• The Recreation and Park Department's management of Marina Yacht Harbor Fund revenues is inefficient and decentralized. Several different Department divisions or units are responsible for revenues allocated to the Marina Yacht Harbor Fund, including the Marina Yacht Harbor, Permits and Reservations Unit, Property Management Division, and Revenue Unit.

• The Recreation and Park Department currently uses ten systems to track revenues. The Revenue Unit tracks cash transactions in the Revenue Tracking System. The Revenue Tracking System and FAMIS, the City's financial system, are not integrated because subsidiary systems cannot track in FAMIS. Most of the ten revenue systems require manual entry and most of the systems are not integrated. Hence, system information is held in silos and re-entered into various systems up to four times before it can be reported from the FAMIS.

• Cash handling at the Harbor is characterized by weak controls, manually intensive processes, and insufficient policies and procedures. The Harbor does not have a cash register although it handles cash on a daily basis. The Harbor needs to immediately implement cash register functionality in the Harbor's management information system, the Marina Program.

• The Harbor has informal agreements with the Oceanic Society and the Farallon group for use of the pump-out dock (Gate 31) for loading and unloading. It receives revenue from both for use of the dock based on the commercial rate, which is $3.00 per foot of the vessel. The Department's Property Management Division needs to write formal agreements with these two organizations.

• The Permit and Reservations Unit lacks written policies and procedures or adequate controls ensuring that permit fee receipts are deposited to the Marina Yacht Harbor Fund appropriately. In the absence of written procedures, Permit and Reservations Unit staff allocate receipts to the Fund based on their individual understanding of what should be allocated. As a result, at least six receipts for Marina Green use fees totaling $2,255 were not credited to the Fund. Also, permit files are incomplete. The Budget Analyst could not find permit files for $7,444 credited to the Marina Yacht Harbor Fund in the Department's Revenue Tracking System.

Inefficient and Decentralized Revenue Management

The major revenue sources of the Marina Yacht Harbor Fund-berthing and mooring fees, permit fees, and concessions-are each administered, collected, and recorded differently.

Berthing and mooring fees, including miscellaneous fees, are collected and deposited at the Harbor. Permit fees paid in cash are collected and deposited at Pioneer Log Cabin, where the Permits and Reservations Unit of the Department is housed. Permit fees that are paid by credit card are submitted through an online transaction software program called Ciber. Last, concessions and lease revenue are collected and deposited at McLaren Lodge, where the central administrative Department offices, are located.

The Budget Analyst identified ten systems that are used for the purpose of tracking and accounting for revenues. As noted in Table 1.1, much of the tracking is handled manually, in spreadsheets or paper ledgers. None of the systems are integrated with any other systems; hence, the information is held in silos and re-entered into various systems up to four times before it can be reported from the main financial system (FAMIS).

Table 1.1

Source: Budget Analyst (from records and observations)

In addition to the proliferation of systems for revenue management, there are several filing systems. Each revenue source that is collected at a different site (the Harbor, Pioneer Log Cabin, and McLaren Lodge respectively) is filed onsite in a homegrown filing system as well as at McLaren Lodge. The Administrative Services Division located at McLaren Lodge itself has two separate filling systems for revenues reported to the Fund.

Revenue Tracking

The Recreation and Park Department tracks revenues monthly and submits a report to the Recreation and Park Commission. The manual and time-consuming process of tracking, reporting, and maintaining revenues in multiple revenue systems requires staff to spend significant work effort on data entry and manual bookkeeping, taking staff time from supervision of the Harbor, its employees, and its tenants.

The Revenue Unit tracks cash transactions in the Revenue Tracking System. The Revenue Tracking System and FAMIS are not integrated because subsidiary systems cannot track in FAMIS, but the Revenue Tracking System and FAMIS are linked to the bank records, so total amounts recorded in FAMIS match total cash amounts. Credit card transactions are handled separately, within two different systems: Class, the Recreation and Park Department's on-line registration and receipt system, and Ciber Online Transactions. According to the Department, Class is organized by index code, as is FAMIS, but the Revenue Tracking System is not.

Revenue Sampling Process and Results

The Budget Analyst audited a stratified sample of berthing and mooring receipts, temporary berth and other miscellaneous fees reported in March 2007, concessions, and permits revenues reported in FY 2001-2002 to FY 2006-2007, with additional items from FY 2007-2008. For all revenue transaction samples, the Budget Analyst reviewed FAMIS entries and verified them against source documents (copies of checks and/or the Daily Report of Cash Receipts). The Department could not provide source documents for 17 percent of the revenue transaction sample, due to the following reasons:

• The Recreation and Park Department has a document retention policy of three years; hence, the source documents validating entries dating back to 2003 and earlier may have been purged and sample items from this time period may not have been validated.
  
  
• The Administrative Services Division has recently undergone some archival reorganization, and some periods were missing from those years that should have been accessible.
  
  
• The Recreation and Park Department files deposits in two separate filing systems for revenues attributed to the Fund. Those revenues that were deposited at the Marina Yacht Harbor were given a different document reference code and filed separately. For those revenues, i.e. permanent berths, only source documents after January 2005 were provided.

The results of the sample are displayed in Table 1.2.

• Sixty-nine percent of the entries in FAMIS accurately matched the corresponding entries in the Daily Report of Cash Receipts.¹
  
  
• Thirteen percent of the sample were FAMIS journal entries by Revenue Unit staff, resulting in increases or decreases in revenues recorded in FAMIS for such items as non-sufficient funds, or funds transfers within the Fund.
  
  
• Three percent of the sample were errors, resulting in understatements or overstatements of revenues. The net effect of errors was an overstatement of $364.50.

Table 1.2
Revenue Sampling Summary Results

Source: Controller's Detailed Transaction File, Recreation and Park Department

Berthing and Mooring Fees

By far, the largest portion of revenues to the Fund comes from berthing and mooring receipts, equal to approximately 78 percent of receipts in FY 2006-2007. Permanent berth fees are due quarterly and temporary berth fees are due monthly. All berthing and mooring fees are submitted in cash, usually as checks, to the Harbor. Harbor staff process the checks and prepare the Daily Report of Cash Receipts for the Revenue Unit at McLaren Lodge to enter them into the Revenue Tracking System and FAMIS.

Inadequate Cash Handling Procedures at the Marina Yacht Harbor

Cash handling at the Marina Yacht Harbor is characterized by weak controls, insufficient cash handling procedures specific to the Harbor, and manually intensive processes. The Harbor Office handles checks and cash for the payment of permanent berth fees, temporary berth fees, and other miscellaneous fees, such as key deposit and wait list fees.

The Marina Yacht Harbor has different procedures for processing permanent berth fees and processing temporary berth and other miscellaneous fees. The Harbor's procedures for receiving and reporting permanent berth fee payments, which are paid quarterly, reconcile permanent berth fee payments against the Marina Program, the Harbor's system to track berth fee payments. Once reconciled and verified by the Harbormaster, permanent berth payments are recorded in triplicate on the Recreation and Park Department's Daily Report of Cash Receipts, and placed into sealed bank bags with original copies of triplicate bank deposit and transit slips. The Harbormaster transports the sealed bank bags to the Department's Revenue Unit. The Revenue Unit staff check the original Daily Report of Cash Receipts against the copy of the bank deposit slip.

However, the Harbor does not record temporary berth and miscellaneous fee payments in the Marina Program, nor does it have a cash register or formal cash receipting system in place. Temporary berth and miscellaneous fees are an estimated $279,000 annually, or approximately 15 percent of the Marina Yacht Harbor's total berth fee revenues of $1,864,114.

The Marina Yacht Harbor does not adequately segregate receiving payments from recording payments for deposit. Currently, the staff person receiving checks and cash for temporary berth and miscellaneous fee payments also records the check and cash payments in the Daily Report of Cash Receipts. Harbor staff keep payments in a locked drawer at the Harbor Office and once recorded in the Daily Report of Cash Receipts, place these payments in the Harbor safe. In January 2007, the Harbormaster implemented a policy requiring the Harbormaster's signature on the Daily Report of Cash Receipts, although this policy is not written and has not been consistently implemented. The Harbormaster should implement a written policy, requiring the Harbormaster to sign all Daily Report of Cash Receipts, verifying the accuracy of the count.

According to Harbor staff, a staff member generally writes out a receipt for cash payments received in person but not for payments received by mail. The Budget Analyst's review of March 2007 Daily Report of Cash Receipts found that all entries either had a check number or cash receipt number. However, in the absence of an automatic cash register system, the Harbor cannot guarantee that all temporary berth and miscellaneous fee payments are accurately recorded and protected from theft.

The Department has circulated department-wide cash handling policies and procedures, but the Harbor lacks specific policies. While the Harbor has written procedures in place for the transactions that are processed at the Harbor, these procedures are task lists rather than comprehensive policies.

In addition, the Harbor keeps $50 in petty cash to make change. Harbor procedures require that the petty cash is reconciled each shift and that staff members from the outgoing and oncoming shift verify the count. Because the Harbor does not have a night shift, the evening shift count is verified the next day.

Monitoring Past Due Accounts

The Marina Yacht Harbor rental agreements for permanent berths assess a 10 percent late fee for berth rents that are ten days past due. The Marina Yacht Harbor Rules and Regulations consider berth rents to be past-due after 15 days. The Harbor assesses a one-time 10 percent late fee that is automatically applied by the Marina Program to permanent berth payments that are 15 days past due.

Although the Marina Program can generate delinquent balances due reports that track berth balances that are 30 days, 60 days, and 90 days past due, these Marina Program reports do not accurately reflect past due activity because permanent berth payments are due quarterly. Rather, Harbor management generate a single report on the 15th day of each month that shows all permanent berths with outstanding balances without indication of how long each balance has been past due.

Applying Delinquent Charges

The Budget Analyst examined a sample delinquent balances due report, which is used to track and apply late fees, and found inconsistencies in the application of that formula. For example, one delinquent payment was assessed a 10 percent late fee twice, with the second late fee assessed at 110 percent of the prior balance. When questioned, staff claimed to be ignorant of the system application while admitting complete reliance on the system for this purpose.

Managing Delinquent Accounts

Because the Marina Yacht Harbor does not generate automatic delinquent balances due reports, the Harbor has no systematic means to identify berths with unpaid balances over an extended period of time. According to the Harbormaster, the Harbor generates a report of unpaid balances on the 15th day after the permanent berth payments are due and Harbor staff call the berth tenants with unpaid balances. The staff then manually cross off paid balances on the report and enter the payment in the Marina Program.

A review of the delinquent balances due report shows that 46 permanent berth tenants who had rent payments due on October 1, 2007 had not paid the delinquent balance, including late fees, as of January 9, 2008, totaling $23,900.

The Marina Yacht Harbor Rules and Regulations also provide for the City to place a lien on boats that have unpaid balances past 50 days. According to the Harbormaster, the Harbor has a lien on three boats currently, one of which has been paid.

Berth Fee Payments

The Harbor would benefit from implementation of Class with Automatic Clearing House functionality. This would allow the Harbor to automatically collect the berth fee by electronic debit from payees' bank accounts. As most of the revenues are from permanent berths, the regularity and consistency of fees lends itself particularly well to this revenue collection method. It would also eliminate manual processing of checks, minimizing human error and inefficiencies related to manual processing, and freeing staff to focus on other activities.

For month-to-month berths, the Harbor receives payments each month. Staff notate the payments on the Daily Report of Cash Receipts, which is tracked on an Excel spreadsheet, outside of the Marina Program. Although the same late fee policy applies to temporary berths, staff admitted uneven application of this policy due to resource constraints.

The Harbor also has informal agreements with the Oceanic Society and the Farallon group for use of the pump-out dock (Gate 31) for loading and unloading. It receives revenue from both for use of the dock based on the commercial rate, which is $3.00 per foot of the vessel. The vessels vary, but most likely the average length is about 45 or 50 feet. These charges are applied and collected at the time of use by Harbor staff, not by Property Management Division's property managers, due to their informal status.

Errors in Collecting Berthing and Mooring Fees

As shown in Table 1.3, of a sample of 223 berthing and mooring fees, three percent of the fee entries in FAMIS could not be matched to the corresponding Daily Report of Cash Receipts.² Significantly, 31 percent of the sample was journal entries by Revenue Unit staff, indicating a substantial portion of time devoted to electronic bookkeeping.

Table 1.3
Berthing and Mooring Sampling Results

.

Source: Controller's Detailed Transaction File, Recreation and Park Department

Upgrading the Marina Program to Address Weaknesses in Financial Controls

Recognizing the problems associated with the Marina Yacht Harbor's weak financial controls, insufficient cash handling policies and procedures, and manually intensive cash handling processes, the Harbor intends to upgrade the Marina Program, implementing cash register functionality.

The original Marina Program software has been purchased by Watch Captain, a vendor that has recently been certified as a City contractor and a purchase order has been issued. The Marina Program software license will allow five end users to access the program, four of which will be used by Harbor staff and one which will be available to the Revenue Unit at McLaren Lodge.

Once the Marina Program software upgrade is complete, the Harbor will implement Class. Class is a cash management system that has point of sale functionality and if fully implemented, would have a touch screen terminal, cash drawer, and credit card swipe as well as financial reporting functionality. Class has been purchased by the Department and is currently used in a limited capacity for recreational programming and credit card transactions. Although Class is not integrated with FAMIS (total amounts by account numbers are manually keyed into FAMIS), the Department is working on integrating the systems. The Harbor intends to maintain the Marina Program as a separate system for detailed records of berths.

Concessions

Concessions that are collected at the Harbor include rents from the Golden Gate Yacht Club, St. Francis Yacht Harbor, Gashouse Cove, and the Kiosk on the Marina Green. All payments come in the form of checks and are processed centrally at McLaren Lodge by the Revenue Unit.

The Revenue Unit provides copies of checks to the Property Management Division's property managers, who monitor lease files periodically. Property managers also track revenues for each lease on an Excel spreadsheet.

Table 1.4 shows the concessions sampling results. All but one of sample documents could be matched to the Daily Report of Cash Receipts or FAMIS.

Table 1.4
Concessions Sampling Results

Source: Controller's Detailed Transaction File, Recreation and Park Department

Permit Fees

A small portion of the Fund revenues come from permitting receipts, averaging approximately three percent of total revenues in FY 2006-2007. Permit fees for private use of the Marina Greens are submitted in cash, check, or by credit card. The Pioneer Log Cabin Permit and Reservations Unit staff process these transactions and forwarded to McLaren Lodge for deposit. Neither the Permit and Reservations nor Revenue Unit staff track these Fund revenues.

To compensate for the small size of the stratified sample, the Budget Analyst audited the total permitting receipts for FY 2006-2007. The sampling methodology for permits consisted of reconciling permitting fee receipts from the Permit and Reservations Unit with the reported revenues from the Revenue Unit.

Cash Handling in the Permit and Reservations Unit

Cash handling in the Permit and Reservations Unit at Pioneer Log Cabin is manual, and inconsistently tracked. Files for receipt copies, Daily Report of Cash Receipts, and credit card transactions are kept according to date in several locations in paper boxes around the office. Though transactions were generally filed by the fiscal year, the dates were not consecutive.

Cash handling controls are weak. In the absence of a safe, the Permit and Reservations Unit staff keep cash and checks in a file drawer. Daily receipts are inconsistently transported to McLaren Lodge by armored transport; some are transported by a staff member. Although all staff are allowed to handle cash transactions, no one has had training on cash handling.

Inadequate Reconciliation of Permit Receipts

The Budget Analyst was not able to successfully reconcile permit fee receipts from the Permit and Reservations Unit with the reported revenues from the Revenue Unit. Ultimately, the Permit and Reservations Unit could not provide all receipts for revenues reported to the Fund for FY 2006-2007 as discussed below.

The Permit and Reservations Unit does not have written policies and procedures specific to the Permit and Reservations Unit, ensuring that permit fee receipts are deposited to the Marina Yacht Harbor Fund appropriately. The Permit and Reservations Unit staff preparing the Daily Report of Cash Receipts write the amounts to be allocated to various funds at the bottom of the form based on their individual understanding or informal practice. For example, a Daily Report of Cash Receipts with receipts of $100 for the Marina Greens and $150 for Park Ranger overtime might allocate $100 to the Marina Yacht Harbor Fund and $150 for Park Patrol salary but the Permit and Reservations lacks formal procedures on how to allocate these receipts.

In a review of the FY 2006-2007 Marina Green permits, the Budget Analyst found that:

• Allocation of receipts to the Marina Yacht Harbor Fund is unsystematic. Not all of the Daily Report of Cash Receipts contain subtotals of the amount to be allocated to the Fund at the bottom of the form and merely indicated "RecYAC" in the subtotal area, presumably as a shorthand to indicate the entire Daily Report of Cash Receipts total to be reported to the Fund. However, for some that only had "RecYAC" written in the subtotal area, some receipts were intended to pay for Recreation and Park Department salaries rather than be deposited as revenue to the Fund. Six receipts that detailed a facility fee for use of the Marina Green totaling $2,255.00 were not reported as "RecYAC" subtotals and hence were not entered into FAMIS. In several receipts, the subtotals for the Fund did not equal the facility fees. For example, a facility fee for $12,450 was reported as $12,786 in the subtotals; in another example, a facility fee for $7,867 was reported as $7,175.
  
  
• Permit files are incomplete. In the initial file review, the Budget Analyst did not find files for 14 permits³ with fees totaling $69,727 of the $81,123 permit fee receipts recorded in Revenue Tracking System, or 86 percent. The Permit and Reservations Unit were later able to find permit files for 11 of the 14 transactions, totaling $62,283 resulting in $7,444 not accounted for.

Conclusions

The Recreation and Park Department's procedures for tracking and overseeing Marina Yacht Harbor revenues are inefficient and decentralized. Systems to track revenues are not fully utilized and revenue tracking "side systems" have proliferated in the Department. Also, several different Department divisions have responsibility overseeing revenues. The current system is vulnerable to human error.

According to the Recreation and Park Department's Information Services Unit, full implementation of the Class system will allow better revenue tracking, but, the Class system has only been fractionally implemented. The Class system cannot be fully implemented across the department until divisions within the department adopt new business practices and the Marina Yacht Harbor completes upgrades to the Marina Program.

Recommendations

The Recreation and Park Department General Manager should:

Costs and Benefits

The Budget Analyst identified a net overstatement to the Fund of $364.50 and a possible understatement to the Fund of $2,255 (pursuant to misapplication of fund accounting on identified permit fees). The lack of cash handling procedures at the Harbor and fund accounting policies at the Permitting Office indicate a high risk of loss. The failure to collect delinquent balances for permanent berths resulted in a revenue loss of $23,900.

Implementation of the Budget Analyst's recommendation would introduce more accountability to Harbor operations and reduce the risk of loss through mishandling, underreporting, or theft.

1 This can be interpreted to mean that at a 95 percent confidence level, the true percentage of the revenue entries in FAMIS that match corresponding entries in the Daily Report of Cash Receipts is between 64 percent and 74 percent.

2 The results indicate that at a 95 percent confidence level, 0 percent to 8 percent of the population (of revenue entries in FAMIS) cannot be matched to a corresponding Daily Report of Cash Receipts or contain discrepancies.

3 These receipts numbered few (14) but were large receipts, including one in the amount of $30,216