FY ANNUAL & FY MID-TERM REPORT. Audit Committee Activities. Art Edwards Audit Committee Chairman March 2, 2018

Transcription

1 FY ANNUAL & FY MID-TERM REPORT Audit Committee Activities Art Edwards Audit Committee Chairman March 2,

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 2017 Highlights - Internal Audits Completed 2018 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 Misty Belford, School Board Chair Ex-Officio FY John Craig, School Board Chair Ex-Officio The Audit Committee s authorization to operate is provided in School Board Policy 6700 Audit Committee and School Board Policy 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 12 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 7 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 3 years. Frank Zilaitis - JD, MBA, MSEE, BSEE. Attorney/Owner - Zilaitis Law, P.A. Audit Committee member for 7 years. Malak Hammad Vice President, Marine Bank and Trust. 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 3 years. 5

6 Reporting Structure Citizens of Brevard County School Board Attorney School Board of Brevard County Audit Committee Superintendent District Cabinet Quality Control* Internal & External Audit * Quality Control reports to the District s Chief Financial Officer 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 oneyear options, so that the Auditor General could work in concert with the External Auditor for a streamlined audit process. In October 2017, Moore Stephens Lovelace, P.A. provided the District an unqualified or clean audit opinion for the 2016 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 was FY 2016, the next AG audit will be FY

8 Internal Auditors In 2007, the Audit Committee s recommended to the School Board that RSM US LLP (formerly McGladrey LLP) be selected as the District s internal auditor. The recommendation 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 services were extended through June 30, Fiscal year total budget was Board approved at $199,500. The Internal Auditors have historically 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 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 Risk Impact 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 As an internal audit function develops and matures, the various types of audits performed will move through a lifecycle of the control environment in order to not only strengthen and enhance processes and controls, but also to facilitate strategy, decision-making and long-term planning. The various types of audits that are proposed have included a hybrid mix of audit types, as shown below. 10

11 Internal Audit Universe See handout 11

12 Internal Audit Focus District-Wide Audits Individual Function Audits Cycle Audits Follow-up Audits Additional Internal Audit Projects 12

13 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. 13

14 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

15 Individual Function Audits 1. Individual Function audits focus on unique scenarios or processes within a specific department. 2. Individual Function audits may also focus on unique scenarios or processes within several departments (but not target all departments in the District). For example: A Purchasing Card audit of Food Services would focus on the risks and controls for transactions related only to Food Services. 15

16 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. 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. For example: Property Control 16

17 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: Eau Gallie HS, Transportation Department 17

18 FY Internal Audits Completed Follow-up Individual: Transportation Follow-Up - White Fleet Analysis Half Cent Sales Surtax - Round 2 - Through June 30, 2016 Half Cent Sales Surtax - Round 3 - Through November 30, 2016 Cycle Audits: Property Control Additional Audit Projects: Self Insurance - CIGNA Before and After School Care Internal Accounts FY Transportation Department Eau Gallie Special Project Fraud Awareness Completed 18

19 July 1 - December 31, 2017 Internal Audits Completed Follow-up Transportation Follow-Up White Fleet Overall Follow-Up District-Wide: Educational Technology Internal/External Penetration Testing Individual: Half Cent Sales Surtax Round 4 - June 30, 2017 Additional Audit Projects: Internal Accounts FY Fraud Awareness Completed In progress Not yet started 19

20 Corrective Actions & Remediation Status 153 audits completed since inception of Audit Committee in FY2000: - 35 Cycle Audits - 34 District-Wide Audits - 61 Individual Audits covering significant High Risk Areas including internal accounts - 23 Additional Audit Projects Follow-up procedures are conducted and reported to the Audit Committee. 356 total corrective actions have been reported since the inception of Audit Committee. 98% 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. 20

21 Audit Committee Goals & Highlights Annual half day off-site workshop and training was conducted September The next off-site training is scheduled for September 21, Annual Evaluations of the Internal Auditors and External Auditors. Documentation of External Audit RFP process completed in late Revisited the RFP process in preparation for 2018 Internal Audit procurement. 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. Audit Committee Charter to be updated with assistance from the School Board Attorney. 100% completion of Goals & Objectives. 21

22 Questions 22