Audit Report Office of the Register of Wills Calvert County, Maryland May 2003
This report and any related follow-up correspondence are available to the public. Alternate formats may also be requested by contacting the Office of Legislative Audits as indicated at the bottom of the next page or through the Maryland Relay Service at 1-800-735-2258. Please address specific inquiries regarding this report to the Audit Manager listed on the inside back cover by telephone at (410) 946-5900. Electronic copies of our audit reports can be viewed or downloaded from the Internet via http://www.ola.state.md.us. The Department of Legislative Services Office of the Executive Director, 90 State Circle, Annapolis, Maryland 21401 can also assist you in obtaining copies of our reports and related correspondence. The Department may be contacted by telephone at (410) 946-5400 or (301) 970-5400.
May 19, 2003 Delegate Van T. Mitchell, Co-Chair, Joint Audit Committee Senator Nathaniel J. McFadden, Co-Chair, Joint Audit Committee Members of Joint Audit Committee Annapolis, Maryland Ladies and Gentlemen: We have audited the Office of the Register of Wills for Calvert County, Maryland for the period beginning May 15, 2000 and ending March 16, 2003. Our audit disclosed that internal controls were not in place to ensure that recorded collections were subsequently deposited. Respectfully submitted, Bruce A. Myers, CPA Legislative Auditor
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Agency Responsibilities Background Information The Register of Wills is a public office established under the Constitution of Maryland. The Office oversees the administration of decedents estates and provides assistance (such as providing the proper forms) to individuals administering estates. The Office collects inheritance taxes and other fees as provided by law. Inheritance tax collections less the applicable commissions are remitted to the State s General Fund. The Office retains fees and commissions for the payment of certain operating expenses. Any fees and commissions in excess of these operating expenses are reverted to the General Fund. Those operating expenses not paid from collected fees and commissions (primarily payroll expenses) are paid by the Comptroller of the Treasury. Financial Information According to the Office s records, the Office s fiscal year 2002 gross receipts totaled $698,452. These receipts were distributed in the following manner: $436,056 was remitted to the General Fund for inheritance tax collections; $59,512 represented fees and commissions disbursed for certain operating expenses and refunds; and $202,884 (the remaining amount) represented fees and commissions remitted to the General Fund. The Office s fiscal year 2002 operating expenses totaled $326,838, of which $292,669 was paid by the Comptroller of the Treasury. Cash Receipts Findings and Recommendations Finding 1 Independent verifications were not performed to ensure that recorded collections were subsequently deposited. Analysis Independent verifications were not performed to ensure that the amounts collected and recorded on the Office s automated cash receipts system were subsequently 3
deposited. Rather, the individual who performed the verifications had access to the deposit before it was taken to the bank, and the capability to void transactions on that system. Consequently, collections could be misappropriated without detection. Recommendation 1 We recommend that an individual independent of the collection and deposit functions verify that all recorded collections were deposited. We advised the Office on accomplishing the necessary separation of duties using existing personnel. Audit Scope, Objectives, and Methodology We have audited the Office of the Register of Wills for Calvert County, Maryland for the period beginning May 15, 2000 and ending March 16, 2003. The audit was conducted in accordance with generally accepted government auditing standards. As prescribed by the State Government Article, Section 2-1221 of the Annotated Code of Maryland, the objectives of this audit were to examine the Office's financial transactions, records and internal control, and to evaluate its compliance with applicable State laws, rules, and regulations. In planning and conducting our audit, we focused on the major financial related areas of operations based on assessments of materiality and risk. Our audit procedures included inquiries of appropriate personnel, inspection of documents and records, and observation of the Office s operations. We also tested transactions and performed other auditing procedures that we considered necessary to achieve our objectives. The Office's management is responsible for establishing and maintaining effective internal control. Internal control is a process designed to provide reasonable assurance that objectives pertaining to the reliability of financial records, effectiveness and efficiency of operations including safeguarding of assets, and compliance with applicable laws, rules, and regulations are achieved. Because of inherent limitations in internal control, errors or fraud may nevertheless occur and not be detected. Also, projections of any evaluation of internal control to future periods are subject to the risk that conditions may change or compliance with policies and procedures may deteriorate. 4
Our reports are designed to assist the Maryland General Assembly in exercising its legislative oversight function and to provide constructive recommendations for improving State operations. As a result, our reports generally do not address activities we reviewed that are functioning properly. This report includes a finding relating to a condition that we consider to be a significant deficiency in the design or operation of internal control that could adversely affect the Office s ability to maintain reliable financial records, operate effectively and efficiently, and/or comply with applicable laws, rules, and regulations. Our audit did not disclose any significant instances of noncompliance with applicable laws, rules, or regulations. The Office s response to our finding and recommendation is included as an appendix to this report. As prescribed in the State Government Article, Section 2-1224 of the Annotated Code of Maryland, we will advise the Office regarding the results of our review of its response. 5
AUDIT TEAM James P. Shevock, CPA Audit Manager Carlton A. Sexton Senior Auditor