The Denver Public Library had lapses in its monitoring of contracts, employee time sheets, and cash handling, Denver Auditor Timothy O’Brien’s office found. Such deficiencies either ran counter to prescribed practices or, more perilously, created a financial risk for the city.
Currently, the library system includes 25 branch libraries and the Central Library, with a collection of more than two million books and other publications. The most recent expansion of the library occurred after 2007. Appropriations to the public library from the city were in excess of $55.8 million in 2019.
In a report released last week, auditors found that the library had been operating under five expired contracts as of last year. Rather than monitoring the performance of contractors itself, the library relied on other city departments to alert them to poor performance. Employees in the Finance and Facilities department were unaware that four of the contracts had expired after the finance director retired.
Through a further lack of oversight, supervisors did not approve 7% of employees’ time sheets within the required two business days following the end of the pay period. However, during the time period investigated, the city still issued paychecks regardless of approval.
“Inaccurate payroll reporting could result in the city over- or underpaying employees, which increases the risk of financial loss for the city,” the report found.
The vast majority of performers — known as “presenters” — in library branches did not have to submit an invoice to be paid. Instead, the library paid them with a check at the time of the presentation. However, in October 2019, the city halted payments in cases where there was no invoice, leaving the Finance and Facilities department to create “dummy invoices” for the performers.
“The lack of documentation on invoices and the lack of evidence of goods and services increases the risk of fraud, because the city could pay for goods or services that have not been rendered,” auditors cautioned.
Of 14 financial policies and procedures for the library system, only four were instituted in 2018 or later. The remainder were undated or were implemented prior to 2015. The audit deemed this significant because the Finance and Facilities department acknowledged the need to update their policies, and there was turnover in multiple key positions in 2019.
There were also deficiencies in the library’s cash-handling protocol, with no procedure for handling cash surpluses or deficits.
“We identified instances when the amounts for overages and shortages were inconsistently recorded in different Workday revenue accounts rather than to the overage and shortage revenue account, and no evidence existed to show supervisory review of the record keeping,” the audit found, referring to the city’s financial reporting software. Auditors clarified that the discrepancies were “negligible.”
O’Brien’s auditors also warned that the Finance and Facilities department should rotate employees between duties, because the only other option in a small department is to institute more rigorous oversight by management.
“Without a plan for periodic rotation of job functions, the Denver Public Library is exposed to the risk that results from having a single person with all knowledge and control over an entire process or fiscal activity,” the report noted.
Finally, the audit advised against the library’s classification of digital purchases in the same category as physical assets, saying it could result in misleading financial reporting.
The report applauded the library for replacing credit cards from stores such as Walmart, King Soopers, Hobby Lobby and Sam’s Club with city-issued purchasing cards, or “P-cards,” in 2019. Finding a lack of oversight with the store cards, auditors explained that “when a purchaser uses the P-card, the transaction from the bank is automatically linked to the city’s accounting system of record, Workday.”
Amber Lindberg, the director of Finance and Facilities for the library, agreed with the recommendations in the report and vowed to make changes. “Financial procedures will align with the city’s Fiscal Accountability Rules,” she wrote in response. “A sample of procedures will be selected for review each year to ensure all procedures are reviewed and updated regularly. Management will document the date of review on the procedure.”
Lindberg added that beginning on June 1, the library was in full compliance with the invoice policy for presenters.