Solid Waste Management Audit

Posted on Dec, 08 2022

In the Fall of 2020, the Audit’s Office received allegations regarding lack of controls at Solid Waste Management (SWM). A meeting was held with the individual reporting those concerns on November 19, 2020. Allegations discussed included:

The video surveillance of the scale house where cash was collected from customers was not functioning.
Segregation of duties were not in place over accounts receivable processing, maintenance of the change fund, cashiering duties, and depositing.
Key internal controls, such as supervisory reviews of voids, daily balancing, and depositing were not occurring.
Credit card receipts did not balance to the point-of-sale records.

Several of the allegations involved areas already being reviewed in the planned follow-up audit of findings noted during the “Audit of Key Controls at the Solid Waste Management Facility” published in 2019. The relevant results of the follow-up testing are summarized below and can be viewed in more detail in the report, “Follow-up Audit: An Audit of Key Controls at the Solid Waste Management Facility” published in June 2022. Remaining concerns regarding video surveillance and segregation of duties were addressed through a review of the current control design, and limited testing.

Resources

An Audit of Salt Lake County Solid Waste Management

Auditor Letter

A pair of legs in jeans and shoes standing on a pile of leaves.

We performed an audit of Solid Waste Management (SWM) after receiving a tip on our fraud hotline concerning allegation of internal control weaknesses. The period under audit was from July 1, 2021, through December 31, 2021.

During our audit we examined SWM for compliance with Countywide Policy 1062 “Management of Public Funds” and Policy 1220 “Management of Accounts Receivable and Bad Debt Collection.” We examined and performed testing on SWM’s inter control environment, resulting in 6 findings and 15 recommendations. Management responded with agreement to all our recommendations. SWM was able to implement some of our recommendations before we completed the audit and have committed to implement the remaining recommendations no later than March 31, 2023.

By implementing our recommendations for compliance with countywide policies and procedures and improving on its internal controls, SWM will be able to better manage its operations, serve the County residents, and mitigate risks of fraud, waste, and abuse. I now present the results of this audit.

This audit is authorized pursuant to Utah Code Ann. 17-19a-401 “County Auditor Investigative
Powers – Report of Findings.” We conducted this audit in accordance with generally accepted
government auditing standards (GAGAS), except for the requirement in GAGAS 3.18, which states, “In all matters relating to the GAGAS engagement, auditors and audit organizations must be independent from an audited entity”. GAGAS states in 3.21 “Independence comprises the following:

a. Independence of mind: The state of mind that permits the conduct of an engagement
without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism.
b. Independence in appearance: The absence of circumstances that would cause a
reasonable and informed third party to reasonably conclude that the integrity, objectivity, or professional skepticism of an audit organization or member of the engagement team had been
compromised.”

Our state statute, 17-19a-206 Performance audit services, reads:
(1)

(a) A county auditor shall, under the direction and supervision of the county legislative body or
county executive and subject to Subsections (1)(b) and (2), provide performance audit services for a
county office, department, division, or other county entity.
(b) A county auditor may not conduct a performance audit of the auditor’s own office.

(2) The county legislative body or county executive shall establish the goals and nature of a
performance audit and related services.

Although this audit is not a performance audit, GAGAS 3.19 states: “auditors and audit organizations should avoid situations that could lead reasonable and informed third parties to conclude that the auditors and audit organizations are not independent and thus are not capable of exercising objective and impartial judgment on all issues associated with conducting the engagement and reporting on the work”.

A reasonable and informed third party is defined by GAGAS: “As evaluated by a hypothetical person, a person who possesses skills, knowledge, and experience to objectively evaluate the appropriateness of the auditor’s judgments and conclusions. This evaluation entails weighing all the relevant facts and circumstances, including any safeguards applied, that the auditor knows, or could reasonably be expected to know, at the time that the evaluation is made.”

Although we are working with the State Legislature, Utah Association of Counties, Utah Association of CPAs, to change this statute, we currently have no control or ability to change this statute. As such there is a risk that readers of our report would conclude that we are not capable of exercising objective and impartial judgment on the audit subject matter.

GAGAS standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. Except for the independence issues above, we believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.”

We appreciate the leaders and team members at the various agencies and departments who shared their time and knowledge with us during the audit. Please contact me at 385-468-7200 with any questions.

Chris Harding, CPA, CFE, CIA

Auditor