitted to the board by a certified public accountant, or a public accountant and enter in the minutes of its proceedings the fact that they have been duly examined, and that the fines therein collected have been turned over to the proper officials of the village or town as required by law.
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UJCA ' 2019-a Compliance cont’d
• Board members are supplied with instructions and a checklist that provides them with the general tools to properly perform the annual audit and provide reasonable assurance that work performed by those individuals who handle moneys as part of their duties are properly monitored and reviewed (see Appendices 8 and 10, Handbook)
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UJCA ' 2019-a Compliance cont’d• Each year, to ensure that the annual audits are
being performed and no major issues are found, the Chief Administrative Judge of the Office of Court Administration (OCA) requests that mayors and supervisors submit copies of these annual audits. OCA’s Office of Internal Affairs reviews these audits for recurring findings and other matters that might identify problems requiring further audit or remedial actions. Results of these reviews are integrated into their risk assessment process. (Internal Audit)
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UJCA ' 2019-a Compliance cont’d
• In addition, OCA provides a list of towns and villages that have not complied with §2019-a of the Uniform Justice Court Act to the Office of the State Comptroller and these lists become part of the Comptroller’s audit risk assessment process. (External Audit)
• Last four years (2010–2014): Range from 25 to 39 percent non-compliance with our request.
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Final Topic!Last but not least…
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Reviewing Your AC1030 Report
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• Refer to Handout:
▫ “Monthly Review of State Report Checklist”
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Thank you!Questions?
For future fiscal related questions, please email:
[email protected] (OSC Local Office Training Unit)
Matthew PostUCS Internal Audit Services
(518) 238 – 4303
For more information, contact the City, Town, and Village Courts Resource Center
at1-800-232-0630 or
[email protected] visit:
www.nycourts.gov/justicecourts
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