TxDOT Internal Audit Follow-Up Report Tuition Assistance Program

Transcription

1 Follow-Up Report Tuition Assistance Program Objective Assess the status of corrective actions for high risk Management Action Plans (MAPs) previously communicated in Tuition Assistance Program (TAP) Audit Report issued August 28, Summary Results Testing included an evaluation of fourteen MAPs to determine if corrective actions were implemented as agreed. MAP Status Comments 13 Closed Corrective actions have been completed. 1 Open Corrective actions that require completion to address identified risks from the original audit report. 5 New Corrective actions that were newly identified and further actions are necessary to properly address the remaining risks. Scope The audit was performed by Augustine Nwoko and Vivian Cohn (Engagement Lead). The audit was conducted during the period from April 22, 2013 to May 17, Methodology The audit work included: Reviewing current policies and procedures, updated guidelines, and strategies. Interviewing process owners and key personnel. Testing compliance with application and reimbursement requirements for a sample of Fiscal Year 2013 TAP participants. Background This report was prepared for the Transportation Commission, TxDOT Administration and Management. The report presents the results of the Tuition Assistance Program Follow-up Audit Report which was conducted as part of the Fiscal Year 2013 Audit Plan. The TAP provides opportunities for employees to further their education and skills based on a business need. TAP coordinators in District, Division, Office or Region (D/D/O/R) administer the program and report to the Human Resources Division (HRD). HRD provides policies and guidance on how to administer TAP. HRD updated their Human Resource Manual in June 2013 to reflect changes in department policies, including TAP policy.

2 - MAP Follow-Up 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 objectives. We believe that the evidence obtained provides a reasonable basis for our conclusions based on our engagement objectives. 2 of 5 July 31, 2013

3 - MAP Follow-Up Detailed MAP Follow-Up Report and Status MAP Status: Open Corrective actions that require completion to address identified risks from the original audit report. Original Audit Finding Number 3: No established standard for expenditure reporting resulting in inaccurate Tuition Assistance Program (TAP) expenditure amounts reported to management and Administration. MAP Owner: Yvonne Howze, HRD Performance Excellence Director MAP 3.2 Re-instate annual reporting of TAP Performance Create and submit an annual report specifying TAP Quality and Performance data to report administrative efficiency, provide an at-a-glance review, and allow more transparency about the operations of the program. Original Completion Date: December 15, 2012 Revised Completion Date: July 15, of 5 July 31, 2013

4 - MAP Follow-Up MAP Status: New Corrective actions that were newly identified and further actions are necessary to properly address remaining risks. Original Audit Finding Number 1: No consistent or department-wide processes in place for monitoring or evaluating program objectives. FMAP Owner: Yvonne Howze, HRD Performance Excellence Director FMAP 1.1 Centralize administration of TAP program Continue utilization of a risk-based approach for centralizing administration of the program to ensure consistent application of standards, policy interpretation, and trend analyses are sufficient to mitigate risks and address findings and concerns. Send a Memorandum to all District Engineers, Division Directors, Office Directors and Region Directors establishing the TAP Administrator s role, points of contact, and clear centralized process for submission of all TAP-related documents, including reports requirements and deadlines. Completion Date: August 15, 2013 FMAP 1.2 Develop and deliver a 90-day technical assistance and deployment strategy for notifying all districts about the TAP policies, centralized procedures, and processes, regardless of whether or not they have active participants. Completion Date: August 15, 2013 FMAP 1.3 Create a comprehensive, up-to-date Standard Operating Procedure (SOP) identifying all aspects of TAP processes and procedures in addition to the posting of TAP Briefcase materials on HRD-Net website. Completion Date: August 15, 2013 Original Audit Finding Number 2: No oversight over DDOR s for managing compliance with Departmental policies governing the Tuition Assistance Program (TAP) including records/documentation to be maintained, approval process, TAP participant monitoring, review for allowable expenses, and reconciling expenditures. FMAP Owner: Yvonne Howze, HRD Performance Excellence Director FMAP 2.1 Provide oversight in D/D/O/R level Develop and implement a thorough evaluation design of the program and institute a centralized reporting process at monthly, quarterly, and annual intervals for tracking all activities, financial and programmatic, working collaboratively with Finance Division. Notify local TAP Coordinators of the new tracking processes and timelines. Completion Date: July 15, of 5 July 31, 2013

5 - MAP Follow-Up Original Audit Finding Number 3: No established standard for expenditure reporting resulting in inaccurate TAP expenditure amounts reported to management and Administration. FMAP Owner: Yvonne Howze, HRD Performance Excellence Director FMAP 3.1 Provide accurate and reliable TAP expenditure data to Management and Administration Work collaboratively with IT and Finance Division to ensure the architectural and infrastructure frameworks are in place to sufficiently report data needed for Program tracking and improvements. Submit reimbursement to HRD TAP Administrator for final review and approval before submitting to Finance Division for processing. Inform FIN of inaccurate billing/reimbursement so that FIN can correct the transaction. Publish monthly exception reports to spotlight the frequency of root causes of errors in TAP expenditures. Completion Date: July 15, 2013 Closing Comments The results of this MAP follow up engagement were discussed with and provided to Human Resources Division Director, Performance Excellence Director, and Finance Division Director, on June 17, The audit team appreciates the cooperation and assistance received from these divisions during this engagement. 5 of 5 July 31, 2013

6 Tuition Assistance Program Audit Report (P53201) Objective To determine if the Tuition Assistance Program (TAP) is being conducted in accordance with state statute and department administrative rules and policies. Opinion Based on the audit scope areas reviewed, control mechanisms are unreliable in addressing risk factors and exposures considered significant relative to impacting operational execution, regulatory compliance, and financial reporting reliability. The organization's system of internal controls does not provide reasonable assurance that key goals and objectives will be achieved. Control gap corrections are pervasive and resulting in negative impacts to the organization. Progress can be made within 2 quarters in addressing the highest risk areas. Overall Assessment Issue Title Findings Finding 1 No consistent or department wide processes in place for monitoring or evaluating program objectives. Finding 2 No oversight over DDOR s for managing compliance with Departmental policies governing the Tuition Assistance Program (TAP) including records/documentation to be maintained, approval process, TAP participant monitoring, review for allowable expenses, and reconciling expenditures. Finding 3 There is no established standard for expenditure reporting resulting in inaccurate TAP expenditure amounts reported to management and Administration. Control Design Unsatisfactory Operating Effectiveness Rating X X Unsatisfactory X X Unsatisfactory X X Unsatisfactory Management concurs with the above findings and has prepared management action plans to address deficiencies. The TAP program has been suspended for new participants pending completion of the included management action plans. Internal Environment TAP operates under a decentralized structure with no single point of authority, responsibility or accountability for the program. A single human resource specialist is assigned to consolidate program data (expenditures, program participants) and address TAP inquires but has no authority to re-direct or enforce non-compliance with program policies. No formal training is required or available for TAP coordinators. Tuition Assistance Program Audit Report 1 of 10 August 28, 2012

7 Summary Results Scope Area Finding Evidence Expenditure Reporting 1, 2, 3 Reported TAP expenditures for FY2011 were understated by $39,904 compared to expenditures recorded in the Department s financial information system (FIMS). No controls or procedures present to verify the accuracy of self reported DDOR expenditure data by HRD TAP Coordinator including reconciliation with expenditures recorded in FIMS. 12 of 14 (86%) DDORs self reported TAP expenditures did not reconcile to actual expenditures recorded in FIMS for FY2011. Repayment 1, 2 82 former program participants are in debt to the Department for a total of $356,950. No performance reports were available to determine factors contributing to unsuccessful completion of the program by participating employees. No formal cost benefit analysis to determine reasonableness of program expenditures. Expenses and Reimbursements 1, 2 Testing performed at 14 DDORs revealed $6,600 in TAP expenditures that could not be supported or determined to be unallowable: Inconsistent records management amongst DDORs and one division did not maintain files for TAP participants. A single human resource specialist is assigned to consolidate program data and address TAP inquires but has no authority to re direct or enforce non compliance with program policies. Audit Scope The scope of this audit consisted of TAP expenditures reported for FY2011 and FY2012. The process areas evaluated were: 1) accuracy of reported TAP expenditures, 2) allowability of expenses and eligibility of participants, and 3) recovering of funds for non-compliance with program provisions. Audit team members were Timothy Owen (Lead), Jennifer Stanush, Dennis Frazier, and Augustine Nwoko. The audit was conducted from June 11, 2012 through August 10, Methodology Performed interviews, data analysis, observations, and reviewed records at selected DDORs. Sample methodology was based on the highest TAP expenditures reported by DDORs for FY and cross section of DDORs. Performed control testing at the following 14 selected DDORs: Districts: Amarillo, Austin, Brownwood, Dallas, El Paso, Houston, Laredo, San Antonio Divisions: Construction, Government Public Affairs, Human Resource, Right-of-Way Office: Office of Civil Rights Region: North Region Tuition Assistance Program Audit Report 2 of 10 August 28, 2012

8 Background This report was prepared for the Transportation Commission, TxDOT Administration and Management. The report presents the results of the Tuition Assistance Program Audit which was added to the Fiscal Year 2012 Audit Plan, based on results of program audits/reviews and input from TxDOT management. The Tuition Assistance Program (TAP) provides opportunities for employees to further their education based on a business need including both degree and non-degree course work. TAP operates with a single staff member in the Human Resources Division acting as a program coordinator. Each DDOR has a designated employee (TAP coordinator) assigned to administer TAP activities at the DDOR level. TAP coordinators self-report DDOR TAP expenditures annually to the HR TAP coordinator. DDOR management (District Engineers, Division Directors) determine eligibility and program participation for responsible staff. Originally TAP was engineering focused however the program has evolved to encompass all work disciplines (business, information technology). In fiscal year 2011 TAP had 158 participants and expenditures were approximately $708,000. 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. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. A defined set of control objectives was utilized to focus on financial, operational and regulatory 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 enterprise 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 financial misstatement, operational sub-optimization, or regulatory non-compliance, particularly in areas not included in the scope of this audit. Best Practices Financial Aid Release Form A form was created and used by the Waco district TAP Coordinator for the purpose of authorizing the school to release a participant s financial aid information to the department. This document provides improved control to monitor duplicate aid and will save the Department funds if the participant is receiving other financial aid. Tuition Assistance Program Audit Report 3 of 10 August 28, 2012

9 Detailed Findings and Management Action Plans (MAP) No. 1: No consistent or department-wide processes in place for monitoring or evaluating program objectives and compliance. Data analysis identified 82 former program participants in debt to the Department for a total of $356,950 (TxDOT monitored defaults $115,426, OAG defaults $210,237, Bankruptcy defaults $31,287). Inquiries to determine if these figures were reasonable to meet program objectives identified that no benchmarks or goals had been established for TAP at a Department-wide level. No performance reports were available to determine factors contributing to unsuccessful completion of the program by participating employees. Further analysis identified 7 of 25 Districts (28%), 6 of 20 Divisions (30%), and 2 of 6 Offices (33%) did not have any participation in TAP for FY2011. Additionally, there are no formal cost benefit analysis to determine reasonableness of program expenditures (average amount spent per participant in FY11 = $4,484 excluding salaries for full time Masters Program). Effect/Potential Impact: Without established benchmarks and goals including on-going performance analysis, it is difficult to measure the program s effectiveness, efficiency and impact to the Department and any benefits it provides. Management Action Plan: 1. We concur with this finding. 2. Comments: HRD/PED has begun identifying methods for data collection and analysis of the Tuition Assistance Program s activities and financial management so that it complies with applicable laws, regulations and policies. These methods will provide for on-going monitoring and evaluation, using a risk-based approach, and will include technical assistance and training. Collaborative efforts are underway with the Finance Division to systematically route, review, track, reject or release TAP invoices for payment. Two process improvement teams have been chartered to identify issues, ideas and innovations for improving oversight of the program, and to develop strategies for enforcement and compliance. A summary report of the team s findings and recommendations for improvement were submitted to Executive Administration on June 29, Additionally, preliminary dialogue with universities about their billing processes have begun, and it appears that a different type of payment arrangement can be made whereby the university will accept payment after the successful completion of a Tuition Assistance Program Audit Report 4 of 10 August 28, 2012

10 course. If these efforts are successful, then the agency s risk of paying for courses that were not successfully completed by an employee will be reduced. 3. Action Steps: a. Introduce a risk-based approach for centralizing administration of the program to ensure consistent standards, policy interpretation, and trend analysis are sufficient to mitigate risks and address issues and concerns. b. Use the risk-based approach for employee training and evaluation of the program s activities with the division s financial goals and measures. c. Develop a 4-months technical assistance and deployment strategy for onsite visits to the remaining districts not visited during the audit; d. Create a comprehensive, up-to-date manual identifying all aspects of TAP processes and procedures; e. Develop procedures for following up on any issues identified during HRD/PED s monitoring activities; f. Implement additional monitoring activities as needed. Target Implementation Date: October 15, 2012 Target Completion Date: February 15, 2013 No. 2: No oversight over DDOR s for managing compliance with Departmental policies governing the Tuition Assistance Program (TAP) including records/documentation to be maintained, approval process, TAP participant monitoring, review for allowable expenses, and reconciling expenditures. Each DDOR has been given the responsibility for managing and implementing TAP in compliance with Department policies. Generally these responsibilities in the DDOR are assigned to a human resources staff member that coordinates the program on a parttime basis. Seventy-two percent (40/56) of DDOR s were able to provide documented TAP procedures upon request. Review of procedures determined a majority of DDORs rely on the Human Resources Division s policy manual for managing the TAP program. The HRD policy manual provides for high-level management of the program but not control activities for day-to-day operations. A single human resource specialist is assigned to consolidate program data (expenditures, program participants) and address TAP inquires but has no authority to re-direct or enforce non-compliance with program policies. No established training program for new or existing DDOR TAP Coordinators. HRO Reference Guide for TAP oversight notes audits must be conducted by personnel independent of HR functions but provides no other specific direction. Testing performed at 14 DDORs revealed $6,600 in TAP expenditures that could not be supported or determined to be unallowable: Tuition Assistance Program Audit Report 5 of 10 August 28, 2012

11 Reimbursement for classes not listed on approved degree plan. ($ 3,077) No invoice from university to support detailed tuition costs. ($2,024) One instance of ineligible participant. ($762) Three instances of unallowable costs paid for conference registration. ($675) One instance duplicate costs paid. ($ 53) Four instances of unallowable costs paid for parking fees. ($40) Effect/Potential Impact: Without adequate controls and oversight for compliance with Departmental policies, the risk non-compliance will be detected in a timely manner increases. The Department incurred $700,000 in TAP expenditures during FY2011. Management Action Plan: 1. We concur with this finding. 2. Comments: A risk-based approach of monitoring and evaluation would benefit the districts in their efforts to comply with applicable laws and policies. It would also assist with tracking talent outcomes and aligning TAP with employee development initiatives. Such an approach would also ensure that DDORs receive a higher level of attention, on-going support, and corrective feedback before deviations and/or violations occur. Collaborative efforts are underway with the Finance Division to systematically route, review, track, reject or release TAP invoices for payment. Making onsite visits into the districts/regions will also provide first-hand knowledge about needs for increased support, supervision, and oversight. 3. Action Steps: a. Introduce a risk-based approach for training and evaluation of the program for purposes of creating a centralized process of managing and reporting outcomes; b. Develop a 4-months technical assistance and deployment strategy for onsite visits to the remaining districts not visited during the audit; c. Create a refresher training in the form of a webinar for DDOR s, create a Frequently Asked Questions worksheet, and other job aides to assist veteran and new DDOR s about the policies and processes for consistent implementation of the program; d. Develop procedures for following up on any issues identified during HRD/PED s monitoring activities; e. Implement additional monitoring activities as needed. Target Implementation Date: October 15, 2012 Target Completion Date: February 15, 2013 Tuition Assistance Program Audit Report 6 of 10 August 28, 2012

12 No. 3: No established standard for expenditure reporting resulting in inaccurate TAP expenditure amounts reported to management and Administration. Reported TAP expenditures for FY2011 were understated by $39,904 compared to expenditures recorded in the Department s financial information (FIMS). Reported TAP expenditures are compiled by HRD TAP Coordinator from self-report DDOR spreadsheets. There are no controls or procedures present to verify the accuracy of self-reported DDOR expenditure data by HRD TAP Coordinator including reconciliation with expenditures recorded in FIMS. 12 of 14 (86%) DDORs self-reported TAP expenditures did not reconcile to actual expenditures recorded in FIMS for FY2011. DDOR procedures for reconciliation were inconsistent including frequency of procedures performed, timeliness, and degree to which expenditures were reconciled. HRO Reference Guide for TAP expenditures notes audits must be conducted by personnel independent of HR functions but provides no other specific direction. The following table compares the DDOR self-reported Reported TAP expenditures for FY2009 FY2011 to the amounts in the Departments financial information system. DDOR Reported Expenditures FY 09 FY 10 FY 11 $768, $671, $668, FIN/BIS $698, $629, $708, Variance $69, $41, $39, Effect/Potential Impact: The Human Resources Division does not have a formal process in place to measure the success and performance of the TAP program. No program benchmarks or goals have been established nor any performance reports provided to management for program evaluation. Absence of program financial reconciliation and reporting reduces the data that management needs for analysis of budget and program performance to ensure the program aligns with department goals. Management Action Plan: 1. We concur with this finding. 2. Comments: In order to minimize risk and tighten financial controls, procedures are needed for TAP invoice approvals and release for payment. 3. Action Steps: Tuition Assistance Program Audit Report 7 of 10 August 28, 2012

13 a. An investigation is underway to determine the feasibility of daily TAP Accounts Payable reports which could be compared and reconciled to self-reported expenditures versus actual expenditures as recorded in FIMS. b. Re-instate annual reporting of TAP Performance which would greatly improve administrative efficiency and make end-to-end reporting possible, and allow more transparency. c. Create and implement a strategy in collaboration with Finance and the Office of the Attorney General (OAG) to recoup no less than 75% (national standard) of funds owed to the agency. Targeted Implementation Date: September 15, 2012 Targeted Completion Date: December 15, 2012 Tuition Assistance Program Audit Report 8 of 10 August 28, 2012

14 Summary Results Based on Enterprise Risk Management Framework Audit Results Dashboard Tuition Assistance Program Audit Scope Areas Evaluated Business Objectives (Financial, Operational, Regulatory) O F, O F, O, R ERM Component Internal Environment Objective Setting Event Identification Risk Assessment Risk Response Control Activities Scope Area 1 Program Expenditure Reconciliation/ Reporting Scope Area 2 Repayment Scope Area 3 Expense Reimbursement Organizational Tone 1, 2, 3 1, 2 1, 2 Ethical Culture & Attitude Planning 1 3 Forecasting 1 1 Goal Setting 1 Cost Benefit Analysis 1 1 Business Continuity Evaluations/Analysis Management Action Plans Policies/Procedure Development & Maintenance 1, 2 3 Control Activities Approvals/Authorizations Supporting Evidence/Records Availability Segregation of Duties 2, 3 2 Safeguarding Assets Information Classification Information & Communication Information Input Information Processing Output/Reporting and Messaging Exception Reporting Review Monitoring Reconciliations 3 2 Peer Reviews Management Representations 3 3 Scope Area Assessment Rating Legend: Satisfactory Needs Improvement Unsatisfactory Tuition Assistance Program Audit Report 9 of 10 August 28, 2012

15 Closing Comments The results of this audit were discussed with and provided to Performance Excellence Director and the Humans Resources Division on August 22, The results were also provided to the Office of General Counsel on August 22, The audit report was provided to Executive Director on August 28, The audit team would like to express its appreciation to the employees of the Human Resources Division and the Amarillo, Austin, Brownwood, Dallas, El Paso, Houston, Laredo, and San Antonio Districts, the Construction, Government Public Affairs, Human Resource, and Right-of-Way Divisions, the Office of Civil Rights, and the North Region for their cooperation throughout the audit. Tuition Assistance Program Audit Report 10 of 10 August 28, 2012