Audit Report

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Library Financial Processes

The objective of the audit was to evaluate the effectiveness and efficiency of internal controls over the Denver Public Library’s accounting processes.

The Denver Public Library is an independent agency of the city that serves as a valuable resource for Denver residents, offering a variety of services, programs, and activities. The city budgeted the library for over $55.8 million to support its administration and operations in 2019.

The Denver Public Library’s financial activities involve purchasing, accounting, budgeting, and contract negotiation. City rules provide the guidance needed to appropriately conduct these activities, and several software systems support the library’s day-to-day operations involving purchasing and accounting for the various goods and services needed to provide this public resource.

The Denver Public Library Has Deficiencies in Its Financial Internal Controls
Auditors identified various internal control deficiencies in the Denver Public Library’s financial operations, including:

  • Inadequate policies and procedures
  • Untimely payroll approvals
  • Insufficient use of invoices

The Denver Public Library’s Digital Assets Are Not Correctly Accounted for in Citywide Financial Records

We found errors in the accounting treatment for the library’s electronic materials.

The Denver Public Library Is Appropriately Discontinuing Its Use of Store Credit Cards as a Purchasing Method

The library determined its store credit card program was creating an unnecessary risk, and by the time we finalized our audit testing in December 2019, the library was taking the appropriate steps to end the use of these cards — switching employees to city-issued purchase cards instead.

1.1  Update and Improve Procedures – The Denver Public Library should develop and/or update, as appropriate, formal, documented procedures for all financial processes including: donated assets, accounts receivable, supplemental staffing, purchasing, gifts, food purchases, personnel budget projections, grants, fees, deposits, accounts payable, cash handling, and P-cards. Management should ensure all procedures align with the city’s Fiscal Accountability Rules, are dated, and are appropriately approved.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.2 Improve Cash-Handling Procedures – In conjunction with Recommendation 1.1, the Denver Public Library’s updated procedures for cash handling should include adequate detail to require consistent and accurate recording of overages and shortages in Workday, and they should include an over or short resolution plan as required by Fiscal Accountability Rule 3.4.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.3 Develop Written Procedures for Rotating Positions – In conjunction with Recommendation 1.1, the Denver Public Library should develop written procedures for rotating positions in the Finance and Facilities department. These procedures should align with city Fiscal Accountability Rules 2.4 and 3.3.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.4 Develop Written Procedures for Contract Monitoring – The Denver Public Library should establish and document formal policies and procedures for contract monitoring that align with Executive Order No. 8 requirements for monitoring expiration dates and ensuring vendors’ compliance with the terms of a contract.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.5 Develop a Written Succession Plan – The Denver Public Library should establish and document a formal succession plan that:

  1. Outlines the steps to ensure the transfer of knowledge and continuity of operations if key personnel leave the organization;
  2. Details the library’s recruitment and retention strategies for key positions; and
  3. Identifies risks and strategies.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.6 Revise Policies and Procedures for Payroll Approvals – The Denver Public Library should review and revise procedures to ensure timely enforcement of time sheet approval requirements in accordance with city policy.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

1.7 Develop Process for Requesting Invoices – The Denver Public Library should implement a process to require performers to submit invoices before the library issues payments.

Agency Response: Agree, Implementation Date – June 1, 2020

 

1.8 Use Workday to Manage Presenter Process – The Denver Public Library should work with the Controller’s Office to determine whether it would be feasible to develop a Workday-based solution to fully manage the presenter payments.

Agency Response: Agree, Implementation Date – Sept. 1, 2020

2.1 Review Library Book Accounting – The Denver Public Library should work with the Controller’s Office to expand the information requested as part of the annual inventory process to ensure enough detail is captured to properly account for the assets. Further, the Controller’s Office should adjust how it accounts for the library’s capital assets in the city’s Comprehensive Annual Financial Report to align it with rules established by the Governmental Accounting Standards Board.

Agency Response: Agree, Implementation Date – Jan. 1, 2020

3.1 Ensure Closure of Store Credit Card Accounts – The Denver Public Library should close all remaining store credit card accounts.

Agency Response: Agree, Implementation Date – Jan. 1, 2020

The objective of our audit of the Denver Public Library’s financial processes was to determine the quality of internal controls over financial processes at the library. I am pleased to present the results of this audit.

The audit revealed the Denver Public Library needs to improve its internal controls over its financial accounting processes, its payroll approvals, and its accounting for digital assets. In addition, we found the library took appropriate steps to begin eliminating the high-risk use of store credit cards by replacing them with city-issued purchase cards.

Through stronger policies, the Denver Public Library will have a stronger internal control environment, ensuring public funds are well spent. Our report lists several related recommendations.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor,” and was conducted in accordance with generally accepted government auditing standards. Those standards require we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We extend our appreciation to the Denver Public Library and city Controller’s Office personnel who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Follow-up report

A follow-up report is forthcoming. 

Audit Team: Katja E. V. Freeman, Kevin Sear, Patrick Schafer, Jeremy Creamean, Maria Durant, Ivy Anderson, June Samadi, Laura Santos

Methodological Support: Samuel Gallaher, Robert Persichitte