Metropolitan Nashville Airport Authority

Transcription

1 Metropolitan Nashville Airport Authority MEMORANDUM TO: CC: FROM: Robert R. Wigington, President and CEO Basil Dosunmu, Interim Chief Financial Officer David Griswold, Chief and Director of Public Safety Davita Taylor, Chief of Staff, Bd. Liaison, Business Diversity Development Christopher Shuff, Captain of Public Safety Tiffany Underwood, Internal Auditor DATE: June 19, 2017 SUBJ: Walden Security Security Guard Services Contract Audit Report Background On October 1, 2014, Walden Security ( Contractor ) entered into the Landside and Air Operations Area (AOA) Security Guard Services Contract ( Security Contract ) with the Metropolitan Nashville Airport Authority ( Authority ) to provide security protection services at specified locations at the Nashville International Airport ( Airport ) and the International Plaza building ( International Plaza ). The Security Contract granted the Contractor an initial three (3) year term, effective October 1, 2014, through September 30, 2017, with two (2) additional one (1) year renewal options. The Security Contract included provisions of all management, supervision, employees, equipment (including vehicles) and supplies necessary to perform protection at the specified and added airport locations. The Contractor would provide sufficient, fully qualified personnel to meet the performance requirements. The Contractor would obtain, maintain and pay for all licenses, permits, and certificates, including all professional licenses required by any statute, ordinance, rule or regulation and certification of on-site guards. Security guard services would be required for the specified locations, or as directed by the Authority. The Security Contract set forth the initial areas of responsibility located in the table below.

2 Areas of Responsibility and Duties Hours per Week Security Coverage Responsibilites Secured Airside Vehicle Gate 9A 168 All areas visible from the gatehouse. Landside Ground Level/Valet 112 The south side of the ground transportation area, underneath the Airport terminal building. Landside Employee Parking Lot 28 The entire area within the employee parking lot boundaries, including the entrance/exit gate areas. Landside Service Tunnel 168 The north side of the Airport terminal building, along the drive leading to the service tunnel or as assigned by DPS. Rover I and Rover II 280 Two guards to move between the following areas of responsibility: charter bus inspections, vendor inspections, AOA perimeter inspection, ground level sweeps, crosswalk sweeps, and CONRAC sweeps. International Plaza Office Building 63 Primaty duties will be to patrol building lobby and parking lot to ensure the safety of the tenants of lntemational Plaza. Two guards to be available at Gate 9A to escort deliveries Concessionaire Inspections and Deliveries 72 for concessionaires to the terminal and to inspect the (Gate 9A) deliveries. Total Guard Hours 891 Secured Supervisor of AOA Security Guards 40 Total Supervisor Hours 40 The Security Contract required the Contractor to provide additional security services as needed, at the request of the Authority, at the billable straight time rate. Should additional service extend beyond three (3) months, the Security Contract would need to be amended to include the additional service. The pricing established approved straight time rates, holiday rates, overtimes rates and additional guard rates for the five (5) year period, as detailed below. GUARD 10/01/14-09/30/17 10/01/17-09/30/18 10/01/18-09/30/19 Starting Rate Pay $9.00 $9.00 $9.00 Billable Straight Time $12.26 $12.26 $12.26 Billable Holiday/OT $17.16 $17.16 $17.16 Billable Additional Guard $12.26 $12.26 $12.26 Supervisor Starting Rate Pay $12.50 $12.50 $12.50 Billable Straight Time $16.64 $16.64 $16.64 Billable Holiday/OT $23.30 $23.30 $23.30 Billable Additional Guard $16.64 $16.64 $16.64 The Small Minority Woman-Owned Business Enterprise ( SMWBE ) participation level would be measured as a percentage of the total dollar value of the Security Contract. The SMWBE participation level was established at Twenty Percent (20%); however, the 2

3 Contractor committed to achieve Twenty-One and Four-Tenths Percent (21.4%) or $124,954 per year. Effective October 1, 2014, the Contractor subcontracted with Prime Security ( Prime ) to achieve the SMWBE participation level. Prime would provide security services at Gate 9A, the Employee Lot and other services, as may be requested. On September 4, 2015, the Contractor entered into the First Amendment to the Security Contract ( Amendment ). The Amendment added an eight (8) hour shift on Thursdays to be assigned at Gate 9A. The Amendment also changed the job responsibilities for the Rover II position and changed the timing of patrol at International Plaza (the total hours for both positions remained unchanged). The Amendment set forth the areas of responsibility in the table below. Areas of Responsibility and Duties Hours per Week Security Coverage Responsibilites Secured Airside Vehicle Gate 9A 176 All areas visible from the gatehouse. Landside Ground Level/Valet 112 The south side of the ground transportation area, underneath the Airport terminal building. Landside Employee Parking Lot 28 The entire area within the employee parking lot boundaries, including the entrance/exit gate areas. Landside Service Tunnel 168 The north side of the Airport terminal building, along the drive leading to the service tunnel or as assigned by DPS. Rover I and Rover II 280 Two guards to move between the following areas of responsibility: charter bus inspections, vendor inspections, AOA perimeter inspection, ground level sweeps, crosswalk sweeps, and CONRAC sweeps. International Plaza Office Building 63 Primaty duties will be to patrol building lobby and parking lot to ensure the safety of the tenants of lntemational Plaza. Two guards to be available at Gate 9A to escort deliveries Concessionaire Inspections and Deliveries 72 for concessionaires to the terminal and to inspect the (Gate 9A) deliveries. Total Guard Hours 899 Secured Supervisor of AOA Security Guards 40 Total Supervisor Hours 40 Effective September 13, 2016, the Contractor contracted with Eagle Security ( Eagle ) to provide the services that were being offered by Prime. Objectives The objectives of this audit were as follows: 1. Determine the Contractor s compliance with contract terms and operational requirements. 3

4 2. Determine the Authority is adequately monitoring the Security Contract to ensure compliance with contract terms and operational requirements. 3. Determine the validity of the payments made to the Contractor. 4. Document and evaluate existing internal controls. Testing In order to satisfy the audit objectives, the following tests were performed: 1. Determine the Contractor maintains adequate insurance coverage. a. Obtain a copy of the current certificate of insurance and all prior certificates of insurance. b. Verify the commercial general liability, workers compensation, and automobile liability insurance coverage meets or exceeds the amount specified in the Security Contract. c. Verify the certificate of insurance on file is current and adheres to all other terms in the Security Contract. 2. Determine the security guards and supervisors maintain a professional license as required by the State of Tennessee. a. Verify security guards possess a registration card that is not currently expired. 3. Determine security guards and supervisors are dressed in appropriate uniforms with Airport photo identification security badges properly displayed. 4. Determine the Contractor has complied with Equal Employment Opportunity, nondiscrimination and drug-free workplace provisions. 5. Determine the Contractor maintains a contractor security company license as required by the State of Tennessee. a. Verify the Contractor notified the Authority s Department of Public Safety ( DPS ) of any suspension, revocation or other negative action involving its license or the license of any security guard employed by the Contractor. 6. Verify the Contractor did not subcontract any of the services under this contract without prior written consent of the Authority. 7. Verify the Contractor s subcontracts have the same provisions as the Security Contract for Equal Employment Opportunity requirements and inspection, audit and enforcement. 8. Determine the Contractor s compliance with airport security and safety requirements. a. Verify security guards are aware of their responsibilities in respect to airport security. b. Verify security guards prevent unauthorized access to airport premises. i. Security guards account for the movement and access of all visitors to secured areas around the airport. c. Verify the Contractor reimbursed Authority for any fines or penalties assessed by the Federal Aviation Administration ( FAA ) because of the Contractor s non-compliance with airport security and safety requirements. 4

5 9. Determine the Contractor s compliance with all federal, state or local laws applicable in the rendering of services by the Contractor under this Security Contract and all rules and regulations of the Authority or any other government agency. 10. Determine the Contractor has procedures in place to ensure the following: a. Verify adequate and appropriate security measures are in place to protect assets, persons and airport activities. b. Verify adequate and appropriate security measures are in place to protect property from theft, loss and/or damage. c. Verify adequate operational equipment is provided, tested and maintained. 11. Determine the Contractor continuously maintained adequate performance and payment bonds ( bonds ). 12. Determine DPS is performing periodic review of the Contractor s operations to ensure compliance with contract requirements. 13. Identify any areas of concern or instances of the Contractor s non-compliance with contract terms and operational requirements identified by Authority personnel. Perform testing of the status of such areas of concern or instances of noncompliance. 14. Determine whether any additional services, outside of the contract, were performed. a. Verify that the additional service was properly requested and authorized by appropriate Authority personnel. b. Determine if the additional service exceeded 3 months and determine if an amendment to the contract was made. 15. Determine the Contractor renewal and amendments comply with contract terms and are properly stated; verify contract modifications were appropriately approved by Authority personnel. 16. Determine the Contractor s compliance with SMWBE requirements in the contract. a. Verify with Business Diversity Development ( BDD ) that the SMWBE used by the Contractor is certified by the Authority. b. Obtain the SMWBE participation level and the disbursement forms accompanying submitted invoices and verify that the Contractor is correctly calculating the SMWBE participation level. c. Verify SMWBE participation levels through confirmation of payments made to the SMWBE. d. Verify that BDD is monitoring the SMWBE participation levels through onsite monitoring, review of SMWBE disbursement forms and verification of payments with the subcontractor. 17. Obtain payment history from October 2014 through January 2017 and performed the following: a. Determine whether any additional services outside of the contract were performed. b. Randomly select 3 months of invoices for detailed testing; additionally, randomly select 3 invoices for additional services outside the contract. c. Review each invoice for mathematically accuracy. d. Determine that invoices are prepared according to the terms of the contract. 5

6 e. Verify that the Contractor was billing for services performed during the audit. f. Verify that invoices are properly coded and approved. g. Determine that documentation required to support billing is attached to the invoice, including MNAA s SMWBE disbursement forms. 18. Document and evaluate existing internal controls. Conclusion Based upon the audit, the following were determined with respect to the stated objectives: 1. DPS did not confirm that the Contractor maintained continuous bond coverage equal to 100% of the contract price, as noted in Finding #1. 2. DPS and the Contractor did not comply with Security Contract requirements for requesting and providing additional services, as noted in Finding #2. 3. DPS is not reviewing invoices properly, prior to invoice approval, as noted in Finding #3. 4. Invoice payment discrepancies were identified, as noted in Finding #4. 5. The invoiced security services performed by the Contractor at Gate 9A for concession deliveries do not agree to the amount billed to HMS Host, as noted in Finding #5. 6. Invoices for International Plaza were not recorded under the purchase order set up for the Security Contract, as noted in Finding #6. 7. Invoice amounts were coded incorrectly in the ERP system, as noted in Finding #7. 8. The purchase agreement, purchase order and SMWBE disbursement forms were not revised for the amended contract amount and the Amendment had mathematical errors, as noted in Finding #8. 9. BDD was not reviewing SMWBE disbursement forms for accuracy or using the forms to monitor participation levels, as noted in Finding # The Contractor was not complying with airport security and safety requirements, as noted in Finding #10. Finding #1 DPS did not confirm that the Contractor maintained continuous bond coverage equal to 100% of the contract price. 6

7 Background Article II, Instructions to Bid, Section E, Payment and Performance Bonds, of the Invitation to Bid for the Security Contract, requires the successful Bidder to furnish and maintain bonds equal to one hundred percent (100%) of the contract price. Prior to the commencement of the Security Contract, the Contractor provided bonds that became effective October 1, 2014, that equaled the total Security Contract price of $593,716. The bonds were effective from October 1, 2014, to September 30, On September 4, 2015, the Contractor amended the Security Contract to reflect a change in the scope of services and increased the contract price to $594,500. The Contractor did not increase the amount of the bonds to reflect the amended contract price. As of September 4, 2015, the Contractor did not maintain adequate bonds equal to 100% of the contract price, as required by the Invitation to Bid. The Contractor filed a continuation certificate dated August 12, 2016, for the initial bonds. The Contractor s initial bonds expired September 30, Thus, the Contractor s bonds were expired from October 1, 2015, to August 12, The Contractor currently maintains bonds covering the period from October 1, 2016, to September 30, However, the Contractor has not continuously maintained bond coverage, as required by the Invitation to Bid. Recommendation DPS should set up an alert system to monitor the expiration date of bonds to ensure that there is not a lapse in coverage. DPS should review the bond coverage each time the contract is amended, to ensure that the bonds equal 100% of the contract price. Management Response DPS has requested updated bonds from Walden Security and will keep them on file. In the new contract that goes into effect October 2017, DPS will be responsible for ensuring the maintenance of bonds with the security contractor. Finding #2 DPS and the Contractor did not comply with Security Contract requirements for requesting and providing additional services. 7

8 Background Exhibit A, Scope of Services, Section II, Additional Services, of the Security Contract requires the Contractor to provide additional security services as needed, at the request of the Authority, at the billable straight time rate. The need for these additional services is communicated using the Other Services Request form ("OSR"). OSR establishes the location and required hours for any additional services and the anticipated length of the additional service. Should the length of time exceed three (3) months, the contract should be amended to include the additional services. An objective of the audit was to determine if additional services were requested and provided outside of the contract. If additional services were requested, a second objective was to determine whether the additional services were properly requested and authorized. During audit testing, it was determined that the roll-up gate at the service tunnel broke and DPS verbally requested additional services outside of the contract. According to the Security Contract, DPS should have requested the additional services through OSR. The Contractor was requested to provide an additional guard to monitor the gate during delivery hours of 3:00 AM to 3:00 PM for approximately three weeks. The Contractor would not provide the additional services, until an amendment was created. The Contractor s attorney was unavailable to provide an amendment and the Contractor refused to provide the services. Therefore, the Contractor did not comply with Security Contract requirements to provide additional services that are less than three months at the billable straight time rate. Because the additional services were not performed by the Contractor, DPS hired Arch Angel Security ( Arch Angel ) at a rate of $33.32 per hour. Arch Angel provided security services for twenty (20) days for a total of 240 hours. Arch Angel invoiced the airport $7,997. The Contractor s refusal of service caused the airport to incur additional security expenses of $5,054, as detailed in the table below. Total Additional Hours Total Additional Expense Company Service From Date Service To Date No. Work Days Daily Hours Hourly Rate Walden 7/4/2016 7/29/ $12.26 $2,942 Arch Angel 7/4/2016 7/29/ $33.32 $7,997 Variance ($21.06) ($5,054) Recommendation DPS should use OSR forms to request future additional services outside of the Security Contract. The Contractor should provide future additional services that are less than three months at the billable straight time rate, without requesting an amendment to the Security Contract. 8

9 Management Response DPS has implemented the Other Services Request (OSR) form for additional services to be performed by Walden Security for periods of time not to exceed three (3) months. Finding #3 DPS is not reviewing invoices properly, prior to invoice approval. Background Article IV. Rights and Duties of Authority, Section A, Payment Terms, of the Security Contract requires invoices for payment to be properly identified with the Contractor s letterhead, name, address and applicable purchase order number. The Contractor shall submit to the Authority on a weekly basis an invoice for payment detailing itemized labor costs, in accordance with the Scope of Services. Invoices shall identify the billable rate and number of hours by service position. An objective of the audit was to determine invoices were properly coded and approved. Internal Audit conducted interviews with DPS to determine the invoice approval process. DPS asserted that the review process consisted of comparing the current invoice to prior invoices for variance analysis and matching invoiced billing amounts to the detailed summary totals. During audit testing, it was noted that DPS was billed $6,145 of the International Plaza expenses. International Plaza expenses should be separately billed and paid, since it is not included in the DPS s budget. Internal Audit could not identify a correction for the International Plaza expense that was inappropriately billed to DPS. Internal Audit also determined that the Contractor billed training cost in the amount of $1,407 to DPS. Internal Audit questioned why these expenses were approved for payment by DPS. DPS asserted that these items should not have been invoiced to DPS and they would request the error to be corrected. On August 23, 2016, the Contractor issued a credit memo (CRM# ) for the training cost. Accordingly, DPS is not reviewing invoices properly to ensure that only contractual DPS expenses are being included for billing. 9

10 Recommendation DPS should review invoices to ensure that only contractual DPS services are included on the bill prior to authorizing payment. Management Response DPS will review invoices to ensure accuracy of services billed prior to payment. Finding #4 Invoice payment discrepancies were identified. Background An objective of the audit was to determine the validity of the payments made to the Contractor. During audit testing, it was determined that Finance had paid a duplicate expense in the amount of $712 for International Plaza. On November 24, 2015, Finance issued check number paying $662 of Invoice No and $50 of Invoice No A. On January 28, 2016, Finance created check number , which paid the amounts from Invoice Nos and A a second time. The ERP system has internal controls that will not allow the same invoice to be paid twice. The ERP s internal controls were circumvented by Finance using a combination of the invoice numbers, instead of the actual invoice numbers. Internal Audit obtained Invoice No , totaling $539, from Finance s files, which contained a note to International Plaza that stated, do not pay this invoice credit applied. Internal Audit determined that Finance selected not to enter Invoice No into the ERP system, rather than creating a credit memo. The remaining $173 of the duplicate payment was treated as a credit to pay Invoice Nos and Recommendation Finance should use the actual invoice number for payments, instead of creating a new invoice number. Finance should enter all invoices into the ERP system and issue credit memos for any over payments. 10

11 Management Response Management concurs with the recommendation. Accounts payable staff along with their supervisor are required to always use the invoice number when available. Finding #5 The invoiced security services performed by the Contractor at Gate 9A for concession deliveries do not agree to the amount billed to HMS Host. Background A requirement of the Security Contract is for the Contractor, or its subcontractor, to provide security services at Gate 9A for concessions deliveries. The Contractor is providing security services to HMS Host for concession deliveries and is reimbursed for those security services through the tenant reimbursement services expense account. The Contractor initially invoices DPS for the contractual hours provided at Gate 9A. The Authority then bills HMS Host from the Reimbursable Services account (Account No ) and credits the Contractor s Security Service Reimbursable by Tenant (Account No ). An objective of the audit was to determine services billed by the Contractor agreed to the amount billed to HMS Host. During audit testing, it was determined that the Contractor provided services at Gate 9A and invoiced DPS $83,797. Internal Audit determined that the Authority credited the Contractor s Security Service Reimbursable by Tenant account and billed HMS Host $87,721 from the Reimbursable Services account. Account Description Account No. HMS Host Amount Reimbursable Services $87,721 Security Service Reimbursable by Tenant ,797 Overbilled ($3,924) After a discrepancy was noted between the services invoiced to DPS and the amount billed to HMS Host, Internal Audit reviewed the amounts billed to HMS Host and determined that HMS Host was invoiced a duplicate bill amounting to $3,924 for services provided during April Invoice No was issued to HMS Host on May 31, HMS Host was billed again for the services on June 30, On August 9, 2016, Finance issued a credit memo (CRM# 22379). It was determined from this error that the Contractor s Security Service Reimbursable by Tenant account and the Reimbursable Services account were not being reconciled. 11

12 Recommendation Finance should reconcile the Contractor s Security Service Reimbursable by Tenant account and the Reimbursable Services account. Management Response Management concurs with the recommendation. Finance will reconcile the Contractor s Security Service Reimbursable by Tenant account and Reimbursable Services account. Finding #6 Invoices for International Plaza were not recorded under the purchase order set up for the Security Contract. Background On October 1, 2014, an initial purchase agreement (MPC ) and purchase order number (MPC ) were established for all International Plaza expenses incurred by the Security Contract. An objective of the audit was to determine whether invoices were properly recorded under the purchase order set up for the Security Contract. During audit testing, Internal Audit verified that International Plaza expenses were recorded under four (4) different purchase orders in addition to the original purchase order MPC , as detailed in the table below. Purchase order Amount MPC $662 MPC MPC ,202 MPC Total $3,189 To accurately reflect expenses incurred under the Security Contract, International Plaza expense should be recorded under purchase order MPC Recommendation MPC should record all future International Plaza security expenses under purchase order MPC

13 Management Response Management concurs with the findings. Management will take the necessary corrective action to ensure that the assigned PO number is used on all Walden expenses. Finding #7 Invoice amounts were coded incorrectly in the ERP system. Background Walden is providing security services to HMS Host for concession deliveries and is reimbursed for those security services in the tenant reimbursement expense account. An objective of the audit was to determine if invoices were properly entered in the ERP system. Internal Audit reviewed the security services expense account ( ) and the tenant reimbursement expense account ( ), from October 2014 to January 2017, to evaluate proper coding in the ERP system. Internal Audit determined that 5 invoices in FY 16 were inappropriately recorded to the security services expense account, instead of the tenant reimbursement expense account, as detailed in the table below. Reimbursement Account Purchase order Date Invoice Amount Journal Entry Number PO /15/ $883 BNGJV PO /22/ BNGJV PO /16/ BNGJV PO /2/ BNGJV PO /3/ BNGJV Total $4,708 During the audit, Finance became aware of the miscoding errors and reclassed the FY 16 expenses that were inappropriately coded to the security service expense account, instead of the tenant reimbursement account. On June 30, 2016, Finance recorded journal entries BNGJC and BNGJV to reclassify the FY 16 expenses. During audit testing, it was determined that 1 additional invoice for FY 17 was inappropriately recorded to the security services expense account, instead of the tenant reimbursement expense account, as detailed below. 13

14 Account Purchase order Date Invoice Reimbursement Amount PO /14/ $981 Recommendation DPS should require Finance to reclassify HMS Host expense for Invoice No from the security services expense account to the tenant reimbursement account. Management Response DPS will work with Finance to classify all expenses in the proper accounts. Finding #8 The purchase agreement, purchase order and SMWBE disbursement forms were not revised for the amended contract amount and the Amendment had mathematical errors. Background On October 1, 2014, the Contractor s Security Contract became effective and an initial purchase agreement (BNA ) and purchase order number (PO ) was established for all BNA expenses incurred under the Security Contract. On September 4, 2015, the First Amendment to the Contractor s Security Contract was entered. The Amendment changed the Rover II job responsibilities, added an additional 8-hour shift at Gate 9A, changed the nightly patrol time at International Plaza and amended the contract price. An objective of the audit was to verify contract modifications comply with contract terms. Through audit testing, Internal Audit reviewed the purchase agreement, purchase order and the SMWBE disbursement form to ensure that contract price listed on each reflected the amended contract amount. Internal Audit determined that the purchase agreement, purchase order and the SMWBE disbursement form were not updated to reflect the amended contract amount. There were also two mathematical errors noted in the Amendment. The first mathematical error related to the hours designated for Rover II at the loading dock and the rover position. The amendment assigned Rover II at the loading dock Monday through Friday from 03:00 to 15:00 for 50 hours. The total hours at the loading dock calculates to 60 hours, instead of the 50 hours listed in the amendment. The amendment is 14

15 also incorrect in listing the remaining hours that Rover II is assigned to the rover position, which should be 52 hours, instead of the 62 hours listed in the amendment. Rover II Duties Assigned Shifts Calculated Weekly Hours Contract Amount Variance Loading Dock Monday through Friday 03:00 to 15: Rover Position Remaining Unassigned Hours The second mathematical error relates to the payment terms of the amendment. Paragraph 2 of the amendment states that the compensation for this position will add an additional $98 of billable time per week, for an annual increase of $5,100. The Request for Signature Approval Form lists the amended contract amount as $594,500, which is an increase of $784 per year above the original contract amount of $593,716. There are conflicting payment terms in the amendment, as noted below. Amendment Paragraph 2 Request for Signature Approval Form Variance Weekly Increase $98.08 No. of Weeks 52 Annual Increase $5,100 $784 $4,316 Original Contract Amount 593, ,716 0 Amendment Contract Amount $598,816 $594,500 $4,316 Recommendation DPS should require Purchasing to update the purchase order and BDD to revise the SMWBE disbursement forms to reflect the amended contract amount. DPS should correct the mathematical errors noted in the first Amendment by formally revising the contract amount. Management Response DPS will work with Finance and BDD to ensure all PO s and disbursement forms are accurate and up to date. Finding #9 BDD was not reviewing SMWBE disbursement forms for accuracy or using the forms to monitor participation levels. 15

16 Background According to the BDD Policy and Process Manual, Section III, Contract Compliance Procedures, contract compliance involves, but is not limited to, the collection and review of payment data and supporting documentation to ascertain that the committed levels of SMWBE participation are achieved. One form of data collected, is the SMWBE disbursement form that the Contractor is required to submit with each of its invoices to support SMWBE participation amounts. An objective of the audit was to determine BDD was monitoring the SMWBE disbursement forms for accurate reporting of SMWBE participation levels. Internal Audit obtained invoices and the SMWBE disbursement forms attached to the invoices for the months of March 2015, September 2015 and April 2016, as well as invoices for the weeks of October 1, 2015 and January 7, Internal Audit compared the invoiced SMWBE amounts to the SMWBE amounts included on the SMWBE disbursement form for 14 total forms. Of the 14 forms that Internal Audit selected for detailed testing, 5 of the selected SMWBE disbursement forms had SMWBE amounts that did not match the invoice or the amounts entered in the ERP system. Internal Audit also determined that the Contractor had not updated the disbursement form to reflect the amended contract amount. Accordingly, Internal Audit determined that BDD was not reviewing the SMWBE disbursement form for accuracy. Internal Audit tried to trace amounts on the SMWBE disbursement forms to amounts included in BDD s calculation of the achieved SMWBE participation level and determined that BDD was not using the SMWBE disbursement forms to calculate the achieved SMWBE participation level. Through audit testing, it was determined that BDD used the actual invoiced amounts to calculate the achieved SMWBE participation level, instead of the SMWBE disbursement form. Recommendation BDD should reconcile the SMWBE disbursement forms to actual invoices on a quarterly basis and request the Contractor to make appropriate corrections to the SMWBE disbursement forms. Management Response BDD concurs with the finding and recommendation and will request that the Contractor submit any corrected SMWBE disbursement forms by the quarterly meetings beginning with the September 2017 quarterly meeting. 16

17 Finding #10 The Contractor was not complying with airport security and safety requirements. Background Attachment A, Scope, Article I, Secured Airside Vehicle Gate 9A, paragraph B, of the Security Contract requires that all guards acquaint themselves with MNAA management and airline and tenant employees who are authorized to enter the terminal ramp restricted area. Guards must ensure all employees and tenants entering the restricted area through the gate have an airport Authority identification/access Badge allowing them into the specific area with proper access level for the area. Article III, Rights & Duties of Contractor, Section K, Airport Security, of the Security Contract requires any fines or penalties assessed against the Authority because of the Contractor's non-compliance with 14 CFR Part 107 or other applicable laws or regulations to be reimbursed to the Authority by the Contractor within ten days of receipt of written notice of the Department of Public Safety Chief of Police stating the amount of the fine or penalty. An objective of the audit was to determine that security guards were properly preventing unauthorized access to airport premises. Through audit testing, it was determined that the Contractor was not complying with airport security and safety requirements. Security guards received multiple breach of rules citations for unsatisfactory performance of contract requirements and failed a TSA conducted field test. The field test was conducted by TSA at Gate 9A, on May 27, The Contractor s subcontractor breached TSA rules by failing to implement Attachment A, Scope, Article I, Secured Airside Vehicle Gate 9A, paragraph B of the Security Contract. The Authority was assessed fines in the amount of $3,667 for the Contractor s breach of TSA rules. Internal Audit determined that the Contractor reimbursed the Authority for the TSA fines, as required by the Security Contract. Recommendation DPS should ensure that the Contractor complies with the airport security and safety requirements provided in the Security Contract. Management Response DPS ensures that all BNA badge holders are complying with airport and TSA security and safety requirements. If a failure to comply is found, the badge holder s badge is pulled, training is required, and fines are administered (if applicable). Based on the severity of 17

18 the infraction, badge holders are, at times, revoked from their ability to possess a BNA badge by DPS for a period of six (6) months. 18