LT-01-08: Audit of the Department of Public Safety's Confidential Informant Fund and Prostitution Fund for Fiscal Year Ended September 30, 1999 (Issued 11/30/01)

Summary

On September 27, 1999, the Department of Public Safety (DPS) Commissioner requested an audit of confidential funds being handled by the Criminal Investigation Bureau's Special Investigation Unit. The Commissioner wanted to determine the accuracy and disposition of confidential funds before the responsibility over the funds are transferred to a different custodian.

This report presents the result of the audit of the DPS Confidential Informant Fund (CIF) and Prostitution Fund for Fiscal Year ended September 30, 1999. The report also shows the accounting of the funds' actual cash balances until the transfers to a new custodian on March 29, 2000 and May 5, 2000. The objectives of the audit were to: (1) determine whether the cash balances of the CIF and the Prostitution Fund were properly accounted for, (2) determine the accuracy of fund balances prior to the transfer to the new custodian, and (3) account for any fund balance discrepancies. This audit was conducted in accordance with Government Auditing Standards.

After the surprise cash counts on November 19, 1999 and subsequent analyses of receipts and disbursements under the CIF and Prostitution Funds, cash shortages were found, of which $400 remains unrecovered from the custodian. The results of our audit is summarized below.

It appears that the former custodian of the CIF and Prostitution Fund did not properly account for payment documents, and did not ensure that only legitimate cash payments were taken from the cash in his custody. Specifically, (a) $908.79 in the CIF and $784.51 in the Prostitution Fund were paid back by the former custodian and an investigator because of cash shortages discovered during the count, (b) cash advances were outstanding beyond the permissible periods, (c) support for expenses incurred were inadequate, and (d) a cash shortage remains unpaid. These occurred because the (1) former custodian did not properly monitor and record fund transactions, and (2) accounting policies and control procedures were inadequate. Consequently, $1,693.30 was found missing after the cash counts, and although $1,293.30 was recouped, $400 remains to be recovered from the custodian.

Recommendations and Response

We recommend that the DPS Commissioner:

1. improve the current control procedures used to monitor and record fund transactions by: (a) instructing the new custodian to develop accounting procedures that will ensure proper recording and liquidation of cash advances, and (b) establishing guidelines for turnover of funds to a new custodian;
    
2. enforce compliance with the 48-hour limit for liquidation of cash advances by reporting violations to DPS management;
    
3. collect the $400 Confidential Funds advance from the former custodian unless the disbursement can be adequately supported; and
    
4. transfer responsibility of the Prostitution Fund's bank account to DOF, and return the $557.59 previously in the Special Operations Task Force account to the General Fund.

In his letter response dated November 23, 2001, the DPS Commissioner agreed to comply with the recommendations provided in the report. In addition, the current custodian of the CIF has sought our assistance in establishing accounting forms that will ensure proper recording and liquidation of cash advances and proper turnover of funds. In our follow-up, the current custodian provided us copies of the accounting forms adopted by DPS. The accounting forms provided to us sufficiently addressed Recommendation 1. We therefore consider Recommendation 1 closed. However, recommendations 2, 3, and 4 remain open.

We appreciate the efforts of DPS to improve its current controls over the CIF and Prostitution Fund. The new procedures and accounting forms developed by DPS will ensure proper recording and liquidation of cash advances and proper turnover of funds.

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