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HomeMy WebLinkAboutAudit Reports - Public - Utility Billing and Collections - Audit Follow-up - 2/16/2018 Date: February 16, 2018 To: Kevin R. Phelps From: Candace MacLeod, City Auditor Subject: Audit Follow-up: Utility Billing and Collections In April 2017, a utility billing and collections audit was performed by an external consultant, REDW LLC., under the supervision of the City Auditor’s Office. The purpose of the audit was to evaluate the effectiveness of the City of Glendale’s (City) utility billing and collections processes and determine compliance with applicable ordinances, policies, and procedures. The audit identified five areas of risk, all of which management concurred with: • Closed accounts with $680,000 in credit balances that were not returned to customers • Adjustments to customer accounts without sufficient support or supervisory approval • Users with the ability to change rate tables in NorthStar, although their job duties did not require such access • Lack of documented procedures for the transfer of past due accounts to third-party collections • New account set-ups without required documentation from the customer Additionally, the auditors noted that there were many outdated policies and procedures or areas where they did not exist at all. A follow-up was conducted in February 2018 to review the actions taken by management to address the audit findings. The results of the follow-up indicated that management has taken measures to reduce all but one reported risk. Budget and Finance is working with IT to develop a management report and procedures to ensure authorized dollar thresholds for account adjustments are not exceeded by staff. Management anticipates that the report and procedures will be developed by February 28, 2018. Attachment cc: Michael D. Bailey, City Attorney Lisette Camacho, Assistant Director Budget and Finance Tom Duensing, Assistant City Manager Jack Friedline, Assistant City Manager Craig Johnson, Director of Water Services Vicki Rios, Director of Budget and Finance _____________________________________________________________________________________ City Auditor’s Office 1 Utility Billing & Collections Follow-up Recommendation Management Response April 2017 Management Response February 2018 Status 1. Budget and Finance should implement controls to ensure that payments are not received on closed accounts. On a periodic basis, Budget and Finance should review the credit balance report and determine if there are any closed accounts with a credit balance and investigate the reason for the balance. Budget and Finance should also implement a process to refund overpayments to customers. Concur. Budget and Finance has determined its current software system cannot reject payments on closed accounts automatically. Budget and Finance will document procedures to review the credit balance report and issue refunds regularly by September 30, 2017. In August 2017, Budget and Finance developed procedures for reviewing credit balances and issuing refunds to customers. All journals are reviewed by the customer service supervisor prior to posting. Closed 2. Budget and Finance should implement controls to ensure that unauthorized adjustments to customer accounts would be caught. This may include periodically running adjustment reports and evaluating the users and amounts, and following up on any abnormal activity. Additionally, Budget and Finance should train individuals responsible for performing adjustments on the documentation required and the authorization levels needed for performing adjustments. Concur. Budget and Finance will develop procedures to ensure all adjustments have proper documentation and are reviewed and approved by supervisors by July 31, 2017 In August 2017, the Budget and Finance Department developed procedures for ensuring all adjustments are reviewed and approved by supervisors. Additionally, Budget and Finance employees responsible for performing adjustments received training on Procedure 503 and authority levels on February 9, 2017, March 15, 2017, and November 30, 2017. Budget and Finance is working with IT to develop a report and Open _____________________________________________________________________________________ City Auditor’s Office 2 Utility Billing & Collections Follow-up Recommendation Management Response April 2017 Management Response February 2018 Status will draft procedures to ensure employees have not exceeded their authorized dollar threshold by February 28, 2018. 3. Budget and Finance should restrict access to update the rate tables to individuals responsible for the rate change. Controls should be implemented to remove terminated and transferred users on a timely basis. Additionally, a process should be implemented to evaluate user access on a periodic basis to ensure that only appropriate individuals have access to the NorthStar system and reduce the risk of unauthorized changes. Concur. Budget and Finance’s system administrator has modified the permissions so users in the billing group no longer have permissions to edit rate data. Budget and Finance’s system administrator created a new group with only two management level personnel with permissions to modify the rate table/screens. Two Information Technologies business analysts have access to the Admin group in NorthStar which gives them the ability to create and maintain accounts and permissions in NorthStar. Budget and Finance will review the list of 40 users identified as either terminated or transferred and disable their access in NorthStar by July 31, 2017. Budget and Finance will develop and document procedures to detect and review transactions performed Roles and permissions for terminated and transferred employees were updated in July 2017. In January 2018, the system administrator removed update and add permissions from the Billing Admin Group and created a new Rates Admin Group with only update and add permissions. Closed _____________________________________________________________________________________ City Auditor’s Office 3 Utility Billing & Collections Follow-up Recommendation Management Response April 2017 Management Response February 2018 Status on the rate tables by July 31, 2017. 4. Budget and Finance should evaluate the review process for the monthly transfer of accounts to third party collection agencies, and determine additional steps to ensure that all required accounts are transferred. Additionally, Budget and Finance should document its process for following up with third party collections agencies to ensure the City collects all available past due accounts. Concur. Budget and Finance will review and document its processes for review of its monthly transfers and for follow up with the third-party collection agency by August 30, 2017. Procedures were developed on August 21, 2017. Closed 5. Budget and Finance should train customer service representatives on the required information necessary for new account set-up. If a deposit is waived, a supervisor should review the reason to ensure the waived deposit is allowable and appropriately documented. Concur. Budget and Finance has developed a process to track the training for new and existing customer service representatives on the required information necessary for new account set-up using documented Procedure 500 “Establishing Utility Services” and Procedure 501 “Utility Deposit Procedure.” Budget and Finance will ensure it completes training for current staff by October 31, 2017. The tracking process will be used to ensure all new staff are properly trained. Budget and Finance will develop procedures to have proper documentation On February 2, 2018, Budget and Finance developed a process to track training for new and existing Customer Service Representatives. As of December 31, 2017, all new hire and existing CSR’s have been trained on Procedure 500 and 501. On February 1, 2018, a process was developed to audit 10% of all new account setups and deposits to monitor compliance of the requirements in Procedures 500 and 501. Closed _____________________________________________________________________________________ City Auditor’s Office 4 Utility Billing & Collections Follow-up Recommendation Management Response April 2017 Management Response February 2018 Status for the reviewing and auditing of the new account set up/deposit processes by September 30, 2017. 6. Budget and Finance, along with Water Services should create a centralized and easily accessible location for all policies and procedures. They should evaluate the following areas and determine if formal policies and procedures should be created or updated: • Collections: including the treatment of payments to closed accounts. • Meter reading: including the process for reviewing error reports and ensuring all meters are read on a continual basis. • Billing: including the process for reviewing error reports prior to sending the monthly bills. • NorthStar user access: including adding and removing access, evaluating access on a periodic basis, and administrative access controls. • Third party collection agencies: including the process for transferring accounts to the third- party collection Concur. Budget and Finance created a centralized and easily accessible location for all policies and procedures effective July 1, 2017. Water Services will update the meter reading audit policy to include the reviewing of error reports. This will be completed by August 1, 2017. Budget and Finance created a centralized and easily accessible location for all policies and procedures in June 2017. Water Services updated the meter reading audit policy to include, but not limited to, the reviewing of “error” (edit) reports for each route. The policy was updated in August 2017 and effective immediately. The policy is located on a shared network drive. Closed _____________________________________________________________________________________ City Auditor’s Office 5 Utility Billing & Collections Follow-up Recommendation Management Response April 2017 Management Response February 2018 Status agencies and following up on the collections process.