Internal Audit Report. Toll Operations: FHWA Reporting TxDOT Office of Internal Audit

Transcription

1 Internal Audit Report Toll Operations: FHWA Reporting TxDOT Office of Internal Audit

2 Objective To determine whether Toll Operations Division (TOD) is providing federally required reporting to the Federal Highway Administration (FHWA). Opinion Based on the audit scope areas reviewed, control mechanisms are effective and sustainable and substantially address risk factors and exposures considered significant relative to impacting financial reporting reliability, operational execution, and compliance. The organization's system of internal controls provides reasonable assurance that key goals and objectives will be achieved despite improvement opportunities identified. Improvement opportunities identified include minor enhancements that would improve achievement of control objectives but are not currently resulting in negative impacts to the organization. Overall Engagement Assessment Satisfactory Control Environment TOD s management conducts its operations with a staff of 19 employees. TOD s responsibilities include annual reporting requirements for the 17 toll agreements (23 U.S.C. 129(a)) between TxDOT and FHWA, which authorize toll activity in Texas. TOD, on behalf of all the tolling entities, is responsible for collecting and providing specific toll road related reports to FHWA as part of those Section 129(a) toll agreements and regulations in 23 U.S.C., Section 166. TOD s management has developed policies, procedures, and tools for collecting and tracking this information to assist in completing these annual reporting requirements. Summary Results Finding Scope Area Evidence None identified FHWA Reporting No findings identified Federal regulations and agreements require TxDOT to certify that the toll facilities are being adequately maintained and to comply with limitations on the use of revenues from toll facilities. The toll agreements require an annual audit of toll facilities to ensure compliance with the federal requirements. TOD has reached out to FHWA to better understand the requirements and response dates. Although guidance has not been finalized, we were able to review and assess the areas of maintenance and toll revenue distribution to determine whether TOD is following the requirements provided to them by FHWA. Less significant opportunities for improvement were communicated to management separately. Audit Scope The audit focused on TOD s responsibility for reporting maintenance certifications and financial audits of the toll roads to the FHWA as required by federal regulations 23 U.S.C. Section 129(a), 23 U.S.C. Section 166, and Moving Ahead for Progress in the 21 st Century Act (MAP-21) governing toll agreements. Reporting was tested for each Texas toll road under such agreements with fiscal years ending in August 20,

3 The audit was performed by Timothy Owen, Sonam Sohal, and Jill Emery (Engagement Lead). The audit was conducted during the period from June 11, 2014 to August 1, Methodology The methodologies used to complete the objectives of this audit included: Examination of federal regulations and FHWA requirements Review of TOD s Statement of Procedures Examination of maintenance certifications and audited financial statements Review of reporting provided to FHWA and TOD s report tracking worksheet Interviews with key personnel These procedures were applied as necessary to perform the audit fieldwork. Background This report is prepared for the Texas Transportation Commission, TxDOT Administration, and Management. The report presents the results of the Toll Operations: FHWA Reporting audit which was conducted as part of the Fiscal Year 2014 Audit Plan. TOD was created in September 2011 from the division previously known as the Texas Turnpike Authority. TOD is responsible for developing, operating, and maintaining TxDOT owned toll facilities. Additionally, TOD has entered into agreements with FHWA to allow federal participation in the construction of those roads and other toll roads across the state. 23 U.S.C. Section 129(a)(3) states that toll revenues must first be used for debt service, for reasonable return on investment of any private person financing the project, and for the costs necessary for the proper operation and maintenance of the toll facility. As a result, TOD is required to collect and remit an annual maintenance certificate in order to use excess revenue for any purpose for which Federal funds may be obligated under this code. The agreement further adds that TxDOT performs an annual audit for compliance with the provisions of the agreement and report the results to FHWA. MAP-21 removes the requirement for new 129 toll agreements, but adds new requirements under 23 U.S.C. 129 and 166 for audits and maintenance certifications even without an agreement. We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards and in conformance with the International Standards for the Professional Practice of Internal Auditing. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. Recommendations to mitigate risks identified were provided to management during the engagement to assist in the formulation of the management action plans included in this report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Office of Internal Audit transitioned to Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework version 2013 in December A defined set of control objectives was utilized to focus on reporting, operational, and compliance goals for the identified scope areas. Our audit opinion is an assessment of the health of the overall control environment based on (1) the effectiveness of the enterprise August 20,

4 risk management activities throughout the audit period and (2) the degree to which the defined control objectives were being met. Our audit opinion is not a guarantee against reporting misstatement and reliability, operational sub-optimization, or non-compliance, particularly in areas not included in the scope of this audit. August 20,

5 Summary Results Based on Enterprise Risk Management Framework Audit Results Dashboard Toll Operations: FHWA Reporting Business Objectives (Reporting, Operational, Compliance) R, O, C ERM Component Control Environment Risk Assessment Control Activities Information & Communication Monitoring Control Activities Organizational Tone Planning Forecasting Goal-Setting Cost-Benefit Analysis Business Continuity Evaluations/Analysis Management Action Plans Policies/Procedure Development & Maintenance Approvals/Authorizations Supporting Evidence/Records Availability Segregation of Duties Safeguarding Assets Information Classification Information Input Information Processing Output/Reporting and Messaging Exception Reporting Review Reconciliations/Root-Cause Analysis Peer Reviews Management Representations Scope Area Assessment FHWA Reporting Rating Assessment Grid Exemplary Satisfactory Needs Improvement Unsatisfactory Closing Comments The results of this audit were discussed with Toll Operations Division on August 8, We appreciate the assistance and cooperation received from the management and employees of the Toll Operations Division contacted during this audit. August 20,