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					                          Internal Audit Semi-annual Implementation Status Report
                                               Report #08-10
                                                July 28, 2008

        Scope:
        This semi-annual report reflects the implementation status, as of May 31, 2008, of the following
        internal and external reports:
Project                                                                                  In          Not
           Date         Project Name                                       Complete
                                                                                       Process   Implemented
                                                                                                               Disagree
#
03-02      10/20/2003 Records Management                                   20          2         1             1
                      Schlumberger-Sema Business Process
03-04      May-03                                                          14          0         0             0
                      Reengineering Report - CLOSED
                      Facilities, Design & Construction/BGA Program
03-10      1/26/2004                                                       22          1         0             0
                      Management & Controls
                      Vehicle Maintenance Stores/Inventory
03-12      3/15/2004                                                       20          0         0             0
                      Management - CLOSED
04-11      9/20/2004 VM Fuel Controls – CLOSED (See Notes.)
                      FY2004 Quadrennial Review (KPMG) - CLOSED
04-17      1/4/2005
                      (See Notes.)
05-04      3/28/2005 Farebox Revenue and Controls & Investigation          24          0         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                                                       16          0         3             0
                      Program
05-18      2/27/2006 RideShare Program                                     28          0         4             0
06-01      5/22/2006    Customer Service Call Center Operations            18          6         1             0
06-05      8/31/2006    Contracting / Procurement Process Audit            13          9         3             0
06-13      10/30/2006 Payroll Audit                                        10          2         0             0
06-14      12/13/2006 Recruitment, Selection, and Hiring Audit             12          7         0             0
07-04      5/14/2007    First Transit Contract Audit                       13          2         0             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                  4           10        0             0
07-10      7/23/2007    Procurement Card / Travel Audit                    6           8         0             0
07-11      10/22/2007 Physical Security Audit                              1           3         0             0
07-18      1/23/2008    Risk Management audit                              8           8         1             0
07-21      3/31/2008    Accounts Receivable Audit                          3           4         0             0
                        5/2008 Total                                       272         65        20            1
                        %                                                  76%         18%        6%           <1%
                        11/2007 Total                                      265         84        28            3
                        %                                                  70%         22%       7%            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 progress updates are shown in red.)

Records Management
Capital Metro Internal Audit Report #03-02, October 20, 2003
   A cross-functional “eDocs” committee is being formed in order to identify opportunities to
    make the Hummingbird system more streamlined and user friendly. Anticipated outcomes
    include an improved records management processes and related user education and training.


Business Process Reengineering (BPR) –
Findings Report and Strategic Implementation Plan
SchlumbergerSema, May 2003
   All items have been successfully resolved. This status report is now closed.


Facilities, Design & Construction/BGA Program Management & Controls
Capital Metro Internal Audit Report #03-10, January 26, 2004
 Capital Project3 Group (CPG) Policies & Procedures Manual is complete. The use of
    formal project management protocols and methodologies help to mitigate construction project
    risks. The CPG manual will be refined and updated on an ongoing basis by performing annual
    reviews and using “lessons learned” improvements identified during post-mortem project
    reviews.


Vehicle Maintenance Stores / Inventory Management
Capital Metro Internal Audit Report #03-12, March 15, 2004
!   New asset management system implemented: Spear, a more robust inventory management
    software, has enhanced the Vehicle Maintenance Department’s ability to control their assets,
    track inventory levels, and review and reconcile inventory adjustments.
!   Inventory management partially outsourced: In April 2008, the Authority outsourced
    standard bin stocking services for fasteners (e.g., screws, bolts, etc.) to an outside vendor. In
    addition, Vehicle Maintenance is pursuing an outsource arrangement for building maintenance
    supplies.
   All items have been successfully resolved. This status report is now closed.

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 #08-10
July 28, 2008                                                                                    Page 2 of 6
Vehicle Maintenance Fuel Controls
Capital Metro Internal Audit Report #04-11, September 20, 2004
   Outstanding recommendations will be addressed in new fuel controls audit which is scheduled
    to begin Summer 2008.


CMTA FY2004 Quadrennial Review
Statutorily required external review, KPMG LLP, January 2, 2005
   The FY2008 Quadrennial Review consultant is currently performing a follow-up as part of their
    review. Therefore, status has been omitted from this semi-annual status update.


Farebox Revenue and Controls & Investigation Assistance
Capital Metro Internal Audit Report #05-04, March 28, 2005
   Daily farebox-related bus probing procedures: Service Island Probing Procedures to ensure
    that ridership and fare data is download for all buses returning to the yard have been approved.
    All items have been successfully resolved. This audit is now closed.


Compensation Audit
Capital Metro Internal Audit Report #05-05, June 27, 2005
   Increased focus on career development: The 2008 performance management plan (PMP)
    was expanded to address employee career development. Employees and Managers are jointly
    responsible for developing an annual development plan. The Organizational Development
    Specialist in HR is also available to assist managers and employees in customizing development
    plans and training solutions to support career development and individual performance.


RideShare Program
Capital Metro Internal Audit Report #05-18, February 27, 2006
   RideShare Monthly Fares: Fare adjustments for the RideShare Program are included in the
    proposed adjustment to Capital Metro’s fare structure. The proposed monthly pass rate, $37.50,
    is not based upon a recovery rate but, instead was increased proportionally as with other fares.
   RideShare Program Changes on hold: Changes in the RideShare Program, including
    minimum ridership requirements, and the future of the “GreenRide” pilot program are on hold
    until early 2009 as a result of turnover in the Chief Operating Officer (COO) position.


Special Transit Services Taxicab Program
Capital Metro Internal Audit Report #05-14, February 27, 2006
   Changes to Taxi Voucher Policies & Procedures “on hold”: Changes to the STS Taxi
    Program are frozen as a result of a legal challenge and the resulting “temporary restraining
    order” issued by the court.
   Out-of-service area taxis: Paratransit taxi trips for persons who reside outside of either the
    Capital Metro service area (i.e., withdrawn cities) or ADA boundaries are granted only when
    space is available (with the exception of “grandfathered subscriptions”).



Capital Metro Internal Audit Implementation Status Report #08-10
July 28, 2008                                                                               Page 3 of 6
Customer Service Call Center Operations
Capital Metro Internal Audit Report #06-01, May 22, 2006
   Escalation plan: An escalation plan to address situations when call volume exceeds capacity
    has been communicated to call center staff and has been used successfully.


Contracting/Procurement Process Audit
Capital Metro Internal Audit Report #06-05, August 31, 2006
   Background checks requirements detailed for contract staff: To reduce risks stemming
    from unknown personnel, the Contracts & Procurement Department has implemented a
    methodology to ensure that required contractor background checks are performed and
    submitted to the Authority.


Payroll Audit
Capital Metro Internal Audit Report #06-13, October 30, 2006
   Still no reliable “audit trail” for changes to operator 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 IT Department was recently informed by vendor that the Trapeze software should be
    updated prior to addressing this issue. Updated software should be placed in production by
    December 31, 2008.


Recruitment, Selection, and Hiring Audit
Capital Metro Internal Audit Report #06-14, December 13, 2006
   Implementation of “e-Recruiting” software scheduled for August 2008: Human
    Resources (HR) has entered the testing phase of the e-Recruiting component of UltiPro HRIS
    (Human Resources Information System). This software will replace slower manual processes
    with real-time online recruitment and application which streamlines the hiring process.


First Transit Contract Audit
Capital Metro Internal Audit Report #07-04, May 14, 2007
!   Improved support for preventative maintenance (PM) repairs: First Transit has
    significantly improved management oversight of preventative maintenance tasks, adding an
    additional supervisory review to confirm the accuracy and completeness of PM activities.
    Internal Audit tested PM documentation and found it to be fully completed and approved.


Sherry Matthews Advocacy Marketing Contract Audit
Capital Metro Internal Audit Report #07-07, March 26, 2007
   No resolution on contractor over-payment: The Authority has not yet obtained a refund for
    $7,139 in contractor overpayments which were identified during the audit. The original
    corrective action plan was to have this resolved in March 2007.


Capital Metro Internal Audit Implementation Status Report #08-10
July 28, 2008                                                                               Page 4 of 6
Transit Advertising Program Audit
Capital Metro Internal Audit Report #07-08, April 23, 2007
   Reduction in transit advertising revenues: The FY2008 transit advertising revenue budget
    target is $885,028. As of May 31, annual earned revenues ($370,385) were 33 percent below
    original projections.
   New Cost-Benefit review of outsourcing Transit Advertising program: When the Transit
    Advertising program was originally brought in house, the decision was based upon a cost-benefit
    analysis. Given the recent economic downturn, an updated analysis of out-sourcing vs. in-
    sourcing the transit revenue program is being performed.


Procurement Card / Travel Audit
Capital Metro Internal Audit Report #07-10, July 23, 2007
!   Procurement Card monitoring program fully implemented: Procurement Buyers now
    monitor purchases quarterly to identify questionable transactions and follow-up with
    cardholders and approving managers in order to escalate and resolve policy violations. Such
    monitoring is considered a key to providing proper oversight of program.
   Travel Manager only monitors some travel: The Travel Manager monitors centrally-booked
    travel to ensure that government rates are being utilized when available and expense reports are
    filed timely. However, since travel by Operations and Human Resources personnel is separately
    arranged, compliance cannot yet be ensured for all travelers.


Security Audit & FTA Implementation Status Review
Capital Metro Internal Audit Report #07-11, October 22, 2007
!   Rail security staffing: Capital Metro will continue to use extra-duty Austin Police
    Department (APD) officers to provide transit security. Two APD officers will be assigned
    for fare enforcement. Capital Metro Legal staff is also working to develop ILAs to solidify
    agreements between officers assigned to Capital Metro and other policing jurisdictions along
    the rail line.
   Rail System Security Plan (SSP): The original SSP was submitted to the Texas Department of
    Transportation (TxDot) in April 2008. Capital Metro and TxDot are reviewing and amending
    the plan as needed.


Risk Management Audit
Capital Metro Internal Audit Report #07-18, January 23, 2008
   Risk Management and FRS have adopted a standardized accident definition. A
    standardized definition has been communicated to all service providers which will help ensure
    reporting accident statistics consistently. However, to reinforce the adopted definition, it should
    be incorporated into purchased transportation vendor contracts in the future.
   Worker’s Compensation reports have been filed timely. Recent testing of Risk Management
    files revealed full compliance with Texas Department of Insurance Division of Worker’s
    Compensation submission deadlines.




Capital Metro Internal Audit Implementation Status Report #08-10
July 28, 2008                                                                                Page 5 of 6
Accounts Receivable Audit
Capital Metro Internal Audit Report #07-21, March 31, 2008
     Credit memos receiving approvals: Credit memos are now being reviewed and approved by
      the Controller to ensure all account write-offs are valid and authorized.

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
       Andrea Lofye, Interim EVP/COO, Chief of Staff
       Randall Hume, EVP Finance & Administration
       Doug Allen, EVP & Chief Development Officer
       Elaine Timbes, EVP Performance & Quality
       Terry Garcia Crews, StarTran, Inc. General Manager
       Sallie Crosby, Chief Counsel
       Dianne Mendoza, VP Business & Community Development
       Aida Douglas, Manager Business Development & DBE Officer
       Rick L’Amie, VP Marketing
       Todd Hemingson, VP Strategic Planning & Development
       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
       Cynthia Martinez, Legal Manager

Capital Metro Internal Audit Implementation Status Report #08-10
July 28, 2008                                                                            Page 6 of 6

				
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