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

AUDIT REPORT IN BRIEF

This audit determined whether the Office of the Actuary (OA) had adequate controls over its timekeeping, payroll, purchasing, and inventory operations. OA was established in 1990 to provide technical advice and actuarial support to the various New York City retirement systems. OA performs annual valuations of the assets and liabilities of the City’s five actuarial retirement systems and other non-actuarial pension funds. In Fiscal Year 2003, OA budgeted $2,620,169 in personal service expenditures for 41 positions and $959,012 for other than personal service (OTPS) expenditures. The OTPS expenditures included purchases for supplies and materials, property and equipment, contractual services, miscellaneous equipment rentals, and utilities.

The Office of the Actuary had inadequate controls in relation to the following timekeeping, payroll, purchasing, and inventory operations. Specifically, OA:

• had no segregation of duties for timekeeping and payroll operations;
• had no segregation of duties for purchasing operations;
• lacked adequate inventory safeguards;
• did not consistently prepare purchase requisitions and receiving reports;
• used some miscellaneous vouchers incorrectly;
• did not handle certain imprest fund purchases properly; and
• did not properly review and approve employee time reports.

OA did have adequate controls in relation to the approval of overtime and leave, the solicitation of bids, and the assignment of purchases to the correct object codes. We did not find any monetary effect for the noted internal control weaknesses. Nevertheless, insufficient controls increase the risks that funds and assets may not be adequately safeguarded.

To address these issues, we make 10 recommendations, among them that OA should:

• Prepare and implement written procedures to ensure that duties within the purchasing and the timekeeping/payroll functions are sufficiently segregated.
• Perform a complete inventory and develop a list of all physical assets.
• Regularly update the inventory list and conduct periodic counts of all physical assets.
• Ensure that a requisition is prepared and maintained for each purchase.
• Ensure that a receiving report is prepared and maintained in each voucher package.
• Ensure that all Employee Time Reports (ETRs) are signed by the preparer, the supervisor, and the Payroll Management System (PMS) data entry operator.