Internal Audit Semi-annual Implementation Status Report Report #08-02 January 23, 2008

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Internal Audit Semi-annual Implementation Status Report Report #08-02 January 23, 2008 Scope: This semi-annual report reflects the implementation status, as of November 1, 2007, of the following

1 Internal Audit Semi-annual Implementation Status Report Report #08-02 January 23, 2008 Scope: This semi-annual report reflects the implementation status, as of November 1, 2007, of the following internal and external reports: Project In Not Date Project Name Complete # Process Implemented Disagree /20/2003 Records Management May-03 Schlumberger-Sema Business Process Reengineering Findings Report and Strategic Plan /15/2003 Procurement - CLOSED /26/2004 Facilities, Design & Construction/BGA Program Management & Controls /15/2004 Vehicle Maintenance Stores/Inventory Management /20/2004 VM Fuel Controls /4/2005 Quadrennial Review (KPMG) /15/2004 Emergency Response / Disaster Recovery Planning CLOSED /28/2005 Farebox Revenue and Controls & Investigation /27/2005 Compensation Structure /14/2005 Accounts Payable-Disbursements /27/2006 Special Transit Services (STS) Taxicab Voucher Program /27/2006 RideShare Program /22/2006 Customer Service Call Center Operations /31/2006 Contracting / Procurement Process Audit /30/2006 Payroll Audit /13/2006 Recruitment, Selection, and Hiring Audit /14/2007 First Transit Contract Audit /26/2007 Sherry Matthews Advocacy Marketing Contract Audit /23/2007 Transit Advertising Program Audit /23/2007 Procurement Card / Travel Audit /2007 Total % 70% 22% 7% 1% 5/2007 Total % 70% 19% 10% 1%

2 Why are status updates important? Governmental auditing standards published by the United States General Accountability Office (GAO) specify that management s role includes establishing and maintaining effective internal control to help ensure that appropriate goals and objectives are met and addressing the findings and recommendations of auditors, and for establishing and maintaining a process to track the status of such findings and recommendations. 1 While management is responsible for addressing audit recommendations, internal audit departments are responsible for establishing policies and procedures for follow-up to determine whether previous significant findings and recommendations are addressed. 2 Status Highlights: (The most significant accomplishments or outstanding recommendations are shown in red.) Records Management Capital Metro Internal Audit Report #03-02, October 20, 2003 Records management system benefits not yet realized: Reduction and/or elimination of network shared drive space were a projected cost-savings benefit of implementing a records management system. Originally, shared drive cleanup (which includes the identification of vital and security sensitive records) was to begin in 8/2003. A new deadline has not been communicated to staff. Strong leadership and a project plan for completion are needed in order to move forward expeditiously. Recent resignations of the Legal Manager and Records Management Officer may further delay this initiative. Procurement Audit Capital Metro Internal Audit Report #03-06, October 15, 2003 All items have been successfully resolved. This audit is now closed. Facilities, Design & Construction/BGA Program Management & Controls Capital Metro Internal Audit Report #03-10, January 26, 2004 Capital Project 3 procedures in development: Formalizing project management protocols and methodologies for construction projects will mitigate related project risks. A new project manager in the Capital Projects Group is currently developing project management templates and processes and is expected to complete them in February (Original estimated completion date: 12/2004.) Vehicle Maintenance Stores / Inventory Management Capital Metro Internal Audit Report #03-12, March 15, 2004! New asset management system implemented: Implementing more robust inventory management software will enhance the Vehicle Maintenance Department s ability to control their assets, track inventory levels, and review and reconcile inventory adjustments. The go- 1 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section A1.08. GAO G 2 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section GAO G 3 Formerly known as Facilities, Design & Construction (FD&C) January 23, 2008 Page 2 of 6

3 live date for the new Spear system was December 3, Vehicle Maintenance now utilizes the Spear system exclusively. Vehicle Maintenance Fuel Controls Capital Metro Internal Audit Report #04-11, September 20, 2004 New fuel tank monitoring system installed: A new Veederoot fuel monitoring system at the Authority headquarters has been installed and is in the final stages of completion and testing. This system should significantly aid in the accuracy of performing variance analysis of actual to reported fuel deliveries and reconciling fuel usage. Emergency Response / Disaster Recovery Planning Capital Metro Internal Audit Report #04-19, November 15, 2004! Capital Metro Emergency Response Plan & testing: Department emergency response plans are not complete or up-to-date. As such, assurance does not exist that vital records will be available in the event of a disaster. Processes to 1) compare test results to the original goals, 2) identify deficiencies, and 3) make needed plan changes has not been implemented. The Director of Safety & Security and Rail Training & Safety Officer are now participating on an APTA (American Public Transportation Association) working group for emergency response planning. Through their participation, they seek to obtain guidance that will be useful in resolving this issue. Similar findings addressing regular reviews and updates to emergency response plans were included in the recent security program audit. 4 In the future, these security-related issues will be followed up as part of the more recent and comprehensive security audit. This audit is now closed. Farebox Revenue and Controls & Investigation Assistance Capital Metro Internal Audit Report #05-04, March 28, 2005 Daily farebox-related bus probing: Buses returning to the yard are now consistently probed to download ridership and fare data. With assistance from the IT Department, a custom report is automatically launched daily which reports whether each bus was probed. This report is reviewed by Service Island supervisors and an additional Vehicle Maintenance reviewer for greater assurance of compliance. Compensation Audit Capital Metro Internal Audit Report #05-05, June 27, 2005 Career ladder system: Career ladder tracks have been developed and communicated to managers for use in staff development and identifying opportunities for advancement. 4 Internal Audit Report #07-11, Security Program Audit, was issued October 22, January 23, 2008 Page 3 of 6

4 RideShare Program Capital Metro Internal Audit Report #05-18, February 27, 2006 RideShare policy updates: The RideShare Manager is currently exploring various options for addressing growing demand for RideShare services while contending with fixed funding. The fare adjustment process has also delayed implementation of several audit recommendations. Customer Service Call Center Operations Capital Metro Internal Audit Report #06-01, May 22, 2006 Customer Service Work Group: A cross-functional customer service work group has been formed to review and refine processes for holistically analyzing customer feedback and complaint data. This group is in the process of developing improved means for addressing the root causes of customer complaints. Contracting/Procurement Process Audit Capital Metro Internal Audit Report #06-05, August 31, 2006 Contract audit policy approved: In accordance with the new policy, Contracts & Procurement, EVP Finance & Administration, and Internal Audit identified high risk contracts for audit. The identified audits have been included in approved FY2008-FY2009 Internal Audit Plan. Bonding policy approved: The Authority bonding policy, adopted by the Board in September 2007, mirrors federal and state bonding requirements. The policy provides consistent, reasonable standards for contractor bonding which balance relative costs and risks. Existing contracts exceeding $100,000 are being reviewed by staff to ensure compliance with the policy. Cost/price analyses utilized: Cost/price analyses, performed cooperatively by contracts administrators and project managers prior to solicitation, are used to assess the reasonableness of offers made by prospective contractors. Documentation of these analyses is required to fulfill FTA contracting requirements. 5 Payroll Audit Capital Metro Internal Audit Report #06-13, October 30, 2006 No reliable audit trail for changes to Fixed Route and Special Transit Services timekeeping data: Fixed Route and Paratransit operators account for over 50% of the combined Capital Metro/StarTran employees. Scheduling and related timekeeping for operators is processed through Trapeze prior to forwarding summarized totals for payroll processing. The IT Department has developed an audit trail report to ensure changes to pay-related data in Trapeze are accurate and authorized. However, Trapeze OPS system weaknesses have prevented the implementation of this report. The Enterprise Application Support Director has escalated this issue to Trapeze management. An upgrade to a newer product version may be required to capture this information, but Capital Metro is not scheduled for an upgrade at this time. 5 Per FTA Circular E, Third Party Contracting Requirements. January 23, 2008 Page 4 of 6

5 Recruitment, Selection, and Hiring Audit Capital Metro Internal Audit Report #06-14, December 13, 2006 Recruiting strategy meetings: When a personnel need is identified, Human Resources (HR) recruiters schedule a hiring strategy meeting with the manager to address the vacant position s functions and requirements as well as hiring timeline goals. Enhanced communication and coordination help ensure that hiring processes will consistently meet the Authority s personnel needs. Employee background reviews enhanced: HR recruiters now perform and document reviews of a prospective employee s education and job experience. Social security numbers are also now verified. First Transit Contract Audit Capital Metro Internal Audit Report #07-04, May 14, 2007 Contract compliance review methodology: Proper oversight of contractor operations is a key factor in reducing risks associated with outsourced services. A revised target date, April 1, 2008, has been set for implementing a methodology for performing periodic contract compliance reviews. Sherry Matthews Advocacy Marketing Contract Audit Capital Metro Internal Audit Report #07-07, March 26, 2007 Task order procedures strengthened: The Contracts & Procurement Department has implemented revised procedures and contract language for use in all task order contracts. The improvements will provide better guidance to internal users, communicate consistent expectations to Authority contractors, and enable better monitoring of Authority contracts. Transit Advertising Program Audit Capital Metro Internal Audit Report #07-08, April 23, 2007 Expected increase in transit advertising revenue: FY2008 transit advertising revenue is budgeted at $885,028, an 8.3% increase over FY2007 actual earned revenues ($816,890). Procurement Card / Travel Audit Capital Metro Internal Audit Report #07-10, July 23, 2007 Reduced risk exposure in Procurement Cards: Cumulative monthly spending limits have been reduced by 46.6% (from $659,999 to $352,500) while still preserving the cardholder s ability to meet the Authority s procurement needs. Travel corrective action plans delayed: Implementation of travel-related corrective action plans has been deferred due to recent turnover and hiring of a new Travel Manager. January 23, 2008 Page 5 of 6

6 Closing: Internal Audit is grateful to Capital Metro management and staff who have worked to implement improvements in controls and processes. Their cooperation and assistance is instrumental to the success of the Authority. Signature on File Caroline M. Beyer, CPA, CISA VP, Internal Audit ACCEPTED: Signature on File Fred M. Gilliam President/CEO cc: Capital Metro Board of Directors Dwight Ferrell, EVP/COO Randall Hume, EVP Finance & Administration Elaine Timbes, EVP Performance & Quality Sallie Crosby, Chief Counsel Andrea Loyfe, Chief of Staff Dianne Mendoza, VP Business & Community Development Aida Douglas, Manager Business Development & DBE Officer Rick L Amie, VP Marketing Todd Hemingson, VP Strategic Planning & Development Richard Krisak, Director Commuter Rail Operations Kirk Talbott, Chief Information Officer Bill Predmore, Enterprise Application Support Director Scott Phebus, Assistant Director Operations Inez Evans, Director Special Transit Services Carl Woodby, Director Maintenance John Hodges, Manager Capital Projects Shanea Davis, Director Contracts & Procurement Mark Ostertag, Director Safety & Security Donna Simmons, Human Resources Manager Allen Walker, Customer Service Manager Pam Laine, Controller Peggy MacCallum, Budget Manager Brian Whelan, Director of Operations Staff Development Dottie Lancaster Watkins, Director of Transportation Dolly Watson, Supervisor Community Transit Kerri Davidson, Deputy Counsel Carol Delgado, Legal Manager January 23, 2008 Page 6 of 6

Internal Audit Semi-annual Implementation Status Report Report #10-10 January 12, 2010

Internal Audit Semi-annual Implementation Status Report Report #10-10 January 12, 2010 Scope This semi-annual report reflects the implementation status, as of November 2010, of outstanding internal and