OC’s Quarterly Audit Reviewed

OCEAN CITY – A review of the town’s internal auditor’s quarterly and annual reports revealed everything appears to be in order, but the work will continue.

Last year, the Mayor and Council at budget time agreed to create an internal auditor position to keep a close eye on the financial dealings of each town department on a rotating basis. During the Nov. 29 work session, Internal Auditor Karin Scott presented her findings for the third quarter of fiscal year 2022 along with a plan for a next round of internal audits for fiscal year 2023.

The town does contract with an outside auditor to complete an assessment of each department’s spending and revenue projections. The internal auditor position was created last year to provide an extra set of eyes and ears on a wide variety of financial issues, from departmental spending, invoices, procurement card, or P-Card expenditures by those employees that carry them, payroll and overtime among others.

“Each quarter I will provide a report about what the internal audit is doing for you,” said Scott. “Annually, I do a report about where I’m going next with this so that you are aware of everything that is on my plate. Things can change. Just be aware there is a plan in place.”

Scott provided a report on which audits had been completed, which were in the process, and which were pending in the coming months. For example, she included an analysis of the town’s warehousing department.

“The warehouse audit has been completed,” she said. “We had a high turnover in that area, so they asked me to take a look at it. I looked to see of the warehouse was running efficiently, and if the inventory was properly stored and accounted for. It is properly safeguarded. They did a good job, but there are still some areas of improvement.”

Scott said included in her quarterly report was a review of the transportation department’s money-counting room to track cash and credit transactions for the municipal bus and the Boardwalk tram, for example.

“I did an audit of the transportation money room,” she said. “I needed to look at if they were running efficiently and that the money was being counted and recorded properly. There was some turnover there too, so I looked to see if the employees were trained properly.”

Another area where Scott audited were the procurement cards, or P-cards. Certain town employees are issued P-cards for incidental needed purchases, gas or travel expenses, for example. Scott said during the audit period, there were 2,620 P-card transactions totaling over $900,000 from the 201 issued cards.

“Of all of those transactions, we only had to follow up on 44,” she said. “There were a few sales tax transactions or missing receipts. One employee used the P-card instead of their personal card, which looked the same, but everything was paid back to the city and there were no significant problems.”

Scott said during the audit period she took a close look at the town’s payroll, particularly the amount of overtime each month. Naturally, level of overtime increases during the peak summer months, and during special events, especially with public safety and public works.

“I looked at payroll to make sure things are being done properly and the town policies are being followed,” she said. “It shows where the spikes are, for example, if a special event comes in. It gives you an idea of what we’re spending money on in terms of payroll and overtime.”

Scott said she had to do three investigative audits during audit period, each of which proved to be not anything nefarious.

“During the period, I had three investigative audits,” she said. “All were allegations of some type of fraud. Two were allegations of employee theft, but I didn’t find any evidence of employee theft, which is good news. There was another issue of conflict of interest, but that was resolved by the department in that case.”

Scott said she met with department heads to identify potential risk areas when the town’s external auditor came in, but didn’t identify any potential areas of risk. She also provided a laundry list of projects she hopes to accomplish in the next round, from an audit of the police department’s evidence area and armory and equipment to the recycling contract with Covanta, and from the convention center catering contract to the planning and zoning permitting process among others.

Mayor Rick Meehan brought up the audit of the transportation department’s money counting room.

“You mentioned transportation and the money room,” he said. “Things have changed a little bit. We’re getting a much larger percentage of credit card transactions as opposed to cash payments.”

Meehan said the transportation department has been operating at a lower level since the pandemic, but was getting back to pre-COVID levels.

“The amount of cash has decreased because the transportation department has not operated at the same level in recent years,” he said. “Do we still need the same number of employees in that section? That’s something to take a look at when we discuss the budget.”

Councilman John Gehrig asked for a more detailed report on overtime for each department.

“For overtime, can we get a bar chart for each month?” he said. “Kind of like our utility bills show us a month-to-month comparison. We’re making decisions based on overtime. I just want to see it on a regular basis, maybe by department. I’d just like to see a three-year comparison.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.