FY ANNUAL & FY MID-TERM REPORT. Audit Committee Activities. Art Edwards Audit Committee Chairman March 8, 2017

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1 FY ANNUAL & FY MID-TERM REPORT Audit Committee Activities Art Edwards Audit Committee Chairman March 8,

2 FY ANNUAL REPORT SBBC Financial Oversight Audit Committee Members Reporting Structure External Auditors Internal Auditors Internal Audit Implementation Internal Audit Universe Internal Audit Focus 2016 Highlights - Internal Audits Completed 2017 Internal Audit Objectives Corrective Actions & Remediation Status Audit Committee Goals & Highlights 2

3 AUDIT COMMITTEE EXTERNAL AUDITORS INTERNAL AUDITORS DISTRICT STAFF SBBC Financial Oversight working together to maintain and increase public confidence with the fiscal and administrative responsibilities of the School Board of Brevard County. 3

4 Audit Committee Members Art Edwards, Chairman District 1 Don Lusk District 2 Nicole Colbert District 3 Frank Zilaitis District 4 Malak Hammad District 5 FY Andy Ziegler, School Board Chair Ex-Officio FY Misty Belford, School Board Chair Ex-Officio The Audit Committee s authorization to operate is provided in School Board Policy 6700 Audit Committee and 6705 Charter of Internal Audit. 4

5 Audit Committee Members Art Edwards, Chairman - Retired Aerospace Corporate Safety Manager. Background includes Engineering, Construction-General Contractor, Project Management and Safety. Presently, Senior Partner in a Safety Consulting firm and President/CEO Edwards Media Group. Audit Committee member for over 11 years. Don Lusk - Retired Administrator with 30+ years of local government experience. Certified Workforce Development Professional. Presently, Senior Policy and Program Officer with local non-profit workforce investment agency. Background includes Health & Human Services, Public Safety, Emergency Management and Community Service programs. Audit Committee member for 6 years. Nicole Colbert, Vice Chairman - Controller with 15+ years of experience in public and private industry accounting. Working in construction and development, she has supervised jobs from high-tech industrial manufacturing facilities to restaurant buildouts, with her primary focus being financial advisory and construction/real estate development. Audit Committee member for 2 years. Frank Zilaitis - JD, MBA, MSEE, BSEE. Attorney/Owner - Zilaitis Law, P.A. Audit Committee member for almost 6 years. Malak Hammad - Vice-President with PNC Bank. She has been a banker for over 20 years and the recipient of numerous "Women of Achievement" awards. She serves in multiple charitable organizations to make a positive impact on Brevard County. Audit Committee member for 2 years. 5

6 Reporting Structure Citizens of Brevard County School Board Attorney School Board of Brevard County Audit Committee Superintendent School Board Management & Staff Internal & External Audit 6

7 External Auditors In 2014, the Audit Committee s recommendation to the School Board for Moore Stephens Lovelace, P.A. to be selected as the District s external auditor was the culmination of an extensive RFP process. A three year contract was awarded with four optional one-year extensions. The Audit Committee has a key role in extension recommendations. The initial term of the contract will end December 31, Execution of the four one-year options would extend the contract to December 31, In 2015, the Audit Committee recommended to the Board to exercise the first one-year option, so that the Auditor General could work in concert with the External Auditor for a streamlined audit process. In October 2016, Moore Stephens Lovelace, P.A. provided the District an unqualified [highest level] audit opinion for the 2015 fiscal year. Audit Committee members completed a fraud awareness questionnaire as part of the audit process. Florida Auditor General (AG) is responsible for the external audit every three years; last AG Audit FY2016, the next AG audit will be in FY

8 Internal Auditors In 2007, the Audit Committee s recommendation to the School Board for RSM US LLP (formerly McGladrey LLP) to be selected as the District s internal auditor was the culmination of an extensive RFP process. A three year contract was awarded with two optional one-year extensions based on recommendation by the Audit Committee. The initial term of the contract ended June 30, The optional extensions have been exercised and an engagement letter for services through December 31, 2017 was approved by the Board on May 24, Internal Audit firm selection is a 2017 priority. Fiscal year budget was Board approved at $199,500. Internal Auditors have met all Audit Committee requests with no budget changes. The Internal Auditors provide regular reporting at quarterly Audit Committee meetings. The Internal Auditors also provide timely response to special requests for audits. 8

9 Risk Impact The School Board of Brevard County, Florida Internal Audit Implementation Functions with High Exposure and High Priority are included in the audit plan these are areas that keep senior leadership and the Board awake at night. Moderate Exposure High Exposure Low Exposure Risk Coverage Periodic Risk Coverage Monitoring only Moderate Exposure Risk Coverage High priority Risk Coverage Self-assessment/ rotational Likelihood of Occurrence 9

10 Internal Audit Universe See handout 10

11 Internal Audit Focus Follow-up Audits District-Wide Audits Individual Function Audits Cycle Audits Additional Internal Audit Projects 11

12 Follow-up Audits 1. Follow-up audits are required by the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing (Performance Standard #2500). 2. Follow-up audits objectives are to determine if: - Open issues from previous audit reports have been properly remediated - Management actions have either been effectively implemented OR - Senior management has accepted the risk of not taking action 3. The intent of Follow-up audits is to validate, on a sample basis, the effectiveness of the remediated controls of previously reported open issues. 12

13 District-Wide Audits 1. District-wide audits address processes and/or functions that: - Touch all District departments or - Touch most departments within the District 2. District-wide audits are designed to gain economies of scale by: - Taking a District-wide view - Evaluating the implementation of policies, procedures, and standards as well as Best Practices across the District as a whole For Example: A District-wide audit of Purchasing Cards will focus on the overall process for the District, including Purchasing Cards issued to schools and departments.

14 Individual Function Audits 1. Individual Function audits focus on unique scenarios or processes within a specific department. For example: A Purchasing Card audit of Food Services would focus on the risks and controls for transactions related only to Food Services. 2. Individual Function audits may also focus on unique scenarios or processes within several departments (but not target all departments in the District). 14

15 Cycle Audits 1. Cycle audits are narrower in scope than District-wide and Individual Function audits. 2. The scope of a Cycle audit will be very specific to inherently high-risk, decentralized functions and processes. For example: - Full-Time Equivalent (FTE) - Property Control, etc. 3. Generally, Cycle audits provide testing and reassurance that: - Policies and procedures are being followed within different departments. - Controls continue to be effective once it has been determined that they have been appropriately designed and implemented. 15

16 Additional Internal Audit Projects 1. Internal Audit Projects focuses internal audit resources on areas or functions that are (1) high exposure and (2) high priority based on Risk Ranking. 2. Internal Audit Projects address situations/potential situations (outside of the existing audit plan) that the Board, Audit Committee or management may become aware of. 3. Internal Audit Special Projects and Requests are generally specifically defined and narrowly focused. For example, the 2014 audit of the WHI Pharmacy Claims was done by special request. 16

17 FY 2016 Internal Audits Completed Follow-up, including Property Control District-Wide: Purchasing Cards Educational Technology Internal and External Security Follow-up Individual: Communications Advertising Revenue Cycle Audits: Full-Time Equivalent Student Membership Property Control Additional Audit Projects: Self Insurance Before and After School Care Internal Accounts FY 2015 Fraud Awareness Completed 17

18 Follow-up District-Wide: Business Continuity Planning 2017 Internal Audit Plan ERP Software Implementation Individual: Half Cent Sales Surtax- June 30, 2016 Half Cent Sales Surtax- November 30, 2016 Cycle Audits: Property Control Additional Audit Projects: Self Insurance Claims Before and After School Care Internal Accounts FY 2016 Transportation- Inventory, Fuel and Purchasing Card Procedures Fraud Awareness Completed In progress Not yet started 18

19 Corrective Actions & Remediation Status 145 audits completed since inception of Audit Committee in FY2000: - 34 Cycle Audits - 33 Entity-Wide Audits - 59 Individual Audits covering significant High Risk Areas including internal accounts - 19 Special Requests Follow-up procedures are conducted and reported to the Audit Committee. 362 total corrective actions have been reported since the inception of Audit Committee. 94% of total corrective actions have been validated and closed through the Formal Follow-up Process. Significant improvements have been gained through sharing of Lessons Learned & Best Practices. 19

20 Audit Committee Goals & Highlights Annual half day off-site workshop and training was conducted September The next off-site training is scheduled for September 22, Process developed for Annual Evaluations of the Internal Auditors and External Auditors. Documentation of Audit RFP process completed in late Internal Audit and External Audit contract recommendations to the Board. Continued improvements in the Audit Committee s function achieved by identifying, prioritizing, and managing Action Items. Sensitivity maintained to Opportunities for Improvement. Half-Cent Sales Tax Accountability supported as needed. 100% completion of Goals & Objectives. 20

21 Questions? 21