08 02 Fall 2007 Audit Implementation Status Report

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					                          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 and external reports:
Project                                                                                 In          Not
           Date         Project Name                                       Complete
                                                                                      Process   Implemented
                                                                                                              Disagree
#
03-02      10/20/2003 Records Management                                   18         4         1             1
                      Schlumberger-Sema Business Process
03-04      May-03                                                          12         2         0             0
                      Reengineering – Findings Report and Strategic Plan
03-06      10/15/2003 Procurement - CLOSED                                 6          0         0             0
                      Facilities, Design & Construction/BGA Program
03-10      1/26/2004                                                       21         2         0             0
                      Management & Controls
                      Vehicle Maintenance Stores/Inventory
03-12      3/15/2004                                                       15         3         2             0
                      Management
04-11      9/20/2004 VM Fuel Controls                                      9          2         2             0
04-17      1/4/2005   Quadrennial Review (KPMG)                            12         3         0             1
                      Emergency Response / Disaster Recovery Planning
04-19      11/15/2004                                                      14         1         2             1
                      – CLOSED
05-04      3/28/2005 Farebox Revenue and Controls & Investigation          23         1         1             0
05-05      6/27/2005    Compensation Structure                             21         1         3             0
05-12      12/14/2005 Accounts Payable-Disbursements                       14         1         3             0
                      Special Transit Services (STS) Taxicab Voucher
05-14      2/27/2006                                                       15         3         1             0
                      Program
05-18      2/27/2006 RideShare Program                                     26         3         2             0
06-01      5/22/2006    Customer Service Call Center Operations            16         8         1             0
06-05      8/31/2006    Contracting / Procurement Process Audit            10         11        3             0
06-13      10/30/2006 Payroll Audit                                        10         2         0             0
06-14      12/13/2006 Recruitment, Selection, and Hiring Audit             10         8         0             0
07-04      5/14/2007    First Transit Contract Audit                       5          7         3             0
                        Sherry Matthews Advocacy Marketing Contract
07-07      3/26/2007                                                       5          1         0             0
                        Audit
07-08      4/23/2007    Transit Advertising Program Audit                  1          12        1             0
07-10      7/23/2007    Procurement Card / Travel Audit                    2          9         3             0
                        11/2007 Total                                      265        84        28            3
                        %                                                  70%        22%        7%           1%
                        5/2007 Total                                       243        65        37            3
                        %                                                  70%        19%       10%           1%
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 accomplishments or outstanding recommendations are shown in red.)

Records Management
Capital Metro Internal Audit Report #03-02, October 20, 2003
   Records management system benefits not yet realized: Reduction and/or elimination of
    network shared drive space were a projected cost-savings benefit of implementing a records
    management system. Originally, shared drive cleanup (which includes the identification of vital
    and security sensitive records) was to begin in 8/2003. A new deadline has not been
    communicated to staff. Strong leadership and a project plan for completion are needed in order
    to move forward expeditiously. Recent resignations of the Legal Manager and Records
    Management Officer may further delay this initiative.


Procurement Audit
Capital Metro Internal Audit Report #03-06, October 15, 2003
   All items have been successfully resolved. This audit is now closed.


Facilities, Design & Construction/BGA Program Management & Controls
Capital Metro Internal Audit Report #03-10, January 26, 2004
   Capital Project3 procedures in development: Formalizing project management protocols and
    methodologies for construction projects will mitigate related project risks. A new project
    manager in the Capital Projects Group is currently developing project management templates
    and processes and is expected to complete them in February 2008. (Original estimated
    completion date: 12/2004.)


Vehicle Maintenance Stores / Inventory Management
Capital Metro Internal Audit Report #03-12, March 15, 2004
!   New asset management system implemented: Implementing more robust inventory
    management software will enhance the Vehicle Maintenance Department’s ability to control
    their assets, track inventory levels, and review and reconcile inventory adjustments. The “go-


1 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section A1.08. GAO-07-162G
2 Government Auditing Standards, 2007 Revision, effective 1/1/2008, Section 7.36. GAO-07-162G
3 Formerly known as Facilities, Design & Construction (FD&C)



Capital Metro Internal Audit Implementation Status Report #08-02
January 23, 2008                                                                                 Page 2 of 6
       live” date for the new Spear system was December 3, 2007. Vehicle Maintenance now utilizes
       the Spear system exclusively.


Vehicle Maintenance Fuel Controls
Capital Metro Internal Audit Report #04-11, September 20, 2004
      New fuel tank monitoring system installed: A new “Veederoot” fuel monitoring system at
       the Authority headquarters has been installed and is in the final stages of completion and testing.
       This system should significantly aid in the accuracy of performing variance analysis of actual to
       reported fuel deliveries and reconciling fuel usage.


Emergency Response / Disaster Recovery Planning
Capital Metro Internal Audit Report #04-19, November 15, 2004
!      Capital Metro Emergency Response Plan & testing: Department emergency response plans
       are not complete or up-to-date. As such, assurance does not exist that vital records will be
       available in the event of a disaster. Processes to 1) compare test results to the original goals, 2)
       identify deficiencies, and 3) make needed plan changes has not been implemented. The Director
       of Safety & Security and Rail Training & Safety Officer are now participating on an APTA
       (American Public Transportation Association) working group for emergency response planning.
       Through their participation, they seek to obtain guidance that will be useful in resolving this
       issue.

       Similar findings addressing regular reviews and updates to emergency response plans were
       included in the recent security program audit.4 In the future, these security-related issues will be
       followed up as part of the more recent and comprehensive security audit. This audit is now
       “closed.”


Farebox Revenue and Controls & Investigation Assistance
Capital Metro Internal Audit Report #05-04, March 28, 2005
      Daily farebox-related bus probing: Buses returning to the yard are now consistently probed
       to download ridership and fare data. With assistance from the IT Department, a custom report
       is automatically launched daily which reports whether each bus was probed. This report is
       reviewed by Service Island supervisors and an additional Vehicle Maintenance reviewer for
       greater assurance of compliance.


Compensation Audit
Capital Metro Internal Audit Report #05-05, June 27, 2005
      Career ladder system: Career ladder tracks have been developed and communicated to
       managers for use in staff development and identifying opportunities for advancement.




4   Internal Audit Report #07-11, Security Program Audit, was issued October 22, 2007.

Capital Metro Internal Audit Implementation Status Report #08-02
January 23, 2008                                                                                  Page 3 of 6
RideShare Program
Capital Metro Internal Audit Report #05-18, February 27, 2006
      RideShare policy updates: The RideShare Manager is currently exploring various options for
       addressing growing demand for RideShare services while contending with fixed funding. The
       fare adjustment process has also delayed implementation of several audit recommendations.


Customer Service Call Center Operations
Capital Metro Internal Audit Report #06-01, May 22, 2006
      Customer Service Work Group: A cross-functional customer service work group has been
       formed to review and refine processes for holistically analyzing customer feedback and
       complaint data. This group is in the process of developing improved means for addressing the
       root causes of customer complaints.


Contracting/Procurement Process Audit
Capital Metro Internal Audit Report #06-05, August 31, 2006
      Contract audit policy approved: In accordance with the new policy, Contracts &
       Procurement, EVP Finance & Administration, and Internal Audit identified high risk contracts
       for audit. The identified audits have been included in approved FY2008-FY2009 Internal Audit
       Plan.
      Bonding policy approved: The Authority bonding policy, adopted by the Board in September
       2007, mirrors federal and state bonding requirements. The policy provides consistent,
       reasonable standards for contractor bonding which balance relative costs and risks. Existing
       contracts exceeding $100,000 are being reviewed by staff to ensure compliance with the policy.
      Cost/price analyses utilized: Cost/price analyses, performed cooperatively by contracts
       administrators and project managers prior to solicitation, are used to assess the reasonableness
       of offers made by prospective contractors. Documentation of these analyses is required to fulfill
       FTA contracting requirements.5


Payroll Audit
Capital Metro Internal Audit Report #06-13, October 30, 2006
      No reliable “audit trail” for changes to Fixed Route and Special Transit Services
       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 Enterprise Application Support Director has
       escalated this issue to Trapeze management. An upgrade to a newer product version may be
       required to capture this information, but Capital Metro is not scheduled for an upgrade at this
       time.




5   Per FTA Circular 4220.1E, Third Party Contracting Requirements.

Capital Metro Internal Audit Implementation Status Report #08-02
January 23, 2008                                                                              Page 4 of 6
Recruitment, Selection, and Hiring Audit
Capital Metro Internal Audit Report #06-14, December 13, 2006
   Recruiting strategy meetings: When a personnel need is identified, Human Resources (HR)
    recruiters schedule a hiring “strategy” meeting with the manager to address the vacant position’s
    functions and requirements as well as hiring timeline goals. Enhanced communication and
    coordination help ensure that hiring processes will consistently meet the Authority’s personnel
    needs.
   Employee background reviews enhanced: HR recruiters now perform and document
    reviews of a prospective employee’s education and job experience. Social security numbers are
    also now verified.


First Transit Contract Audit
Capital Metro Internal Audit Report #07-04, May 14, 2007
   Contract compliance review methodology: Proper oversight of contractor operations is a
    key factor in reducing risks associated with outsourced services. A revised target date, April 1,
    2008, has been set for implementing a methodology for performing periodic contract
    compliance reviews.


Sherry Matthews Advocacy Marketing Contract Audit
Capital Metro Internal Audit Report #07-07, March 26, 2007
   Task order procedures strengthened: The Contracts & Procurement Department has
    implemented revised procedures and contract language for use in all task order contracts. The
    improvements will provide better guidance to internal users, communicate consistent
    expectations to Authority contractors, and enable better monitoring of Authority contracts.


Transit Advertising Program Audit
Capital Metro Internal Audit Report #07-08, April 23, 2007
   Expected increase in transit advertising revenue: FY2008 transit advertising revenue is
    budgeted at $885,028, an 8.3% increase over FY2007 actual earned revenues ($816,890).


Procurement Card / Travel Audit
Capital Metro Internal Audit Report #07-10, July 23, 2007
   Reduced risk exposure in Procurement Cards: Cumulative monthly spending limits have
    been reduced by 46.6% (from $659,999 to $352,500) while still preserving the cardholder’s
    ability to meet the Authority’s procurement needs.
   Travel corrective action plans delayed: Implementation of travel-related corrective action
    plans has been deferred due to recent turnover and hiring of a new Travel Manager.




Capital Metro Internal Audit Implementation Status Report #08-02
January 23, 2008                                                                             Page 5 of 6
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
      Dwight Ferrell, EVP/COO
      Randall Hume, EVP Finance & Administration
      Elaine Timbes, EVP Performance & Quality
      Sallie Crosby, Chief Counsel
      Andrea Loyfe, Chief of Staff
      Dianne Mendoza, VP Business & Community Development
      Aida Douglas, Manager Business Development & DBE Officer
      Rick L’Amie, VP Marketing
      Todd Hemingson, VP Strategic Planning & Development
      Richard Krisak, Director Commuter Rail Operations
      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
      Carol Delgado, Legal Manager




Capital Metro Internal Audit Implementation Status Report #08-02
January 23, 2008                                                                         Page 6 of 6

				
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