Internal Audit For Nueces Co. Justices of The Peace

OFFICE
OF
COUNTY
THE
DIANA ROSAS, M.A.M.

FIRST ASSISTANT
AUDITOR
ELVA FUENTES
INTERNAl AUDIT SUPERVISOR
DAlE ATCHLEY, C.PA

COUNTY AUDITOR
USA DAVIS, c.w.
EXECUTIVE ACCOUNTANT
901 LEOPARD STREET. RM. 304
CORPUS CHRISTI, IX 78401
PHONE: (361) 888-0556 FAX: (361)888-0584
November 7, 2014
Honorable Joe Benavides, Justice of the Peace, Precinct 1 Place 1

Honorable Samuel Loyd Neal, Jr., County Judge
Re: Surprise Cash Audit performed on October 30,2014

We conducted this audit under the authority of Local Government Code 115.001 and 115.002. We performed our
audit in accordance with generally accepted government auditing standards and included inquiries, examination of
accounting records, and other audit procedures that we considered necessary under the circumstances.
Our audit period of our testing was for October 24,2014 to October 30,2014. The objectives ofthis audit were to
perform a surprise cash count of funds on site and review cash handling and accounting procedures in place.
To achieve these objectives, we:
Performed a cash count audit

Interviewed staff
Reviewed till balance'and daily close out reports for the period of October 24, 20 14.to October 30,2014
Reviewed cash receipts journal for the period of October 24,2014 to October 30,2014
Background
Judge Joe Benavides has served as JPl-1 since he was elected in 2013. His average annual budget is $222,538.
The average annual amount collected by this court over the past five years is $507,313. He currently has four
full-time employees (including him) and one temporary employee.
Conclusion
During the cash count and related review of accounting procedures, we observed the office did perform daily
closeout and prepared daily deposits. The office follows proper procedures to insure county monies are adequately
safeguarded.
We also identified three instances where internal controls were below minimum standards. Internal control
standards establish the minimum level of quality acceptable in business operations. Internal controls help to
ensure compliance with laws and regulations, as well as to help safeguard county assets against waste, loss, and
misuse. The internal control weaknesses present at the time of the audit were separation of duties regarding case
assignments, no printed documentation to verify that change fund is counted, and unreceipted mail receipts.
A complete and detailed explanation of each of the findings as well as recommendations for improvement are
presented in the section, Opportunities for Improvement, immediately follows this page. Several of the flDdings
require management's attention and a written response is necessary in order to evaluate compliance with your
action plan in the future.
We would like to express our sincere appreciation in providing our office full access and cooperation in order to
complete this audit
Sincerely,
CWx
Dale Atchley, CPA
Nueces County Auditor
cc: Commissioner Joe A. Gonzales
'/Ms. Elva Fuentes, Internal Audit Supervisor
Opportunities for Improvement
_tit
..
Internal Control Weaknesses
The Nueces County Fraud Policy states that "Every county official/department head shall develop and maintain
an internal control system that is to be clearly documented and readily available for examination in compliance
with this Policy. The internal control system should compose five standards: (1) control environment, (2) control
procedures, (3) risk assessment, (4) communication and reporting, and (5) monitoring. Objectives for each of
these standards are to be identified or developed for each office/department activity and are to be logical,
applicable and complete. Documentation of the office/department's internal control system will provide an
organizational structure for management directives, administrative policy, accounting policies, procedures and
manuals, and audit reports."
The internal control standard #1 control environment is where the environment is set to be committed in adhering
to the organizations policies and procedures and its ethical and behavioral standards.
The internal control standard #2 control procedures indicates controls are performed at various levels to reduce
risks in achievement of fmancial reportiugobjectives. Controls can either be preventive or detective. The intent
of these controls is different. Preventive controls attempt to deter or prevent undesirable events from occurring.
They are proactive controls that help to prevent a loss. Examples of preventive controls are separation of duties,
proper authorization, adequate documentation, and physical control over assets. Example of detective controls are
reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
Control Procedures - Separation ofDuties
Attachment I of the Fraud Policy states under Control Procedures - (3) a-b Separation of Duties states as follows:
Separation ofduties may be incorporated into the job descriptions. The main point ofthis is to heighten
awareness of those positions that have full control ofa transaction. Key duties and responsibilities that
show a separation ofduties are:
a. Having the custody of assets, having authority to perform the transaction, having the
responsibility to record the transaction and having the responsibility to reconcile or approve the
transaction cannot be performed by the same individual. In small offices where an employee is
out sick or on vacation and one individual has to perform all duties then a review has to be
completed by upper level management or upon return of the absent employee. Deliberate
procedures must be in place in such situations.
b. The process ofreceiving assets and-issuing assets has to be ccn:efully monitored For example a
JP clerk who receives payments should not be responsible for issuing refunds without having
another person involved in the process.
14-01
Separation of Duties
We observed that each court clerk has been designated to handle specific case types (Traffic, Juvenile,
~d Civil). Each clerk has authority in their assigned case type to assess fines/fees, make adjustments, and
In other words, they have full control ofthe case.
Issue
and duties involving transactions and events should be separated among

to assessing fmes/fees, adjusting fmes/fees, collecting and receipting payments,
cases. The fewer actions performed by a single employee the greater the
,'"'....""UJ'UU.1t;S
separation of duties, thus the more effective the internal controls are (preventive control). When staff is reduced,
managements close control and documented review becomes critical (detective control).
Control Procedures - Tzmeliness and Performance Standards

Attachment I of the Fraud Policy states under Control Procedures - 2) Timeliness and Performance Standards
states:
All transactions and other significant events are to be promptly recorded, clearly documented and
properly classified. Documentation of a transaction or event should include the entire process or life
cycle ofthe transaction or event, including:
a. The initiation or authorization ofthe transaction or event
b. All aspects ofthe transaction while in process
c. The final classification in summary records
14-02 Unreceipted Mail Payments
Nueces county accounting procedures requires that money received be deposited by the next business day
upon reaching $300 or by the seventh business day from when the funds were received if less than $300.
Local Government Code 113.022 and Code of Criminal Procedures 103.004 state that "a county officer
shall deposit the money with the county treasurer on or before the next business day after the date on
which the money was received. If the deadline cannot be met, the officer or person must deposit the
money, without exception, on or before the fifth business day after the day on which the money is
received."
It is the fiduciary duty of the officer to safeguard county assets by complying with the state statutes and
county policy. Excessive accumulation of cash increases the risk of loss due to mishandling and theft.
At the time of the audit, there were 20 checks totaling $ 421.25. Ten of the checks were received in
October and ten were received in July, August, and September. The checks for July, August, and
September ranged from $1 - $ 5. Most of the checks are mostly for civil cases. The office does maintain
a daily log of monies received and is maintained in a binder.
Recommendation: All payments should be timely receipted and deposited in accordance with County and state
statutes (Local Government Code.I13.0l2 and Code oferirrrinalProcedures 103.004).
14-03
Change Fund Count Not Properly Documented

All steps of the daily closeout procedure should be clearly documented from beginning to end. A
supervisor'S approval (manual or electronic) implies verification and validation. Proper documentation
provides an adequate trail for review by management and auditors.
This office does not have any documentation on daily closeout work papers indicating that all monies
were counted. This office utilizes the Odyssey system by entering the starting balance (change fund) and
at the end of the day they count all monies including change fund. This process is followed by most JP
offices we have visited. But the Odyssey system does not provide a detailed printout of counted monies.
Recommendation: That a simple calculator tape of the counted monies is attached to each clerks Odyssey
deposit report. The supervisor can then initial the tape so that they verify all monies including change fund were
counted by the clerk (preventive).
5
OFFICE
OF
COUNTY
THE
AUDITOR
D I A N A ROSAS, M A M .
ELVAFUENTES
FIRST A S S I S T A N T
INTERNAL A U D I T SUPERVISOR
DALE ATCHLEY, C P A
COUNTY AUDITOR
LISA DAVIS, C I . O .
EXECUTIVE A C C O U N T A N T
901 LEOPARD STREET, R M 304

C O R P U S C H R I S T I , T X 78401
P H O N E : (361) 888-0556 FAX: (361) 888--0584
November 21,2014
Honorable Lany G. Cox, Justice of the Peace, Precinct 2 Place 2

Honorable Samuel Loyd Neal, Jr., Counly Judge
Re: Surprise Cash Count Audit performed on October 28, 2014

We conducted this audit under the authority of Local Govemment Code 115.001 and 115.002. We performed our
audit in accordance with generally accepted govemment auditing standards and included inquiries, examination of
The audit covered the period of October 10, 2014 to October 29, 2014. The objectives of this audit were to
perform a surprise cash count of funds on site and review cash handling and accountmg procedures in place at
time of the audit.
Performed a surprise cash count audit

Interviewed staff
Reviewed till balance and daily close out reports for the period of October 10, 2014 to October 29, 2014
Reviewed cash receipts journal for the period of October 10, 2014 to October 29, 2014
Reviewed 102 manual receipts
Background
Judge Larry Cox has served as JP2-2 since February 1, 1980. His average annual budget is $203,724. Judge Cox
served as presiding judge for the years of 2010 and 2011. The average annual amount collected by this court over
the past five years is $285,989. He currently has three full time employees and one temporary employee.
Over the last couple of years, this office has had turnover. Clerk turnover has been one each year for the last three
years. The temporary position turnover is two to three times every year.
Justice of the Peace 2-2
Page 1
Conclusion
During the cash count audit, the first thing noticed was the volume of manual receipts used by this particular
office. It appears that this court uses a higher volume of the manual receipts compared to other courts. The
inability to monitor fhe volume of manual receipts resulted in various findings including a possible theft of $672,
variances in amounts and tender types when transferring receipts to the Odyssey system along with delays in
transferring receipts. Due to the fact that there was possible theft, there will be a full audit scheduled in the near
future.
Eight instances were identified that intemal controls were below minimum standards. Intemal control standards
establish fhe minimum level of quality acceptable in business operations. Intemal controls help to ensure
compliance with laws and regulations, as well as to help safeguard county assets against waste, loss, and misuse.
The intemal control weaknesses present at the tune of the audit were untimely deposits, untimely receipts, hot
check restitution monies not properly handled, manual receipts not used m sequential order or monitored, no
printed documentation diat change fund is verified and manual receipts not properly filled out. Other findmgs
include commingling of monies for employee group lotto ticket monies with county monies and money orders not
restrictively endorsed.
presented in the section, Opportunities for Improvement, immediately follows this page. Several ofthe fmdings
complete fhis audit.
Sincerely.
cc:
Honorable Mike Pusley, Nueces County Commissioner Pet. 1

Honorable Joe A. Gonzalez, Nueces County Commissioner Pet. 2
Honorable Oscar O. Ortiz, Nueces County Commissioner Pet. 3
Honorable Joe McComb, Nueces County Commissioner Pet. 4
Ms. Elva Fuentes, Intemal Audit Supervisor
Justice ofthe Peace 2-2
Page 2
14-01
Cash Missing (Manual Receipts)

There were four instances when manual receipts were not receipted in the Odyssey system. They were
processed by one particular clerk and were mostly cash. These receipts total to be $ 672.00.
There was one receipt that was marked out "void" but also marked "pd in full". This payment was never
receipted in the case. However, fhe ledger indicates various subsequent payments were made after the
date of the manual receipt.
This prompts further review on this clerk's transactions in a fUture audit.
Recommendation: Management/supervisors must review manual receipts more thoroughly to verify receipts
have been transferred to the Odyssey system (preventive control).

The Nueces County Fraud Policy states that "Ever)' county official/department head shall develop and maintain
an intemal control system that is to be clearly documented and readily available for examination in compliance
applicable and complete. Documentation of the office/departmenfs intemal control system will provide an
The internal control standard #1 control enviromiient is where the environment is set to be committed in adhering
Intemal control standard #2 control procedures is where controls are performed at various levels to reduce risks in
achievement of fmancial reporting objectives. Controls can either be preventive or detective. The intent of these
controls is diflferent. Preventive controls attempt to deter or prevent undesirable eventsfromoccurring. They are
proactive controls diat help to prevent a loss. Examples of preventive controls are separation of duties, proper
authorization, adequate documentation, and physical control over assets. On the other hand, example of detective
controls are reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
internal control standard #5 Twow^foWng- is determining-whether intemal control is adequately designed, properly
executed and effective. Intemal control is adequately designed and properly executed if all five intemal control
components are present and flmctioning as designed. Monitoring must be continuous and ongoing so that
corrective action can be taken in a tunely manner.
Control Procedures: Timeliness and Performance Standards
Attachment I of the Fraud Policy states under Control Procedures - 2) Timelmess and Performance Standards
states:
All transactions and other significant events are to he promptly recorded, clearly documented cmd
a. The initiation or authorization of the transaction or event
Page 4
14-02 Untimely Deposits

Local Govermnent Code (LGC) 113.022 and Code of Criminal Procedm-es (CCP) 103.004 state that "a
county officer shall deposit the money with the county treasurer on or before the next business day after
the date on which the money was received. If the deadline cannot be met, the officer or person must
deposit the money, without exception, on or before the fifth business day after the day on which the
money is received."
Part of the cash audit plan is to examine the last three deposits. Clerks close their individual tills every
day, and then die administrative secretary prepares a deposit for all monies collected. One of the three
deposits tested was for seven (7) business days.
Recommendation: Deposits be prepared daily to avoid accumulation of excess monies. A l l payments should be
deposited in accordance with county policy and state statutes (LGC 113.022 and CCP 103.004).
14-03 Untimely Receipting of Manual Receipts to the Odyssey System
There were ten receipts showing a delay transferring receipts into the Odyssey which ranges fi'om 8 to 10
days. Then, there were three receipts that showed a delay of 31 days or more. The two of the three
receipts were cash transactions totaling $627. The third receipt did not indicate a tender type. Most of
these receipts were prepared by the same clerk as mentioned in finding (14-01).
A l l these receipts should have been transferred immediately into the Odyssey system. This presents an
opportunity for fraud, misuse, theft, or loss. If there were questions that delayed fhe clerk from
fransferring die receipts to the Odyssey system, the fimds should be have been deposited as a separate
deposit. As issues get resolved, then transfer receipt into the Odyssey system.
Recommendation: As in finding 14-02, all payments should be deposited in accordance with county policy and
state statutes (LGC 113.022 and CCP 103.004).
Control Procedures: Monitoring -Adequate and Continuous Supervision

Attachment I ofthe Fraud Policy states under Monitoring states:
Adequate and continuous supervision is a critical component to the prevention of fraud. Supervisors are
responsible for maintaining operating levels, meeting or exceeding goals and objectives and
implementing changes. Some examples of documentation to have on hand to show that monitoring is
being performed are:
J) Wât evidence exists that supervisory review has occurred? Where in the process does a supervisor
sign off and how often? What do they sign off on? i.e., timesheets, performance reports, exceptions, etc. ?
14-04 Hot Check Restitution Monies Not Properly Handled
Currently, the process of handling hot check cases is normally that the defendant brings in separate
payment for tiie county portion and a separate payment for the merchant. The separate payment for the
merchant is normally payable to the merchant and is receipted as a "restitution to merchanf type in the
Odyssey system to document those monies was received. Then the court will mail out the payment
directly to the merchant. There are some cases where the defendant has the money order payable or has
paid in cash to the court. When that happens, it also receipted in the Odyssey system with appropriate
tender type and deposited. Then the court requests a check from the auditors office to be forwarded to tiie
merchant.
Page 5
TMs court has a bank bag that holds checks payable to the merchant. Once a week, the checks are mailed
to the merchants. At die tune of the audit, diere were two checks payable the Judge Cox and one check
was payable to Jenny Craig. One of those checks was dated 4/13/12 had not been receipted; the next
check is a refund from Peter Piper claiming the check they received was not theirs. The money order
payable to Jenny Craig stated it did not belong to them. There was no indication of follow-up action on
these money orders. These items were in the possession of the clerk mentioned in fmding 14-01.
Recommendation: Management/supervisors must review each employees work to ensure procedures are
properly followed. Management/supervisors must review that checks submitted to the proper merchant.
14-05 Change Fund
There is no documentation on daily closeout work papers indicating that all monies were counted. This
department utilizes the Odyssey system to enter the starting balance (change fimd). This seems to be fhe
norm for most JP offices we have visited. Clerks count their monies and enter the amounts in the
Odyssey system. But die Odyssey system does not provide a detailed printout of counted monies.
Recommendation: That simple calculator tape of the counted monies is attached to each clerks Odyssey deposit
report. This would provide for adequate documentation that all monies were counted by clerk mcluding change
fund.
14-06 Manual Receipts Not Used In Sequential Order or Monitored
Part of the cash audit is to take inventory of manual receipt books on hand. We reviewed the past two
years because that is when the new Odyssey software was put m place. We perform random testing to
confirm payments were transferred (receipted) to the Odyssey system.
This office uses manual receipts in times when fhe Odyssey system is down or when there is a question
on the case and the supervisor is not available. There is a manual receipt book assigned to each clerk. It
appears that this court uses a higher volume of the manual receipts compared to other courts. There were
129 manual receipts used m the last two fiscal years. There were some instances where blank receipts
were not voided out and/or missing one part of the 3-part receipt.
We performed rMidom testing of receipts on each manual receipt book. Random testmg of one the clerk's
manual receipt book triggered questions and mdicated some of the receipts had not been receipted into the
Odyssey system. This led to 100% testing on this particular clerk's receipts.
Best business practice is lhat manual receipts be used in sequential date and number order for easy
reconcilement. Due to this office not having control or monitoring the manual receipts has led to cash
missing (Refer to 14-01).
Recommendation: That manual receipts be used one book at a time and ui sequential order. If a receipt is
inadvertently skipped, the unused receipt needs to be immediately marked "VOID and not used" and initialed by
supervisor (preventive control). Just like all voids should be marked "VOID", initialed by supervisor with a
reason for the void. Remaining receipt books should be kept in the safe. Management must ensure receipts are
properly utilized. Local Govemment Code 103.11 indicates the county auditor has authority over receipt books.
The county auditor can request receipt books be turned over if not utihzed properly.
Page 6
Other Manual Receipt Findings

Code of Crimmal Procedures (CCP) Art. 103.010. RECEIPT BOOK states:
(b) An officer who collects fines or fees in a crimmal case shall give the person paying the money a
receipt fi-om the receipt book. The receipt must show: (1) the amount of money paid;(2) the date the
money was paid; (3) the style and number of the case in which the costs were accrued;(4) the item of
costs;(5) the name of the person paymg the money; and(6) the official signature of the officer receiving
the money.
(c) Instead of a receipt book, each officer collecting fmes or fees in criminal cases for die county may
maintain the information hsted in Subsections (b)(l)-(5) m a computer database. The officer shall
provide a receipt to each person paying a fine or fee.
The foUovmig arefindingspertaming to manual receipts:
14-07
Variances of Amounts in Manual and Odyssey System Receipts

There were five instances where the amounts shovra on the manual receipt did not match the amounts m
the Odyssey computer receipts. Three receipts were combmed with an over the counter payment because
the plaintiff had not submitted the proper eviction filing fee. The other two had unexplained differences.
14-08
Variances of Tender Type in Manual and Odyssey System Receipts

There were three instances in which the manual receipt indicated cash was received but when it was
transferred to the Odyssey system; it reflected either money order or check tender method.
14-09
Manual Receipts not Completely Filled Out

There were thirteen instances where the receipts were not completely filled out. Four receipts did not
have the date, three did not have fhe style of case, diree did not have the name of the payer, and three did
not have the signature of the clerk acceptmg the money. Two of those instances above had multiple
issues.
Recommendation: That staff needs be further trained in the Odyssey system m effort to minimize the use of
manual receipts. However, the staff needs to be trained to fill out manual receipts properly and comply with CCP
103.010(b). Also, it is recommended that the manual receipt number be referenced in the comment data field of
the Odyssey computer receipt.
Other Findings
14-10
Commingling of Funds - Lotto Ticket Monies Kept in County's Safe

When a fiduciary, a person entrusted with the management of funds other than his or her own in tmst
mixes trust money with that of others, the fiduciary is commmgling funds and thereby breaching his or
her fiduciary duty.
At the tune of the audit, monies were not found but it appears that staff keeps monies collected for group
lotto tickets in the safe.
Recommendation: That items that are not county property be removed from the safe. That only county property
and monies be kept in the safe. The purpose of the safe is to safeguard county assets only not personal property.
Management needs to ensure fhe safe is used strictly for counly purposes.
Page 7
14-11 Money Order and Check not Restrictively Endorsed

Two money orders were not restrictively endorsed upon receipt (Refer to 14-03). To safeguard the
county's assets, money orders and checks should be stamped immediately with a restrictive endorsement.
Checks that are not restrictively endorsed upon receipt are at a greater risk of misappropriation.
Recommendation: That all checks and money orders be immediately restrictively endorsed upon receipt.
Page 8
OFFICE
D I A N A ROSAS,
OF
THE
COUNTY
AUDITOR
M A M .
ELVA FUENTES
FIRST ASSISTANT
INTERNAL A U D I T SUPERVISOR
DALE ATCHLEY, C P A
C O U N T Y AUDITOR
LISA DAVIS, C I . O .
901 L E O P A R D STREET, R M 304

C O R P U S C H R I S T I , T X 78401
P H O N E : (361) 8 8 8 - 0 5 5 6 " FAX; (361) 888-0584
October 17, 2014

Honorable Robert Balderas, Justice of the Peace Precinct 1, Place 3
Re: Justice of the Peace Precinct 1 Place 3 Audit (JPl-3)
On the moming of Monday, October 6, 2014, the coimty auditor's office was notified of a tfaeft that occurred
during the early moming hours of Simday, October 5, 2014 at the Bill Bode County Building. This facility is
currently occupied by Justice of the Peace Precinct 1 Place 3 (JPl-3) and Constable Precinct 1. The Corpus
Christi Police Department conducted an investigation. On Tuesday, October 7, 2014, the coimty auditor's office
conducted a cash audit and a review of the facility to determme the loss incurred by the county.
We conducted this audit under the authority of Local Govemment Code 115.001 and 115.002. We performed our
audit in accordance vrith generally accepted govermnent auditing standards and included inquiries, examination of
accounting records, and other audit procedures that we considered necessary under the circimistances.
Our audit period of our testing was for October 1, 2014 to October 7, 2014. The objectives oftihiisaudit were to
determine; the amount ofloss due to theft and related property damage; review security in place to safeguard
county funds and property; perform a cash count of fiinds on site; review cash handling and accounting
procedures in place.
To achieve these objectives, we;
. _]nspected!the premises;;
Inspected damage at the facihty
Interviewed staff
Inventoried fixed assets
Reviewed till balance and daily close out reports for the period of 10/1/14 through 10/6/14
Reviewed cash receipts journal for the period of 10/1/14 through 10/7/14
Obtained a copy of the police report

Background
The JPl-3 office is located m the B i l l Bode County Building at 11408 Leopard Street, Corpus Christi, T X 78410.
Constable Precinct 1 previously maintained an office space at the B i l l Bode Building but has since moved tiie
primary office to the Nueces County Courthouse. Currently, the constable utilizes the space primarily as storage.
1
The building was also the secondary otFice for Commissioner Precinct 1, Mike Pusley, but he has moved his
office to the Hilltop Community Center, located across die street from the B i l l Bode Building. The space
formerly used by the Commissioner is now used as a secondary ofSce area for the JPl-3 administrative secretary,
who also maintains a primary workstation in the JPl-3 area.
The Bill Bode Building is managed by the Public Works department. The average annual budget for this buildiog
is $ 63,445. There is one employee under this budget.
Judge Robert Balderas has served as XPl-3 since he was elected in 2003 and has served as Presiding Judge for the
term of 2005-2007. His average annual budget is $ 217,549. He currently has four full-time employees and two
temporary employees. The average annual amoimt collected by this court over the past five years is $ 195,382.
Conclusion
The county suffered a cash loss of $300, which was tiie approved change fund amount, as well as addition costs
related to damage to property and the facility itself We observed that the loss could have been avoided if
adequate building securities would have been put in place at the BiU Bode County Building.
The fixed assets were inventoried and identified.
During tibe cash count and related review of accounting procedures, we observed the office did follow timely
deposit procedures which minimized the amount of the cash loss. However, we identified seven Instances where
intemal controls were below minimum standards. Intemal control standards estabhsh the minimum level of
quality acceptable in business operations. Intemal controls help to ensure compliance with laws and regulations,
as well as to help safeguard county assets against waste, loss, and misuse. The internal control weaknesses
present at the time of the audit were a lack of separation of duties, insufficient authorization of reductions in
Odyssey system, insufficient documentation of void authorization in Odyssey system, password integrity
compromised, clerk ID not adequately identified on Odyssey receipts, overpayments are not receipted, and change
fimd kept in safe during business hours.
presented in the section. Opportunities for Improvement, immediately follows this page. Several of the findings
complete this audit
Sincerely,
Dale Atchley, CPA

14-01 Building not Adequately Secured

The county suffered a loss of assets at JPl-3 and damage to property at tiie BiU Bode County building
resulting from a theft tiiat occuired on the early moming of Sunday, October 5. The county's loss of cash
totaled $300 and the costs of aU o f the damages to the building and tbe contents within have yet to be
detemiined.
Loss due to theft and destmction of county property are costly to both the county and the taxpayers.
When a theft occurs, the coimty suffers the immediate loss of assets (such as cash and property) and the
cost of repairs due to damages. The county also suffers a long term on-going expense as the cost of
insurance may increase as a result of the theft for years to come.
We observed multiple security issues that may have contributed to the loss incurred.
The B i l l Bode building has four access doors: public, employees, constable, and judge. The public front
entry way is a double-door entry with clear glass panels framed in metal which has only single lock. H i e
glass panes of the doors do not have security film to prevent possible burglars from lurking. We also
observed that there was an approximately V2" gap between the two doors which would allow sufficient
room for any large metal tool to be used as leverage to break the doors open and gain access.
There is no monitored alarm system on the building, which provided ample time for assets to be taken and
damages to occur. There is a C C T V system at this building, but it is not adequate as it does not provide a
clear visual of what is being videoed and the placement of the cameras does not monitor aU entrances and
exits.
Recommendation: Measures should be taken to adequately safeguard assets and facihty. We recommend that an
alarm system be installed. We recommend a security review be performed on the facihty on a regular basis. This
review will ensure security of the building and safety of employees and the public, therefore, minimizing the
future possibility ofloss.

XherNueces County Fraud Policy states that-"Every county official/department head shall develop and-maintain
an intemal control system that is to be clearly documented and readily available for examination in compliance
with this Policy. The internal control system should compose five standards: (1) control environment, (2) confrol
applicable and complete. Documentation of the office/department's intemal control system will provide an
organizational stmcture for management directives, administrative policy, accounting policies, procedures and
Tbe intemal control standard #1 control environment is where tbe environment is set to be committed in adhering
Tbe intemal control standard #2 control procedures indicates controls are performed at various levels to reduce
risks in achievement of financial reporting objectives. Controls can either be preventive or detective. The intent
of these controls is different. Preventive controls attempt to deter or prevent undesirable events from occurring.
4
revievi's, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
Control Procedures - Separation of Duties

Attachment I of the Fraud Policy states under Control Procedures (3) a~b Separation of Duties states as follovi's:
Separation of duties may be incorporated into the job descriptions. The main point of this is to heighten
awareness of those positions that have fiill control of a transaction. Key duties and responsibilities that
show a separation of duties are:
completed by upper level management or upon retum of the absent employee. Deliberate
procedures mmt be in place in such situations.
b. The process of receiving assets and issuing assets has to be carefully monitored. For example a
14-02
We observed.that each comt cleric has been designated to handle specific case types (Traffic, Juvenile,
and Civil). Each clerk has authority in their assigned case type to assess fines/fees, make adjustments, and
issue receipts. In other words, they have full control of the case.
Recommendation: Responsibilities and duties involving transactions and events should be separated among
different employees vvdth respect to assessing fines/fees, adjusting fines/fees, collecting and receipting payments,
and maintauiing custody of the cases. Die responsibility for opening mail should be assigned to individuals who
have no responsibility to assess fmes/fees. The fewer actions perfonned by a single employee the greater the
separation of duties, thus the more effective the intemal controls are (preventive control). When staff is reduced,
Control Procedures Proper Authorization

Attachment I of the Fraud Policy states under Control Procedures - (1) Proper Authorization states "Transactions
and other significant event are to be authorized and executed only by persons acting witiiin the scope of their
authority. Authorizations should be clearly communicated to managers, supervisors and employees and should
include the specific conditions and terms under which authorizations are to be made."
14-03
Insufficient Authorization of Reductions in Odyssey

Currently, Odyssey does not require an authorization to make a reduction in the fees assessed, and there is
no notation from the judge to approve the reduction. When authorization is not required for the reduction
of fines and fees, it reduces the effectiveness ofthe intemal controls.
14-04
Insufficient Documentation of Void Authorizatious in Odyssey

Currently at JPl-3, there are two clerks that have the approval rights in Odyssey to void transactions.
Those two clerks have the authority to issue a receipt and void the same transaction. Per interview, the
two clerks stated that they get a verbal approval from each other to void the receipt that tiiey issued. There
is no written evidence (audit trail) tiiat the autiiorization occurred and this reduces effectiveness of
intemal controls.
Recommendation: For 14-03 and 14-04, current practices in place should be modified to be in agreement with
county intemal control pohcies. The Odyssey system needs to be default setup that the person who issued the
receipt cannot be the same user which approves (review) the voiding, adjusting, or reversing of that s ^ e receipt
(preventive control). It is preferred that a supervisor authorize a void, adjustment, or reversal. But it is not
necessary i f a dual-control principle is put in place this way there is another person confirmiag the action in the
event the supervisor is not available.
Control Environment -Adhere to County Policies

The intemal control standard #i control environment is where the enviromnent is set to be committed in adhering
to the organizations policies and procedures and its ethical and behavioral standards. Management needs to assure
tbat employees are well acquainted with County and departmental policies and procedures that pertain to their job
responsibilities.
14-05
Password Integrity
Per tiie Nueces County Network Communications Policy, Violations and Prohibited Used, 3.2.2., it is
strictly prohibited to "adopt the identity of another person on any electronic message, attempting to send
electronic mail anonymously, or using another person's password."
During interview witii staff, it was disclosed that passwords have been compromised. This compromises
the integrity of the audit trail and the accountability of the system. This occurred because the employees
did not have access to electronic files.
Recommendation: Documents should be saved on a shared network so designated employees will have access
to those files as needed. Management-needs to make sure eanpJoyees..are. cross-trained and,_tiiatthej^ each have
proper access (with their own sign in) to files needed in effort to perform job duties without compromising
intemal controls.
14-06
Clerk not Adequately Identified on Odyssey Receipts

System software security controls are an integral part of intemal control activity that helps ensure
managements directives to mitigate risks. System softwê security controls provide for assigned access
and documented use of system software. There should be consistency in setting up security roles for
users and assurance that system output is also consistent.
During the cash count audit, it was determined that at least two of the clerks Odyssey receipts did not
identify the clerk that issued the receipt. However, the system fmancial ledger of those cases did reflect
the clerk ID on the transaction line item.
6
Recommendatioii: Nueces County Information Technology department should be contacted and instructed that
receipts for departments utilizing Odyssey be standardised.
It should be noted that when it was discovered during tiie course ofthe audit that Odyssey was not indicating the
clerk ID on the receipts of two of the clerks, the staff at JPl-3 contacted the county's infonnation technology
department and this issue has been corrected for those two clerks.
Control Procedures Timeliness and Performance Standards

Attachment I of the Fraud Pohcy states under Control Procedures - 2) Timeliness and Performance Standards
states:
cycle of the transaction or event, including:
a The initiation or authorization ofthe transaction or event
b. All aspects of the transaction while in process
14-07
Overpayments are Not Receipted

Nueces county accounting procedures requires that money received be deposited by the next business day
upon reaching $300 or by the seventh business day from when the funds were received if less than $300.
Local Govemment Code 113.022 and Code of Criminal Procedures 103.004 state that "a coimty officer
shall deposit the money with the county treasurer on or before the next business day after tiie date on
money, without exception, on or before the fifth business day after the day on which the money is
received."
It is the fiduciary duty of the officer to safeguard county assets by complying with the state statutes and
county policy. Excessive accumulation of cash increases the risk of loss due to mishandling and theft.
Currently, the office: does not receipt overpayments received-by mail. They contact the defendant to^notify
tiiem and instmct them to pick up the overpayment. The payment remains in the office until defendant
picks it up.
Another scenario is that when a defendant brings in a payment which is over the amount due, the office
does not receipt it. They instmct the defendant to bring back the check, money order, or cashier's check
for the correct amount. This is inconvenient for the defendant. The current policy is, i f there is an
overpayment for $5.00 and under, it becomes county revenue. If payment is $5.00 and over the amount
due, a check is issued to the party tibat overpaid. The Odyssey software is set up for this overpayment
procedure and otiier JP courts are currently utilizing it.
Recommendation: A l l payments should be receipted and deposited in accordance with County and state statutes
(Local Govermnent Code 113.022 and Code of Criminal Procedures 103.004). In the event that an overpayment
is received and a refund is due to the payer, it needs to be properly receipted in the Odyssey software. Then, an
7
order to pay disbursement request also referred to as a check request should be prepared, and then signed by the
judge. The request and the supporting documentation, including a copy of receipt indicating that a refund is due,
should be submitted to the county auditor's office.
Control Procedures - Safeguarding of Assets

Attachment I of the Fraud Policy states under Control Procedures (4) Safeguarding of Assets (Preventive and
Detective controls) states:
What physical controls are in place to protect assets? Who has the keys to the vault and is access to the
vault limited?
Is money left on top of desks unattended?
Restrictions on access to resources will depend upon the vulnerability of the resource and the
perceived risk ofloss, both of which shall be periodically assessed (Preventive).
Periodic comparison shall be made between the resources and recorded accountability of the
resources to reduce the risk of unauthorized me or loss and protect against waste and wrongful
acts. The vulnerability and value ofthe county resources shall determine the frequency of this
comparison (Detective).
14-08
Clerk's Change Fund Kept in Safe during Business Hours

The current practice at the JPl-3 office is tiiat clerks would keep their change fiind in the safe during the
business day. A s funds were received and change was needed, the clerks would go to the safe to put the
money in then till and make change as needed. This practice caused increase in traffic to and from the
safe, while customers waited, which in tum increased the customers exposure to the location of the safe.
It was also confirmed that the change fimd is counted every day, but there is no documentation as such on
their daily closeout work papers.
Recommendation: Each clerk's designated change fund should be retrieved from the safe at the beginning of the
work day and kept in a locked drawer m their workstation during the day. A t the end of the business day after the
till/change fund is reconciled; we then recommend that the change fund be retumed to the safe for safekeeping
ovemight. Clerks should count their change fund at the beginning and end of their shift to verify amount is
correct (preventive)-and-needs-to be documented m-tlieir daily closeoutwork papers.
OFFICE
OF
THE
COUNTY
AUDITOR
DIANA RoSAS, MAM.

FIRST ASSISTANT
ElVA FUENTES
INTER.'lAl AUDIT SUPERVISOR
DAlE ATCHLEY, C.PA

COUNlY AUDITOR
LISA DAVIS, CI.O.

EXECUTM ACCOUNTANT
901 LEOPARD STREET, RM 304

CORPUS CHRISTI, TX 78401
PHONE: (361) 888-0556 FAX: (361) 888-0584
November 17,2014
Honorable Duncan Neblett, Justice ofthe Peace, Precinct 4

Re: Surprise Cash Audit performed on October 29, 2014

The audit covered the period 9115114 to 10/24/2014. The objectives oftbis audit were to perform a surprise cash
count of funds on site and review cash handling and accounting procedures in place.

futerviewed staff
Reviewed till balance and daily close out reports for the period 9115114 to 10/24/14
Reviewed cash receipts journal for the period 9115114 to 10/24/14
Background
JP4 is located in the city of Port Aransas, Texas. Judge Neblett has been the justice of the peace since January 3,
1993. Judge Neblett has managed an average budget of$ 161,121 and has two full time employees: administrative
secretary and a court clerk. The average overall collections for the past five years are $ 244,102. From the date
of the last audit in 2009, cases filed declined by 48.3% and cases disposed declined by 39.65% in comparison to
FY2013. Office of Court Administration (OCA) data is not complete for this court; last report submitted to OCA
was in May 2014. As a result of the decline in court activity, overall collections declined by 39% and revenues
have declined by 21 % from 2009 in comparison to FY2014
This office has had turnover in the last couple of years. The court clerk position has had a new hire each year.
There were two new temporary hires in the current year and two new temporary hires in the prior year.
The new Odyssey software was implemented in June 2012. All files from the FullCourt (previous software) were
converted to the new Odyssey software. This software has many of the same capability as FullCourt as to OCA
reporting, Omnibase reporting, Linebarger collections, etc.
Justice ofthe Peace 4 Cash Audit
Page 1
The last audit of this office was the investigative audit of December 9, 2009. This audit revealed seventeen
[mdings: six fraudulent [mdings, eight weakness in internal controls, and three general findings. These [mdings
contributed to the theft of $ 85,532 by the administrative secretary. The case was prosecuted by the district
attorney's office and the employee was convicted in 2014. Loss due to this theft was costly to the county and the
taxpayers. In addition, the county insurance costs increased for five years due to the county being considered a
risk.
Conclusion
During this cash audit, a total of fourteen [mdings were noted: eleven weaknesses in internal controls; one was
non-compliance in OCA reporting, and two general [mdings. The internal control weaknesses include: lack of
management review/supervision, administrative secretaIy has full control of office operations, lack of separation
of duties, daily closeout documentation not retained, administrative secretary maintains key to clerk's cash box.
passwords are shared, untimely deposits, untimely receipts, administrative secretary does not follow required
Odyssey deposit procedures, monies not kept in safe overnight, and safe which is in need of repair or replacement.
Other [mdings were change fund not utilized and money order and check were not restrictively endorsed.
Internal controls help to ensure compliance with laws and regulations, as well as to help safeguard county assets
against waste, loss, and misuse. The level of internal controls has weakened even further since the theft audit. It
clearly indicates a disregard to compliance of audit recommendations, laws and regulations, and county policies.
Red flags on top of the already severely weak internal controls are the drastic decline in overall collections and
revenues corresponding to the decline in cases filed and cases disposed since the last audit five years ago.
The [mdings in this cash audit have set the tone for the environment ofthe office. This situation places the county
at an extraordinary risk for history to repeat itself and the county to suffer another substantial loss. A full audit
will be scheduled in the near future.
A complete and detailed explanation of each of the [mdings as well as recommendations for improvement is
presented in the section, Opportunities for Improvement, which immediately follows this page. Several of the
[mdings require management's attention and a written response is necessary in order to evaluate compliance with
your action plan in the future.
complete this audit.
Dale Atchley, CPA

cc:
Nueces County Commissioners

Ms. Elva Fuentes, Internal Audit Supervisor
Justice of the Peace 4 Cash Audit
Page 2
Opportunities for Improvement
Page 3

The Nueces County Fraud Policy states that "Every county officiaVdepartment head shall develop and maintain
applicable and complete. Documentation of the office/department's internal control system will provide an
Internal control standard #1 control environment is where the environment is set to be committed in adhering to
the organizations policies and procedures and its ethical and behavioral standards.
Internal control standard #2 control procedures is where controls are performed at various levels to reduce risks in
achievement of fmancial reporting objectives. Controls can either be preventive or detective. The intent of these
controls is different. Preventive controls attempt to deter or prevent undesirable events from occurring. They are
proactive controls that help to prevent a loss. Examples of preventive controls are separation of duties, proper
authorization, adequate documentation, and physical control over assets. On the other hand, example of detective
controls are reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
Internal control standard #5 monitoring is determining whether internal control is adequately designed, properly
executed and effective. Internal control is adequately designed and properly executed if all five internal control
components are present and functioning as designed. Monitoring must be continuous and ongoing so that
corrective action can be taken in a timely manner.
Control Procedures: Monitoring - Adequate and Continuous Supervision

Attachment I of the Fraud Policy states under Monitoring states:
Adequate and continuous supervision is a critical component to the prevention offraud Supervisors are
1) What evidence exists that supervisory review has occurred? Where in the process does a supervisor
sign offand how often? What do they sign offon? i.e., timesheets, petformance reports, exceptions, etc.?
14--01 Lack of Management SupervisioniReview

Lack of supervision was a finding in the prior audit. Lack of supervision continues to be an issue with this
court. This displays a disregard to prior audit recommendations, the Nueces County Fraud Policy, and
other county policies.
Currently, there is no evidence of management review in the daily cash management procedures. This
gives all authority to the supervisor (administrative secretary). The lack of management review increases
the opportunity to commit and conceal fraud. Therefore, represents a high risk to the county overall.
Recommendation: It is imperative that management comply with prior audit recommendations and county
policies. Management should be more involved in everyday cash management review.
Page 4
Control Procedures: Separation ofDuties
Attachment I ofthe Fraud Policy states under Control Procedures
(3) a-b Separation of Duties states as follows:
Separation ofduties may be incorporated into the job descriptions. The main point of this is to heighten
awareness of those positions that have full control ofa transaction. Key duties and responsibilities that
show a separation ofduties are:
b. The process ofreceiving assets and issuing assets has to be carefully monitored. For example a
14-02 Administrative Secretary has Full Control

In the prior audit, the administrative secretary has breached internal controls by assuming all
responsibilities. Currently, the administrative secreta:ty has the password log-in for the clerk's access to
Odyssey software (Refer 14-06) and the key to the clerk's cash box (Refer to 14-05). With all this access,
an employee has the capability to manipulate the fmancial system, therefore, presenting a high risk for
data integrity to be jeopardized. The previous audit presented this situation and the administrative
secretary was able to manipulate a significant amount of system data.
There is a memo issued to staff written by the administrative secretary prescribing procedures and job
duties but there is no indication or reference of management approval.
Recommendation: It is imperative that management comply with prior audit recommendations and county
policies. Management should be more involved and ensure that supervisor is appropriately supervising staff and
complying with management approved procedures and county policies.
14-03 Lack of Separation of Duties
This office has been reduced to one staff at various times of the year due to turnover. There is no
evidence that management has reviewed any of the daily operations because there is no documentation
retained of closeout (Refer to 14-04).
Since this is a small staffed office, it is important that management closely monitor all aspects of the daily
operation.
Recommendation: Duties and responsibilities involving transactions and events should be separated among
different employees with respect to assessing fines/fees, adjusting fmeS/fees, collecting and receipting payments,
and maintaining custody of the cases. The fewer actions performed by a single employee the greater the
separation of duties, thus the more effective the internal controls are (preventive control). When staff is reduced,
management's close control and documented review becomes critical (detective control).
Page 5
14-04 Daily Ooseout Work Papers not Retained

All steps of the daily closeout procedures should be clearly documented from beginning to end. A
supervisor's approval (manual or electronic) implies verification and validation.
As stated in the written job duties, the administrative secretary is responsible for auditing the daily
closeouts, but there is no evidence of what her process is or that all monies were counted and verified.
Odyssey closeouts and deposit procedures have reports associated with every step. During the audit, the
administrative secretary ran new till reports, which indicates the reports are either not printed or printed
reports are tossed. Destruction of documentation can lead to concealment of fraud.
Recommendation: That Odyssey reports for closeout and deposit procedures be retained for record. Proper
documentation must be kept on file as it provides an adequate trail for review by management and auditors. In
addition, it is recommended that a simple calculator tape of the counted monies be attached to each clerks
Odyssey Deposit Report with the initials of the supervisor on the tape indicating they verified all monies
including change fund were counted by the clerk (preventive).
14-05 Supenisor Maintains Key to Clerk's Cash Box
It was observed that the Administrative Secretary had the key to the clerk's cash box.
Recommendation: Each clerk keep their cash box key in their possession at all times once it is assigned to them.
Control Environment: Adhere to County Policies
The internal control standard #1 control environment is where the environment is set to be committed in adhering
to the organization's policies and procedures and its ethical and behavioral standards. Management must see to it
that employees are well acquainted with county and departmental policies and procedures that pertain to their job
responsibilities.
14-06 Password Integrity Compromised
Per the Nueces County Network Communications Policy, Violations and Prohibited Used, 3.2.2., it is
strictly prohibited to "adopt the identity of another person on any electronic message, attempting to send
electronic mail anonymously, or using another person's password."
During interview with the clerk, it was disclosed that the supervisor knows her Odyssey log-in passwords.
As a result, the integrity ofthe audit trail and the accountability of the system have been compromised.
It was further noted that the clerk has only been with the department only a couple of weeks. She was a
transfer from another department. Clerk indicated that she shared her login password with her previous
supervisor also.
Recommendation: Management ensures supervisors and employees are following the Nueces County Network
Communications Policy and that they each have proper access (with their own sign in) in effort to perform job
duties without compromising internal controls. Management may contact Information Technology to request
password change for clerk's log-in passwords.
Page 6
Control Procedures: Timeliness and Performance Standards
Attachment I of the Fraud Policy states under Control Procedures - 2) Timeliness and Performance Standards
states:
properly classified Documentation of a transaction or event should include the entire process or life
a. The initiation or authorization ofthe transaction or event
14-07 Untimely Deposits

Local Government Code 113.022 and Code of Criminal Procedures 103.004 state that "a county officer
shall deposit the money with the county treasurer on or before the next business day after the date on
money, without exception, on or before the fIfth business day after the day on which the money is
received."
Part of the cash audit plan is to examine the last three deposits. Two of the three deposits were for the
administrative secretary's till. One deposit dated 9/3012014 was for transactions dated 9/15/2014 through
9/30/2014 (12 business days). This was an accumulation of $ 3,880.40, $ 691 was cash and $3,189.40
was checks and money orders. The next deposit for the administrative secretary's till was 10/20/2014 for
transactions dated 10/1/2014 through 10/20/2014 (14 business days) which totaled to be $ 805.00, $ 498
was cash and $ 306.10 was checks and money orders.
Untimely deposits were also an issue in the prior audit. The previous administrative secretary would hold
on to monies in effort to apply the various schemes.
Recommendation: Daily closeout procedures must be followed and deposits prepared in a timely manner. All
payments should be deposited in accordance with County and state statutes (Local Government Code 113.022 and
Code of Criminal Procedures 103.004). It is imperative that management comply with prior audit
recommendations and county policies.
14-08 Odyssey Deposit Procedures not Followed
This office does not follow the Odyssey procedure to document that a deposit has been processed. Staff
had copies ofthe procedures on hand that were provided to all JP staff at the Odyssey training. Following
this procedure is an important tool for deposit analysis. The Odyssey Deposit report is one in which the
supervisor can use for verifIcation against the actual deposit form.
Administrative secretary made a decision to not follow this procedure without management approval.
Recommendation: That the Odyssey Deposit procedures be followed for consistency in reporting for all JP
offices.
Page 7
14-09 Overpayment Not Receipted

There was one check on hand for $97 that was dated back to 9/11114. The check was being held until a
replacement check for the correct amount is received. The check was not restrictively endorsed (Refer to
14-13) and the pay to order line was left blank. Checks not restrictively endorsed can increases the risk of
loss due to mishandling and theft.
Recommendation: All payments should be receipted and deposited in accordance with County and state statutes
(Local Government Code 113.022 and Code of Criminal Procedures 103.004). In the event that an overpayment
is received and a refund is due to the payer, it needs to be properly receipted in the Odyssey software. Then, an
order to pay disbursement request also referred to as a check request should be prepared, and then signed by the
judge. The request and the supporting documentation, including a copy of receipt indicating that a refund is due,
should be submitted to the county auditor's office.
Control Procedures: Safeguarding ofAssets

Attachment I of the Fraud Policy states under Control Procedures
Detective controls) states:
(4) Safeguarding of Assets (Preventive and
What physical controls are in place to protect assets? Who has the keys to the vault and is access to the
vault limited? Is money left on top ofdesks unattended?
Restrictions on access to resources will depend upon the vulnerability of the resource and the perceived
risk ofloss, both ofwhich shall be periodically assessed (preventive).
Periodic comparison shall be made between the resources and recorded accountability of the resources
to reduce the risk of unauthorized use or loss and protect against waste and wrongful acts. The
vulnerability and value of the county resources shall determine the frequency of this comparison
(Detective).
14-10 Cash Boxes Not Kept In Safe Overnight
Currently, both staff member keep their cash box in their locked drawer at their desk overnight. This
office does have written office policies which addresses this issue. #6 -Cash in Office states, "All monies
located in any desk are to be limited to county funds only. All payments cash or otherwise, are to be
locked securely in the safe when not in the direct care of staff. Monies should be locked up anytime when
left for extended periods of time, inclusive of lunch and office closure. Payments receipted are the
responsibility of receiving clerk until deposited."
Recommendation: That all monies be kept in safe overnight. Locking money bags can be ordered from treasury
for which each employee can lock it and place it in the safe at night.
14-11 Safe In Need of Repair or Replacement
The safe is in an adequate location. Currently, the handle comes off but combination is still needed to
access it.
Recommendation: The safe is in poor condition needs to be replaced in order to better safeguard monies.
Page 8
Compliance Finding
14-12 Office of Court Administration (OCA) Reports are Past Due
Section 71.035(b) of the Texas Government Code (GC) states that "The council may require a state
justice, judge, clerk, or other court official, as an official duty, to comply with reasonable requirements
for supplying statistics pertaining to the amount and character ofthe civil and criminal business transacted
by the court or other information on conduct, operation, or business of his court or the office of the clerk
of his court that is within the scope of the functions of the council". In addition, Section 171.2 of the
Texas Administrative Code (TAC) states that "District clerks, county clerks, justice of the peace,
municipal judges shall submit a summary-level court activity report each month to the Office of Court
Administration (OCA) using the methods required by this chapter no later than 20 days following the end
of the month reported".
In preparing audit reports, it is standard to provide background information including revenues, budget
and statistical information of the office being audited. According to the OCA reporting website, the last
report submitted to OCA was in May 2014.
Recommendation: That the office file reports immediately to become in compliance with GC 71.035(b) and
TAC 171.2. The Odyssey system has the capability and procedures are in place to expedite this reporting. It is
management's responsibility to ensure required reporting is submitted in a timely manner.
Other Findings
14-13 Change Fund Not Utilized
This office does not use the change fund. They only give change if they have it in their till. Defendants
are asked to bring exact monies. Turning away defendants because they do not have the exact payment
amount may discourage them from coming back. Therefore, a collection effort has failed. A long term
consequence is lower collections and revenues.
Excess cash on hand can lead to possible misuse, loss, or theft.
Local Government Code Section 103.902 states, "On the recommendation of the county auditor, the
commissioners court may increase or decrease the change fund at any time".
If this office chooses to not utilize the change fund, then they need to inform the county auditor.
Recommendation: If this office chooses to not utilize the change fund, then the county auditor will recommend
to the commissioners court that the change fund be turned in.
14-14 Money Order and Check not Restrictively Endorsed
The administrative secretary had one check in her till that was not restrictively endorsed. There was one
money order dated 9/11114 which was unreceipted (Refer to 14-09) and it was not restrictively endorsed.
Recommendation: That all checks and money orders be immediately restrictively endorsed upon receipt.
Page 9
OFFICE
D I A N A ROSAS,
OF
COUNTY
M A M .
AUDITOR
ELVA F U E N T E S
FIRST A S S I S T A N T
I N T E R N A L A U D I T SUPERVISOR
DALE ATCHLEY, C P A
COUNTY AUDITOR
LISA DAVIS,
c.i.o.
901 LEOPARD STREET RM 304
CORPUS CHRISTI, T X 78401
PHONE: (361) 888-0556 FAX: (361) 888-0584
November?, 2014
Honorable Robert Gonzalez, Justice of the Peace, Precinct 5 Place 1

Re: Surprise Cash Audit performed on October 29, 2014

Our audit period of our testmg was for October 24, 2014 to October 29, 2014. The objectives of this audit were to
perform a surprise cash count of funds on site and review cash handling and accounting procedures in place.
Performed a surprise cash count audit

Interviewed staff
Reviewed till balance and daily close out reports for the period of October 24, 2014 to October 29, 2014
Reviewed cash receipts journal for fhe period of October 24, 2014 to October 29, 2014
Bacl^round
Judge Robert Gonzalez has served as JP5-1 since he w ^ elected in 2001. He has served as presiding judge siace
2012. His average annual budget is $ 212,123. The judge currently has four full-time employees (including him)
and one temporary employee. The average annual amount collected by this court over the past five years is
$ 787,193. This average is high due to a large class action suit against Transunion involving 69,607 cases which
was filed in this court in FY2010. This suit brought in $1,740,175 in local revenues. Excluding this suit, the
average collections are $ 355,631.
Conclusion
The office follows daily closeout procedures and prepares daily deposits. A l l monies are promptly receipted.
Procedures are in place to ensure county monies are adequately safeguarded.
We found that one of the cierks had gift cards kept in her cash box. These gift cards we identified to be donated
by a local merchant for use as door prizes during the upcoming building Christmas party. The merchant has done
this for fhe past couple of years. Since these gift cards are not county property, it is considered commingling of
assets. They should be kept separatefromcounty monies.
We also identified three instances where internal controls were below minimum standards. Internal control
standards establish the minimum level of quality acceptable in business operations. Internal consols help to
ensure compliance with laws and regulations, as well as to help safeguard county assets against waste, loss, and
misuse. The internal control weaknesses present at the time of the audit were separation of duties regarding case
assignments, no printed documentation to verify that change fund is counted, and manual official receipts not
used in sequential order.
presented in the section. Opportunities for Improvement, immediately follows this page. Several of the findings
We would like to express our smcere appreciation in providing our office full access and cooperation in order to
complete this audit.
Sincerely,
Dale Atchley, CPA

cc: Commissioner Joe A. Gonzales

Ms. Elva Fuentes, Intemal Audit Supervisor
14-01
CommingUng of Funds - Donated Gift Cards Kept in Clerk's Cash Box

When a fiduciary, a person entrusted with the management offimdsother than his or her own in tmst
mixes trust money with that of others, the fiduciary is commingling funds and thereby breaching his or
her fiduciary duty.
The county process for accepting donations, whether cash or assets, is presenting it to the commissioners
court for acceptance.
One of the clerks had 5 gift cards of $20 each from various merchants in her cash box. The gift cards
were donated to the office by Snappy Foods, a local merchant, for fhe annual building Christmas party.
These gift cards were not intended for overall county use, therefore, they should not be kept with county
monies.
Recommendation: The gift cards should be removed from the clerk's cash box and county safe. Since the
merchant designated the gift cards for a specific purpose, we will not require these cards to go through
commissioner court for approval. Any future, if not for county purposes, should be kept apart from county
monies.

The Nueces County Fraud Policy states that "Every county official/department head shall develop and maintain
with this Pohcy. The mtemal control system should compose five standards: (1) control environment, (2) control
applicable and complete. Documentation of die office/department's intemal control system will provide an
The intemal control standard #1 control environment is where the environment is set to be committed in adhering
to the organizations policies and procedures and its ethical and behavioral-standards.
The internal control standard #2 control procedures indicates controls are performed at various levels to reduce
risks in achievement of financial reporting objectives. Controls can eidier be preventive or detective. The intent
of these controls is different. Preventive controls attempt to deter or prevent undeshable events from occurring.
reviews, analysis, variance analysis, reconciliations, physical inventories, and self-audits.
The intemal control standard #5 monitoring is determining whether intemal control is adequately designed,
properly executed and effective. Intemal control is adequately designed and properly executed if all five intemal
control components are present and functionmg as designed. Monitoring must be continuous and ongoing so that
corrective action can be taken in a timely manner.
Control Procedures - Separation of Duties

Attachment I of tiie Fraud Policy states under Control Procedures - (3) a-b Separation of Duties states as follows:
Separation of duties may he incorporated into the job descriptions. The main point of this is to heighten
awareness of those positions that have full control of a transaction. Key duties and responsibilities that
show a separation of duties are:
transaction cannot be performed by the same individual. In small offices where cm employee is
out sick or on vacation and one indrtidual has to perform all duties then a review has to be
b. The process of receiving assets and issuing assets has to be carefully monitored. For example a
14-02
We observed that each court clerk has been designated to handle specific case types (Traffic, Juvenile,
and Civil). Each clerk has authority in their assigned case type to assessfines/fees,make adjustments, and
issue receipts. In other words, they have fiiU control of the cases. However, this seems to be the norm for
all JP offices.
Recommendation: Responsibilities and duties involving transactions and events should be separated among
different employees witii respect to assessing fines/fees, adjustingfines/fees,collecting and receipting payments,
and maintaining custody of the cases. The fewer actions performed by a single employee the greater Ihe
separation of duties,tiiusthe more effective the intemal controls are (preventive control). When staff is reduced,
Control Procedures - Timeliness and Performance Standards

Attachment I of the Fraud Pohcy states under Control Procedures - 2) Timeliness and Performance Standards
states:
cycle of the transaction or event, including:
a. Ihe initiation or authorization of the transaction or event
h. All aspects of the transaction while in process
c. The final classification in summaiy records
14-03 Change Fund Count Not Properly Documented
All steps of the daily closeout procedure should be clearly documented from beginning to end. A
supervisor's approval (manual or electronic) implies verification and validation. Proper documentation
provides an adequate trail for review by management and auditors.
5
This office does not have any documentation on daily closeout work papers indicating that all monies
were counted. This office utilizes the Odyssey system by entering the starting balance (change fund) and
at the end of the day they count all monies including change fund. TTiis process is followed by most JP
offices we have visited. But the Odyssey system does not provide a detailed printout of counted monies.
Recommendation: That a simple calculator tape of the counted monies is attached to each clerks Odyssey
deposit report. The supervisor can then initial the tape so that they verify all monies including change fund were
counted by the clerk (preventive).
Monitoring
Attachment I of the Fraud Policy states under Monitoring states:
Adequate and continuous supervision is a critical component to the prevention of fraud. Supervisors are
1) What evidence exists that supervisory review has occurred? Where in the process does a supervisor
sign off and how often? What do they sign off on? i.e., timesheets, performance reports, exceptions, etc. ?
14-04
Manual Receipte Not Used In Sequential Order

Part of our cash audit plan Is to review manual receipt books on hand. These receipt books are properly
kept in the locked safe. Manual receipts are issued when die Odyssey system is down. The manual
receipt is then entered into the Odyssey when system comes back up. Staff agreed that this is the only
time manual receipts are issued. This office has procedures in which they attach a copy of the receipt
processed in the Odyssey system to each manual receipt issued.
However, we found that receipts were not always used in sequential order. There were four receipts
which were inadvertently skipped since October 2012. The receipts had all three parts but they were blîk
and not marked void or marked out to not use.
Any skipped unused receipts which were not voided could create a risk for possible misuse if there is no
one monitoring.
Recommendation: If a receipt is inadvertently skipped, the unused receipt needs to be immediately
marked "VOID and not used" and initialed by supervisor (preventive control). Just like all voids should
be marked "VOID", initial by supervisor with a reason for the void. Management must ensure receipts
are properly utilized. Local Government Code 103.11 indicates the county auditor has authority over
receipt books. The county auditor can request receipt books be turned over if not utilized properly.

Internal Audit For Nueces Co. Justices of The Peace

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Internal Audit For Nueces Co. Justices of The Peace

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OFFICE

DIANA ROSAS, M.A.M.

INTERNAl AUDIT SUPERVISOR

DAlE ATCHLEY, C.PA

USA DAVIS, c.w.

901 LEOPARD STREET. RM. 304

CORPUS CHRISTI, IX 78401

PHONE: (361) 888-0556 FAX: (361)888-0584

Honorable Joe Benavides, Justice of the Peace, Precinct 1 Place 1

Re: Surprise Cash Audit performed on October 30,2014

Performed a cash count audit

Dale Atchley, CPA

Nueces County Auditor

cc: Commissioner Joe A. Gonzales

'/Ms. Elva Fuentes, Internal Audit Supervisor

Opportunities for Improvement

and duties involving transactions and events should be separated among

Control Procedures - Tzmeliness and Performance Standards

Change Fund Count Not Properly Documented

901 LEOPARD STREET, R M 304

P H O N E : (361) 888-0556 FAX: (361) 888--0584

Honorable Lany G. Cox, Justice of the Peace, Precinct 2 Place 2

Re: Surprise Cash Count Audit performed on October 28, 2014

Performed a surprise cash count audit

Justice of the Peace 2-2

Nueces County Auditor

Honorable Mike Pusley, Nueces County Commissioner Pet. 1

Justice ofthe Peace 2-2

Justice of the Peace 2-2

Cash Missing (Manual Receipts)

Internal Control Weaknesses

Justice of the Peace 2-2

14-02 Untimely Deposits

Control Procedures: Monitoring -Adequate and Continuous Supervision

Justice ofthe Peace 2-2

Justice of the Peace 2-2

Other Manual Receipt Findings

Variances of Amounts in Manual and Odyssey System Receipts

Variances of Tender Type in Manual and Odyssey System Receipts

Manual Receipts not Completely Filled Out

Commingling of Funds - Lotto Ticket Monies Kept in County's Safe

Justice of the Peace 2-2

14-11 Money Order and Check not Restrictively Endorsed

Justice ofthe Peace 2-2

901 L E O P A R D STREET, R M 304

P H O N E : (361) 8 8 8 - 0 5 5 6 " FAX; (361) 888-0584

October 17, 2014

Inspected damage at the facihty

Performed a cash count audit

Inventoried fixed assets

Obtained a copy of the police report

Dale Atchley, CPA

14-01 Building not Adequately Secured

Internal Control Weaknesses

Control Procedures - Separation of Duties

Control Procedures Proper Authorization

Insufficient Authorization of Reductions in Odyssey

Insufficient Documentation of Void Authorizatious in Odyssey

Control Environment -Adhere to County Policies

Clerk not Adequately Identified on Odyssey Receipts

Control Procedures Timeliness and Performance Standards

Overpayments are Not Receipted

Control Procedures - Safeguarding of Assets