REPORT OF INTERNAL AUDIT

Transcription

1 REPORT OF INTERNAL AUDIT PRESENTED TO AUDIT/TASK: #09-07, City Hiring Practices AUDIT CLIENT: Human Resources AUDIT DATE: June 30, 2009 REPORT DATE: December 31, 2009 AUDITOR: Steven Rehn CIA, CFSA APPROVAL: Steven Rehn CIA, CFSA INTRODUCTION In accordance with Boise Municipal Code Title 1, Chapter 9; and in response to the request of members of the City Council, the Office of Internal Audit undertook a review of the processes the City follows in its hiring practices. Responsibility for hiring activities tends to be shared between Human Resources (H/R) and the hiring division or department. Generally, when a service group within the City identifies a staffing need, group management works cooperatively with H/R in an effort to secure the needed staff resources. Four broad steps in the City s current hiring processes are: Posting: H/R and the hiring group develop a job requisition and suitable job announcement, and ensure that the position envisioned is properly classified and compensated. H/R then posts the job to the City s website, and coordinates any other marketing activities that may be required to attract a pool of qualified candidates.

2 Recruiting: Once applications are received, the hiring group is responsible for screening the applicants, for interviewing the top candidates, and for selecting a finalist. Making the Offer: The hiring group checks references for the finalist selected, and also extends a conditional offer of employment to the candidate selected. On-Boarding: H/R re-enters the process after the conditional offer of employment is accepted. Any required pre-employment consent forms are completed, necessary background check activities are performed to clear the candidate for employment, supporting documentation is gathered and memorialized, and the newly-hired employee is scheduled for orientation. Human Resources, working cooperatively with the various departments and divisions across the City, opened and actively worked an estimated 620+ job requisitions between early FY 07 and the audit date June 30, 2009 in order to satisfy staffing needs. To more effectively manage these levels of activity, H/R implemented the use of an electronic recruiting system early in FY 07 referred to as erecruit. The system allows both H/R staff, and hiring supervisors and managers to actively work, and to document the completion of their respective responsibilities as they seek to fill open positions. ERecruit also results in the capture and creation of the baseline set of electronic data for each employee it is ultimately uploaded electronically to the main employee database after successful candidates complete the hiring process. 2

3 SCOPE AND METHODOLOGIES Internal Audit established the scope of the review to include basic operational aspects of the hiring processes currently in place within the City. The period of time under review encompassed all hiring activity commencing October 1, 2006, and ending June 30, In some instances, transactions occurring after this date were reviewed as specific questions developed during the audit were followed up and / or resolved. The overall purpose of the audit was to gain a reasonable degree of assurance that the control environment surrounding hiring processes was adequate. Generally, an adequate control environment should ensure that resources are properly safeguarded, and that the goals and objectives established by management for the program(s) under review are being met; including compliance with applicable policy, law, and/or regulation. With respect to the hiring process, the control environment was anticipated to be strongly oriented towards the accomplishment of goals and objectives (essentially the thorough and accurate completion of the prescribed process steps), and compliance-related activities. Specific objectives that were established for the audit included the following: Document and assess the adequacy of the current control environment within Human Resources as it relates to recruiting and hiring activities. Document and assess the effectiveness of processes and procedures surrounding job posting, recruiting, screening, and initial offers of employment. Determine whether all required activities relative to candidate vetting and approval are occurring before active employment commences. Determine whether appropriate measures are in place relative to the timely and accurate gathering and loading of employee-related data to the PeopleSoft system. Internal Audit oriented its review of these processes so as to pay particular attention to measures established to manage and mitigate perceived areas of risk; and efforts to capture and retain critical documentation associated with hiring activities. During the audit we utilized methodologies consisting of observations, interviews, detail testing, and analysis in order to achieve the identified objectives. All activities were planned and conducted in a fashion that was deemed to be adequate to support the findings and general comments contained within this report. 3

4 EVALUATION AND COMMENTS Based on the work performed, Internal Audit believes the grade that best represents the status of the City s hiring processes as of the audit date is a Needs Improvement. Audit grades are formally established in the Office s approved policies and procedures. Those aspects of a Needs Improvement grade that appear to be most applicable to the conditions noted during this review are: Weaknesses or deficiencies are encountered on a relatively frequent basis within the audited entity or function. Issues noted, and their frequency, are suggestive of a pattern or practice of inadequate oversight. Internal control mechanisms may not be universally in place, implemented, or actively observed. Management oversight is weak, or is not always effective The Human Resources Department has been successful in its efforts to assist other city departments and divisions in recruiting, screening, selecting, and deploying staff resources. However, based on the results of Audit s work in this area, it appears there are opportunities to achieve significant improvements in the processes and procedures that support these hiring activities. A number of the control mechanisms that could have been solidly in place were, instead, loosely established and observed. The centralized capture and retention of key documentation was not actively pursued; and, definitive process drivers (such as checklists or established listings of positions with unique requirements) do not appear to have been consistently deployed. A more structured and robust control environment would have resulted in a higher degree of consistency relative to the various steps in the hiring process, as well as the collection of a more complete set of documentation in support of the activities leading to the completion of each hiring action. Internal Audit s detailed findings and observations appear on the pages that follow. 4

5 FINDINGS AND RECOMMENDATIONS 1. FINDING: Hiring Process Infrastructure In order to assess the effectiveness of the hiring processes, a select group of documentation items normally associated with hiring was selected for testing. Testing for these items was then conducted on a randomly selected sample of 21 hires that occurred between March 2007 and June A number of instances were noted where documentation in support of screening and vetting activities expected to be present in either hard copy or electronic records was not present. By document type and frequency, those were: Ten instances were noted where evidence of reference checks was not present Four instances were noted where Background Check Consent forms were not present Five instances were noted where evidence that Background Checks were conducted was not present Two instances were noted where Drug test authorizations were not present in the files Two instances were noted where Credit Check authorizations were not present in the files During the period under review, this particular function appears to have been carried out absent well-established internal procedural guidance. One policy document that was in place effective 11/14/06 and covering the requirements for background investigations, stipulates: all offers of employment are conditioned on an applicant successfully passing the City s reference and other background check processes An underlying regulation that became effective somewhat later 9/5/08 adds the following clarifications to the policy: All offers of employment are conditioned on an applicant successfully passing the City s background processes. The City conducts reference checks, criminal history checks, and fingerprinting in accordance with this regulation Neither of these documents draws any distinctions amongst the different classes of employees. The only distinction that is drawn pertains to volunteers. Staff indicated during discussions that there has been no comprehensive set of hiring regulations in place that stipulated what the City s background- and reference-check processes were. Reliance appears to have been placed on informally-established practices that were determined in concert with hiring departments, and that tended to 5

6 be based on a department s perceived needs at the time. As a result, new-hires have been, and continue to be processed with the understanding that the position type (interns, part time temporary, etc ) governs the type of documentation and vetting that is required. A series of checklists geared to specific position types evidences this process. Also, perhaps due to the absence of official hiring regulations, H/R does not appear to actively pursue, capture and retain a baseline set of hire-related documents. Industry best-practice strongly supports the thorough vetting of all candidates for employment. The incomplete documentation noted by Audit does not substantiate the vetting process, and also could leave the City in a vulnerable position in adverse circumstances for instance, in the event of litigation. The inability to demonstrate competent and effective hiring practices could impair the organization s chances of prevailing in this type of scenario. RECOMMENDATION: Internal Audit recognizes that Human Resources has been working on, and is currently in the process of finalizing a new hiring regulation. Prior to the implementation of that document, Audit recommends that management pursue interim corrective actions in the following areas: Determine baseline documentation requirements that will be incorporated in the pending regulations, and begin enforcing those requirements for current hires pending final approval and roll-out of the regulations. Re-train staff as appropriate in the requirements. Refine hiring processes, checklists, and other procedural aids to ensure that all desired / required documentation is timely and accurately completed. Implement procedures that will promote the capture of all documentation and ensure it is memorialized in H/R s document archives, whether paper or electronic. MANAGEMENT RESPONSE: Thank you for your review of the hiring process conducted in Human Resources. The purpose of this response it to give you the steps we have taken and will take regarding the City s hiring, drug testing, and records management processes. Each will be addressed separately. 6

7 HIRING PROCESS A. Completed Work Finalized hiring regulation For over one year we have been revising the hiring regulation. This has involved several meetings with our internal customers to work through issues regarding such things as posting periods, reference checks, and many of the other details in the draft hiring regulation. From these meetings we balanced our customers needs and best practices. Revised veterans preference process Idaho s Veterans Preference statute applies to the City, but is written based on antiquated hiring processes. We spent significant time creating a process that would be compliant with the law, and meets the City s business needs. Revised related hiring regulations Because of the varied hiring scenarios in the City, after meeting with our customers we created the following three regulations in addition to the main hiring regulation: Temporary, Stand-By, Paid Interns, or Independent Contractors; Promotions, Transfers, Temporary reassignments, and Demotions; and, Rehiring Former Employees. Revised supporting forms We created and also revised the forms that support the hiring process reference checks and applicant evaluation. B. Pending Work and Timeframe for Completion Regulation approval We will send all of the above regulations to the Mayor s office for approval in January, Train Supervisors Because of the sporadic nature of hiring that is currently occurring, we will train each supervisor on the revamped hiring processes when that supervisor is ready to fill a vacancy. A complete and thorough step-by-step description of the hiring process and all supporting documents are being placed on the Inside page in January, (Note: The Inside page referred to above is the City s internal web site.) 7

8 2. FINDING: Applicant Drug Testing The City of Boise has traditionally incorporated drug testing of applicants into its hiring processes. Recent developments in this area (emerging case law) have resulted in a testing protocol designed to cover safety-sensitive positions only. Audit obtained a list of positions from H/R staff that were deemed to qualify for testing. Audit then selected a separate sample of sixteen (16) recent requisitions where drug testing was a likely requirement, and tested against that list. Following are the results: 7 out of the 16 hires were tested as expected 5 out of the 16 positions were not deemed to be safety sensitive even though the same, or similar positions were included on the required testing list 4 out of the 16 hires were not drug tested as expected While causal factors may not be completely determinable, it appears that a general lack of structure and /or defined procedures in this area may have contributed to the lack of testing noted. Anecdotal evidence indicates that hiring departments and divisions, working cooperatively with H/R, may have been determining the necessity of drug testing on an ad-hoc basis. H/R staffers most closely involved in the hiring processes do not appear to have been fully aware of the listing that was provided to Audit until only recently. Failure to include this type of testing into candidate vetting processes could expose the City to an unacceptable level of risk. In terms of prudent and consistent hiring practices, the organization would be at a disadvantage if it were ever called upon to demonstrate due diligence in a scenario involving litigation. RECOMMENDATION: Audit recommends that management review current procedure, and implement a more robust process relative to drug testing in the interim. That revised process should then be carried over into the revised hiring processes currently in the development / finalization stage. Doing so will help ensure that risk related to this process is mitigated to the desired extent. 8

9 MANAGEMENT RESPONSE: The purpose of this response it to give you the steps we have taken and will take regarding the City s drug testing processes. DRUG TESTING A. Completed Work Revised the CDL and Safety-Sensitive drug test regulations Hired a new drug testing vendor We found a vendor that has a sophisticated, but simple on-line process, which includes training material for supervisors Review Requisitions Based on your recommendation we review each new requisition to determine if that position is subject to drug testing. B. Pending Work and Timeframe for Completion Regulation approval We will send all of the above regulations to the Mayor s office for approval in January, Job Description Migration To make this process efficient in the long term the City needs accurate job descriptions for each position that will list what background and drug testing checks apply to that position. For the first time in the City s history we launched an initiative to revise and review all 1,600 positions and create job descriptions versus the broad class specifications that are in place now. When this effort is complete in approximately 18 months this will greatly resolve any further issues with what new hire screening and training a position needs. As mentioned above, in the interim, we are reviewing every requisition to determine the relevant background checks that apply to the position. 9

10 OTHER AREA OF CONCERN While testing documentation surrounding the hiring process, Internal Audit had occasion to perform in-depth reviews of file information retained both electronically, and in hard copy format. Based on that review, Audit believes there are opportunities for improvement in the area of recordkeeping, and recommends that management consider a review of current processes. Audit bases its comments on the following conditions that were noted while reviewing records: Staff is maintaining a set of requisition files separate and apart from primary employee files. The requisition files contained varying levels of documentation not displaying any consistency from file to file. Portions of the documentation retained in requisition files appear to duplicate existing records on the People Soft erecruit system. Per staff representations, all critical documentation related to the hiring process is scanned for electronic retention. The electronic files grouped logically into separate topical areas for personnel, payroll, and regulatory did not evidence consistency. On the surface, the records retained in this format often appeared to be incomplete for any given employee, and displayed little consistency from one employee to the next. Original hard copy documentation is retained and archived for destruction, but may not be organized in a fashion that renders it easily locatable and retrievable. Business records, and particularly employee-related records, derive considerable value from their completeness, and on how easy they are to locate and retrieve when needed. Based on those criteria, the records that support current hiring practices may not possess the measure of value necessary in this critical area. Management may wish to review their recordkeeping practices, considering improvements in the areas of file consolidation (for hard copy files), completeness (for electronically-retained documentation), organization (for ease of retrieval), and possible elimination of duplicative materials (such as requisition files). 10

11 MANAGEMENT RESPONSE: The purpose of this response it to give you the steps we have taken and will take regarding the City s records management processes. RECORDS MANAGEMENT A. Pending Work Hiring Check List We have drafts of a hiring checklist that will be attached to every hiring process. The checklist comprehensively lists the paperwork that a supervisor must submit when hiring an employee, the forms that the employee must complete, and what elements of the City s background investigation, drug tests, and credit checks apply to that employee. This work will be completed January, New Hire Paperwork We have drafts of the new hire paperwork packets that are individualized by job category (regular full-time, regular part-time, temporary, etc ). The paperwork identifies who receives it and where the paperwork is routed and stored. This work will be completed January,

12 CONCLUSION As indicated earlier, the Human Resources Department is preparing to roll out a newlycreated set of hiring regulations the product of an extensive internal review of processes and procedures. The implementation of those regulations should result in a process that reflects consistency and integrity, and one that provides for the capture and retention of critical documentation associated with hiring activities. Internal Audit would like to recognize the assistance and cooperation of both management and staff of the Human Resources Department during the course of this review. MANAGEMENT PARTICIPANTS Shawn Miller, Human Resources Director / City of Boise 12