1 Public Administrator/ Guardian/Conservator’s Office (PAGC) Internal Controls Audit Public Administrator/ Guardian/Conservator’s Office (PAGC) Internal Controls Audit January 27,

2 Overview Background Background Lessons Learned (or take aways) Lessons Learned (or take aways) Findings and Recommendations (by categories) Findings and Recommendations (by categories) Corrective Actions Corrective Actions

3 Background Definition of PAGC Definition of PAGC –Administration is no apparent heirs –Guardian takes care of the person. –Custodian takes care of the assets. Purpose: Purpose: –Determine whether adequate controls exist over financial operations and compliance with applicable laws and regulations. Conclusion: Conclusion: –There were a total of 27 findings covering financial accountability, fees, client assets held in trust, inefficient processes, management of client estate, computer systems, and policies and procedures. –There were many internal control issues that accumulated as results of practices that evolved over the years, prior to the current management.

4 Background (Continued) PAGC agreed to all the facts of the findings contained in the report. PAGC agreed to all the facts of the findings contained in the report. All indications were that clients were receiving the properly care. All indications were that clients were receiving the properly care. This was a complex audit with many challenges: This was a complex audit with many challenges: –PAG implemented a new case management system during the audit. –Changes in management (PAGC Director and DAAS Director).

5 Lessons Learned (or take aways) Reconciliations (Other restricted assets, residual interest) : Reconciliations (Other restricted assets, residual interest) : –Do timely. –Correct reconciling items in one cycle. –Fix process when know it does not work. –Have an escalation policy. –Include reconciling to the general ledger. Timely recording (residual interest) : Timely recording (residual interest) : –Gives management real time information. Management can not manage well with inconsistent, incomplete or untimely data. Management can not manage well with inconsistent, incomplete or untimely data. –Have an escalation policy. Schedules not met. Schedules not met. Procedures not followed. Procedures not followed. Policies not followed. Policies not followed. Regulations not followed. Regulations not followed. Possible impacts. Possible impacts.

6 Lessons Learned (or take aways) Use of technology (computrust did not have electronic files nor pass to SAP) Use of technology (computrust did not have electronic files nor pass to SAP) –limit printed reports. –do pdf if only need to see information. –pass data to different systems. –Constantly improve. Record all transactions at source document level (cash receipts posted to holding account) : Record all transactions at source document level (cash receipts posted to holding account) : –Best Practices. –Eliminates correction journals. –Gives management real time information. –Hard edits give management a “known accuracy baseline”. –Soft edits give management a “known range baseline”.

7 Findings and Recommendations Financial Accountability-Needs Improvement Financial Accountability-Needs Improvement –Controls over protection of client assets: Client assets of $72.5M recorded in financial statement could not be fully verified. (#1) Client assets of $72.5M recorded in financial statement could not be fully verified. (#1) –Items no longer held by PAGC still had balance –Duplicate entries –Items under PAGC’s responsibility are not included –Client assets are not recorded at current fair market value PAGC adjusted balance to $29.4M.

8 Findings and Recommendations (Continued) Financial Accountability-(Cont.) Financial Accountability-(Cont.) –Controls over protection of client assets (Cont.): No financial expertise sought to manage client financial securities (estimated $6.8M). (#12) No financial expertise sought to manage client financial securities (estimated $6.8M). (#12) We were unable to determine whether the 2009 periodic physical inventory of client assets had taken place at the warehouse. (#22) We were unable to determine whether the 2009 periodic physical inventory of client assets had taken place at the warehouse. (#22) Fiscal oversight of financial operations by PAGC and SSA is lacking. (#4) Fiscal oversight of financial operations by PAGC and SSA is lacking. (#4)

9 Findings and Recommendations (Continued) Financial Accountability-(Cont.) Financial Accountability-(Cont.) –Controls over protection of client assets (Cont.): Lack of timely transfer from trust fund to General Fund for quarterly residual interest payments ($450K). (#2). This has been fixed. Lack of timely transfer from trust fund to General Fund for quarterly residual interest payments ($450K). (#2). This has been fixed. Money in temporary holding accounts of approximately $252K were not recorded in the client’s account or returned to sender on a timely basis. (#10) Money in temporary holding accounts of approximately $252K were not recorded in the client’s account or returned to sender on a timely basis. (#10) Review of cash and check deposits not performed in a manner that would detect misappropriation of client funds. (#14) Review of cash and check deposits not performed in a manner that would detect misappropriation of client funds. (#14) –Controls over vendor master data: Anyone could set up a vendor in the system. (#26). This has been fixed. Anyone could set up a vendor in the system. (#26). This has been fixed.

10 Findings and Recommendations (Continued) Fees: Fees: –Certain fees are not submitted to the Board for review and acceptance (fees are approved by the court as specified by Probate Code). (#6) –Full cost recovery method not employed. (#6) –$4.5M in deferred and unpaid fees not communicated to SSA management and the Board. (#9) –PAGC’s policy of implementing new fees resulted in $180K of monthly fees not charged. (#11) –No annual review for determination of fee increase. (#17) –No written policy on fee waivers (for representative payee fees). (#20)

11 Findings and Recommendations (Continued) Client assets held in trust: Client assets held in trust: –No tracking and monitoring of Inventory and Appraisal reports (38%) that are not submitted to court by the due date specified in Probate Code. (#3) –No escalation procedures for real property sales that take longer than one year. (#16)

12 Findings and Recommendations (Continued) Inefficient processes: Inefficient processes: –Inefficient process of monitoring the payment of client’s bill. (#5) –Recurring checks received in the mail not set up as ACH deposits. (#13) –Inefficient process of computing bond fee. (#18)

13 Findings and Recommendations (Continued) Management of client estate: Management of client estate: –Final accountings required for the final distribution of client estates are not done timely. (#15) –Improvements are needed over timeliness of closing terminated and decedent accounts. (#21) –Improved communications are needed to ensure that PAGC is aware of all General Assistance loans to conservatees. (#24). This has been fixed.

14 Findings and Recommendations (Continued) Computer Systems: Computer Systems: –Data integrity verification is needed to ensure the accuracy and completeness of data converted to the new case management system (Panoramic). (#7) –Although PAGC is aware of the benefits of interfacing Panoramic with SAP, other priorities have prevented PAGC from pursuing the interface during implementation. (38)

15 Findings and Recommendations (Continued) Policies and Procedures: Policies and Procedures: –Written policies and procedures for approving bond fee payments should be followed. (#19) –PAGC needs to complete its review and update of written policies and procedures. (#23) –SSA is not recording low value assets in SAP as required by County policy. (#25) Other Findings-there are various findings we considered less significant. (#27) Other Findings-there are various findings we considered less significant. (#27)

16 Corrective Actions PAGC has either taken corrective actions or have committed to take corrective actions to fix all the findings. PAGC has either taken corrective actions or have committed to take corrective actions to fix all the findings. SSA Financial Management Services has begun conducting a comprehensive review of PAGC financial operations. SSA Financial Management Services has begun conducting a comprehensive review of PAGC financial operations. SSA did not include completion dates in their response to the audit report as the agency felt that, due to the magnitude of the findings, their comprehensive review of PAG financial operations needs to be completed first before dates can be determined. SSA did not include completion dates in their response to the audit report as the agency felt that, due to the magnitude of the findings, their comprehensive review of PAG financial operations needs to be completed first before dates can be determined. SSA will provide FGOC, through the Controller’s Office, with an implementation plan in six months. SSA will provide FGOC, through the Controller’s Office, with an implementation plan in six months.