Internal Audit Semi-annual Implementation Status Report Report #08-10 July 28, 2008

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Internal Audit Semi-annual Implementation Status Report Report #08-10 July 28, 2008 Scope: This semi-annual report reflects the implementation status, as of May 31, 2008, of the following internal

1 Internal Audit Semi-annual Implementation Status Report Report #08-10 July 28, 2008 Scope: This semi-annual report reflects the implementation status, as of May 31, 2008, of the following internal and external reports: Project In Not Date Project Name Complete # Process Implemented Disagree /20/2003 Records Management May-03 Schlumberger-Sema Business Process Reengineering Report - CLOSED /26/2004 Facilities, Design & Construction/BGA Program Management & Controls /15/2004 Vehicle Maintenance Stores/Inventory Management - CLOSED /20/2004 VM Fuel Controls CLOSED (See Notes.) /4/2005 FY2004 Quadrennial Review (KPMG) - CLOSED (See Notes.) /28/2005 Farebox Revenue and Controls & Investigation /27/2005 Compensation Structure /14/2005 Accounts Payable-Disbursements /27/2006 Special Transit Services (STS) Taxicab Voucher Program /27/2006 RideShare Program /22/2006 Customer Service Call Center Operations /31/2006 Contracting / Procurement Process Audit /30/2006 Payroll Audit /13/2006 Recruitment, Selection, and Hiring Audit /14/2007 First Transit Contract Audit /26/2007 Sherry Matthews Advocacy Marketing Contract Audit /23/2007 Transit Advertising Program Audit /23/2007 Procurement Card / Travel Audit /22/2007 Physical Security Audit /23/2008 Risk Management audit /31/2008 Accounts Receivable Audit /2008 Total % 76% 18% 6% <1% 11/2007 Total % 70% 22% 7% 1%

2 Why are status updates 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. 1 While management is responsible for addressing audit recommendations, internal audit departments are responsible for establishing policies and procedures for follow-up to determine whether previous significant findings and recommendations are addressed. 2 Status Highlights: (The most significant progress updates are shown in red.) Records Management Capital Metro Internal Audit Report #03-02, October 20, 2003 A cross-functional edocs committee is being formed in order to identify opportunities to make the Hummingbird system more streamlined and user friendly. Anticipated outcomes include an improved records management processes and related user education and training. Business Process Reengineering (BPR) Findings Report and Strategic Implementation Plan SchlumbergerSema, May 2003 All items have been successfully resolved. This status report is now closed. Facilities, Design & Construction/BGA Program Management & Controls Capital Metro Internal Audit Report #03-10, January 26, 2004 Capital Project 3 Group (CPG) Policies & Procedures Manual is complete. The use of formal project management protocols and methodologies help to mitigate construction project risks. The CPG manual will be refined and updated on an ongoing basis by performing annual reviews and using lessons learned improvements identified during post-mortem project reviews. Vehicle Maintenance Stores / Inventory Management Capital Metro Internal Audit Report #03-12, March 15, 2004! New asset management system implemented: Spear, a more robust inventory management software, has enhanced the Vehicle Maintenance Department s ability to control their assets, track inventory levels, and review and reconcile inventory adjustments.! Inventory management partially outsourced: In April 2008, the Authority outsourced standard bin stocking services for fasteners (e.g., screws, bolts, etc.) to an outside vendor. In addition, Vehicle Maintenance is pursuing an outsource arrangement for building maintenance supplies. All items have been successfully resolved. This status report is now closed. 1 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section A1.08. GAO G 2 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section GAO G 3 Formerly known as Facilities, Design & Construction (FD&C) July 28, 2008 Page 2 of 6

3 Vehicle Maintenance Fuel Controls Capital Metro Internal Audit Report #04-11, September 20, 2004 Outstanding recommendations will be addressed in new fuel controls audit which is scheduled to begin Summer CMTA FY2004 Quadrennial Review Statutorily required external review, KPMG LLP, January 2, 2005 The FY2008 Quadrennial Review consultant is currently performing a follow-up as part of their review. Therefore, status has been omitted from this semi-annual status update. Farebox Revenue and Controls & Investigation Assistance Capital Metro Internal Audit Report #05-04, March 28, 2005 Daily farebox-related bus probing procedures: Service Island Probing Procedures to ensure that ridership and fare data is download for all buses returning to the yard have been approved. All items have been successfully resolved. This audit is now closed. Compensation Audit Capital Metro Internal Audit Report #05-05, June 27, 2005 Increased focus on career development: The 2008 performance management plan (PMP) was expanded to address employee career development. Employees and Managers are jointly responsible for developing an annual development plan. The Organizational Development Specialist in HR is also available to assist managers and employees in customizing development plans and training solutions to support career development and individual performance. RideShare Program Capital Metro Internal Audit Report #05-18, February 27, 2006 RideShare Monthly Fares: Fare adjustments for the RideShare Program are included in the proposed adjustment to Capital Metro s fare structure. The proposed monthly pass rate, $37.50, is not based upon a recovery rate but, instead was increased proportionally as with other fares. RideShare Program Changes on hold: Changes in the RideShare Program, including minimum ridership requirements, and the future of the GreenRide pilot program are on hold until early 2009 as a result of turnover in the Chief Operating Officer (COO) position. Special Transit Services Taxicab Program Capital Metro Internal Audit Report #05-14, February 27, 2006 Changes to Taxi Voucher Policies & Procedures on hold : Changes to the STS Taxi Program are frozen as a result of a legal challenge and the resulting temporary restraining order issued by the court. Out-of-service area taxis: Paratransit taxi trips for persons who reside outside of either the Capital Metro service area (i.e., withdrawn cities) or ADA boundaries are granted only when space is available (with the exception of grandfathered subscriptions ). July 28, 2008 Page 3 of 6

4 Customer Service Call Center Operations Capital Metro Internal Audit Report #06-01, May 22, 2006 Escalation plan: An escalation plan to address situations when call volume exceeds capacity has been communicated to call center staff and has been used successfully. Contracting/Procurement Process Audit Capital Metro Internal Audit Report #06-05, August 31, 2006 Background checks requirements detailed for contract staff: To reduce risks stemming from unknown personnel, the Contracts & Procurement Department has implemented a methodology to ensure that required contractor background checks are performed and submitted to the Authority. Payroll Audit Capital Metro Internal Audit Report #06-13, October 30, 2006 Still no reliable audit trail for changes to operator timekeeping data: Fixed Route and Paratransit operators account for over 50% of the combined Capital Metro/StarTran employees. Scheduling and related timekeeping for operators is processed through Trapeze prior to forwarding summarized totals for payroll processing. The IT Department has developed an audit trail report to ensure changes to pay-related data in Trapeze are accurate and authorized. However, Trapeze OPS system weaknesses have prevented the implementation of this report. The IT Department was recently informed by vendor that the Trapeze software should be updated prior to addressing this issue. Updated software should be placed in production by December 31, Recruitment, Selection, and Hiring Audit Capital Metro Internal Audit Report #06-14, December 13, 2006 Implementation of e-recruiting software scheduled for August 2008: Human Resources (HR) has entered the testing phase of the e-recruiting component of UltiPro HRIS (Human Resources Information System). This software will replace slower manual processes with real-time online recruitment and application which streamlines the hiring process. First Transit Contract Audit Capital Metro Internal Audit Report #07-04, May 14, 2007! Improved support for preventative maintenance (PM) repairs: First Transit has significantly improved management oversight of preventative maintenance tasks, adding an additional supervisory review to confirm the accuracy and completeness of PM activities. Internal Audit tested PM documentation and found it to be fully completed and approved. Sherry Matthews Advocacy Marketing Contract Audit Capital Metro Internal Audit Report #07-07, March 26, 2007 No resolution on contractor over-payment: The Authority has not yet obtained a refund for $7,139 in contractor overpayments which were identified during the audit. The original corrective action plan was to have this resolved in March July 28, 2008 Page 4 of 6

5 Transit Advertising Program Audit Capital Metro Internal Audit Report #07-08, April 23, 2007 Reduction in transit advertising revenues: The FY2008 transit advertising revenue budget target is $885,028. As of May 31, annual earned revenues ($370,385) were 33 percent below original projections. New Cost-Benefit review of outsourcing Transit Advertising program: When the Transit Advertising program was originally brought in house, the decision was based upon a cost-benefit analysis. Given the recent economic downturn, an updated analysis of out-sourcing vs. insourcing the transit revenue program is being performed. Procurement Card / Travel Audit Capital Metro Internal Audit Report #07-10, July 23, 2007! Procurement Card monitoring program fully implemented: Procurement Buyers now monitor purchases quarterly to identify questionable transactions and follow-up with cardholders and approving managers in order to escalate and resolve policy violations. Such monitoring is considered a key to providing proper oversight of program. Travel Manager only monitors some travel: The Travel Manager monitors centrally-booked travel to ensure that government rates are being utilized when available and expense reports are filed timely. However, since travel by Operations and Human Resources personnel is separately arranged, compliance cannot yet be ensured for all travelers. Security Audit & FTA Implementation Status Review Capital Metro Internal Audit Report #07-11, October 22, 2007! Rail security staffing: Capital Metro will continue to use extra-duty Austin Police Department (APD) officers to provide transit security. Two APD officers will be assigned for fare enforcement. Capital Metro Legal staff is also working to develop ILAs to solidify agreements between officers assigned to Capital Metro and other policing jurisdictions along the rail line. Rail System Security Plan (SSP): The original SSP was submitted to the Texas Department of Transportation (TxDot) in April Capital Metro and TxDot are reviewing and amending the plan as needed. Risk Management Audit Capital Metro Internal Audit Report #07-18, January 23, 2008 Risk Management and FRS have adopted a standardized accident definition. A standardized definition has been communicated to all service providers which will help ensure reporting accident statistics consistently. However, to reinforce the adopted definition, it should be incorporated into purchased transportation vendor contracts in the future. Worker s Compensation reports have been filed timely. Recent testing of Risk Management files revealed full compliance with Texas Department of Insurance Division of Worker s Compensation submission deadlines. July 28, 2008 Page 5 of 6

6 Accounts Receivable Audit Capital Metro Internal Audit Report #07-21, March 31, 2008 Credit memos receiving approvals: Credit memos are now being reviewed and approved by the Controller to ensure all account write-offs are valid and authorized. 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 Fred M. Gilliam President/CEO cc: Capital Metro Board of Directors Andrea Lofye, Interim EVP/COO, Chief of Staff Randall Hume, EVP Finance & Administration Doug Allen, EVP & Chief Development Officer Elaine Timbes, EVP Performance & Quality Terry Garcia Crews, StarTran, Inc. General Manager Sallie Crosby, Chief Counsel Dianne Mendoza, VP Business & Community Development Aida Douglas, Manager Business Development & DBE Officer Rick L Amie, VP Marketing Todd Hemingson, VP Strategic Planning & Development Kirk Talbott, Chief Information Officer Bill Predmore, Enterprise Application Support Director Scott Phebus, Assistant Director Operations Inez Evans, Director Special Transit Services Carl Woodby, Director Maintenance John Hodges, Manager Capital Projects Shanea Davis, Director Contracts & Procurement Mark Ostertag, Director Safety & Security Donna Simmons, Human Resources Manager Allen Walker, Customer Service Manager Pam Laine, Controller Peggy MacCallum, Budget Manager Brian Whelan, Director of Operations Staff Development Dottie Lancaster Watkins, Director of Transportation Dolly Watson, Supervisor Community Transit Kerri Davidson, Deputy Counsel Cynthia Martinez, Legal Manager July 28, 2008 Page 6 of 6

Internal Audit Semi-annual Implementation Status Report Report #08-02 January 23, 2008

Internal Audit Semi-annual Implementation Status Report Report #08-02 January 23, 2008 Scope: This semi-annual report reflects the implementation status, as of November 1, 2007, of the following internal