Budget Template for Internal Audit

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					Internal Audit Review For Small Projects
                  Cyndi Fout
             Project Services Director
                   October 26, 2009
                                    Internal Audit Review

    • Small Construction Projects Under $50K
      – March/April 2009
      – 22 projects were selected
      – Assess the effectiveness of:
         • Internal Controls
         • University Policies and Procedures
         • Applicable laws and regulations




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                           Internal Audit Review

    Improvement Area’s Identified
      1. Oversight of Contractor Selection
      2. Project Scope & Estimate Documentation
      3. Project Scope & Estimate Approvals
      4. Transferring Project Funds
      5. Single Projects Conducted as Multiple
         Projects
      6. Prevailing Wage
      7. Administrative Fees


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                                Internal Audit Review

    • Oversight of Contractor Selection
      – Findings
        • Management does not formally monitor contractor
          selections or analyze which contractors a particular
          project manager may routinely use
      – Recommendation
        • Establish procedures and controls to better monitor
          the selection of contractors for small projects that
          are not required to be competitively bid




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                                   Internal Audit Review

    • Oversight of Contractor Selection
        (cont’d)
      – Management Response
        • Query in NetLink will be developed that will
          summarize the number of contracts held by each
          vendor by PM for improved monitoring of the work
          allocations
           – Summary reports with drill down capabilities to be
             developed by end of year
           – MBE/EDGE information will be included
        • Reviewed monthly by FDC Leadership


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                                Internal Audit Review

    • Project Scope & Estimate
      Documentation
      – Findings
        • 1 project did not have a documented project scope
          to support project estimate
        • 1 project did not have an initial cost estimate
          documented
        • 2 projects final costs were not reasonably reflective
          of the original estimate and no information was
          documented to explain the discrepancies



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                                    Internal Audit Review

    • Project Scope & Estimate
      Documentation (cont’d)
      – Recommendation
        • Strengthen procedures and controls to ensure that
          all projects have documented scopes, cost
          estimates, and explanations if the estimates are
          not reasonably accurate
      – Management Response
        • Review in Project Delivery Training
           – Initiate/Plan the Project Training in September




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                                                                Internal Audit

If the original project budget was $10,000 and there is an
increase of $500 to bring the new total project cost to
$10,500, which the customer is required to fund, what do
you need to do?
 – Document
    • Cost estimate template with explanation
– Obtain customer approval
    • Email
         – Save in project file as either a PDF or hard copy
         – Has to include chartfield information
    • Revised estimate letter or cost estimate template
         – Place customer approval in project file (electronic or hard copy)

In the above scenario if the increase was $2,000 what
else would you need to do?
– FIPA
                                           Internal Audit

The original project scope that was submitted on the
project intake request was to renovate a room in “Bldg A”
into lab space. An estimate letter was completed,
approved by the customer, and A/E selected. During the
design phase it was determined that it would be more
beneficial to renovate a room in “Bldg B”. No increase in
cost. What steps need to be completed?
– Customer Approval of revised scope
– Revise scope provided to Teresa to update NetLink
– Documentation placed in project file
                                      Internal Audit Review

     • Project Scope and Estimate Approvals
       – Findings:
          • 1 project did not have documentation to support
            management approval of the initial project scope and cost
            estimate
          • 10 projects did not have documentation to support the project
            users acceptance of the initial project scopes and cost
            estimates
       – Recommendations
          • Strengthen procedures and controls to ensure that all project
            scopes and cost estimates are approved and accepted by
            both FOD mgmt and customer



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                                     Internal Audit Review

     • Project Scope and Estimate Approvals
       (cont’d)

       – Management Response
         • Review in Project Delivery Training
            – Initiate/Plan the Project training in September




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                            Internal Audit Review

     How do customers approve projects?
       – Estimate Letters
       – Emails (OSUMC)




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                                     Internal Audit Review

     • Transferring Project Funds
       – Findings:
         • 2 projects did not have funding transferred prior to
           work being performed and billed
       – Recommendations
         • Strengthen procedures and controls to ensure
           project funding is received prior to work
           commencing
       – Management Response
         • Review in Project Delivery Training
            – Initiate/Plan the Project Training in September


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                                         Internal Audit Review

     How can you tell if funds have been transferred in
     NetLink?
     What funding sources do not require funds to be
     transferred prior to expenses?
     –   Bonds
     –   OSUMC
     –   Student Life (if we use their plant fund)
     –   OSURF Grants
     –   State Funds
     If a project was funded with one of the above funding
     sources would an IFA be required?



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                                            Internal Audit Review

     Should the PM send a purchase request to the Contracts
     Administrator without funds being transferred if the
     customer is funding the project with general funds?
     – No
     with development funds?
     – No
     with OSURF grant funds?
     – Yes …..
         • verify with CA that they have rec’d a purchase order
     with department grant funds?
     – No
     Should the CA approve a purchase request without
     funds being transferred for any of the above scenarios?
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                                Internal Audit Review

     • Single Projects Conducted as Multiple
       Projects
       – Findings:
         • 4 individual projects that were created and
           conducted at the same time and location as
           another similar project already in progress
       – Recommendations
         • Strengthen procedures and controls to ensure that
           new work requests are processed through the
           change order process rather than initiating a new
           project when an existing project is already in
           progress
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                                      Internal Audit Review

     • Single Projects Conducted as Multiple
       Projects (cont’d)
       – Management Response
         • Implement parameters by which these scenarios
           will be monitored in the future
            – If work is being requested by the same customer, in the
              same building and same relative time frame the projects
              will be combined
            – This will be monitored through Project Services Group
              during the Project Intake Process (Diane) and Project
              Approval (Teresa)
                  If projects are identified they will be given to the DoP
                   for review and decision on path forward


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                                          Internal Audit Review

     If you have received 2 projects within a few weeks of
     each other that were requested by the same customer
     and in the same building what should you do?

     – Determine if work is going to start and complete fairly close
       together
         • Yes – combine them
         • No – they can be completed separately


     – Unsure….discuss with your DoP




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                                Internal Audit Review

     • Prevailing Wage (PW)
       – Findings:
         • 2 instances where projects exceed the PW
           threshold with no supporting documentation
           maintained to attest to the payment of PW
         • 1 instance where a single project exceed the PW
           threshold but was split into 3 individual projects
           with documentation supporting the payment of PW
           for only 1 of the 3 projects.
       – Recommendations:
         • Strengthen procedures and controls to ensure
           documentation verifying the payment of PW
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                                    Internal Audit Review

     • Prevailing Wage (PW) cont’d
       – Management Response
         • Review PW limits during Project Delivery Training
            – Procure Construction Services training in August




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                                          Internal Audit Review

     What are the current PW Thresholds?
      – Renovation       $22,166
      – New Construction $73,891


     PW thresholds are based on _______ cost
          • Total Project


     What do you need to do if your original project cost was $20,000
     and an unforeseen condition causes an increase of $5,100 to the
     total project cost (revised total project cost is $25,100)?
     Obtain revised quote from contractors to include pw on original and change
     order work
      – FIPA (10% increase)
      – Customer approval
          • Revised estimate letter
          • Email
21    – Documentation in project file
                                      Internal Audit Review

     7. Administrative Fees
       – Findings:
         • 2 projects did not appear to have the appropriate
           administrative fees assessed
       – Recommendations
         • Strengthen procedures and controls to ensure that all
           administrative fees are properly assessed for each
           construction project
       – Management Response
         • Project Accounting will recalculate/audit fees at project
           closeout to insure appropriate fees have been charged
         • Review in Project Delivery Training


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                            Internal Audit Review

     • Summary
      – Make sure you are placing documentation in
        the file for project estimates, scopes,
        approvals and changes
      – Convert emails to PDF’s if needed
      – Don’t break up projects
      – Spread the work among multiple vendors
      – Verify funds are transferred prior to
        procurement activities
      – Know the PW thresholds – get revised quotes
        if needed
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     Internal Audit Review




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