Montgomery County Controller Diane B. Morgan 2008 Yearly Report

In an effort to be accountable to the citizens of Montgomery County, I thought I would take this opportunity to inform the public about the changes that have taken place in the Controller’s department since I was sworn in last January. The Controller’s office consists of four departments; payroll, accounts payable, audit, and retirement. In these tough times, we were budgeted $1,755,000 (rounded to $1,000), and spent $1,681,000 for 2008.

$15.2 million identified in Montgomery County Employees Retirement Fund

The most important event occurred in the Retirement department.  In the process of reconciling the balances for 2007 of the Montgomery County Employees Retirement Fund, our staff discovered errors totaling more than $15,200,000 in the 2006 report issued by my predecessor.  That error resulted in the County being required to make a premature contribution of $2,100,000 in 2007. 

After consultation with the County auditor, this led to a restatement of the total funds balance in the 2007 report. 

You can view the financial report online at: http://controller.montcopa.org/controller/site/default.asp, Annual Financial Statements p.7 Net Assets Held in Trust for Pension Benefits Beginning of year, restated - $469,993,350, and the explanation on p.12 Note 7 –

Restatement of Prior Years – Assets at Beginning of Year as originally stated: $454,761 921

                                               Prior Period Adjustment -                                         15,231,429

                                               Net Assets at Beginning of Year, as restated       $469,993,350

Instituted Programs to Reduce County’s Overhead Costs

The Controller’s office launched the Ceridian Self Service package in December. This provides convenient access for employees to view HR and benefits information while saving administrative overhead. It also reduces the cost involved in printing approximately 70,000 biweekly statements and the approximately $4,000 biweekly cost involved in constable check delivery to the various departments.  Employees now have direct access to their payroll information, and can view their vacation and accrued sick leave, print check stubs, and allow for changes in proprietary information and dependents on the Internet at their convenience. We anticipate upgrading to allow employees to enroll in or change County offered insurance plans which will reduce HR overhead costs.

Aggressive approach to collections yields results

The payroll department has recovered more than $8500 in overpayments this year. 

Operating Efficiencies

We filled eight open positions this year, out of a department of 23. I hired 2 people due to openings when I arrived.  We lost our first deputy due to his promotion to Chief Financial Officer. The other 5 openings were due to the exodus of personnel because of the County early retirement incentive bonus. We’ve begun a Handbook with enhanced job descriptions, reviewed departmental functions, and reorganized accordingly. We are now operating with 2 open positions due to the County hiring freeze.

Streamlined changes to Retirement department to promote faster reconciliation of investment accounts and eliminate time associated with manual calculations 

Major automation initiatives have taken place in the Retirement department to allow it to operate into the 21st century.  All statements from investment advisors and the fiduciary custodian are now received electronically and are transmitted directly into an accounting package. The County Information Technology department is working with us to develop many screen applications including elimination of manual checks, system reconfiguration for new tax data, computerization of accounts payable, and computer processing of buy-backs. We have also implemented a program to calculate cost of living (COLA) updates.  What formerly took a week to update, now takes less than one day. These innovations will help reduce repetitive manual calculations, reduce entry mistakes, eliminate paper usage, reduce storage costs, and save our trees.

After 5 years bank yields interest

The bank, which administers our retirement checking account, has agreed to credit the account with interest beginning November, 2008 moving forward when no interest has been paid since 2003. So far, we have collected $826 for November, 2008, and $3,159 for December. It has been estimated that we lost more than $96,000 in unpaid interest for the 5 year period.

Secure, cost-effective accounts payable procedures have been added

In the Accounts Payable Department, we’ve taken an aggressive approach to encouraging vendors to accept direct deposit payment (ACH).  We hope to increase our venders’ participation to 50% by next year.  This measure is more efficient, safeguards against check loss, and saves postage.  We’re also investigating the purchase of an accounts payable scanning system that will scan directly into our accounting system.  This will provide greater efficiency by reducing input time and errors. It will also add an index system for contracts, invoices, and audit materials. With the PA Right to Know Law a scanning and indexing system will be invaluable in helping us to respond to queries within the time limits required by law.

Audit controls have been enacted to enhance accountability

The Controller’s internal audit department is required to audit all of the elected row officers who collect monies, 911 Emergency Dispatch, various funds in Parkhouse Nursing Facility, and the prison.  In addition to our required audits, we’ve reviewed Voter Services overtime expense and have suggested a change in policy to ban employees from “double dipping” by using sick time to work on Primary Day at overtime rates. We’ve had cooperation in instituting audit controls in the 911 Emergency Dispatch Department and cooperation in the District Attorney’s office when we suggested a policy to ensure investment instruments are insured by SIPC (Securities Investor Protection Corporation) in addition to FDIC. We began regular in-house educational training sessions for auditors; and have begun to investigate the level to which tax collectors are audited by the local school district and the municipalities.

Challenges remain in the audit department with a reduced staff due to commissioners reductions in our current budget and the fact that the department was behind on the required audits when I took office last year.

Suggested changes to Employee Handbook will bring County in line with accepted business practices.

The Controller’s department has suggested numerous changes to the Employee Handbook. Among the suggestions are elimination of granting employees their entire annual vacation when they only have completed 5 full workdays in January, and replacing it with the universally accepted business practice of using vacation time only as earned.  We’ve also encouraged a strict policy for reimbursing overtime and demanding that employees use their accumulated compensation time before they retire. 

Proposed change to rotate audit firms was denied

My recommendation to change the auditing firm who prepares our annual audit to another experienced suburban area auditing firm, at no additional cost, and with no relationship to any County official, was denied by a 2:1 vote of the Board of Commissioners. The County has used this firm’s services for the past 14 years, and they have prepared the County audit for the last 6 years.  I believe change was necessary since research has shown that public entities are required to rotate auditors every five years. Philadelphia, Allegheny, and Berks Counties rotate their outside auditors. A “fresh set of eyes” and a dose of healthy skepticism often results in the discovery of errors and encourages suggestions for new ways of performing a task as well as  enabling an auditor to maintain their independence. The Controller’s office will perform a periodic re-examination of this policy.

I would like to thank the Commissioners, the Treasurer, and the Finance Department for their cooperation during this difficult time.

As fiscal watchdog for the citizens of Montgomery County, I will continue to foster transparent government, formulate sound and progressive cost saving measures, ensure governmental compliance, and embrace new ideas for achieving better performance. If you have suggestions as to how to achieve additional cost cutting savings, I would be most appreciative.

Very truly yours,

Diane B. Morgan