Compliance Review of Department of Transportation
DATE: August 28, 2018
TO: Seleta J. Reynolds, General Manager Department of Transportation
FROM: Georgia Mattera, Chief Deputy Controller Office of the Controller
SUBJECT: BANK ACCOUNTS NOT CONTROLLED BY THE OFFICE OF FINANCE
The Office of the Controller conducted a compliance review of the Los Angeles Department of Transportation’s (DOT) bank accounts not controlled by the Office of Finance. Our objective was to ensure expenditures are authorized, supported, and comply with the purposes for which these accounts were established.
Management of each City department must design, implement, and maintain a system that reasonably assures proper authorization and support for expenditures and that complies with established policies and regulations. The Office of the Controller assists management by performing periodic assessments of the effectiveness of departmental processes. These assessments complement, not replace, management’s assurance responsibilities.
After reviewing current practices related to the Petty Cash and Bail Refund Revolving Fund Bank Accounts, we concluded DOT followed applicable policies and procedures; though we identified areas for improvement related to the Bail Refund Account. The attached report includes our observations and recommendations. Further, based on our evaluation of DOT’s response, we now consider Recommendation 1 as Implemented, and Recommendations 2 and 3 as In Progress.
We appreciate your staff’s cooperation and assistance during this review.
cc: Sue Chen, Departmental Chief Accountant IV
Several Los Angeles City (City) departments have bank accounts not controlled by the Office of Finance, and detailed transactions in these accounts are not generally recorded in the City’s Financial Management System (FMS). Periodic compliance reviews of these bank accounts are necessary to assess whether departments are using them in accordance with authorized purposes and whether there are adequate internal controls and oversight.
The Department of Transportation (DOT) has two of these accounts, both maintained as revolving funds to streamline reimbursements. The City authorized DOT’s Petty Cash Fund checking account in 2010, and the current authorized balance is $2,000. The second is used for refunding parking citation bail after a DOT review deems the citation recipient “not liable.” The City created the Bail Refund Revolving Bank Account by ordinance, in 1986, with an authorized balance based on twice the amount of monthly refund checks. The balance as of June 30, 2018 was just under $216,000.
FACT #1: DOT officers issue about 2.2 million parking citations annually.
FACT #2: About 4% of DOT’s parking citations issued are contested and go to review; 27% of those reviewed in FY 2018 resulted in a permanent suspension of the citation, down from 41% in 2016.
FACT #3: While less than 1% of citations go to a hearing; about 25% of hearings result in a finding in favor of the contestant, whereby a refund is also due to the payor.
FACT #4: Very few (approximately one-tenth of 1%) are appealed to the Superior Court; and about 68% of those appeals result in a reversal of the finding, whereby a refund is due to the payor.
Compliance Review Results
DOT’s recordkeeping and controls over these two checking accounts are in proper order. DOT reconciles book and bank balances regularly and divides custody, recordkeeping, and authorized signer duties among different staff. The transactions we reviewed accorded with the two funds’ authorized purposes.
We identified an area for improvement related to processes surrounding the Bail Refund Revolving Bank Account. DOT typically stores thousands of outstanding, uncashed checks, currently totaling well over $700,000 that were sent to claimants but returned to DOT. Accounting for thousands of outstanding checks is burdensome, and claimants who spend significant effort to obtain a refund are unaware that a refund check has been issued.
While uncashed checks are subject to escheatment by the City after three years, DOT should make it easier for the rightful claimants to find their outstanding refund prior to the escheatment process. This would more fully address the City Council’s 2012 instruction to implement a searchable database of payee names for whom a parking violation refund was made, so individuals who are owed refunds from the City can collect their money.