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Table of Contents





Transmittal Letter .................................................................................................................................... 1

Executive Summary ............................................................................................................................... 2

Background ....................................................................................................................................... 3 - 8

Objectives and Approach ................................................................................................................. 9 - 10

Issues Matrix .................................................................................................................................. 11 - 12
































1












J uly 11, 2013


The Audit Committee of
Brevard County, Florida
Viera, Florida 32940-6699

Pursuant to the approved 2012/2013 internal audit plan, we hereby submit our internal audit report
covering the Accounts Receivable function. The internal audit of the Accounts Receivable function
focused on accurate and proper tracking of aged receivables and amounts due from other governments,
reasonableness of the allowance for doubtful accounts and the assumptions used in determining those
amounts, proper segregation of duties and other policy compliance issues. We will be presenting this
report to the Audit Committee at the next scheduled meeting on August 7, 2013.

Our report is organized in the following sections:

Executive Summary This provides a summary of the issues related to
our internal audit of the Account Receivable
function.
Background This provides an overview of the Accounts
Receivable function.

Objectives and Approach The internal audit objectives and focus are
expanded upon in this section as well as a
review of the various phases of our approach.

Issues Matrix This section gives a description of the issues and
recommended actions as well as Managements
responses.


We would like to thank the various departments and all those involved in assisting the Internal Auditors in
connection with the review of the Accounts Receivable function.

Respectfully Submitted,

INTERNAL AUDITORS









Carr, Riggs & Ingram, LLC
215 Baytree Drive
Melbourne, Florida 32940

(321) 255-0088
(321) 259-8648 (fax)
www.cricpa.com



























Executive Summary


















2

Executive Summary

The primary objective of this audit was to assess the design and effectiveness of internal controls in place
over the Accounts Receivable function and to assess compliance with certain laws, rules and other
County policies and procedures. During the course of our work, we discussed the control design and
operating deficiencies and any compliance issues with management.

Relative risk is an evaluation of the severity of the concern and the potential impact on operations. Items
rated as High risk are considered to be of immediate concern and could cause significant operational
issues if not addressed in a timely manner. Items rated as Moderate risk may also cause operational
issues, however, they do not require immediate attention, but should be addressed as soon as possible.
Items rated as Low risk could escalate into operational issues, but can be addressed through the normal
course of conducting business.

There are many areas of risk to consider including financial, operational, and compliance, to name a few.
For public sector organizations, we also consider public perception risk when determining the relative risk
rating.

Our observations and recommendations for improving controls and operations are described in detail in
the Issues Matrix included in this report. A summary of issues identified and their relative risk rating is
provided below.

Issues Risk Rating

1. Policies and Procedures: Formal written policies and procedures provide the
guidelines and instructions for employees to follow and ensures everyone is aware
of control procedures to be followed. We noted that the County does have policies
and procedures in place over the accounts receivable reconciliation process,
where applicable. However, we noted that the County did not have formal written
policies and procedures over the process for determining the allowance for
uncollectible accounts. Therefore, in the event of turnover, new employees do not
have a formal set of procedures to follow as guidance.

Moderate

2. Allowance for Uncollectibles: The allowance for uncollectible accounts should be
reviewed on an annual basis along with the underlying assumptions that were
used to calculate it. Currently, only Fire Rescue and Solid Waste have allowances
for uncollectible accounts. The allowance for ambulance fees is currently 35% of
open receivables which comes from the third party billing company used by the
County based on historical collections. County Finance reviews this percentage bi-
annually to determine if this percentage needs adjustment. Solid Wastes
allowance has not been reviewed or revised for several years. The County should
take into consideration the collectability of accounts receivable with balances
outstanding for more than 1 year. Failure to estimate or review the allowances for
uncollectible accounts on an annual basis could lead to recording errors.

Moderate














Background
































3

Background

Overview

The Accounts Receivable processing and collection function is the responsibility of County Finance and
each department. Fees, fines and assessments charged by departments are approved by the Board of
County Commissioners (the Board).

At the department level, Accountant I, Accountant II or Finance Managers prepare customer invoices to
send to customers. Finance Managers or Department Directors review customer invoices. The original
invoice is sent to the customer and a copy is sent to County Finance. Fund Accountants enter customer
invoices into SAP and the entry is automatically posted to SAP. Some departments like Fire Rescue may
enter customer invoices into SAP, but the entry is not posted until it is approved by a Fund Accountant in
County Finance and is posted by the Assistant Finance Director.

Payments come into either the department or County Finance. Mail is opened and a list of payments
received is maintained by the department secretary or front desk receptionist in County Finance. Deposits
are prepared by the department or Revenue Clerk in Finance and monies are deposited at the bank or
transported by armored vehicle. The Revenue Clerk in County Finance enters details of the collection.
Monies are kept locked in a safe in a locked room until deposit is sent to the bank. The Revenue Clerk
provides a pink copy of the deposit slip and copy of check or check stub to the Fund Accountants who
enter the receipts into SAP. The Fund Accountants send the cover sheet with a pink deposit slip to the
Revenue Clerk who attaches the bank receipt or proof of bank stamp on the deposit slip. Departments
send either the yellow or pink copy of the deposit slip and the bank receipt copy of the check to County
Finance.

At or near year end, Fund Accountants send transactions details of all open accounts receivables in SAP
to Accountants I or II at the departments. The detail is reviewed for any discrepancies and for receivables
that need to be written off. The departments must prove due diligence that they have followed up and
attempted to collect receivables through certified letters or submission to a collection agency. Fund
Accountants in County Finance will then prepare a proposed listing of write-offs which is reviewed by the
Assistant Finance Director and a request to the Board for write-offs is prepared. The Board request and
supporting documentation is sent to the Board for approval. Once the write-offs are approved by the
Board, the Fund Accountants prepare write-off memos which are entered into the system and reviewed
by Assistant Finance Director before being posted in SAP to write-off the amounts.

Adjustments made during the year are typically for correcting invoices. The departments send an email to
the Fund Accountants with details of the adjustment and the Fund Accountants make the corrections.

Fund Accountants in County Finance can create new customers. Each department sends an email to the
Fund Accountant requesting a new customer identification number. After the customer is created, Fund
Accountants send the department the new identification number.

Brevard County Fire Rescue (BCFR) uses a third party vendor to manage its Emergency Medical
Services (EMS) billings. The third party vendor is responsible for billing the patients receiving EMS
services based on reports prepared by BCFR personnel and for tracking receipt of those payments.
Patient payments are received directly by BCFR in a bank lockbox and deposited to BCFRs bank
account on the same day. Copies of payments received are sent to the third party vendor so they can
track the receipt of payments. Delinquent accounts are sent to a collections agency for further pursuit of
payment. We reviewed the reconciliations between SAP and the reports provided by the third party
vendor, noting no issues. Additionally, we reviewed copies of the independent service auditors report on
the suitability of the design and operating effectiveness of the controls at the third party vendor and found
no significant deficiencies in their controls.

4

Background - continued

Overview - continued

Special assessment receivables provide residents with an opportunity to finance specific infrastructure
improvements including road resurfacing, water, and sanitary sewer line installation through a
cooperative relationship with the County. A lien is placed on each property owners property to ensure
payment. Special assessments can be paid in full at the beginning of the assessment or paid in annual
installments over a 10-year period. If paid annually, the special assessments are included on the
residents annual property tax bill. The Board of County Commissioners approves the annual special
assessments billed and the Brevard County Tax Collector is responsible for the collection of the special
assessments.

Staffing

Key personnel from the Accounts Receivable function that are involved in the operations and assisted in
the audit are as follows:

Name Title
Kathy Prothman Assistant Finance Director
Brad Pugh Fund Accountant General Fund and Information Systems
Veronica Krall Fund Accountant Fire Rescue, Animal Services and Tourism
Anselma Reynolds Fund Accountant Utilities Department and Libraries
Donna Hyatt Fund Accountant FEMA
J anet Whittmore Fund Accountant Risk Management, Valkaria Airport and
Transit Services/SCAT


5

Background - continued

Summary of Process Flow






A Ap pp pr ro ov ve e F Fe ee es s, , F Fi i n ne es s, ,
a an nd d A As ss se es ss sm me en nt t s s
C Ch ha ar rg ge ed d b by y D De ep pa ar rt t m me en nt t s s

S Se en nd d
O Or ri i g gi i n na al l
I In nv vo oi i c ce e


Send
Payment

S Se en nd d
C Co op py y o of f
I In nv vo oi i c ce e

Send
Deposit
Supporting
Document-
ation

I In nv vo oi i c ce e
A Ap pp pr ro ov va al l


Deposit
Slip
Review

Fund Accountants
E En nt t e er r
C Cu us st t o om me er r I In nv vo oi i c ce es s & &
R Re ec ce ei i p pt t s s I In nt t o o S SA AP P

E En nt t e er r T Tr ra an ns sa ac ct t i i o on n i i n nt t o o
D De ep pa ar rt t m me en nt t B Bi i l l l l i i n ng g S So of f t t w wa ar re e
K KE EY Y
I In nv vo oi ic ci in ng g P Pr ro oc ce es ss se es s
C Cu us st to om me er r P Pa ay ym me en nt t a an nd d D De ep po os si it t P Pr ro oc ce es ss se es s

Send
Deposit


B BO OA AR RD D O OF F C CO OU UN NT TY Y
C CO OM MM MI IS SS SI IO ON NE ER RS S

D DE EP PA AR RT TM ME EN NT TS S

C CU US ST TO OM ME ER RS S

B BA AN NK K
C CO OU UN NT TY Y
F FI IN NA AN NC CE E

6

Background - continued

Selected Statistics

The following is a listing of accounts receivable, allowance for uncollectibles and due from other
governments balances for the last 5 fiscal years.

Governmental Funds* FY 2007-2008 FY 2008-2009 FY 2009-2010 FY 2010-2011 FY 2011-2012
Accounts receivable, gross $13,221,554 $13,704,380 $14,106,156 $13,296,525 $15,081,214
Allowance for uncollectibles 2,917,534 3,310,872 3,392,981 3,162,169 3,876,350
Accounts receivable, net 10,304,020 10,393,508 10,713,175 10,134,356 11,204,864
Allowance as a % of gross A/R 22% 24% 24% 24% 26%
Due from other governments 16,800,617 21,425,964 23,334,596 16,599,743 16,215,615

* Includes constitutional officers

The increase in due from other governments between FY08 and FY09 was a result of amounts due from
FEMA for Tropical Storm Fay and Hurricane Wilma of approximately $3.5 million and $1.2 million,
respectively.

Due from other governments decreased in FY11, primarily as a result of $2.6 million in Road Stimulus
grants, $1.6 million in NSP grants and $1.0 million for the Stormwater Crane Creek grant all being due to
the County as of FY10 and collected during FY11.

Accounts receivable increased in FY12 primarily as a result of increases in the ambulance billing
accounts receivable balance which experienced an increase from the mixture of services provided during
FY12 compared to FY11. The increase in the ambulance billing accounts receivable also resulted in an
increase in the allowance for uncollectibles as a percentage of gross accounts receivable in FY12. The
increase in the percentage of the allowance for uncollectibles in FY09 was a result of a greater
percentage of the ambulance billing accounts receivable making up the total accounts receivable
balance.

Proprietary Funds** FY 2007-2008 FY 2008-2009 FY 2009-2010 FY 2010-2011 FY 2011-2012
Accounts receivable, gross $2,297,287 $1,178,527 $1,079,061 $1,130,383 $1,037,041
Allowance for uncollectibles 105,467 106,567 106,567 106,567 106,567
Accounts receivable, net 2,191,820 1,071,960 972,494 1,023,816 930,474
Allowance as a % of gross A/R 5% 9% 10% 9% 10%
Due from other governments 7,374,252 6,523,173 6,921,357 4,678,441 5,835,881

** Includes internal service funds

Accounts receivable decreased in FY09 as a result of a Risk Management receivable for the Retiree Drug
Subsidy of approximately $600,000 at the end of FY08 that was collected during FY09. There was no
allowance for uncollectbles associated with the Retiree Drug Subsidy, therefore, the allowance as a
percentage of gross accounts receivable increased in FY09.

Due from other governments decreased in FY11 primarily as a result of the collection of FEMA grants that
were recorded in FY10.

Due from other governments increased in FY12 because of SCAT reimbursement requests of
approximately $950,000 that had not been received by the end of FY12.

7

Background - continued

Selected Statistics (continued)

Accounts Receivable:

Account # Account Description
Balance at
09/30/11
Balance at
09/30/12
1150000 Accounts Receivable $ 3,075,506 $ 2,961,016
1150001 Fleet Accounts Receivable 107,345 103,480
1150002 Facilities Accounts Rec 26,665 3,826
1150005 Installment Connection 38,856 25,935
1150006 Septage 74,265 64,593
1150007 SCAT Accounts Receivable 5,141 11,333
1150008 IS/Communications Accounts 6,334 37,771
1150009 Traffic Engineering Accounts 55,391 37,196
1150016 Ambulance Fees ADP 9,035,060 11,075,285
1150017 Service Fees - Mims 26,716 30,618
1150022 Golf Receivables 4,874 4,098
1150024 Service fees-Barefoot B 174,654 179,815
1150027 Accounts Receivable- W/ - 147
1150050 NSF Check Receivable 7,566 8,606
1150083 Private Individual & Or 57,835 53,903
1150100 Miscellaneous Accounts 849,932 776,155
1150217 Impact Fees Calendar Year 19,921 15,425
1155000 Gate Receivable 436,380 342,997
1170000 Estimated Uncollectible (3,268,736) (3,982,917)
1210000 - 073 Assessments Receivable 133,027 178,104
1212540 - 551 Solid Waste Assessments 94,310 91,447
1215073 SW Assessments, Prorated 32,659 25,742
1250000 - 059 Interest & Penalty Rec 5,362 5,402
1280002 San Sebastian Rec 34,940 34,940
Total Accounts Receivable $ 11,034,003 $ 12,084,917

Note: These totals are for the Board only. The amounts on pages 5 and 6 of this report include the
receivables of the constitutional officers and reclassifications of balances between the Board and the
constitutional officers.

8

Background - continued

Selected Statistics (continued)

Due From Other Governments:

Account # Account Description
Balance at
09/30/11
Balance at
09/30/12
1330000 Due from Other Government $ 2,277,858 $ 2,045,054
1330005 Due From Sheriff 3,306,162 5,752,684
1330011 Due From Clerk 348,206 234,001
1330012 Due From Tax Collector 3,290,483 2,959,454
1330013 Due From Property Appraiser 397,012 526,246
1330015 Due From Tax Collector 5,385,137 5,192,365
1330034 Due From State of Florida 5,145 355
1330050 COBRA SUBSIDY FED GOVT 1,194 468
1330057 Due From Melbourne Utilities 763,152 748,453
1330058 Due From Cocoa Utilities 1,075,219 1,135,620
1330099 Due From FIND 2,660 34,891
1330331 Due From Federal Government 6,364,147 8,808,493
1330334 Due From State of Florida 9,767,503 8,126,611
1331000 Due From Cities 27,930 29,375
Total Due from other Governments $ 33,011,808 $ 35,594,070

Note: These totals are for the Board only. The amounts on pages 5 and 6 of this report include the
receivables of the constitutional officers and reclassifications of balances between the Board and the
constitutional officers.

























Objectives and Approach


























9

Objectives and Approach

Objectives

The primary purpose of this audit was to assess the design and effectiveness of internal controls in place
over Accounts Receivable (including due from other governments) and to assess compliance with certain
laws, rules and other County policies and procedures.

Objectives of the current internal audit review of Accounts Receivable include the following:

Determine that effective policies and procedures are in place to ensure
compliance with generally accepted accounting principles.
Ensure compliance with internal policies and procedures.
Verify accuracy and proper tracking of aged receivables and amounts
due from other governments.
Review the reasonableness of the allowance for doubtful accounts
balance and the assumptions used in determining amounts.
Verify proper segregation of duties.

Approach

Our audit approach consisted of three phases:

Understanding and Documentation of the Process

During the first phase, we held an entrance conference with the Assistant Finance Director and other
personnel to discuss the scope and objectives of the audit work, obtained preliminary data, and
established working arrangements. We then conducted interviews with responsible personnel and
documented their role in the processes.

Detailed Testing

The purpose of this phase was performance of testing procedures based on our understanding of the
accounts receivable process, applicable County ordinances, and Federal and State statutes. Our
procedures included observation and inquiry, walk through and testing of individual transactions. The time
period covered by testing was October 1, 2012 through April 30, 2013. We utilized sampling and other
auditing techniques, such as inquiry and observation, to meet our audit objectives outlined above:


10

Objectives and Approach - continued

Approach (Continued)

Detailed Testing (Continued)

Obtain an understanding of the accounts receivable process for key receivables including
ambulance fees, general and other receivables, due from other governments, payments in lieu of
taxes (PILT) and the allowance for uncollectibles and identify critical controls.
Determine whether any written policies and procedures are in place over key receivables
processes.
Determine whether proper segregation of duties exists at all points in the process for key
receivables (custody of assets, authorization or approval of related transactions affecting those
assets, and recording or reporting of related transactions).
Test a selection of 3 monthly reconciliations for ambulance fees between the ADPI reports and
SAP reports prepared by County Finance for the following:
o Review for unusual reconciling items;
o Review for documentation of preparer and reviewer of the reconciliation.
Test the most recent annual reconciliation for ambulance fees for the following:
o Review for unusual reconciling items;
o Review for documentation of preparer and reviewer of the reconciliation.
Test a selection of 20 SAP entries to increase accounts receivable and 20 SAP entries to
decrease accounts receivable for key receivables including due from other governments for the
following:
o Review the supporting documentation to determine whether the SAP entry had adequate
support and appeared appropriate.
Review the latest entry to write off uncollectible amounts for reasonableness and proper Board
approval.
Test a selection of 20 SAP entries to decrease accounts receivable and all SAP entries to
increase accounts receivable for general accounts receivable for the following:
o Review the supporting documentation to determine whether the SAP entry had adequate
support and appeared appropriate.
Review GL detail for Animal Services and test for accuracy of the reported balance in SAP.
Review the internally maintained schedule of Federal Emergency Management Agency (FEMA)
funds receivable for the following:
o Review for reasonableness and collectability and trace to the FEMA status website.
Review general compliance with statutes, policies, procedures, administrative orders and by-
laws.

Reporting

At the conclusion of our audit, we documented our understanding of the processes surrounding accounts
receivable (including due from other governments) based on our interviews at the County and
summarized our findings related to accounts receivable. We conducted an exit conference with
Management and have incorporated Managements responses into our report. We prepared our report
and related findings and provided copies to appropriate County personnel.



























Issues Matrix






























Accounts Receivable Function Internal Audit Report

Issues Matrix

11



Rating Issues Recommendation Management Response
Moderate 1 Policies and Procedures
Formal written policies and procedures provide the
guidelines and instructions for employees to follow
and ensures everyone is aware of control
procedures to be followed. We noted that the
County does have policies and procedures in place
over the accounts receivable reconciliation
process, where applicable. However, we noted that
the County did not have formal written policies and
procedures over the process for determining the
allowance for uncollectible accounts. Therefore, in
the event of turnover, new employees do not have
a formal set of procedures to follow as guidance.

We recommend Brevard County establish
and implement formal written policies and
procedures over the process for
determining the allowance for uncollectible
accounts.
Response: County Finance will
develop written procedures for
evaluating and estimating
allowances for uncollectible
accounts, per the auditors
recommendation.

Responsible party:
Kathleen Prothman, Assistant
Finance Director

Estimated completion date:
November 30, 2013

Next testing date:
April 2014



Accounts Receivable Function Internal Audit Report

Issues Matrix

12



Rating Issues Recommendation Management Response
Moderate 2 Allowance for Uncollectibles
The allowance for uncollectible accounts should be
reviewed on an annual basis along with the
underlying assumptions that were used to calculate
it. Currently, only Fire Rescue and Solid Waste
have allowances for uncollectible accounts. The
allowance for ambulance fees is currently 35% of
open receivables which comes from the third party
billing company used by the County based on
historical collections. County Finance reviews this
percentage bi-annually to determine if this
percentage needs adjustment. Solid Wastes
allowance has not been reviewed or revised for
several years. The County should take into
consideration the collectability of accounts
receivable with balances outstanding for more than
1 year. Failure to estimate or review the
allowances for uncollectible accounts on an annual
basis could lead to recording errors.

We recommend the County review the
allowance for uncollectible accounts and
underlying assumptions used to calculate
them on an annual basis.







Response: County Finance staff
will review allowance for
uncollectible accounts and
underlying assumptions and
estimates on an annual basis and
will incorporate this process in the
procedures referenced in Issue #1.

Responsible party:
Kathleen Prothman, Assistant
Finance Director

Estimated completion date:
November 30, 2013

Next testing date:
April 2014