City and County of Denver Corrective Action Plan and Summary Schedule of Prior Audit Findings Year Ended December 31, 2016

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1 and Summary Schedule of Prior Audit Findings Department of Finance Agency / Department / Federal Program Corrective Action Plan Page Single Audit Page Municipal Airport System Municipal Airport System Department of Public Works Department of Health and Human Services - SNAP Cluster Department of Health and Human Services - TANF Cluster 6 22 Summary Schedule of Prior Audit Findings 8 24

2 Finding: Denver Municipal Airport Status: Corrective action in progress. Corrective Action: We agree with the finding. The initiative to strengthen accounting controls and improve transparency at Denver International Airport (DEN) began in The approach is three-pronged; involving people, process, and tools. In the past year, DEN Accounting has replaced a director, three managers, and a supervisor. With the exception of the supervisor, every individual hired in these positions is a Certified Public Accountant, with two also being Certified Management Accountants, and all have substantial professional experience. As staff accountants retire or leave the team, we are requiring replacements have a bachelor degree in accounting or finance. As new tools are introduced, we will begin organizing the department in a way that facilitates crosseducation among roles while maintaining proper segregation of duties. In September 2016, DEN initiated an accrual based monthly close process. While this approach has added work, it has instilled a discipline around timeliness, accuracy, and control while improving transparency in our quarterly financial reporting. In February 2017, we implemented operational performance management; identifying key metrics and reporting on them monthly. In 2015, a project was initiated to migrate both The (the City) and Denver International Airport (DEN) onto one common financial management system; Workday will replace both Peoplesoft and AMS, eliminating the current redundant and bifurcated accounting processes. Additionally, Workday includes system controls whereby a journal entry cannot be posted to cash or accounts receivable (AMS does not have this control). Workday is scheduled to go live August 28, Prior to the Workday implementation, the City will continue having control over DEN s cash receipts, disbursements, investments and borrowing, recording related transactions to the City's Peoplesoft system as they occur. DEN Accounting General Accounting will continue completing a monthly reconciliation between the AMS and Peoplesoft cash accounts. Historically, the AMS/Peoplesoft cash reconciliation has included unidentified reconciling items that were classified as timing and carried monthly. At year-end 2015, the AMS cash balance was higher than Peoplesoft and included $955K of categorized but not specifically identified reconciling items. The variance was deemed immaterial and passed on during the 2015 audit. At year-end 2016, the variance had increased to $1.3M. Journal entries were posted to AMS to bring the two systems in balance

3 With regard to accounting for the Westin Hotel, in June 2017, DEN Accounting in collaboration with DEN Revenue Management and Marriott accounting staff, implemented a new process for hotel accounting that will ensure timely and accurate recording of the hotel s financial activities and results. In closing, we want to make it clear that the $13.6 million understatement of cash related to the Westin Hotel accounting, and the $12.1 million overstatement of cash related to the Painted Prairie land sale, were both identified by DEN staff in our reconciliations, proactively discussed with BKD, and corrected in the 2016 financial statements. Person(s) Responsible for Implementing: Hugh Curran, Senior Vice President, Denver International Airport Financial Management, Hany Abouyousseff, Accounting Director, Denver International Airport. Implementation Date: December 31,

4 Finding: Municipal Airport System Financial Reporting Status: Corrective action in progress. Corrective Action: We agree with the finding. In Fall 2016, with the Workday implementation as a catalyst, we initiated a project to update all Accounting procedures. As part of that effort, policies were separated. When Workday is implemented in August 2017, we plan to adopt City policies where ever possible while updating all procedures as needed. Person(s) Responsible for Implementing: Hugh Curran, Senior Vice President, Denver International Airport Financial Management, Hany Abouyousseff, Accounting Director, Denver International Airport. Implementation Date: December 31,

5 Finding: Department of Public Works - Schedule of Expenditures of Federal Awards Preparation Status: Corrective action in progress. Corrective Action: We agree with the finding. Public Works will designate an individual to be the Grants Manager. This person will be responsible for understanding all expenditure and SEFA related activity, all accrual and deferral activity, and all reconciliation activity. The Grants Manager will create written procedures for conducting monthly reconciliations to the general ledger. This person will also create a reconciliation template that will be completed, reviewed, and approved each month. This individual will receive the necessary training to address all grant-related obligations. Public Works accounting is hopeful that the new Workday financial software will decrease our reliance on Excel spreadsheets and increase our ability to extract and track accurate data to perform the necessary duties. Person(s) Responsible for Implementing: Lynn Doyle, Accounting Supervisor, Public Works. Implementation Date: September 30,

6 CFDA No SNAP Cluster Department of Agriculture, Award - None Provided, Award Year 2016 Passed-through Colorado Department of Human Services Finding: Special Tests and Provisions - EBT Card Security - Security measures outlined in Colorado Electronic Benefit Transfer Bulletin, Volume 4B.710 and other State Agency letters require that Electronic Benefit Transfer (EBT) cards are destroyed on a daily basis by at least two people who do not have access and that the destruction log be signed within one business day of cards being received. In response to state requirements, Denver Department of Human Services (DDHS) has implemented policy and procedure A which requires that the related destruction forms be reviewed and initiated by a supervisor. The EBT destruction logs were not initialed by the EBT Supervisor, as required by DDHS policy, for 13 of the 25 days tested. Questioned Costs: None. Status: Corrective action in progress. Corrective Action: We agree with the finding. The internal policy used in this audit has more requirements than what is required by state rule. DDHS will revise the current policy to align with state rule and will not require a supervisor signature. The updated policy will be posted to allow all supervisors and staff to follow the same procedure. Person(s) Responsible for Implementing: Larraine Archuleta, Family and Adult Assistance Division Director, DDHS Implementation Date: July 31,

7 CFDA No TANF Cluster Department of Health and Human Services, Award - None Provided, Award Year 2016 Passed-through Colorado Department of Human Services Finding: Eligibility, Reporting, and Special Tests and Provisions Penalty for Failure to Comply with Work Verification Plan - Denver Department of Human Services (DDHS) is required to investigate and verify information on applications and redeterminations, as part of determining eligibility. DDHS is also required to process applications and redeterminations for benefits timely and ensure that benefits are only issued for periods of eligibility. Information obtained from clients should be input into Colorado Benefit Management System (CBMS) and agree to supporting documentation included in the case file for accurate reporting of information to the State for the processing of benefits. Finally, DDHS is responsible for ensuring that all TANF cases selected by the Colorado Department of Human Services (CDHS) for Work Verification Rate review are properly reviewed in accordance with CDHS Agency Letter TCW P and TCW P. This policy requires that all cases selected be reviewed by the end of the month following the receipt of the sample from CDHS. Portions of the reviews are the responsibility of the Workforce Team (Office of Economic Development (OED) and/or ResCare). The following issues were noted in the 60 cases tested: 1. Twenty-four instances in which there was no documentation that the client was participating in an eligible work activity. ($42,466) 2. Five instances in which there was no documentation that the participant completed an Initial Assessment. (questioned costs included in number 1 above) 3. Four instances in which documentation of the initial case interview could not be provided ($7,514) 4. Four instances in which either the Initial Assessment or Individual Responsibility Contract (IRC) were not completed timely ($0). 5. One instance in which an eligible member of the assistance unit was not included within CBMS. (Questioned cost cannot be determined) 6. Two instances in which case was incorrectly closed or not closed timely. (Questioned cost cannot be determined) 7. Ten instances in which there was inaccuracy of information between case file and CBMS. ($0) 8. Three instances in which the case reviews were not completed by the Workforce Team (OED or ResCare) in compliance with county and state policies. In addition, issues identified in case reviews occurring after the ResCare transition effective July 1, 2016, were not documented as resolved. ($0) Questioned Costs: Overpayments of $49,980. Questioned Costs were determined by reviewing the 2016 payments that occurred for the periods effected by the above issues. Status: Corrective action in progress

8 Corrective Action: We agree with the finding. DDHS Eligibility will continue to use and monitor case reviews within WMS to help identify potential areas for additional training. TANF Workforce responsibilities are currently transitioning the case management model for Colorado Works clients. The service delivery model will be based on evaluation of client need and will engage a variety of internal and external case management providers. All funded services will require quality assurance processes to include case reviews that will be aimed at reducing the findings from this audit. Additionally, DDHS will work with internal case managers to develop a review structure similar to the Eligibility review process. Case reviews will be performed and monitored at least monthly. Person(s) Responsible for Implementing: Larraine Archuleta, Family and Adult Assistance Division Director, DDHS. Implementation Date: July 31,

9 Summary Schedule of Prior Audit Findings Summary of Finding Finding: Municipal Airport System - The Municipal Airport System over-capitalized $41.8 million of costs related to projects within the Hotel and Transit Center and Other Capital Improvements Projects program. We recommend management continue to challenge the costs assigned to the discrete assets are proper. Additionally, we recommend Airport System accounting personnel work with project management teams from inception to develop tracking mechanisms, which are useful for both program financial assurance and financial reporting. Finally, we recommend the Municipal Airport System continue to update its written policies and procedures for activity related to construction projects. Status: Corrective action complete. Proposed audit adjustments have been made to adjust construction-in-progress and capitalized interest, as recommended during the 2015 audit. Management has reviewed each project associated with the greater HTC project to appropriately track items that were expended during the life of the project in order to ensure that the proper cost is capitalized in the project. Moving forward, accounting leadership will be involved at the inception of large projects to ensure that accounting treatment is proper, and actions are appropriately documented for future reference. Additionally, the airport implemented a new project controls team to ensure appropriate controls are in place for future projects. The Project Controls Manager has been hired, and she is in the process of interviewing for additional positions on her team. Efforts to update accounting and finance procedures is underway. During 2016, all procedures were reviewed, and updated versions are in draft form and have been submitted for review and approval. Additional updates will be made throughout 2017 as the City and Airport collectively transition to a new ERP system Finding: Capital Assets - Five instances were noted where capital assets had to be adjusted to be properly reflected in the financial statements. We recommend that management review both new capital asset classification and the classification on existing inventories to ensure that all capital assets are recorded in the most appropriate category. In addition, we recommend that management review controls over how construction-in-progress ledger as items are placed into service. Management should also review controls over recording capital assets in general, including a robust review of capital asset-related journal entries and key spreadsheets. Finally, we recommend additional training be provided to relevant staff in order to ensure that all capital assets are recorded in accordance with City policies. Status: Corrective action complete. The Controller's Office has continued to review asset classifications to ensure they are in the proper category. Additionally, testing was performed on asset additions and deletions to ensure capital assets are recorded accurately. Further, workpapers were reviewed to ensure that all formulas were correct

10 Summary Schedule of Prior Audit Findings Summary of Finding Finding: Continuum of Care Program - Subrecipient Monitoring - We noted one instance in which DDHS did not issue a management decision on audit findings within six months and did not follow up to ensure the subrecipient took timely and appropriate action on deficiencies detected through audits. We recommend that DDHS develop a process to track and review single audit reports received by subrecipients to ensure that findings are identified timely, that management decisions are issued and that follow up occurs to determine that appropriate action was taken. Status: Corrective action complete. DDHS now sends out a single audit request letter that includes a questionnaire to all subrecipient s annually and will send out a management letter requesting more information when needed. A workpaper was created to document the review of each subrecipient's single audit report. DDHS has drafted additional subrecipient policies and procedures that will enhance the documentation and monitoring process Finding: TANF Cluster - Eligibility - Case reviews did not identify and resolve issues noted. In addition, lack of communication between DDHS and the Office of Economic Development (OED) resulted in clients not being successfully transitioned between eligibility and workforce teams. We recommend that DDHS continue striving for 100% completion and timeliness related to case reviews. This could be accomplished through the establishment of specific days each month for supervisor completion of required case review days and monitoring of results within the Work Management System. In addition, with the changes in the structure related to the OED portion of the program, we recommend that DDHS add specific compliance and oversight requirements into the contract with the new third-party administrator. Finally, we recommend that DDHS streamline the intake interview and workforce assessment into back to back appointments rather than requiring the client to come to the office on multiple visits

11 Summary Schedule of Prior Audit Findings Summary of Finding Status: Corrective action in progress. See current year finding at DDHS Eligibility will continue to use and monitor case reviews within WMS to help identify potential areas for additional training. TANF Workforce responsibilities are currently transitioning the case management model for Colorado Works clients. The service delivery model will be based on evaluation of client need and will engage a variety of internal and external case management providers. All funded services will require quality assurance processes to include case reviews that will be aimed at reducing the findings from this audit. Additionally, DDHS will work with internal case managers to develop a review structure similar to the Eligibility review process. Case reviews will be performed and monitored at least monthly Finding: TANF - Special Tests and Provisions - Eight instances in which the case reviews were not completed timely in compliance with county and state policies. We recommend that DDHS continue to monitor case reviews on a weekly and monthly basis prior to month-end to ensure that the review of all cases selected for Work Participation Rate review occurs timely. Status: Corrective action in progress. See current year finding at DDHS Eligibility will continue to use and monitor case reviews within WMS to help identify potential areas for additional training. TANF Workforce responsibilities are currently transitioning the case management model for Colorado Works clients. The service delivery model will be based on evaluation of client need and will engage a variety of internal and external case management providers. All funded services will require quality assurance processes to include case reviews that will be aimed at reducing the findings from this audit. Additionally, DDHS will work with internal case managers to develop a review structure similar to the Eligibility review process. Case reviews will be performed and monitored at least monthly Finding: CCDF Cluster - Reporting - We noted four instances in which information related to the client household within CHATS did not agree to the case file. We recommend DDHS continue to perform case reviews on a monthly basis and analyze trends from the results to identify areas of concern. In addition, we recommend DDHS continue on-going training for case workers that emphasizes the importance of accuracy of information between case files and CHATS. Status: Corrective action complete. The CCAP work unit continues to perform monthly case reviews and will use the resulting error trend data to inform on-going training for the team and individual eligibility technicians as necessary

12 Summary Schedule of Prior Audit Findings Summary of Finding Finding: Adoption Assistance - Title IV-E - Special Tests and Provisions - We noted three instances where the required three-year review was not performed. We recommend that DDHS work to develop a report using Work Management System (WMS) or other internal resources to pull the listing of required renewals to be completed until the state can correct reporting issues related to the TRAILS report. We also recommend the TRAILS report be pulled, at a minimum, once a year to help ensure all cases requiring renewal are captured, once the report is determined to be reliable. Status: Corrective action complete. A report was developed to assist staff in capturing required renewal cases. The staff who are required to document these dates will be trained to identify missing cases which should have been identified for renewal. This will also serve as a control for the Financial Services Payroll Team