Internal Audit Semi-annual Implementation Status Report Report #10-04 August 20, 2010

Transcription

1 Internal Audit Semi-annual Implementation Status Report Report #10-04 August 20, 2010 Scope: This semi-annual report reflects the implementation status, as of May 2010, of outstanding internal and select external reports. 1 Why status updates are 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. 2 While management is responsible for addressing audit findings, internal audit departments are responsible for establishing policies and procedures for follow-up to determine whether previous significant findings and recommendations are addressed. 3 Status Highlights: The following status highlights summarize key implementation changes by audit project. The items selected for highlighting are based upon the auditor s professional judgment and do not represent every status change within the last six months. The most significant progress updates are accented in red font. Appendix A provides additional detail and statistics of the implementation status of the corrective action plans as well as the responsible executive staff member(s) for the area(s) audited. Customer Service Call Center Operations Capital Metro Internal Audit Report #06-01, May 22, 2006 Customer complaint data reporting improved: In lieu of a more costly replacement system, an acceptable and cost-effective method has been developed to improve analysis of customer complaint data in the current CMCS system. Future system options will be reevaluated as organizational needs evolve. 1 The Sunset Commission s Staff Report on Capital Metro operations was issued in April The first status update will be in Fall Implementation status for projects included in this report is as of May 2010 unless otherwise indicated. 2 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section A1.08. GAO G 3 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section GAO G CAPITAL METRO METROACCESS PERFORMANCE AUDIT #10-06 PAGE 1 OF 7

2 Customer Experience scorecard now being reported to Board: The Office of Strategic Management (OSM) is now reporting a Customer Experience scorecard to the Board which provides a broader measure of performance but also includes complaint data. Scorecard reporting began with MetroRail in May and has expanded to other modes of service (e.g. FRS, MetroAccess, etc.) beginning in July and is anticipated to continue. This audit is now closed. Payroll Audit Capital Metro Internal Audit Report #06-13, October 30, 2006 No change for audit trail for modifications to operator timekeeping data: Fixed Route and MetroAccess operators account for over 50% of the combined Capital Metro/StarTran employees. Scheduling and related timekeeping for operators are processed through Trapeze prior to forwarding summarized totals for payroll processing. The IT Department had developed an audit trail report to ensure changes to pay-related data in Trapeze are accurate and authorized. However, Trapeze OPS system weaknesses and competing priorities associated with the commuter rail start-up have indefinitely delayed action on this report. A variance analysis of individual operator payrolls can be an effective compensating control when performed on a timely, regular basis. However, the last analysis was for December The FRS Department is currently completing the remaining outstanding months analysis. Ideally, this report should be submitted for the FRS Director s review each pay period. This way, significant unexplained variances can be reviewed more effectively. Recruitment, Selection, and Hiring Audit Capital Metro Internal Audit Report #06-14, December 13, 2006 One action plan item remaining: The last action plan item, pending experience with recent process changes, is anticipated to be completed prior to the next status update. Procurement Card / Travel Audit Capital Metro Internal Audit Report #07-10, July 23, 2007 Government travel rates now regularly sought: The travel managers are now seeking government rates after Capital Metro was considered eligible following legislative action in Travel expense report tracking implemented in June 2010: Travel expense report tracking and p-card reconciliation procedures were implemented in June This new procedure will be reviewed further by the Controller and will be assessed during the next status update. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 2 OF 7

3 Security Audit & FTA Implementation Status Review Capital Metro Internal Audit Report #07-11, October 22, 2007 Monitor and report implementation status of security-related recommendations: In July 2010, Transportation Security Administration (TSA) security inspectors performed an on-site Assessment and Security Enhancement (BASE) review at Capital Metro. Through the BASE program, the TSA assesses a transit system's security posture on the 17 Security and Emergency Preparedness Action Items which were the original basis of the outstanding security audit and review recommendations. The BASE review is expected to be finalized in August 2010: Information from this review will replace the existing list of security-related recommendations and will be used to generate an updated risk profile and prioritization. To fully resolve the audit recommendation, comprehensive status tracking of the updated BASE security recommendations with regular reporting to executive management will be needed. Accounts Receivable Audit Capital Metro Internal Audit Report #07-21, March 31, 2008 Oracle financial system upgrade on hold: The final two audit action plans include leveraging the Oracle application s functionality to manage late paying accounts and using the system s approval and authorization functions. These enhancements are connected to the Oracle upgrade which is a proposed FY2011 capital project. FY2008 Statutory Quadrennial Review Statutorily required external review, Cambridge Systematics, Inc. with McDonald Transit Associates, Inc., December 31, 2008 Streamline the StarTran Relationship: The Quadrennial Review included a recommendation to streamline the StarTran relationship. The Sunset Staff Report included a similar recommendation to competitively bid all transit services not directly provided by Capital Metro employees. As such, this issue will now be tracked as part of the (more current) Sunset Review. This audit is now closed. Fuel Controls Audit Capital Metro Internal Audit Report #08-12, October 27, 2008 E-fueling system at North Operations functioning correctly: The fuel monitoring system at the North Operations facility used for refueling revenue buses operated by First Transit (UT shuttle operator) and non-revenue vehicles operated by Capital Metro is now functioning as intended. Fuel usage is now reconciled and correct within a one percent tolerance. Rail contractor vehicles will continue to be fueled at off-site facilities which are more accessible while in the field. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 3 OF 7

4 URS Contract Audit Capital Metro Internal Audit Report #08-13, October 27, 2008 Cost recovery status: Disallowed and unsupported costs of $122, continue to be withheld from contractor payments. (No change from the Fall 2010 status update.) The majority of these costs are attributable to one sub-contractor. In July 2010, URS sent a letter to one of the subcontractors demanding supporting documentation for questioned costs identified in the original audit. In the interim, the Procurement Department has agreed to allow the standard per-diem expense for substantiated travel days only. This adjustment is still pending. Inconsistent use of Invoice Review Checklist: The invoice review checklist has not been used consistently by the Project Manager to ensure that labor costs are in compliance with contractual labor rates and supporting documentation provided for direct costs. Continued compliance with agreed-upon corrective action plans is expected once an agreed-upon action plan has been reported as implemented. Warranty Processing Audit Capital Metro Internal Audit Report #08-11, December 10, 2008 Warranty processing procedures: Revised warranty processing procedures have been implemented and address all issues raised during the audit. This audit is now closed. Veolia Contract Audit Capital Metro Internal Audit Report #09-03, April 27, 2009 Verification of freight rail revenues: A reconciliation of freight rail revenues received from contract inception (October 2007) through October 2009 identified $475, of unreported revenue. An invoice for this amount was submitted to Veolia in December Subsequently, Capital Metro authorized an offset of $84, for fuel and mobilization costs associated with starting up freight rail operations. The net amount, $390,840.40, remains outstanding and is due to Capital Metro. In November 2009, freight rail revenue monitoring was discontinued as a result of the Freight Rail Business Manager temporarily shifting positions as well as the replacement of the rail contractor was underway. Analysis of the remaining months freight rail revenues under the terminated contract will resume once current contract negotiations with the freight rail operator are complete. Over $382,000 of revenue adjustments were made which reduced freight rail revenue. To ensure that these adjustments are authorized and supported by a valid business purpose the Freight Rail Business Manager had requested supporting details for these adjustments. The contractor s response did not provide an adequate explanation. As such, questions regarding revenue adjustments remain outstanding and may further amend this figure. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 4 OF 7

5 Recovery of disallowed costs and resolution of questioned costs: The contractor has remained largely unresponsive to Capital Metro s requests for support. Capital Metro intends to recover $294,423 from Veolia during termination settlement negotiations. 4 Veolia and Capital Metro staff and attorneys are scheduled to meet in mid-august to continue the termination settlement negotiations. Facilities & Property Management Audit Capital Metro Internal Audit Report #09-04, June 29, 2009 Rail contractor compliant with work order system usage: The current rail contractor has been fully trained on the purchasing and work order system (Spear). Additional verification to ensure proper usage will be conducted during the upcoming rail inventory audit. Building maintenance purchases connected to work orders: P-card documentation is now linked to building maintenance work orders to ensure accountability for related purchases. Non-revenue Vehicles Audit Capital Metro Internal Audit Report #09-05, August 24, 2009 Fuel card controls and monitoring: The new commuter rail contractor does not use Authority-issued fuel cards, but instead directly bills for actual fuel usage. A similar arrangement with the freight rail contractor is anticipated and will be finalized during contract negotiations in September Overall implementation status delayed: While some progress has been made, full implementation of most corrective action plans has been delayed until October 2010 pending approval of the Non-Revenue Vehicle Policy. Lockwood, Andrews & Newnam Contract Audit Audit Project #09-17, November 23, 2009 Majority of questioned costs successfully resolved: A review of additional supporting documentation reduced the amount of unallowable costs. In addition, because wage rates were estimated in the original contract, previously questioned labor expenses were allowed if they were consistent with the average estimated wage rates specified in the original contract. As a result, the final amount due to Capital Metro was reduced from $256,906 to $7, This amount was adjusted in the final modification issued to close out the contract. 4 As a point of reference, the Fall 2009 status update reflected $359, of disallowed or insufficiently supported contract costs. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 5 OF 7

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 Frank Fernandez Chair, Finance / Audit Committee cc: Capital Metro Board of Directors Linda Watson, President/CEO Doug Allen, EVP/Chief Development Officer Randall Hume, EVP Finance & Administration Elaine Timbes, Interim EVP/Chief Operating Officer John Almond, VP, Engineering & Construction Kerri Butcher, Interim Chief Counsel Dianne Mendoza, VP Business & Community Development Todd Hemingson, VP Strategic Planning & Development Capital Metro Leadership Team Terry Garcia Crews, General Manager, StarTran, Inc. Bill Predmore, Director, Enterprise Application Support Sgt. John Jones, Security Coordinator Kevin Timmins, Freight Rail Business Manager Inez Evans, Director, MetroAccess, StarTran, Inc. Carl Woodby, Director of Maintenance, StarTran, Inc. Brian Whelan, Director, Operations Staff Development, StarTran, Inc. Dottie Lancaster Watkins, Director of Transportation, StarTran, Inc. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 6 OF 7

7 Appendix A: Detail & Statistics of Implementation Status Report Date Executive Sponsor Project Name Complete Implementation Status In Process Not Implemented Disagree 6/27/05 Hume Compensation Structure /22/06 Mendoza Customer Service Call Center Operations - CLOSED Timely /30/06 Timbes Payroll Audit /13/06 Hume Recruitment, Selection, and Hiring Audit /23/07 Hume Procurement Card / Travel Audit /22/07 Timbes Physical Security Audit /31/08 Hume Accounts Receivable Audit /31/08 n/a 12/10/08 Timbes FY2008 Quadrennial Performance Review - CLOSED Warranty Processing Audit - CLOSED % 10/27/08 Timbes Fuel Controls Audit % 4/27/09 6/29/09 Timbes Hume Timbes Almond Veolia Contract Audit % Facilities & Property Management Audit % 8/24/09 Timbes Non-revenue Vehicles Audit % TOTALS Current Number /2010 Percentage 76% 17% 7% 0% Previous Number /2009 Percentage 79% 12% 8% 0% 20% 35% Action item status categories: Complete In Process Not Implemented Disagree Timely Intent of the corrective action plan item has been met and no further corrective action is required. In some instances, Internal Audit monitors to ensure that ongoing processes continue. Substantive progress towards implementation of corrective action plan has been made but additional actions are required before intent is met. No measurable progress towards implementation of corrective action plan (excludes action plan items for which the target date has not yet been reached) Management disagrees with finding and/or accepts the risk of occurrence and effects Beginning with the Fall 2008 Status Update, Internal Audit has been reporting Percentage of Audit Recommendations Implemented Timely for all audits issued since that time. Figure represents relative percentage of all corrective action plans for which intent was met by the stated target date. The total figure represents a weighted average for all applicable updates. This performance metric is part of the Route 2025 Objective #8: Improve & integrate business practices and accountability. CAPITAL METRO INTERNAL AUDIT IMPLEMENTATION STATUS REPORT #10-04 PAGE 7 OF 7