Audit of Property Accountability

Transcription

1 Department of Management Services OFFICE OF INSPECTOR GENERAL Audit of Property Accountability EXECUTIVE SUMMARY At the request of the Director of Administration, the Office of Inspector General evaluated the effectiveness of the Department of Management Services (Department) property accountability function. The primary objective of the audit was to determine whether the Department properly accounts for and safeguards its tangible personal property. This report presents the results of our audit. RESULTS IN BRIEF Major improvements are needed in accounting for and controlling state-owned tangible personal property. During the audit we conducted an inventory which disclosed that 533 property items were missing or could not otherwise be accounted for by property custodians. At the same time, we also located 532 property items which were not listed on the Department s property records. This loss of accountability and breakdown in internal controls can be attributed to the fact that Division managers and designated property custodians are not complying with State laws and Department property accountability requirements. Our review showed that: Department managers are not properly delegating the control of property in their custody, Procedures for the transfer and surplus of property are not being followed, and Required annual property inventories for the Department are not being completed in a timely manner and discrepancies between inventories and the property records are not being investigated and reconciled. MAJOR RECOMMENDATIONS We recommend that (1) the Department conduct a full physical inventory of all property items and the inventory results be reconciled to the Florida Accounting Information Resource property sub-system (sub-system), (2) the Secretary or Secretary s representative delegate custody of Department property to Division Directors in a formal letter that assigns responsibility for the property in their custody, (3) the Property Administrator, Property Accountant, and designated property custodians be trained in their job duties as well as State laws and Department procedures concerning property accountability, and (4) immediate use be made of available scanning technology to track and inventory property. Page 1 of 20

2 ISSUES DISCUSSED IN THIS REPORT WERE PREVIOUSLY REPORTED The property accountability issues discussed in this report are similar to those previously reported by this office in Internal Audit Report No , Audit of Property Accountability, dated December 6, Based on the results of our current audit, few improvements have been made in the internal controls relating to the safeguarding of and accounting for Department property since our previous report. ADDITIONAL COMMENTS During the course of this review, other matters came to our attention. These matters concern (1) accounting for attractive items costing less than $1,000 and (2) use of modern scanning technology to increase the efficiency of tracking and inventorying property. These issues are discussed under the Other Matters section of this report. INTRODUCTION AND BACKGROUND PROPERTY ACCOUNTABILITY REQUIREMENTS Requirements regarding property accountability are set forth in Section 273, Florida Statutes. The Chief Financial Officer establishes specific rules to implement these requirements. 1 In addition, the 1 Prior to July 1, 2006, agencies were required to comply with Chapter 10.3, Rules of the Auditor General, concerning the control and safeguarding of tangible personal property. The Chief Financial Officer is in the process of establishing new Florida Administrative Code rules. The Chief Financial Officer intends to substantially adopt the Rules of the Auditor General and Agencies should continue to comply with the Rules of the Auditor General and Section 273, Florida Statutes until these rules are officially established. Department s Administrative Policies & Procedures Manual provides internal policies and procedures for property control. These requirements and procedures also apply to the independent organizations administratively housed within the Department. State statutes requires that tangible personal property items consisting of furniture, computers, motor vehicles, and other items of a non-consumable, non-expendable nature that cost $1,000 or more and have a normal life expectancy of one or more years be properly controlled. In addition, Department policies requires that certain small and attractive items costing less than $1,000, such as cameras, tape recorders and computers also be controlled. To account for and control Department property, each property item acquired is assigned to a specific organization code. PROPERTY CUSTODIANSHIP The Secretary of the Department, as the primary property custodian, is responsible for the supervision, control, and disposition of Department property. To carry out these responsibilities, the Secretary delegates custodianship to Division and Commission Directors who in turn may delegate custodianship to one or more employees under their supervision. These Custodian Delegates (delegates) are responsible for the day-to-day accountability and control of the property assigned to their custody. Department procedures require Division Directors to appoint delegates in writing, and to provide a copy of the appointment notice to the Property Administrator. Absent the formal designation of a delegate, the property remains under the Division Director s direct control. Once a delegate is appointed, the delegate is listed on a Property Custodians List which is Page 2 of 20

3 maintained in the sub-system. The list identifies the delegate responsible for property assigned to a specific organization code. CUSTODIAN DELEGATE RESPONSIBILITIES When initially appointed, delegates are required to complete a physical inventory of the property to which they are assigned responsibility. Delegates acknowledge responsibility by signing a Custodian s Inventory List provided by the Department s Property Accountant (Accountant) and prepared from the Property Master File. The signed inventory list serves as a property receipt. Department procedures specify that in all cases where property is transferred to a different location (change of address), from one organization code to another, or declared surplus the delegate must notify the Property Administrator (Administrator) by completing a property transfer or surplus form. To maintain proper accounting of assets for custodial and insurance purposes, the Accountant updates the Property Master File to reflect any changes in the assigned organization code and/or location of all property using the transfer or surplus form. This process requires coordination between the delegates, Administrator and Accountant. PROPERTY ACCOUNTABILITY SYSTEM The Administrator and Accountant, within the Bureau of Financial Management Services, are responsible for maintaining the property accountability sub-system. The Administrator coordinates with Division staff, delegates and the Bureau of Financial Management Services to ensure that all new property is tagged and entered into the subsystem. The Administrator also trains Department staff on property control requirements and procedures, and helps coordinate annual and special inventories. Under the supervision of the Administrator, an annual inventory is conducted each September to account for all property. The Accountant processes all property transactions and maintains the Property Master File. This includes recording new items in the sub-system and other transactions approved by the Administrator, such as property loans or transfers. The Accountant also enters information on the results of inventories, including changes in the physical location or condition of property and whether an item was unaccounted for and reconciling differences between physical inventories and the property records. As of July 31, 2006, the Department s personal property included 4,842 items with an acquisition value of $34,670,703. As shown in Table 1, the majority of the Department s property (60.2%) is comprised of computer and computer related equipment. Page 3 of 20

4 TANGIBLE PERSONAL PROPERTY BY CATERGORY Category No. of Items Percent of Total Items Acquisition Cost Percent of Total Cost Computer Equipment 2, % $17,966, % Machinery & Equipment 1, % $3,136, % Furniture % $450, % Other % $239, % Motor Vehicles & Aircraft % $11,852, % Library Resources & Artwork % $1,025, % Total 4, % $34,670, % Table 1 Property is distributed throughout the Department as shown in Table 2. DISTRIBUTION OF DEPARTMENT PROPERTY Organization Support Program: Retirement State Group Insurance Human Resource Management Americans with Disabilities Act Working Group No. of Items Percent of Total Items 10.76% 1.71% 0.97% 0.62% Acquisition Cost $3,101,361 $303,269 $67,120 $59,392 Percent of Total Cost 8.95% 0.87% 0.19% 0.17% Enterprise Information Technology Services 1, % $13,696, % Business Operations: Specialized Services Real Estate Development State Purchasing Office of Supplier Diversity 132 1, % 35.52% 1.78% 0.45% $10,947,376 $4,509,679 $136,697 $33, % 13.01% 0.39% 0.10% Administration % $1,070, % Commissions* % $745, % Total 4, % $34,670, % *Includes Florida Commission on Human Relations and Public Employees Relation Commission Table 2 Page 4 of 20

5 DISCUSSION ISSUES The Department did not effectively account for and control State-owned tangible personal property. We conducted an inventory of 3,278 property items owned by the Department and located within the immediate Tallahassee area 2. Based on the results of the inventory the Department did not have direct custodial control of approximately 533 items with an acquisition value of over $4.075 million. Of the 533 items which could not be accounted for, 385 (72.2%) were computers or computer-related equipment. RESULTS OF INVENTORY No. of Items Inventoried No. of Items Not Properly Accounted For Percentage of Items Not Properly Accounted For Acquisition Value of Items Not Properly Accounted For Location Enterprise Information Technology Services 1, % $1,481,911 Division of Real Estate % $414,070 Division of Retirement % $1,727,883 Division of Administration % $300,435 Division of Specialized Services % $35,280 Division of State Group Insurance % $80,498 State Purchasing % $20,133 Human Resource Management % $10,835 Americans With Disabilities Act % $3,567 Office of Supplier Diversity % -0- Total 3, % $4,074,612 Table 3 2 Our review did not include property located at the Governor s Mansion. Accountability procedures for these property items differ in respect from those followed by other Department organizational units. We also did not include property items located at those organizations which are housed under the Department for administrative purposes only. Page 5 of 20

6 It is likely that many of the property items not accounted for during our inventory are still on hand within the Department. During the course of the audit, Divisions made efforts to locate, and bring under control many of the items we identified during our inventory. However, due to the lack of effective controls and documentation noted during the audit, it is doubtful whether Division managers and their delegates will be able to fully account for all items. During our physical inventory, we also identified 532 property items which had been tagged as Department property but were not correctly listed in the sub-system. These items had a value of about $1.6 million. We reviewed the history of the property records and determined that: 399 items (mainly computers and computer related equipment) with an estimated value of $935,000 had not been entered into the sub-system when acquired, 115 items valued at $609,255 were listed as surplus in the sub-system but were still in use, 15 items valued at $29,986 were classified as not on hand in the subsystem but were still in use, and 3 items valued at $8,977 had been removed from the sub-system by the Department of Financial Services after the Department reported the items as missing or not on hand but were still in use. ISSUE 1 CUSTODY OF PROPERTY NOT PROPERLY DELEGATED Department managers did not delegate custody of property in accordance with Rules of the Auditor General, Department of Financial Services and Department procedures. Consequently, property custodians were not assigned, or if assigned were not informed they were accountable for property. DELEGATE APPOINTMENT PROCEDURES NOT FOLLOWED We obtained and reviewed the Property Custodians List to identify the delegates responsible for the property assigned to the 192 organization codes within the Department. Our review showed that 95 delegates were listed on the Property Custodians List. However, further review showed that 8 of the 95 delegates on the list were no longer employed by the Department. To determine whether the remaining 87 delegates had received written notification of their designated property responsibilities we reviewed the Administrator s files. The files contained only 39 appointment letters for the 87 delegates (5 of the delegates responsibilities were contained in their job descriptions). Only 24 of the 39 appointment letters contained the signature of the Division Director. The remaining 15 appointment letters contained one or more omissions such as a failure to designate the property code for which the delegates were responsible, Division Director s signature, date of appointment, etc. Without appointment letters, it is doubtful whether delegates, not formally assigned, can be held responsible for any property items not accounted for at a later date. Page 6 of 20

7 PROPERTY ADMINISTRATOR NOT AWARE OF THOSE DELEGATES ASSIGNED CUSTODY OF PROPERTY The Administrator stated that he does not always receive an appointment letter from the Division Directors and that he might not know who is assigned the responsibility for a particular organization code until the annual inventory is conducted. Based on the lack of information concerning whom and how many delegates were properly assigned, we question whether the Administrator could adequately manage the Department s property accountability function. Also, without proper notification, personnel are unaware of their responsibility to account for property and the Administrator does not know who is accountable for Department property. While recognizing that numerous organizational and staffing changes have occurred within the Department over the past several years, the Administrator is ultimately responsible for managing the Department s property. As such, the Administrator must maintain an awareness of Department changes in order to coordinate with division personnel to ensure control and accountability of property. DELEGATES DID NOT CONDUCT INITIAL INVENTORIES Delegates did not always conduct initial inventories when property was placed under their control because they were either unaware of the requirement to do so or were unaware they had been assigned as delegates. In other instances, newly assigned delegates conducted informal inventories with departing delegates. However, no records were provided to the Administrator indicating any changes in the status of property at the time the new delegate assumed custody. We surveyed 53 of the 87 delegates and 22 reported they had not received an inventory list from the Accountant at the time of their appointment. This resulted, in part, from the Division managers failure to formally designate delegates in writing. Because delegates were not formally designated, no letters were sent to the Administrator who is responsible for notifying the Accountant of the change in delegates. Therefore, no inventories were conducted. Because delegates did not conduct initial inventories, property records were not updated. CONTRACTOR ASSIGNED PROPERTY MANAGEMENT RESPONSIBILITY In our previous audit, we reported that the Division of Retirement (Division) contracted with an external vendor to provide asset management services for its computer and computer-related equipment. The transfer of the property to the vendor was part of a process to privatize the information technology function of the Division and was required by the existing contract. The contractor did not conduct an initial physical inventory of any of the property nor give the Department a receipt for the property placed in its custody. We recommended that all contracts and contract amendments delegating custody of Department property to vendors be reviewed by the General Counsel. Currently, the Division is in the process of awarding a new contract for operation of its information technology function and has issued an Invitation To Negotiate (ITN) NO. DMS 06/ Again, the selected contractor will be required to provide asset Page 7 of 20

8 management of the Division s computers and computer related equipment. However, the ITN does not contain specific language which indicates the selected vendor will be responsible for managing Department property in accordance with State statutes, rules and Department procedures. Also, the ITN does not contain language or an attachment identifying the items of property the vendor will be required to manage or state that a property list will be provided at the time the contract commences. In addition, the ITN does not prescribe the procedures to be followed should the contractor loose accountability of the assets it will be required to manage. In our previous report, we stated that: 3 Because the contractor did not complete the receipting process, the Department will have difficulty determining at the close of the contract whether any misplaced or lost property was the result of the contractor s failure to properly manage the property. Further, the Division s contract does not require the vendor to conduct a final inventory at the conclusion of the contract period or to reconcile any discrepancies before receiving the final contract payment. Since our previous review, the contract has been renewed on three occasions. However, no action has been taken to correct or amend the contract language. During our current inventory, the contractor could not account for 105 items for which they were responsible for managing. Given the current status of the property managed by the vendor and the lack of specific contract language concerning the same, it is doubtful that the vendor can be held responsible for property items unaccounted for when the contract is closed. 3 Internal Audit Report No , Audit of Property Accountability, dated December 6, ISSUE 2 ANNUAL PROPERTY INVENTORY NOT CORRECTLY COMPLETED AND PROCEDURES FOR THE TRANSFER AND SURPLUS OF PROPERTY NOT FOLLOWED Annual physical inventories were not completed timely and discrepancies that existed between the inventories and the property records were not reconciled. Moreover, procedures for the transfer of property between organizations and surplus of property were not followed. This resulted in loss of control over Department assets and increased the probability that property has been misplaced, lost, or stolen ANNUAL INVENTORY NOT FULLY COMPLETED OR COMPLETED IN A TIMELY MANNER The Fiscal Year annual inventory was not completed for all organization codes. Our review showed that no inventories were completed for 25 of the Department s then 179 organization codes. The acquisition value of the property at the 25 organization codes was about $2.3 million. Section , Florida Statutes, requires that delegates annually inventory property in their custody. Department procedures further specify that personnel designated by the appropriate Division Director or Bureau Chief will conduct an annual physical inventory for each organization code. The Property Office has established a six-week period (September through October) during which the annual property inventory is conducted. Inventories for 39 of the organization codes were not completed until after the inventory closing date. The inventories Page 8 of 20

9 were completed anywhere from seven days to two months after the closing date. The annual physical inventory should result in a complete and accurate accounting of the physical location, condition, and value of the Department s assets. Absent such an inventory, the Department has less assurance that property is reasonably safeguarded from loss, misuse, and theft. INVENTORY PROCEDURES NOT FOLLOWED Chapter 10.3, Rules of the Auditor General as well as Department procedures specify that the delegate may not personally inventory items for which they are accountable. However, the delegate should accompany the person performing the inventory. Permitting the delegate to inventory property fosters conditions wherein errors, misuse of property or fraud may occur and fail to be timely detected. Department procedures also require the person taking the inventory and the Division Director to sign and date the annual inventory, thereby certifying that the reported information reflects the actual physical status of items assigned to the organization code at the recorded physical inventory date noted. For the Fiscal Year annual inventory, 92 of the 154 organization codes that completed an inventory did not meet Department requirements. Specifically we found the following problems: In 42 instances delegates inventoried the property under their control, did not review and sign the annual inventory report, and In 10 instances we found a combination of the errors listed above. DELEGATES DID NOT INVENTORY ALL PROPERTY ITEMS Delegates did not always report property items at their location if the property was not listed on the inventory list for their organization code. While the property items may not have belonged to the organization code for which the delegate was responsible, we determined that, in many instances, the items were listed on another delegate s organization code. Property items identified by delegates and not belonging to their property codes should be noted and reported to the Administrator. The Administrator can then match the item s identification number to the proper organization code and the item can be returned or transferred to the proper location and placed under control. The failure of delegates to notify the Administrator of the existence and location of these property items starts a series of events resulting in (1) the property item being reported as missing or stolen by the delegate who is assigned the responsibility for custody, (2) the delegate responsible for the custody of the property item signing an affidavit declaring the item missing or stolen, (3) the item being reported to the Department of Financial Services as missing or stolen and (4) the item eventually being removed from the sub-system. In 35 instances the recorded physical inventory date was not provided, In 5 instances, the Division Directors Page 9 of 20

10 STATUS OF MISSING PROPERTY ITEMS NOT RESOLVED As a result of the partial annual inventory conducted during Fiscal Year , 256 items valued at $600,909 were identified as missing or not on hand. At the conclusion of the inventory, affidavits on the status of missing items were required to be turned in with the inventory. This did not allow time for inventory reconciliation or allow delegates to find the missing property items before having the items reported as missing and/or removed from the inventory. Rules of the Auditor General and Department procedures require that all discrepancies between the physical inventory and the property record be reconciled. The Administrator is responsible for coordination with the Accountant to ensure reconciliation of inventory results with property records. To eliminate the possibility of record keeping errors the Accountant is required to research items reported as not on hand. Delegates are responsible for conducting a search and investigation to locate the property or determine the reason for its disappearance. If an item is not located after a lapse of six months, the delegate must submit an affidavit in accordance with the Department s procedures for handling lost or stolen property. During an interview with the Administrator we were told that the delegates are required to return the affidavits with the annual inventory rather than allowing time to search for the missing item before writing it off the property inventory. During our inventory, we located a total of 18 items that were previously listed as either not on hand or already removed from the Property Master List. Had delegates been required to look for missing items rather than just turn in affidavits, these items may have been located. Accordingly, the accuracy of the Department s overall inventory is questionable ANNUAL INVENTORY HAS NOT BEEN PERFORMED The Fiscal Year annual inventory has not been completed. According to the Administrator, the annual inventory was delayed until after a new Department Secretary could be appointed. Therefore, the inventory would not be required to be performed twice in a short period of time. However, since the inventory was scheduled to commence in September 2006, it is unlikely that the Administrator was aware that a new Secretary would be appointed or if appointed when the appointment would take place. Based on our discussions with the Administrator, the annual inventory was started in January As of February 2007, the annual inventory had not been completed. TRANSFER AND SURPLUS PROCEDURES NOT FOLLOWED Our review showed that the Administrator did not enforce policies and procedures nor ensure that the proper forms were submitted when property was transferred or declared surplus. This resulted in the sub-system records not being properly updated. For example, during our review, we observed desktop support employees either transferring or exchanging computers directly with employees without the knowledge of the delegates responsible for controlling the property or the Administrator. Delegates told us they were not always consulted or informed when property items were transferred to or from their location. Page 10 of 20

11 Because property items were transferred from one location to another without any update of the property records, delegates could not locate the items during subsequent inventories. For example, during our inventory we found 15 computers which had been transferred to the Agency for Workforce Innovation (AWI) in January 2006 but continued to be listed on the Department s property records. These items remained on the Department s records because the required property surplus forms had not been completed prior to transfer of the items to AWI. When we discussed this issue with the delegate, we were informed that the Administrator had directed the delegate to prepare transfer forms showing the property was transferred to AWI. However, the correct procedure would have been to surplus the computers prior to transfer to AWI. Had the correct surplus procedures been followed, the computers would have been removed from the Department s property records. Because the transfer was made incorrectly, the computers are now listed on AWI s property records as well as the Department s property records. TRAINING Organizational changes can significantly undermine the effectiveness of basic functions such as property accountability. Within the last several years, the Department has experienced a high degree of organizational change, including the appointment of several Secretaries, the realignment of programmatic responsibilities within many of the Divisions, and greater use of outsourcing to provide services. Most of the delegates we interviewed reported they had not received formal training concerning their custodial responsibilities or property accountability procedures. Only 15 of the 53 delegates we surveyed reported they had received such training. Among the eight employees who had served as delegates for less than one year, only one person reported that they had received training. OTHER MATTERS ACCOUNTING FOR ATTRACTIVE PROPERTY ITEMS While Statutes require that only nonconsumable property items costing over $1,000 be tracked and controlled, agencies are given the option of accounting for items costing less than $1,000. The Department has determine that it will account for certain attractive items costing less than $1,000 to include cameras, handheld devices such as Personal Digital Assistants, personal computers, laptop computers, projectors, scanners, tools, tool sets and lawn equipment. All property items costing $1,000 or more are classified and purchased from Operating Capital Outlay (OCO) funds and as such are automatically reported in the property pending file within the subsystem. The pending file notifies the Accountant that the items have been received and allows the property items to be entered into the sub-system where they will be accounted for and controlled. However, items costing less than $1,000 are not automatically reported in the subsystem. Therefore, the purchaser, generally the budget liaison at the division level, should be required to notify the Accountant and Administrator of the purchase of the items so that the items can be entered directly into the sub-system. Otherwise, Page 11 of 20

12 these items risk the chance of being lost, misplaced or stolen. USE OF SCANNING TECHNOLOGY The Property Office was not using the most efficient method of tracking and inventorying property. Although the Department recently invested about $13,000 in the purchase of scanning equipment and software to assist in the tracking and inventory of property, the Property Office has not made use of this technology 4. We were informed by the Administrator that the technology was not being used because the scanning software was not functioning properly. Our review; however, showed that the problem was not software but the method used by the Bureau of Financial Management Services when entering the bar code tag numbers into the sub-system. When the numbers on the bar code tags are entered into the sub-system, the Bureau assigns an additional prefix code to each item number. This prefix code enables the Bureau to categorize property items by category, e.g., computers, machinery, etc. However, by assigning prefix codes to each property item in the sub-system, the numbers the scanners record from the bar code tags affixed to the property items do not match the numbers contained in the sub-system for the same items. Discontinuing the use of prefix codes should allow the use of a more efficient technology, reduce errors, and reduce the time required to perform inventories. 4 The scanning equipment was purchased by the State Technology Office (STO) on August 31, The functions of STO were transferred to the Department on July 1, STO was renamed Enterprise Information Technology Services. The scanning equipment was transferred to the Property Administrator in December RECOMMENDATIONS FOR THE DIVISION OF ADMINISTRATION Recommendation No. 1 We recommend that the Department conduct a complete physical inventory of all property items and reconcile all items not accounted for in accordance with the Rules of the Auditor General and Department policies and procedures. Recommendation No. 2 We recommend that the Secretary consider delegating custodianship of property to Division Directors in a formal letter which assigns personal responsibility for management of State property. Recommendation No. 3 We recommend that: Division Directors be required to designate delegates in accordance with Department policies and procedures, In those instances where delegates are not correctly designated, Division Directors be held responsible for property accountability, and Upon the appointment of new delegates, property inventories be conducted in accordance with Department policies and procedures and that the Administrator be notified of the status of the inventory. Page 12 of 20

13 Recommendation No. 4 We recommend that the Administrator be responsible for: Continually reviewing the Custodians List and coordinating with the Divisions to ensure that the list is current and correct and for notifying the Accountant of changes to the list and Notify Division Directors whenever a newly appointed delegate fails to complete an initial physical inventory within two weeks of the delegate s appointment. Recommendation No. 5 We recommend that Department procedures be amended to include procedures for delegating custody of Department property to private vendors and their responsibilities for control of same. Recommendation No. 6: We recommend that training on the duties and responsibilities of property custodianship be provided for Department managers and delegates. At a minimum, the training should include procedures and requirements for: Delegating the use and control of property to delegates in writing, Notifying the Administrator of the designation of new delegates, Conducting initial physical inventories when new delegates are appointed, Conducting an annual physical inventory, and Recommendation No. 7: We recommend that: The Administrator be trained in his/her job duties as well as State Statutes, Florida Administrative Code and the Department policies and procedures, and The Administrator s supervisor be required to monitor and enforce the duties of the position. Recommendation No. 8: We recommend that Desktop Support be required to contact the appropriate delegate prior to moving and/or replacing any computer or computer related equipment. Recommendation No. 9: We recommend that: Division Directors and delegates be provided written notification of the planned annual inventory completion date, The Secretary or Secretary s designee be advised whenever a Division Director fails to submit the annual inventory by the close of the established completion date, and At the conclusion of the Department s annual inventory, the Director of Administration be provided with a summary report of missing items and subsequent reports on the status of the missing items until such time as the status of the items are resolved. Transfer and surplus of property. Page 13 of 20

14 Recommendation No. 10: We recommend that: Budget liaison personnel within the divisions be responsible for notifying the Administrator of the purchase of property items meeting the definition and description of attractive items prescribed by Department policies and procedures and Training in this area be provided during the Annual Planning and Budget Workshop. Recommendation No. 11 We recommend that the Bureau of Finance and Accounting remove those prefix codes currently assigned for each item of property in the sub-system and discontinue adding prefix codes to identify property items in the future. FOR THE DIVISION OF RETIREMENT Recommendation No. 12 We recommend that the contract resulting from ITN Number DMS 06/ for Information Technology Services include specific language addressing the custodianship of property placed in the management of the contractor. DIVISION RESPONSE The Division s complete response is attached in Exhibit A. OBJECTIVE, SCOPE AND METHODOLOGY OBJECTIVE The overall objective of this audit was to determine whether the Department effectively accounts for and safeguards its tangible personal property. Specific objectives were to determine whether (1) Department managers properly delegated custodial responsibilities for property, (2) prescribed procedures were followed when transferring property from one organization code to another organization code, (3) physical inventories were conducted in accordance with prescribed procedures, and (4) property items were properly recorded in the Department s records. SCOPE The audit, conducted in accordance with Section , Florida Statutes and The International Standards for the Professional Practice of Internal Auditing, reviewed the Department s accountability and control over tangible personal property included in the Department s Property Master List as of July 31, We did not include property assigned to the Governor s Mansion as accountability procedures for these items differ in some respects from those followed by other organizational units. We also excluded property assigned to both the Florida Commission on Human Relations and the Public Employees Relations Commission Page 14 of 20

15 METHODOLOGY To accomplish the audit objectives, we performed the following steps: Reviewed applicable Florida Statutes, Comptroller s Memoranda, Rules of the Auditor General, and the Department s Administrative Policies & Procedures, Reviewed Fiscal Year annual inventory reports, affidavits and other documentation, Inventoried Department property items across 192 organization codes, Reviewed property sub-system data pertaining to all Department property, Surveyed 53 delegates, and Interviewed staff in the Property Office, Bureau of Financial Management Services, and other organizational units. Page 15 of 20

16 Exhibit A Division s Response Page 16 of 20

17 Page 17 of 20

18 Page 18 of 20

19 William O. Monroe, Auditor General Exhibit B - Distribution List Gary VanLandingham, Director, Office of Program Policy Analysis and Government Accountability Terry Shoffstall, Director Joint Legislative Auditing Committee Melinda Miguel, Chief Inspector General Executive Office of the Governor Kim Mills, Audit Director Executive Office of the Governor Department of Management Services Staff: Ken Granger, Chief of Staff David Faulkenberry, Deputy Secretary of Human Resource Support Terry Kester, Deputy Secretary of Enterprise Information Technology Services Shane Strum, Deputy Secretary of Business Operations John Brenneis, General Counsel Tom Clemons, Director of Administration Charles Covington, Director of State Purchasing John Ford, Director of Telecommunications and Wireless Services Rosalyn Ingram, Director of Specialized Services Mike Kyvik, Chief Operations Officer Sharon Larson, Director of Human Resource Management Rebecca McCarley, Director of Legislative Affairs Cathy Schroeder, Director of Communications Sarabeth Snuggs, Director of Retirement Susan Counts, Interim Director of ADA Working Group Jeff Dykes, Interim Director of Division of State Group Insurance Dean Izzo, Interim Director of Real Estate Development Mitchell Clark, Chief of Financial Management Services Debra Forbess, Chief of Planning and Budgeting Page 19 of 20

20 To promote accountability, integrity, and efficiency, in government, the Office of the Inspector General makes audits of the Department of Management Services programs, activities, and functions. This audit was made in accordance with applicable standards contained in the International Standards for the Professional Practice of Internal Auditing, issued by the Institute of Internal Auditors. This report and other audit reports prepared by the Office of Inspector General of the Department of Management Services can be obtained on our Web site ( by telephone ( ); or by mail (4040 Esplanade Way, Suite 135, Tallahassee, Florida 32399). Page 20 of 20