OFFICE OF THE CITY AUDITOR

CITY HALL

375 Merrimack Street

Lowell, Massachusetts 01852-5998

To:                   Councilor Kevin Broderick

From:               Sheryl L. Wright, City Auditor

Date:                January 31, 2008

Re:                   Accomplishments Update

As per our conversation, I would like to discuss with you the progress I have made since my appointment in January.   

The following are points are for our discussion:

ACCOUNTING ISSUES:

• ACCOUNT CLASSIFICATION – I have met with both our External Auditors and the Department of Revenue to reclassify, close, or move many funds.  I have closed over 40 Agency accounts and moved them into the appropriate categories.

• ACCOUNT RECONCILIATION – I have done research and reviewed with Departments the many accounts that have been in the negative for 5 or more years.  It had been the practice to (incorrectly) transfer balances from accounts with surplus to those accounts overdrawn at year-end and then to reverse these entries once the Audit had been complete.  I have done the analysis and made the correct adjustments where I can, and once all accounts have been researched, I will be coming to Council for other transfers.  

• CASH RECONCILIATION – While we are reconciling daily activity, our outside consultant has been working on reconciling the bank statements back to the last time we think cash was actually reconciled (February 2005). He has been working on procedures for the Treasurer’s office to follow in the future.  The cashbook has been reconciled to bank statements and General Ledger through June 30, 2007. We are now awaiting the Consultants final report. 

• JOURNAL ENTRIES – I keep a 3 ring binder with the back-up to all journal entries I make.  I have yet to find back-up for any adjustments made prior to my arrival.

• SALE OF PROPERTY – As you have seen, the proceeds for all properties sold are being put into the “Sale of Property Receipts Reserved for Appropriation” account and will come before Council for transfers.

• LONG TERM DEBT – All long term debt has been booked on the system to the appropriate fund for FY2007.

• SCHOOL AUDITS – The 4 outstanding School Construction Audits have been completed.

PAYROLL ISSUES:

• IRS/SOCIAL SECURITY PROBLEMS - I have met with Joseph Ponte, our IRS agent to re-send the FY2003 W-2 file that was sent in the incorrect format to the IRS and Social Security.  We have had several meetings and have clarified and corrected ongoing reporting issues and have mitigated fines that were assessed on the City with both of these agencies.

• SCHOOL HOLDBACK ELIMINATED – The school summer pay was calculated by paying each teacher the 42 week pay amount and taking out (as a deduction) the equivalent of what they would be paid during the summer.  This has caused their State Tax, Federal Tax and Mass State Teachers calculations to be incorrect.  I met with the School Administration and Union and agreed to change this process.  We have re-set all the teachers payroll tables and are now paying them for either 42 or 52 weeks. This simple change in procedure has corrected all the miscalculations.

• ACCRUALS – We are in the process of training for the implementation of vacation and sick time accruals on the payroll system – implementation in July of 2008. 

VENDOR PAYMENT ISSUES:

• VENDOR CHECKS - We are now running vendor checks weekly and therefore have almost eliminated manual checks.  We now book wire transfers directly instead of cutting checks and then voiding them when we wire the money.  This has saved both time and money. 

• VOIDED CHECKS Vendor checks are now being voided and re-issued on the system and therefore we have a record of all voided checks.  This will help with the on-going outstanding check issues the Treasurers office has.

BUDGET AND PURCHASING ISSUES:

• BUDGETS - Both the 2007 and 2008 budgets have been balanced and revenues and expenses have been put on the system.

• CONTRACTS – I now sign all contracts and actually put the account number to be charged on all documents.

• PURCHASE ORDERS – The accounting system has been reset for all appropriated funds and Purchase Orders are rolled on the system.   The past practice was to liquidate all Purchase Orders and then take any balances and put them into the Agency fund for expenditure without authorization.  At year end I distributed a memo describing the End of Year process.

• RE-ENGINEERING PROCUREMENT – As the Department of Revenue has recommended, the Purchasing agent, the CFO, the City Solicitor, and I have been working to streamline and update our procurement and payment processes.  We have been meeting monthly and are to the point of finalizing our proposals and submitting them to the City Manager.

REPORTING COMPLETED:

• FY 2007 AUDIT – completed on schedule for recap

• FY 2007 SCHEDULE A – completed on schedule

• 2008 Recap – completed and accelerated using an improved team approach process

• School End of Year Report – Agreements signed – NSS met in 2009

• Free Cash sent in and awaiting DOR approvals

ONGOING PROJECTS:

• FORMALIZE ALL PROCEDURES AND STREAMLINE CASH RECONCILIATION

• DECENTRALIZE CASH RECEIPT ENTRY 

• ONGOING STAFF AND DEPARTMENTAL TRAINING