BOARD OF COUNTY COMMISSIONERS
SOLID WASTE OPERATIONS
REPORT NO. 2000-05
DATED: JUNE 1, 2000
The Board of County Commissioners
The Clerk of the Circuit Court
Pinellas County, Florida
The Internal Audit Division has completed an audit of Scalehouse Operations for the Solid Waste Operations, Utilities Department.
The purpose of this audit was to: 1) evaluate compliance with applicable laws and local regulations; 2) determine the completeness and effectiveness of internal controls over scalehouse operations; 3) evaluate the software used for the scalehouse to include application security, input controls, and accuracy of output; and 4) review access rights and security settings for the Local Area Network (LAN).
The scope of the audit included testing compliance to applicable laws and/or local regulations. We interviewed personnel, evaluated internal controls, and reviewed documentation that supported selected items such as cash receipts, escrow accounts, and accounts receivable. We reviewed system input and verified the accuracy of output generated by scalehouse software. Settings for the LAN were reviewed to determine compliance with MIS and Best Practice standards. The audit period was from July 1, 1999, through December 31, 1999. We performed other audit procedures we considered necessary in the circumstances.
Solid Waste is a self-funded enterprise fund within Pinellas County Government that derives its revenue from fees paid by refuse haulers, the sale of electricity, and the sale of recovered metals. The objective of the facility is to provide the citizens of Pinellas County with a versatile and effective system of refuse disposal. The Solid Waste Management Program includes incineration, resource recovery, landfilling, recycling, and artificial reef construction.
The Scalehouse is operated by the Solid Waste Customer Service Department. It consists of four scales, three inbound and one outbound, that are designed to monitor and control access to the plant, landfill and mini-refuse stations. A computerized weighing system records the weight, type of waste, waste destination, and billing information. The disposal, or tipping, fee is $37.50 a ton. When the vehicles enter the facility they drive onto the scale to tabulate the weight of the vehicle before unloading. They are weighed again before exiting if their empty weight is not already recorded in the data management system. Once weighed, the vehicles may be routed to the facility's "tipping floor", where loads are emptied. Depending on the type of refuse, the vehicle may be routed to the landfill or recycling area. The facility also provides private citizens with a separate all-weather covered and paved area to unload their refuse for a small fee.
The results of our review are shown below. They begin with an overall evaluation followed by detailed discussions of the findings and recommendations with management's response.
The internal controls in place for scalehouse operations are effective. The Scale Management System (SMS) software program that was installed in December, 1998, is currently meeting the users' needs. Access rights and security settings for the Local Area Network (LAN) were found to be in compliance with MIS and Best Practice standards. Applicable laws are being complied with; however, there is one issue requiring management's attention that relates to a fee no longer being assessed which is still a requirement of the Pinellas County Code. The following items need management's attention.
FINDINGS, RECOMMENDATIONS, AND RESPONSES
FINDING 1 - Two SMS application reports contained conflicting information.
The SMS "Customer Status of Deposit Account" (CSDA) report did not reflect the correct individual escrow information and the data differed from the "Customer Deposit" (CD) report. The following issues were noted:
A. Seven customers were not listed on the CSDA report, but the CD report and supporting documentation show that a bond deposit had been received by Solid Waste. Utilities MIS group investigated the problem and found that the "Credit Status" field for all the missing customers was incorrectly set at "Open", causing the bond information not to appear on the CSDA report.
B. The CSDA report listed nine customers with "zero" deposit amount, but the accounts have a bond deposit with Solid Waste. Utilities MIS requested that the vendor review the problem. The results of the investigation found that the CSDA report obtains the bond information from the Customer Table and the CD report from the Deposit Table. Both tables are updated by the applications Customer File Maintenance Screen with the add/delete deposit function. For some reason the tables were out of synchronization.
The CSDA report is used to compare the individual customer bond deposit amount to the current outstanding balance and document that no credit has been granted. The application control that automatically freezes an account if the current outstanding balance exceeds the bond deposit amount uses the Deposit Table data that is correct. The functioning of the application internal control routine to prevent credit extension has not been affected by the CSDA report problem.
A. The seven customers' "Credit Status" fields should be properly updated.
B. The Customer Table field should be refreshed with the correct data from the Deposit Table. In addition, Utilities MIS should consider having the vendor correct the application logic to prevent the two tables having a field not in agreement, or reduce the risk of a future problem by discontinuing the use of one of the data table fields.
A. The "Credit Status" fields for the seven customers identified were updated by file maintenance by Utilities Information Services (UIS) personnel. There is no synchronization between the two fields and staff does not have the ability to modify the deposit field that is captured on the "Customer Status of Deposit Accounts" report. This problem appears to occur for accounts that have a "Hold" status put on the account when their charges exceed the deposit amount.
B. A process needs to be established by UIS personnel to refresh the fields; however, this will not solve the problem because the logic of the application will continue to cause this discrepancy to occur. We concur that UIS needs to work with the vendor to resolve the program logic that creates the discrepancy.
FINDING 2 - Solid Waste customer escrow information was not current and the escrow record keeping process did not utilize the automated application capabilities.
The customer escrow information maintained on the Scale Management System (SMS) application should reflect the current status of the cash deposit or the instrument used to guarantee the outstanding monthly charges. In addition, management should utilize the automated tools available to reduce the use of less effective manual processes. Our review of the record keeping process for the customer's escrow accounts noted the following items requiring management attention:
A. The escrow account information on the SMS application lists two accounts having cash escrow balances, but the funds have been returned to the customer.
B. A manual ledger listing cash escrow accounts is currently being maintained for tracking customer escrow deposits. The SMS application retains the same information that can be obtained by requesting the "Customer Deposit Report". Since the SMS application information is used to prevent customer receivable balances from exceeding the escrow amount, the manual ledger record does not represent an internal control function and is no longer required for record keeping.
C. Four manual listings are maintained for noncash escrow (Letters of Credit, Surety Bonds, Private Bank Escrow, and Purchase Escrow). Notations are made on the hard-copy listings for changes in escrow status, with the list being formally updated yearly. The SMS application maintains all noncash escrow information under one type "Bond Deposit" by customer and the information includes the escrow amount. Other key information, such as maturity or commitment date, type, and issuer of instrument, is present only on the manual records. In addition, the current noncash manual records did not reflect all the transactions processed through the SMS application (since 10/1/99). For better synchronization between the manual records and the SMS application, management should use one combined PC spreadsheet and update both the spreadsheet and application records at the same time.
A. The SMS records should be updated to reflect the current status of the customers' escrow balance.
B. Management should discontinue the use of a manual log for cash escrow records. The SMS "Customer Deposit Report" should be periodically reconciled to the general ledger cash escrow balance.
C. Management should transfer the noncash manual information to a PC spreadsheet and change the procedure to update both the SMS application and spreadsheet at the same time and periodically confirm that both balances agree.
A. the OUT OF BALANCE SITUATION OCCURRED BECAUSE OF THE PROCESS that was followed. The accounting clerk would process a refund for deposit and wait until notified by finance the money had been refunded. The process was changed that at the time the refund request is submitted, the account will be changed to reflect the change to the escrow balance. This is verified at the time of approval of the change to the customer record.
B. The manual log for cash escrow has been discontinued and staff will now be reconciling the general ledger to the SWM2000 system on a monthly basis.
C. The procedure of a PC spreadsheet has been put in place to update the customer's Escrow information. Management is currently working with UIS to have the spreadsheet synchronized with the SWM2000 system.
FINDING 3 - SMS application output is not being utilized in the most cost-effective manner.
The gathering and processing of data from the SMS database should utilize the current application attributes to take advantage of available technology to produce the most efficient and accurate output. Our review of the utilization of the SMS output to produce the required information for reporting billing terms on the Plant and Landfill contracts found the following items:
A. Utilities Finance is not taking advantage of the technology available to produce the records to be used in the billing/reporting process for the Plant and Landfill contracts. The current process uses the daily "Destination and Material Tonnage Summary" (DMTS) hard-copy report and manually inputs the data into two spreadsheets (Plant and Landfill). SMS, being a database, offers the ability to download files to seed the billing/report instrument. In addition, the use of a spreadsheet as the capture and reporting document has many inherent control weaknesses (macro's can be altered, data can be inadvertently changed and spreadsheet structure incorrectly modified). It is ineffective to use manual daily input when the SMS application stores the daily information and retrieval could take place at month-end.
B. Utilities Finance performs a manual review of the DMTS report for possible incorrect combinations of Destination and Material (D&M) codes for the customers. The SMS application currently does not offer this type of edit check. A more efficient control is an automated process to flag possible D&M codes that when combined, might not be proper. This report can be run from the Utilities Finance database (SMS database that is downloaded weekly for Utilities Finance use) using the "Advance" database report capability and not requiring a change to the SMS application through the vendor.
RECOMMENDATION - Since Utilities Finance has already established the infrastructure for SMS data collection by the weekly download of the SMS database to the Finance server, management should consider developing a project plan to reduce the manual input and review the process for the Plant and Landfill contracts billing. Some of the alternatives that could be considered are:
Download file(s) to seed the spreadsheets.
Replace the spreadsheets with a database.
Create a set of exception reports through the Finance downloaded database for edit controls.
Download the data monthly with weekly exception reporting for review purposes.
RESPONSE - A project is under way. Two main spreadsheets are in the process of being converted. We will review the situation for a better solution. One of the functions which occurs during data entry is "corrections" which we need to address with an electronic upload.
FINDING 4 - Section 106-98, County Code is in conflict with federal law.
County Code Section 106-98, Fees, rates and charges, states, ". . .a surcharge shall be collected for all solid waste generated outside the territorial boundaries of the county that is received and disposed of by the system." The provisions of this ordinance became invalid in May, 1994, when the United States Supreme Court struck down "flow control" ordinances.
The collection of the $40 out-of-county surcharge was discontinued by management at Solid Waste on May 27, 1994. The last audit, performed in 1996, recommended that management consult with the County Attorney's office to determine the procedure required for repeal of the out-of-county surcharge. Management's response was that, "Customer Service will coordinate with Finance, Solid Waste Operations and the County Attorney's office to amend the County Code in this matter." However, a memo dated November 16, 1999, from the County Attorney's office stated, ". . . leave ordinance as is so that in the event "flow control" should become valid again, we would already have it on the books."
RECOMMENDATION - Section 106-98, County Code should be amended so as not to conflict with federal law.
RESPONSE - The County Attorney's Office and the Department of Solid Waste Operations are in the process of recommending certain changes to County Code 106. The change necessary to have the referenced Section 106-98 amended so as not to conflict with federal law will be made during the aforementioned code review.
Audit supervised by:
Ronald M. Peters, CIA, CISA
Audit performed by:
Karleen F. De Blaker
Clerk of the Circuit Court
Ex Officio County Auditor
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