Internal Audit Follow-Up Report

Transcription

1 Internal Audit Follow-Up Report Post Implementation Review ERP - Inventory TxDOT Internal Audit Division

2 Objective To assess the status of corrective actions for high-risk Management Action Plans (MAPs) previously communicated in the Post Implementation Review ERP Inventory audit report issued June Summary Results Testing consisted of an evaluation of 10 MAPs to determine if corrective actions were implemented as agreed. MAPs with future dates were not tested during this engagement, and their implementation will be assessed during a future follow-up. MAP Status Comments 1 Open Corrective actions that require completion to address identified risks from the original audit report. 1 Open Corrective actions were not yet due and were not evaluated during this engagement. 9 Closed Corrective actions have been completed. Scope The engagement was performed by Jennifer Stanush, Franciou Niclas, and Eva Vargas (Engagement Lead). The engagement was conducted during the period from June 14, 2017 to July 26, The engagement focused on (1) the implementation of an inventory management program by the Support Services Division (SSD) to include updated policy and procedures, training, inventory reporting, and stockpile measurement application utilization reporting, (2) the development, implementation, and monitoring of a Recycled Asphalt Pavement (RAP) valuation method, (3) the implementation of inventory monitoring and tracking, and (4) restriction of physical access to the Austin District Signal Shop stock room. Methodology The methodology used to complete the objectives of this engagement included: Selected a judgmental sample of two districts included in the original engagement and one district not included in the original engagement for testing. Reviewed the Materials Management Policy Manual and Materials Management Procedures Manual. Interviewed key SSD and district personnel including Material Management Section Special Project Coordinators, Business Service Coordinators (BSC), Maintenance Section Supervisors, and Maintenance Section Support Technicians. Reviewed communication and memorandums, SSD newsletters, inventory management training materials, job aids, queries, and reports for tracking and monitoring inventory and stockpile measurement application usage. Performed an on-site observation to verify installation of badge card reader for the Austin District Traffic Signal Shop stock room. November

3 Background This report is prepared for the Texas Transportation Commission and for the Administration and Management of TxDOT. The report presents the results of the Post Implementation Review ERP Inventory Follow-Up engagement which was conducted as part of the Fiscal Year (FY) 2017 Audit Plan. TxDOT implemented an enterprise resource planning system in October This system is an integrated suite of software, which provides a common technology platform across core business areas like human resources, finance, payroll, and supply chain. The Financial Supply Chain Management module is TxDOT s financial system of record where inventory quantities and values are entered and retained for reporting, issuance, and replenishment purposes. Inventory is also entered in the Maintenance Management System (MMS) to monitor, maintain, and manage inventory for maintenance sections. SSD is responsible for the development and implementation of inventory management policy, procedures, and reporting/monitoring tools used by the districts in the management of their inventory. In addition, SSD provides training, guidance, monitoring, and technical support to the districts to ensure the accuracy of TxDOT inventory for internal and external reporting. We conducted this follow-up engagement 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 engagement to obtain sufficient, appropriate evidence to provide a reasonable basis for our conclusions based on our engagement objective. Recommendations to mitigate risks identified were previously provided to management during the original engagement to assist in the formulation of the management action plans referenced in this report. The Internal Audit Division uses the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework version November

4 Detailed MAP Follow-Up Status MAP Status: Open Corrective actions that require completion to address identified risks from the original audit report. Original Audit Finding No. 1: Inventory Items and Values in ERP MAP Owner: Randy Hopmann, P.E., Director of District Operations MAP 1.3: Create and implement an Inventory Management Program that will incorporate other districts and divisions input on how to better manage, monitor, and report on inventory across the state. This program should include performance measures and a training curriculum to assist in the strengthening of controls around inventory at TxDOT. Original Completion Date: March 15, 2017 Revised Completion Date: September 15, 2017 Corrective actions were not yet due and were not evaluated during this engagement. Original Audit Finding No. 3: Mitigation of Prior Audit Findings MAP Owners: Andrew Chavez, Director, Support Services Division (SSD) Patty Ybarra, IT Business Analyst, Information Management Division Stephen Stewart, Director, Financial Management Division Mike Wilson, Business System Support Specialist, SSD Brandye Munn, Business Analyst, Maintenance Division Dee Dee Evans, Business Analyst, Procurement Division Josh Morton, Fleet Mgmt. System Administrator, Fleet Operations Division MAP 3.5: Ensure ERP Inventory module reflects proper valuation of TxDOT s inventory with appropriate units of measure and conversion factors through proper implementation of inbound and outbound interfaces with MMS/FNAV. Original Completion Date: August 15, 2017 Revised Completion Date: November 15, 2017 November

5 MAP Status: Closed Corrective actions have been completed. Original Audit Finding No. 1: Inventory Items and Values in ERP MAP Owner: Daryl Starkes, Materials Management Section Director, Support Services Division MAP 1.1: SSD will perform the following functions: SSD will maintain an updated policy manual and will deliver a procedure manual in Sept 2016 SSD will continue to create and update job aids to provide clarification to end users SSD will provide a report to the district BSCs to allow districts to monitor, track, and process adjustments in the system SSD will develop and provide a report to districts for utilization of iphone Application. SSD will also monitor iphone application usage and if necessary notify District Engineer (DE) when offices are not using the application SSD will conduct training to district BSCs and Inventory Coordinators regarding policies and procedures (Job Aids) and communicate to the BSCs the required use of the iphone SSD will create and maintain job aides for the iphone on the website SSD will provide districts with reports on iphone application usage to help monitor the usage of the application SSD will include zero value analysis as part of the year-end inventory count and correct as many of the zero value items SSD will also run a monthly report for the zero value items and request the district inventory coordinator or BSC correct the issue. If they don t respond and correct the issue, SSD will communicate with the district DE to let them know Original Completion Date: September 15, 2016 Actual Completion Date: December 15, 2016 MAP Owner: Randy Hopmann, P.E., Director, District Operations MAP 1.2: The Director of District Operations will work with Support Services Division to host additional iphone application training and explain the importance of inventory accuracy for district personnel and complete this training by November 1, Additionally, a memo will be issued to districts stressing the expectation for accurate inventory records and need to maintain these records on a frequent basis. This memo will be issued by July 15, Original Completion Date: November 15, 2016 Actual Completion Date: November 22, 2016 November

6 Original Audit Finding No. 2: Recording and Valuation of Recycled Asphalt Pavement (RAP) MAP Owner: Daryl Starkes, Materials Management Section Director, Support Services Division MAP 2.1: Support Services Division (SSD) will work with selected district Points of Contact (POCs) to develop a method for RAP valuations and implement the program state wide. SSD will work to develop a consistent formula to calculate value RAP and provide that formula to each district to use. SSD will send communication to notify districts that all RAP must be in Inventory. SSD will monitor and track RAP valuations and adjustments state wide and provide a report to the districts. Original Completion Date: December 15, 2016 Actual Completion Date: February 17, 2017 Original Audit Finding No. 3: Mitigation of Prior Audit Findings MAP Owner: Daryl Starkes, Materials Management Section Director, Support Services Division MAP 3.1: The Support Services Division (SSD) will do the following: Provide regular reports to the districts and administration on inventory of roadway materials Monitor, track, and report the frequency and usage of stockpile inventory measurements Plan and document random audits conducted by materials management for roadway materials stored in stockpiles Original Completion Date: August 15, 2016 Actual Completion Date: October 7, 2016 MAP 3.2: The Support Services Division will publish a Materials Management Procedures Manual - Chapter(s): Inventory Accuracy, Controls, and Functional Procedures - to include: Phase I Inventory Accuracy o Using ERP as system of record o Physical layout, bin locations, labelling o Documenting removal of items from stock o NIGP item management - units of measure and conversion rates o Inspecting and receiving new items - use of stockpile measuring Application o Reconciling transactions with office records, general ledger and budget o Performing spot inventories on regular basis o Investigating discrepancies - tracing errors o Performing adjustments Phase II Controls o Segregation of physical stock in different stock accounts o Limiting access by securing and locking stock items o Limiting issuance of keys to secured areas o Standard picking/shipping/in-transit processes November

7 o Periodic obsolete inventory reviews o Perform annual wall-to-wall inventories requiring certification by district engineer o Investigating and documenting discrepancies and obtaining approvals for adjustments o Segregation of duties to prevent inappropriate use of state funds or stock items Phase III Functional Procedures o Workflow and decision points o Procedures o Include or link to ERP job aids Original Completion Date: September 15, 2016 Actual Completion Date: December 15, 2016 MAP 3.3: The Support Services Division will create and deliver inventory management training to district personnel responsible for Inventory (e.g., Business Services Coordinators, Inventory Coordinators, Inventory BU personnel with PS Inventory Clerk role) on content of Materials Management Policy Manual and Phase I of Procedures Manual (Job Aides) Original Completion Date: August 15, 2016 Actual Completion Date: April 5, 2016 MAP 3.4: The Support Services Division will create a Materials Management and Compliance group within the Materials Management Section with dedicated Inventory Specialists responsible for assisting and training districts in specific geographic areas on inventory management functions. This will include: Provide districts with monthly inventory activity summary including potential surplus and long supply items Assist and train districts' on functions related to accuracy and controls Overall management of physical stock and system quantities and values Performing spot audit tests on high dollar/high volume items in district stock accounts Provide Tier 1 customer assistance through the ASKMATLSMGMT mail box Monitor ERP user role list and work with BSCs to ensure appropriate access is given and removed in a timely manner Monitor iphone Stockpile Application usage, assist users with system issues Inventory specialist will assist the districts with performing their duties related to Materials Management. These include: Conduct spot inventories, reconciliations, researching discrepancies, identifying needed adjustments Creating and maintaining physical layout plans with bin locations and labels, both physically and in ERP How to conduct root cause analysis, and how to surplus items (including expired and obsolete items) and remove them from the system, in order to meet the districts' performance metrics Original Completion Date: July 15, 2016 Actual Completion Date: June 2016 November

8 MAP Owner: Juli Word, Business Services Supervisor, Austin District Imelda Barrett, Director of Transportation Operations, Austin District MAP 3.6: Rekey the Signal Shop Stock Room and emergency key lockbox. Keys to the Signal Shop Stock Room and emergency key lockbox will be recalled and new keys issued. Signal Shop Stock Room keys will be limited and issued to the following people: (1) Signal Shop Stock Account Coordinator (2) Signal Shop Stock Account Assistant (3) One Signal Shop employee assigned to support the Coordinator and Assistant (4) Signal Shop Supervisor (5) Facilities Maintenance Supervisor Emergency lockbox keys will be limited and issued to the following people: (1) Signal Shop Key Control Coordinator (2) Signal Shop Key Control Assistant (3) Signal Shop Lead Worker or Crew Leader (4) Signal Shop Supervisor All keys will be stamped with DO NOT DUPLICATE or similar phrase. All key users will sign and date a log stating the old key was returned for destruction. All key users will sign and date an issuance log at the time the key is issued and received All key users will sign and date the Austin Traffic Signal Key Control policy stating they have received and understand the policy. Additionally, a key ring with after-hours keys will be issued to up to two traffic signal standby employees at the beginning of their shift for the week they are on standby and returned at the end of shift when their standby duty is concluded for the week. These keys will be returned the next morning and locked. The key log will be signed, dated, and time stamped when the key is returned by the key user and acknowledged by the individual securing the key. Original Completion Date: June 15, 2016 Actual Completion Date: November 1, 2016 MAP 3.7: Install a badge card reader for more control, ease of reporting on accesses, remove the risk of who has a physical key, and maintaining a key inventory. Original Completion Date: August 15, 2016 Actual Completion Date: November 1, 2016 Closing Comments The results of this MAP Follow-Up engagement were discussed with the Support Services Division Director, Materials Management Section Director, and Austin District Business Services Supervisor on August 2, The Internal Audit Division appreciates the cooperation and assistance received from the Support Services Division and Districts contacted during this engagement. November