ELKTON HOUSING AUTHORITYLocal Government

FINDING #2019-001 - CREDIT CARD TRANSACTIONS Condition The Authority provides the use of credit cards as an alternative means to its traditional purchase process. The Authority has one primary credit card account with 3 subaccounts with credit card limits ranging from $10,000 to $20,000. During our current year audit, we performed a review of credit card transactions and of the $61,722 in transactions reviewed, we noted the following: ? $37,641 lacked appropriate documentation to support the purchased. ? $24,081 in purchases made were personal expenses charged by a management employee. ? One of the credit cards being used for purchases was in the name of a former employee of the Authority indicating that the credit card was not deactivated upon the employee leaving. In addition, we noted that there was no written policy surrounding the use of credit cards. Criteria Authority credit cards are required to be used for approved Authority related expenses and supported by appropriate documentation. Cause There was a lack of proper monitoring and oversight for credit card expenditures. In addition, there was no segregation of duties and the lack of adequate written guidance for personnel regarding credit card usage exposed the Authority to inconsistent processing of transactions, risk of error, credit card misuse, and inappropriate transactions that can go undetected. Effect of Condition This condition resulted in financial loss to the Authority. Recommendation We recommend the Authority implement a credit card policy to, at a minimum, include: a. Which employees are eligible to request and receive a credit card b. The criteria used for approving requests for credit cards and the process and timeline for evaluating and approving requests for credit cards, including but not limited to, identifying employees responsible for managing credit cards and required documentation (i.e. itemized receipts) needed prior to approving requests c. Requirement of the cardholder to acknowledge receipt of the Cardholder Agreement and credit card d. Detailed guidance for allowable purchases and penalties for accidental, personal, or disallowed purchased e. The process of deactivating cardholder accounts of employees who separate from employment with the Authority f. Periodic transaction monitoring and oversight of all purchased for compliance with policy and adequate documentation Upon implementation of the credit card policy, we recommend that the Authority provide training to current card holders, and any new card holders prior to issuance of a credit card. The Authority should also review all cardholder accounts to determine if the current credit limits are accurate and appropriate for all users.

FINDING #2019-002 ? UNAUTHORIZED BANK ACCOUNTS OPENED BY MANAGEMENT EMPLOYEE Condition During our current year audit, we noted that a management employee opened bank accounts without the appropriate approval of the Board of Commissioners. Criteria Any new accounts opened in the name of the Authority should be approved by the Board of Commissioners prior to opening. Cause The lack of written policies and procedures surrounding the opening of new bank accounts and a lack of segregation of duties. Effect of Condition The management employee was able to use Authority funds (both federal and non-federal) for personal uses thus causing financial loss to the Authority. Recommendation We recommend that the Authority implement a written policy for opening bank accounts that will required documented approval from the Board of Commissioners present. We also recommend that the Board of Commissioners maintain a listing of all bank accounts and endeavor to review all bank statements and bank reconciliations at the monthly board meetings.

FINDING #2019-003 ? UNAUTHORIZED USE OF AUTHORITY FUNDS Condition During our current year audit, we noted that a management employee misappropriated approximately $95,000 in Authority funds. The employee used the funds for personal expenses unrelated to the Authority?s activities. Criteria Authority funds are required to be used for approved Authority related expenses. Cause There was a lack of adequate controls and a lack of segregation of duties surrounding the cash management systems. Effect of Condition The management employee was able to use Authority funds (both federal and non-federal) for personal uses thus causing financial loss to the Authority. Recommendation We recommend that the Authority implement policies and procedures that will provide for strong internal controls. Such policies and procedures should provide for the proper segregation of duties.