Audit Report on the Financial Practices of the Office of the Actuary

AUDIT REPORT IN BRIEF

The objective of this audit was to determine whether the Office of the Actuary (OA) had adequate controls over its purchasing, timekeeping, payroll, and inventory operations.

The OA provides actuarial services and information for the City’s five actuarially-funded retirement systems, certain other pension and post-employment benefit funds, various City agencies, employers, labor organizations, and legislative bodies. According to the Fiscal Year 2009 Comptroller’s Comprehensive Annual Financial Report, the OA had expenditures of $3.3 million for Personal Services (PS) and $1.4 million for Other Than Personal Services (OTPS) for the year.

Audit Findings and Conclusions

We determined that during Fiscal Year 2009, the OA had weaknesses in its controls over purchasing and timekeeping procedures. Regarding purchases, although we found that all purchases in our sample were for proper business purposes, the OA lacked adequate internal controls over its payment process for goods and services. Specifically, the OA did not adequately verify billings for consulting work, nor did it perform the required annual evaluations of its largest vendor. We also found that the OA: incorrectly charged payments to the wrong fiscal years, did not pay some invoices on a timely basis, incorrectly paid employees for overtime hours worked by not obtaining a required overtime cap waiver, and did not ensure that agency sign-in sheets were complete and supported the hours entered into CityTime. In addition, the OA’s computer network is not adequately secure and its controls need to be enhanced.

With regard to its payroll and inventory procedures, our review found that the OA had adequate controls. In addition, although we found minor errors, the OA maintained a detailed inventory list of all its electronic and computer items.

Audit Recommendations

To address these issues, we make 11 recommendations, including that the OA should:

• Review the timekeeping report from its largest vendor, Buck Consulting, along with its monthly invoices so that the OA can more readily determine whether invoices are reasonable, accurate, and justified by the supporting documentation.

• Record the agency’s expenditures accurately in the fiscal year in which they are incurred.

• Make payments to vendors within 30 days of the receipt of an invoice.

• Conduct annual performance evaluations for all contractors, specifically conducting a current performance evaluation prior to the renewal of its contract with Buck.

• In the absence of an overtime cap waiver, compensate those employees whose pay exceeds the amount allowed by the OT CAP with compensatory time rather than paid overtime.

• Prepare a disaster recovery plan for its computer network, including off-site storage for its database.

Agency Response

In its written response, the OA generally agreed with all 11 recommendations but disagreed with the audit’s findings. After carefully considering the OA’s arguments, we found them to be without merit. A detailed discussion of the OA response is included as an appendix to this report, and the full text of the OA response follows as an addendum.