Internal Audit Guide Task Force Members

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2 Internal Audit Guide Task Force Members Alice Wilson, Kentucky, Co-Chair Stephen Kirk, Illinois, Co-Chair Sandra Healy, Idaho Wayne Cobb, Alabama Wayne Rogers, North Carolina Benito Ybarra, Texas Kristen Burkhart, Wyoming David Bruce, FHWA

3 Agenda General Areas Covered in the new Internal Audit Guide Practice Aids- Why the change & Discussion How Can you help? What do you think of the new format? Changes to the Guide. Ideas for Practice Aids (See Brainstorming List). Any others? Priorities for Practice Aids. What are your top 10?

4 Task Force We have had a very busy year. We spanned 3 Time Zones, which added to the difficulties in scheduling times for 8 extremely busy people to meet. We have representatives from 7 states and 1 Federal Partner from FHWA. We represent both small and large Internal Audit shops. We represent states with both combined as well as separate Internal and External Audit functions. The Co-Chairs would like to thank the members of the Task Force for their extensive time commitment and contributions to this effort over the last year.

5 Why Change the Guide? Many expressed a need to have a reference tool that addressed Internal Auditing for all Modes of Transportation. The previous guide focused on Highway Construction. There was also a desire to have more program specific audit information. In order to better address everyone s needs, the Task Force changed the composition of the Internal Audit Guide. The Guide itself now covers the basic guidance that cuts across all Internal Audits, rather than a specific program area. Program specific audit guidance will now be addressed in individual Practice Aids that will focus on audits of specific programs and activities.

6 Ground Rules This guide will focus exclusively on conducting Internal Audits. We recognized that audit shops are set up differently at the various State Transportation Departments. Some separate Internal and External Audit work and some utilize the same auditors for both functions. Regardless of who is conducting the Internal Audit function, we decided to focus exclusively on Internal Audit work. External Audit activities are already addressed in a separate guide and will not be covered in this guide even if an Internal Audit group of a State is responsible for those activities.

7 Areas Covered in the New Internal Audit Guide Chapter 1: Introduction (Revised); Chapter 2: Auditing Standards (Revised); Chapter 3: Types of Audits (Revised); Chapter 4: Risk Assessment and the Development of an Audit Plan (Revised and expanded into a separate chapter); Chapter 5:Internal Control (Revised and expanded into a separate chapter); Chapter 6: Laws and Regulations (Revised and expanded into a separate chapter); Chapter 7: General Audit Program (Revised); Glossary (Revised).

8 Chapter 1: Introduction Updated the introduction to address the changes to the Guide

9 Chapter 1: Introduction Sections Overview Why a Guide? Auditing Standards Engagements

10 Chapter 2: Auditing Standards Added a discussion of GAGAS and IIA requirements and included a comparison between the requirements

11 Chapter 2: Auditing Standards Sections Generally Accepted Government Auditing Standards (GAGAS) International Standards for the Professional Practice of Internal Auditing, Institute of Internal Auditors (IIA) Comparison of GAGAS and IIA Standards

12 Chapter 3: Types of Audits Updated the language Added information pertaining to Information Technology related audits Expanded Non-Audit Services Added Consulting

13 Chapter 3: Types of Audits Sections Types of Audits Overview Types of Audits- Financial, Performance, Program Effectiveness and Results, Internal Control, Compliance, Information Technology, Follow-Up Attestation Engagements- Examination, Review, Agreed Upon Procedures Non-Audit Services Consulting Services

14 Chapter 4- Risk Assessment and Development of an Audit Plan Risk Assessment was made into its own Chapter, it was previously part of an Appendix and the content was expanded to cover the whole risk assessment process through the development of a work plan.

15 Chapter 4- Risk Assessment and Development of an Audit Plan Sections Agency Risk Assessment Overview Identify Audit Universe or Auditable Units Benefits of Auditable Units Permanent Files Risk Assessment Risk Assessment Criteria Consideration of Internal Controls Internal Control Weaknesses Analysis of Internal Audit Resources Developing The Audit Work Plan

16 Chapter 5: Internal Control Updated to reflect the 2013 COSO changes and expanded the discussion. Added Information Technology Related Controls with a focus on Control Objectives for Information and Related Technology (COBIT) Standards.

17 Chapter 5: Internal Control Sections Internal Control Overview COSO Categories Five Components of COSO COBIT Framework and COBIT Domains Understanding an Auditee s Internal Controls Documenting Internal Controls Internal Controls Over Financial Reporting Evaluation of Internal Controls Classifying Internal Control Weaknesses

18 Chapter 6: Laws and Regulations Made this a separate chapter, it was previously part of an Essentials chapter. Expanded the chapter and listings.

19 Chapter 6: Laws and Regulations Sections Hierarchy Administrative Requirements Cost Principle Requirements OMB Circular A-133 Catalogue of Federal Domestic Assistance (CFDA)

20 Chapter 7: General Audit Program Expanded the previous General Audit Program to include more detailed steps.

21 Chapter 7: General Audit Program Sections Purpose and Scope Phases A. Preliminary Survey (Planning) Phase B. Execution (Fieldwork) Phase C. Closing (Reporting) Phase

22 Glossary: The glossary was expanded to address additional terms. Still a work in progress

23 Why are Program Specific Activities now Contained in Individual Practice Aids? Only an individual Practice Aid has to be amended rather than the whole Internal Audit Guide if there are changes made to a specific program. When there is a new program, a new Practice Aid addressing that program can be developed without amending the whole Internal Audit Guide. Having separate Practice Aids by subject provides easier use. Each Practice Aid will focus exclusively on one program or activity. Allowed the Task Force to break this project into manageable pieces through various projects rather than take on one huge project at once. Therefore, allowing us to provide usable products to AASHTO members more quickly.

24 Practice Aid Content Program Description; Statutes and Regulations; Catalogue of Federal Domestic Assistance (CFDA#) (if applicable); Audit Scope and Objectives; Audit Program.

25 Practice Aid Development Plan The Internal Audit Task Force will have on-going responsibilities to develop Practice Aids. As you will see from the list we began to develop, there is an extensive need. Therefore, we need your assistance in providing drafts so the project can move forward more effectively. Please take the time to look at the various audits you have conducted. If you have an existing Audit Program for one of the areas or one you think should be included, please provide it for review by the Task Force. Working on this project together we will be able to accomplish more and arrive at a better product.

26 Proposed Practice Aids Disadvantaged Business Enterprise (DBE) Initial Certification Process; Disadvantage Business Enterprise (DBE) Labor & Workforce Utilization Monitoring; Federal Aid Billing; Value Engineering; Materials; Liquidated Damages; Recreational Trails Program; Ferry Boat Program; Congestion Mitigation and Air Quality Program (CMAQ);

27 Proposed Practice Aids Bridge Inspection Program; Bridge Project Design & Review; Bridge Analysis and Load Capacity Determinations; Bridge Maintenance & Repair; Oversize Overweight Permits; Outdoor Advertising (Billboards); Metropolitan Planning Organizations (MPOs); Motor Pool and Vehicle Fleet Operations; Federal Funding Accountability & Transparency Act (FFATA) Reporting.

28 Proposed Practice Aids Continued Land Acquisition; Highway Planning and Construction (CFDA ) Highway Construction Project Funds Management; Highway Construction Project Cost Estimation; Highway Construction Project Planning and Preconstruction Activities; Highway Construction Public Involvement; Highway Construction Procurement- Bidding & Awarding Construction Contracts; Highway Construction Contractor Payments;

29 Proposed Practice Aids Continued Highway Construction Contractor Change Orders; Highway Construction Site Audits; Highway Construction Contract Administration and Closeout; Highway Construction Consultant Selection; Highway Construction Consultant Contract Modifications; Highway Construction Consultant Payments; Highway Safety Improvement Program; Highway Rail Crossing Safety Program;

30 Proposed Practice Aids Continued Operational Safety Inspections of Airports; Operational Safety Inspections of Heliports; Aircraft and Pilot Registration; Aircraft Maintenance of State Fleet; Airport Improvement Program, (CFDA #20.106); Airport Construction Project Funds Management; Airport Construction Project Cost Estimation; Airport Construction Project Planning and Preconstruction Activities;

31 Proposed Practice Aids Continued Airport Construction Procurement- Bidding & Awarding Construction Contracts; Airport Construction Contractor Payments; Airport Construction Contractor Change Orders; Airport Construction Site Audits; Airport Construction Contract Administration and Closeout; Airport Construction Consultant Selection; Airport Construction Consultant Contract Modifications; Airport Construction Consultant Payments;

32 Proposed Practice Aids Continued Capital Assistance Program for Elderly Persons with Disabilities (CFDA#20.513). Transit Capital Investment Grants (CFDA#20.500). Transit Formula Grants (CFDA#20.507). Transit Metropolitan Planning Grants (CFDA#20.505). Formula Grants for Other than Urbanized Areas, (CFDA#20.509). Transit State Planning & Research (CFDA#20.515)

33 Proposed Practice Aids Continued Motor Carrier Safety (CFDA#20.218)- Truck and Charter Bus Inspections; Motor Carrier Safety (CFDA#20.218)- Truck and Charter Bus Compliance Reviews of New Entrants; Motor Carrier Safety (CFDA#20.218)- Safety Audits of Trucking and Charter Bus Companies; State Traffic Safety Improvement Grants (CFDA#20.600). National Priority Safety Programs (CFDA#20.616). High-Speed Rail Corridors and Intercity Passenger Rail Service Capital Assistance Grants (CFDA#20.319) Railroad Agreements;

34 Feedback- The Task Force Needs Your Input Provide Feedback regarding the new format. Recommendations for improvements to the Internal Audit Guide. Provide ideas for Practice Aids. Provide your Top 10 Priorities for Practice Aids. Submit Audit Programs to the Task Force pertaining to the various topics for screening and formatting by the Task Force. Volunteer to work on the development of a particular Practice Aid.

35 How to Respond Please have one person coordinate all comments for your state and submit them in one package. Include your name, telephone and . State specifically the section and area you are commenting on. Clearly state your comments or changes. Please send responses by August 30, 2013

36 Where do I send my Feedback? Alice Wilson, CPA- Co-Chair Alice.Wilson@ky.gov (502) Stephen Kirk, CIA, CGAP- Co-Chair Stephen.Kirk@Illinois.gov (217)