Fee revenues collected at the Department's nine swimming pools are placed in cash lock boxes. Such cash lock boxes are transported regularly by armored transport to McLaren Lodge from each of the swimming pools. Upon arrival, the Recreation and Park Department's Revenue Unit staff transfer the cash from the lock boxes to bank deposit bags and place the bags in a safe located in McLaren Lodge. Because some of the currency is crumpled, the bills must be straightened and flattened prior to being run through a currency counter. Although the Department's policy is to have two staff members straighten and count the bills and coins, the Budget Analyst's 2006 audit disclosed that there was only one instead of two employees in a cubicle with a large box of bills, straightening and counting cash. In response to the Budget Analyst's inquiry on the status of the 2006 recommendation concerning the counting of swimming pool cash, the Department stated that it 93has implemented a policy requiring two employees to be present as cash is being counted. The revised cash handling policy and CLASS1 policy both specify procedures for reconciliation.94 However, during this cash handling audit, on two separate occasions one month apart, there were instances where the Budget Analyst observed similar situations as described above in the Revenue Unit's cubicle - only one employee processing a large stack of bills, with no other person in the cubicle and with no oversight. One of the employees conducting the cash counts stated that 93the staffing of the Revenue Unit was insufficient to provide a two-person, cash processing operation.94 Placing an employee in the position of access to hundreds and sometimes thousands of dollars without effective oversight controls is a direct violation of adequate internal control standards. Further, non-compliance with published policies and procedures is detrimental to the maintenance of a quality control environment and the safeguarding of Departmental assets. Our review of a sample of Z-Out tapes2 from both the Recreation and Park Department's Japanese Tea Garden and the Tennis Court cash registers revealed instances of non-sequential Z-Out Report numbers. Further, there was no note in the file explaining the reasons for the skipped Z-Out Report deviations. At the request of the Budget Analyst, the Department's Financial Operations Manager conducted an inquiry to determine the reason for the non-sequential deviations and determined that the deviation associated with the Japanese Tea Garden was due to a service maintenance that was performed on the particular cash register. As of the writing of this report, the Financial Operations Manager has not explained the non-sequential deviation in the Z-Out Report numbers for the tennis courts. In addition to the cash register problems, our audit has disclosed that there are opportunities to achieve economies in the staffing of the Japanese Tea Garden Admissions Section. The hourly rate for the classification 3302, Admission Attendant position, is approximately $19.34, not including mandatory fringe benefits. The Budget Analyst estimates that an average reduction of three work hours per day can be achieved in the Admissions Section, which would result in a savings of approximately 0.6 FTE, valued at approximately $23,930 in salary and mandatory fringe benefits annually.

General

The Revenue Unit of the Department's Finance Section is located at McLaren Lodge and has the responsibility of receiving, verifying, recording, reconciling, and auditing most revenues generated by the Recreation and Park Department's activities.³ Section 10 of the 2006 Recreation and Park Department Audit Report, 93Cash Handling Practices,94 addresses the Revenue Unit's handling of swimming pool cash at McLaren Lodge. This section reports the Budget Analyst's evaluation of the current status of the swimming pool recommendation and also reports on our examination and evaluation of the operations of the Japanese Tea Garden Admissions Section and physical security concerns of cash handling facilities at the Recreation and Park Department.

Revenue Unit's Handling of Swimming Pool Cash

Fee revenues collected at the Department's nine swimming pools are placed in cash lock boxes. Such cash lock boxes are transported regularly by armored transport to McLaren Lodge from each of the swimming pools. Upon arrival, the Revenue Unit staff transfer the cash from the lock boxes to bank deposit bags and place the bags in a safe. Because some of the currency is crumpled, the bills must be straightened and flattened prior to running through a currency counter. Although the Department's policy is to have two staff members straighten and count the bills and coins, the 2006 audit reported an observation where there was only one employee in a cubicle with a large box of bills, straightening and counting cash. No other employee was present to comply with the policy and to oversee the process. The recommendation for this subject was included in the 2006 audit report and the Department's statement of current status, are as follows:

The Recreation and Park Department General Manager should:

10.4 Direct the Director of Administration and Finance to develop formal protocols requiring (a) at least two employees present at all cash counts, and (b) routine reconciling of cash counts with attendance records and other use tallies as appropriate.

Implementation: The department has implemented a policy requiring two employees to be present as cash is being counted. The revised cash handling policy and CLASS4 policy both specify procedures for reconciliation.

During this follow-up audit, there were two instances where the Budget Analyst observed only one employee processing a large stack of bills in the Revenue Unit's cubicle. There was no other employee present to comply with the policy and to oversee the process. The dates of the observations were October 24, 2007, and November 24, 2007. The auditors informed the Director of Administration and Finance following the first observation. The employee conducting the cash count of the November sighting stated to the effect that 93the staffing of the Revenue Unit was insufficient to provide a two-person, cash processing operation.94

The continued practice of allowing an unaided employee to process large sums of cash is a significant control weakness that unnecessarily places the organization's resources at risk and is a disservice to the employee required to perform the task. In theory, but not in practice, the Department recognizes the unsuitability of this practice. The Department's Department-Wide Memo of August 11, 2006, contains the following provision:

Internal controls are necessary to prevent mishandling of funds and to safeguard against loss. Strong internal controls also protect employees by defining responsibilities in the cash handling process.

Placing an employee in the position of access to hundreds and sometimes thousands of dollars without effective oversight controls is a direct violation of adequate internal control standards. Further, non-compliance with published policies and procedures is detrimental to the maintenance of a quality control environment and the safeguarding of Departmental assets. The importance of the a quality control environment, along with the functions of the other four components of internal control, is formulated in the universally recognized authority on internal control, Internal Control - Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission, as follows:

The control environment provides an atmosphere in which people conduct their activities and carry out their control responsibilities. It serves as the foundation for the other components. Within this environment, management assesses risks to the achievement of specified objectives. Control activities are implemented to help ensure that management directives to address the risks are carried out. Meanwhile, relevant information is captured and communicated⁵ throughout the organization. The entire process is monitored and modified as conditions warrant.

The General Manager of the Recreation and Park Department should immediately instruct the Director of Administration and Finance to ensure that a minimum of two employees execute the cash counting function and fully comply with the Department's own policies.

Japanese Tea Garden Admissions

Background

According to information provided by the Parks Trust, the Japanese Tea Garden, originally developed as the Japanese Village for the 1894 California Midwinter International Exposition, is now one of the most visited attractions in San Francisco. Admission to the Japanese Tea Garden is controlled by Recreation and Park Department employees stationed at the entrance gate to the facility. The Department retains all admission revenues.

Fashion House, Inc., a Recreation and Park Department concessionaire, operates a gift shop and a tea house within the Japanese Tea Garden. The Budget Analyst's report concerning the concessionaire's compliance with the provisions of its lease is included in Section 6 of this audit report.

Japanese Tea Garden Admission revenues were flat following the events of September 11, 2001, but have risen in the past two years, particularly in FY 2006-2007, as shown below. Japanese Tea Garden concession payment revenues also rose significantly in FY 2006-2007.

Table 3.1
Japanese Tea Garden Admissions and
Concession Revenues

Admission fees, shown below, were last amended in July of 2006.

Age Category	Admission Fee	Admissions are free from 9:00 A.M. to 10:00 A.M. every Monday, Wednesday, and Friday. On Wednesday, November 7, 2007, the auditors counted in excess of 75 adults and 50 children during the free period. Admission Attendants report that free admissions on favorable-weather-days often far exceed those of the day of the auditors' observation.
Adult	$5.00
Senior	$1.50
Child (6 - 12)	$1.00
Child (Under 6)	Free

The Admission booth accepts cash payments only. Department representatives have stated that the queues that would result from processing credit cards at times of high attendance would be excessive - the Budget Analyst concurs in that opinion. The photographic exhibit below shows the admissions booth and the walkway area leading up to the tea house.

Exhibit 3.1
Japanese Tea Garden Admissions Booth And Tea Garden Walkway

Cash Handling

Two Admission Attendants operate two payment windows in the admission booth, one on the front and the other on the side. A third attendant is normally present from late morning until late in the afternoon in order to cover for lunch breaks, work breaks, and assistance in controlling admissions. The admissions booth contains cash registers, a safe, files, forms, and equipment for recording admissions and collecting cash.

Although the processes of opening, closing and operating the admissions booth are fairly complex, and the value of cash maintained is not trivial, there are no written procedures for Japanese Tea Garden admission operations.

Current unwritten procedures include limiting admissions booth opening, closing and change fund processes to the lead Admission Attendant and two assistants. Close out procedures are as follows:

• Z-Out⁶ the two cash registers.
• Count and place Z-Out cash sums into a deposit envelope.
• Complete the Daily Receipt of Cash Received form.
• Fill out the deposit slips.

The Z-Out process is a universal and primary cash collection control. The non-resettable, sequential recording of transactions provides an efficient means of reconciling transaction totals to cash collected. The purpose of requiring that all customers receive a cash receipt is to provide reasonable assurance that every transaction is recorded.

Our review of a sample of Z-Out tapes from both the Japanese Tea Garden and the Tennis Court cash registers revealed instances of non-sequential Z-Out Report numbers. Further, there was no note in the file explaining the reasons for the skipped Z-Out Report deviations. At the request of the Budget Analyst, the Department's Financial Operations Manager conducted an inquiry to determine the reason for the non-sequential deviations and determined that the deviation associated with the Japanese Tea Garden was due to a service maintenance that was performed on the particular cash register. However, as of the writing of this report, the Financial Operations Manager has not explained the non-sequential deviation in the Z-Out Report numbers for the tennis courts.

The Director of Administration and Finance should ensure that the Revenue Unit is provided with a detailed set of policies and procedures for performing its revenue collection, counting, depositing, reconciliation and auditing functions, which, currently the Revenue Unit does not have.

Staffing

The Japanese Tea Garden Admissions Section, which is assigned to the Finance Group of the Administration and Finance Division, is authorized 5.0 fulltime equivalent (FTE), classification 3302, Admission Attendant positions. As of the writing of this report, the position authorizations and personnel appointments are shown below:

Only two of the nine Admissions Section appointments are full-time. As with the Aquatics Program staff, the Department prefers a high ratio of permanent, part-time and as-need employees in order to accommodate the cyclical and irregular attendance pattern of the Japanese Tea Garden.

The lead Admission Attendant schedules the staffing of the Admissions booth. The number of staff required to efficiently carry out the cash collection and admissions control duties is dependent on the number of patrons seeking admission at any particular time. Daily attendance can vary from less than 200 on an inclement winter day to more than 3,000 on a bright summer day.

Table 3.2 below displays the staffing profile for the Japanese Tea Garden for three days of calendar year 2007 - two days in the late summer and one day in mid-autumn. One Admission Attendant, the Lead Attendant, arrives at 8:30 A.M. to perform the booth opening tasks. A second staffperson arrives to begin duty at 9:00 A.M. when the gates are opened. Lunch breaks normally begin at 11:00 A.M.

The staffing profiles vary from a high of five Admission Attendants with a total of 32 work hours for the day(Profile #1), to four Admission Attendants with a total of 24 work hours for the day (Profile #2), and to a low of three Admission Attendants with a total of 18 work hours for the day (Profile #3).

Considering the economy of the three staffing profiles, in the professional judgment of the Budget Analyst profile numbers 1 and 2 reflect excess staffing. In the case of Profile Number 1, the presence of Attendant No. 2, who does not report for duty until 1:00 P.M., is not necessary because even without the presence of Attendant No. 2 there are four other Admission Attendants working from 1:00 P.M. until 5:00 P.M., which is one-half hour before closing. In the professional judgment of the Budget Analyst, the four Admission Attendants are sufficient to cover for a high attendance day at the Japanese Tea Garden, since the constraining factor in throughput of visitors is the physical limitation of the Admissions booth: the Admissions booth can only accommodate two workstations.

In the case of Profile No. 2, scheduling Attendant No. 2 to report one hour earlier would obviate the need for Attendant No. 3, since a minimum of two Admission Attendants would be present until closing, with three present from 1:00 P.M. until 5:00 P.M. except for the one hour lunch break taken by one Admission Attendant between the hours of 2:00 P.M. and 3:00 P.M.

Profile No. 3 appears to have been scheduled economically. As shown in Profile No. 3, during periods of relatively slow activity, a single Admission Attendant can perform the fee collection and admitting functions.

Table 3.2
Japanese Tea Garden
Admissions Staffing

Source: Department timesheets and Japanese Tea Garden attendance records.

Tables 3.3 (a) & (b) generalize the issue of uneconomical staffing and the need for greater management oversight and monitoring. Table 3.3 (a) displays the date, number of patrons, and number of Admission Attendant hours worked for four consecutive, winter-hour weeks in January and February of 2007. Table 3.3 (b) does the same for four consecutive summer-hour weeks in September and October of 2007.

Tables 3.3 (a) & (b)
Japanese Tea Garden Admissions Staffing
Winter Hours (a) and Summer Hours (b) 2007

(a)

(b)

Note: The bottom two lines in Tables 3.3 (a) and (b) show total attendance and total staffing for the four days in each column.

An examination of Tables 3.3 (a) and (b) reveals the following information:

a. The total attendance for the winter hours is 19,746 and the total number of hours worked is 731. The total attendance for the summer hours is 30,987 and the total number of hours worked is 738. The ratio of total attendance to total hours worked is 27.01 for the winter hours and 41.99 for the summer, meaning that the average number of patrons per work hour was approximately 42 for the summer and but only approximately 27 for the winter.

b. The highest attendance day, 2,045 patrons on October 14, 2007, had 30 work hours, with a corresponding ratio of 68.2 patrons per hour worked. The smallest attendance day, 261 patrons on February 1, 2007, had 24 work hours, with a corresponding ratio of 10.9 patrons per hour worked. Thus the ratio of patrons to hours worked was 526 percent greater for October 14, 2007, than for February 1, 2007.

c. The 20 winter-hour weekdays all were staffed 24 work hours each, except for February 19, 2007, which had 27 work hours;

d. The lowest number of work hours, 18 and 17, occurred on two consecutive Fridays, October 19, and October 26, 2007. The attendances on those two days were 991 and 888, respectively. Comparing the attendance and work hours of the lowest work-hour day, Friday, October 26, 2007, to the other days in this sample reveals the following information:

1) Twenty-one of the twenty-eight winter-hour days had a smaller attendance than October 28, 2007, including January 27, 2007, with 31 work hours and an attendance of 817 patrons, and February 10, 2007, with 31 work hours and an attendance of only 406 patrons, and;

2) Ten of the other twenty-seven summer hours had a smaller attendance than October 28, 2007, including October 10, 2007, with 27 work hours and an attendance of 821, and October 17, 2007, with 27 work hours and an attendance of 643.

The Budget Analyst is aware that there are fixed staffing costs involved in controlling admissions to the Japanese Tea Garden and that a linear relationship would not result in an efficient and economical operation. However, in the professional judgment of the Budget Analyst, our analysis of the data shown in Tables 3.3 (a) and (b) indicates that there are opportunities to achieve economic savings in the staffing of the Japanese Tea Garden Admissions Section. In the relevant attendance ranges, greater correlation of patronage to hours worked can be achieved. Also, a minimum staffing profile could be implemented for days of inclement weather when the probability of low attendance is high.

The hourly rate for the classification 3302, Admission Attendant position, is approximately $19.34, not including mandatory fringe benefits. Thus, if an average reduction of three work hours per day can be achieved in the Admissions Section, savings of approximately 0.6 FTE, valued at approximately $23,930 in salary and mandatory fringe benefits, annually, could be realized.

Physical Security

The Budget Analyst, with the assistance of the Sheriff's Department, conducted a physical security evaluation of the Japanese Tea Garden Admissions booth area. The area does have security sensors, which are activated when the facility is closed, and which are wired into the City's Emergency Communications Center and, in general, the physical security of the area is adequate. However, the Sheriff's representatives recommended that the following actions be implemented in order to provide additional security:

1. If feasible, schedule armored transport cash pick-ups for late in the afternoon, so that lesser sums of cash will be stored overnight in the Admissions booth.

2. Ensure that the Admissions booth has telephone communications with McLaren Lodge.

3. Install a drop safe in the Admissions booth in order to reduce the amount of loose cash available during the day.

As of the writing of this audit report, the Department has installed a telephone in the Admissions booth and is awaiting installation of a new safe that has been ordered and received. According to the Lead Admission Attendant, the armored transport service is unable to accommodate afternoon cash pickups.

Controller's 1993 Audit of the Japanese Tea Garden

The Controller's Audits Division conducted an audit of Japanese Tea Garden Admissions in October of 1993. The audit results were as follows:

D8 The Department correctly collected Tea Garden admission fees and deposited the daily collections on a timely basis.

D8 Although the Department generally has adequate internal controls over its Tea Garden admission operations, the Department does not adequately segregate the fee collecting and admitting functions at the Tea Garden. The Department also needs to improve its procedures for recording and reporting free admissions.

In the professional judgment of the Budget Analyst, the presence of a minimum of three Admission Attendants during period of high entry activity, which is the Department's current practice, is adequate.

The Department does not currently record free admissions. Information concerning free admissions would be useful in validating or proposing changes to the current free admissions policy.

Security of Recreation and Park Department Facilities

The Budget Analyst has received information from reliable sources within the Recreation and Park Department concerning burglaries of various Recreation and Park Department facilities in the past few years. Sites reported include the General Manager's Office, Rossi Pool, and the Tennis Courts Office. The Budget Analyst requested that the Department's Director of Operation, who oversees the operations of the Department's Park Patrol, provide a listing of burglaries and attempted burglaries that have occurred in the past few years. However, as of the writing of this audit report, the Director of Operations has not provided such a listing.

The purpose of the burglary information request is to determine the extent and severity of burglaries occurring on Recreation and Park Department properties, information that may provide the basis for determining the urgency of a burglary risk assessment and implementation of control activities.

As an example of burglaries occurring on Recreation and Park Department property, in 1996 a Park Patrol Officer who was found to have extorted money from a tourist was also found to have been involved in numerous other crimes involving Recreation and Park Department property. Further, the office of the Department's Director of Operations was broken into during the course of the Recreation and Park Department audit as were the offices of his two primary reports.

The Budget Analyst's 2006 audit report included a section on the Department's security needs. Therein, we reported that the Department does not have a security plan, addressing the overall security requirements of the Department. The report also states that the four Park Patrol officers (the Department is currently authorized 13) cannot meet all of the Department's security needs, and that recreation directors, gardeners, and custodians expressed concern about security and safety. For example, one recreation director reported an incident at Garfield Park in which a neighbor pulled a gun on a contract worker. Further, we reported that in focus groups conducted by the Budget Analyst, staff reported that they did not receive adequate information about safety and security incidents and the Department's follow up on these incidents.

The Director of Operations should ensure that the Recreation and Park Department develops or procures an incident reporting system and that in addition to collecting statistics, the system is used to analyze trends and assist in controlling exposure to incidents.

Conclusions

In the professional judgment of the Budget Analyst, the occurrence of violating the two-person control for cash counting in the Revenue Unit shows a lack of adequate cash handling controls and an appreciation for the importance of that control and requires the attention of the General Manager.

The Admissions Section of the Japanese Tea Garden needs a set of written policies and procedures to provide reasonable assurance that controls for cash collection and patron admission are adequate.

Staffing for Japanese Tea Admissions should be reduced to the minimum level required to effectively perform the cash collection and visitor admission functions.

The Department should conduct a risk assessment of burglaries on Recreation and Park Department property and implement control activities, if warranted, to reduce the risks of burglaries. Further, the Director of Operations should ensure that the Department develops or procures an adequate incident reporting system and that the system is used to analyze trends and to control exposure to incidents.

Based on the findings included in the 2006 Recreation and Park Department Audit Report and this follow-up audit report, the General Manager of the Recreation and Park Department faces challenging control risks in safeguarding assets, accuracy of financial reporting, economy and efficiency of operations, and compliance with policies and procedures. Obtaining the services of an internal auditor or auditors, such as is the practice of the Airport, could be a significant benefit to the organization. Such a staffperson would be available to the General Manager, and through the General Manager, to the Recreation and Park Commission, for assisting in risk management, control, and governance processes. The Budget Analyst recommends that the General Manager consider creating such a position, which possibly may be funded by reducing audit work orders.

Recommendations

The Recreation and Park General Manager should:

3.1 Direct the Director of Administration and Finance to enforce the protocol requiring at least two employees present at all cash counts.

3.2 Direct the Director of Administration and Finance to develop detailed policies and procedures covering the operations of the Revenue Unit.

3.3 Reduce staffing to the minimum level required to effectively perform the cash collection and visitor admission function at the Japanese Tea Garden.

3.4 If feasible, schedule armored transport cash pick-ups for late in the afternoon, so that lesser sums of cash will be stored overnight in the Admissions booth.

3.5 Ensure that the Recreation and Park Department develops or procures an incident reporting system and that the system is used to analyze trends and assist in controlling exposure to incidents.

3.6 In accordance with the Controller's 1993 Audit of the Japanese Tea Garden, direct the Director of Administration and Finance to "improve its procedures for recording and reporting free admissions."

Costs and Benefits

The development or procurement of an incident reporting system would incur costs, yet undetermined. However, those costs, in the professional judgment of the Budget Analyst, would be far outweighed by the benefit of possessing incident information useful for planning and control. Benefits of implementing the recommendations include 1) savings from more economical staffing within the Japanese Tea Garden Admissions Section; 2) enhanced internal controls of safeguarding assets at the Japanese Tea Garden; 3) improved cash handling of approximately $1,500,000 in departmental fee revenue annually from the Japanese Tea Garden; 4) improved internal controls for the operations of the Revenue Unit; 5) data of patronage of free admissions, which may confirm the utility of the current policy or indicate that a change is appropriate; and 6) the availability of incident information for planning and control, useful for the safety of both staff and visitors.

1 CLASS is a computerized program registration and facility booking system.

2 Cash register transactions are recorded on register tapes in a non-resettable, sequential manner. The Z-Out process entails activating a key position on the cash register that causes 1) a report of the transaction totals since the last Z-Out to be printed, 2) a sequential number to be assigned to the particular Z-Out report, and 3) a 93zero out94 of the register in preparation for the next day's or shift's work. The register tape would then record non-resettable sequential transactions since the last Z-Out report.

3 As shown in Exhibit II of the Introduction, certain concessions wire funds directly to the Recreation and Park Department bank account. Also, City garages submit their payments directly to the City Treasurer.

4 CLASS is a computerized program registration and facility booking system.

5 Information and Communication is one component of internal control.

6 Cash register transactions are recorded on register tapes in a non-resettable, sequential manner. The Z-Out process entails activating a key position on the cash register that causes 1) a report of the transaction totals since the last Z-Out to be printed, 2) a sequential number to be assigned to the particular Z-Out report, and 3) a 93zero out94 of the register in preparation for the next day's or shift's work. The register tape would then record non-resettable sequential transactions since the last Z-Out report.