April 26, 1999

To:Audit Committee

From:City Auditor

Subject:Follow-up to Review of Data Conversion, York Employees' Pension and Benefit Fund

Recommendation:

It is recommended that:

(1)for those recommendations contained in the 1998 report from the City Auditor titled, "Review of Data Conversion, York Employees Pension and Benefit Fund", which have not yet been implemented, as outlined in Attachment I, the Chief Financial Officer and Treasurer:

(a)submit to the Audit Committee an action plan with specific time lines and staff responsibility for implementation; and

(b)report to the Audit Committee on the status of the implementation process prior to December 31, 1999.

Background:

Audit Services completed a review of the data conversion of the York Employees' Pension and Benefit Fund on August 10, 1998. A report was submitted to Audit Committee on October 26, 1998, outlining our findings and recommendations. At the Audit Committee meeting held in November 1998, the Audit Committee requested a progress report on the status of the Management Response to the Auditor's review within six months.

Our follow-up review included discussions with staff of the Finance Department and a review of relevant documents and records.

Comments:

The status of the recommendations contained in our previous report is as follows:

Implemented2

Not Implemented3

Attachment I - Status of Recommendations, outlines in detail our follow-up commentary on each of the recommendations.

Conclusions:

Given that financial statements for the York Employees' Pension and Benefit Fund must be filed by June 30, 1999, it is imperative that action be taken on the outstanding recommendations to expedite the conversion of the general ledger files, bring the bank reconciliations up to date and to resolve the data integrity issues identified in our previous report.

We have reviewed this report with staff from the City Finance Department who generally concur with its contents.

Contact Name and Telephone Number:

Jerry Shaubel, Director of Audits, 392-8462

Jeffrey Griffiths

City Auditor

Attachment (York Employees' Pension and Benefit Fund, Status of Recommendations)

C:\DATA\AUDIT\REPORTS\1999\ABC'S\PENSION\YORKPENS.A26

York Employees' Pension and Benefit Fund

Status of Recommendations

Recommendation:

1. Where possible, the remainder of the conversion process should be done using electronic extracts of source data rather than manual procedures. Where manual procedures are deemed necessary, thorough checking should be performed including the use of control and hash totals.

Management's Response:

The conversion process of the York Pension Payroll was done with limited IT resources and limited electronic form data records. When IT resources are available, we will ensure that electronic extracts of source data is used. All information that is updated manually, will be thoroughly checked and procedures will include appropriate controls.

Follow-Up:

See Recommendation 2.

Recommendation:

2.It is recommended that:

(a)the conversion of the City of York's Pension Year to Date files be processed via a direct extract from the City of York payroll system so as to limit the possibility of data input errors and/or file manipulation;

(b)action be taken to expedite the conversion of the general ledger and year to date files; and

(c)bank reconciliations be brought up to date upon completion of the data conversion. This should be a priority.

Management Response:

The conversion of the year-to-date files has been done through electronic extract of data. This data was verified to payroll totals and errors corrected. The general ledger is currently being updated to the Metro system. This portion of the conversion is expected to be completed by November 30, 1998. Bank reconciliations will be up to date by year end.

Follow-Up:

Recommendation 2(a), the conversion of the York Pension year to date files, was completed in November 1998.

Recommendations 2(b) and (c) have not been completed. As of March 1, 1999, the 1998 pension transactions relating to the York Employees' Pension and Benefits Fund have not yet been recorded in the general ledger of the former Metro pension system and this has prevented staff from completing bank reconciliations. The inability to prepare timely bank reconciliations is a significant control weakness which could expose the Corporation to potential loss.

Management Comments - May 10, 1999

The Pension Section staff has just been increased with the hiring of the Pension Analyst and summer student. The analyst is currently reviewing the account structure and codes for the former City of York and City of Toronto plans in preparation for conversion to the Pension Accounting System. Once completed and set up in the next several weeks, historical and year to date data will be input.

While it is acknowledged that the bank reconciliations are outstanding, transactions are basically limited to pension payments issued from the pension payroll system. The bank statements and cancelled cheques are scrutinized by the Pension Supervisor on a monthly basis.

Recommendation:

3.It is recommended that the personnel files for pensioners and current employees of the former City of York be reviewed and the appropriate information in the employee master file be updated accordingly.

Management Response:

All required information is being updated on a priority basis for all pensioner and current employees. As time and resources become available, the appropriate information will be updated.

Follow-Up:

To date, the Pension Division have not been able to commit resources to correct the data integrity issues identified in our previous review.

Management Comments - May 10, 1999

A file by file review and updating of basic data from the individual files is to be undertaken using our summer student. This is scheduled to be completed in June.