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Home My WebLink About07/23/2018 - Regular Minutes - City Council - Audit Committee TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 1101 Texas Avenue Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Mayor Pro-Tem James Benham TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) TO: City of College Station Audit Committee FROM: Ty Elliott, City Internal Auditor DATE: August 13, 2018 SUBJECT: Invitation to Bid 18-104 Attestation Examination Engagement – Independent Audit Opinion The Office of the City Internal Auditor conducted this examination engagement of Invitation to Bid (ITB) 18-1041 pursuant to Article III Section 30 of the College Station City Charter, which outlines the City Internal Auditor’s primary duties. An examination engagement consists of obtaining sufficient, appropriate evidence to express an opinion on whether the subject matter is in conformity with the criteria in all material respects. An examination engagement of purchasing controls over ITB 18-104 was conducted per direction of the City of College Station Audit Committee due to an allegation received from the City’s ALERTLINE hotline. The opinion expressed in this memo addresses the design and operating effectiveness of the City’s purchasing process internal controls and how they were applied to Invitation to Bid 18-104. It is our opinion that the City of College Station maintained effective internal control over purchasing during Invitation to Bid 18-104; no evidence of misconduct was found on the part of the City. Summary of Significant Testing We conducted this examination engagement in accordance with generally accepted government auditing standards. 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. The following paragraphs further detail the audit procedures used to obtain this evidence. Engagement scope covered the period from ITB 18-104 advertisement date (7/16/18) to the pre-bid meeting date (7/30/18).2 Purchasing Policy Design. The City has established a manual of purchasing policies for internal use by departments. We compared these policies to the Local Government Code Chapter 252 Purchasing and Contracting Authority of Municipalities and obtained a legal opinion from the City Attorney’s Office 1 ITB 18-104 was issued to replace the roofs of City Hall and the City Hall annex buildings due to hail damage received during March 2018. 2 Advertisement to bid date was chosen as the beginning of the scope because that is the official beginning of the bid process and the pre-bid meeting date was chosen as the end of the scope because it is the date the allegation was submitted. City of College Station Page 2 of 2 TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 1101 Texas Avenue Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Mayor Pro-Tem James Benham TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) regarding policies in question. In addition, we interviewed the City Purchasing Manager regarding typical pre-bid meeting procedures. Operating Effectiveness. In order to establish further criteria, we interviewed: 1) the City Manager’s Office Project Manager regarding ITB 18-104’s alignment with construction industry standards, 2) the Risk & Workforce Compliance Manager regarding the insurance company’s (FM Global) response to the City’s hail damage claim, and 3) the Assistant Director of Planning & Development regarding City Hall and City Hall Annex building plans. In addition, we spoke with the claimant to more fully obtain their thoughts and concerns regarding ITB 18-104. We also reviewed previous roofing bids advertised by the City and identified typical bid specifications. ITB 18-104 documentation was reviewed including: the invitation to bid specifications, the hail damage report, the contract, the pre-bid sign-in sheet, the ITB addendums, the site visit sign-in sheet, the online bidding system vendor report, and online bidding system vendor questions and answers and compared these to purchasing policies. We also interviewed all City staff present at the pre-bid meeting and compared this to procedures identified by the Purchasing Manager. Finally, we considered the location, owner, and offered products of the vendors who attended the pre-bid meeting. TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 1101 Texas Ave. Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Councilmember James Benham TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) TO: Honorable Mayor and City Council FROM: Ty Elliott, City Internal Auditor DATE: September 25, 2018 SUBJECT: Fiscal Year 2018 Council Update of the City Internal Audit Office Over the course of this fiscal year, we released four audits: the Sanitation Audit, the Procurement Card Audit, the Research Valley Partnership Attestation, and the Invitation to Bid 18-104 Attestation. The associated reports and opinions for these audits can be seen on the City Internal Auditor’s website. Per the Audit Committee’s direction, we also completed a City-wide COSO assessment of the City’s internal control framework and implemented an Audit Follow-Up Program. As part of this Program, we received implementation responses for seven previous audit engagements going back through November of 2015. In addition, our Office received a Distinguished Knighton Award from the Association of Local Government Auditors for our audit of the Sanitation Division and the highest peer review opinion possible. The following table show our performance metrics: Table 1: Performance Metrics Performance Metric FY16 – FY18 FY18 Proposed FY Goal Number of Audits Published 9 4 Complete Audit Plan GAGAS Compliance Rate1 98.6% 99.3% 100% Number of Recommendations 44 17 N/A Concurment Rate 88.6% 100.0% Greater than 90% Full Concurment Rate 81.8% 88.2% Greater than 85% Follow-Up Reviews 7 2 All Audits Number of Reviewed Recommendations 39 12 N/A Implementation Rate 84.6% 100.0% Greater than 80% Full Implementation Rate 33.3% 41.7% Greater than 75% Cleared Implementation Rate NA NA Greater than 85% Neglected Rate 5.1% 0.0% Less than 5% “In Spite Of” Recommendations 3 0 N/A Average Time Between Follow-Up & Audit 16 Months 8 Months 6 - 12 Months 1 The GAGAS Compliance Rate is based on a checklist that is completed at the end of each audit. City of College Station City Internal Auditor’s Office 2 | P a g e A summary of the major impacts of our Office’s engagements over the last fiscal year follows: Peer Review. During the summer of FY18, our Office received a peer review of our internal quality control system. This included a review of policies and procedures, audit engagements and work papers, and documents related to independence, training, and development of audit staff. Based on this review and interviews with our Office’s staff, the peer review team granted us the highest opinion possible. Going forward, receiving this review and opinion will lend our Office further credibility and should provide the Audit Committee with greater assurance about the quality of our work. Invitation to Bid 18-104 Attestation Engagement. At the beginning of August, our Office conducted an examination attestation engagement per the direction of the Audit Committee. During this engagement, we gathered sufficient and appropriate evidence to express an opinion on the effectiveness of purchasing controls on Invitation to Bid 18-104, which was issued to replace the roofs of City Hall and the City Hall annex building. Our opinion stated that purchasing controls were generally effective, providing assurance to the City Council about City staff’s activities. COSO Assessment. Over the course of this year, our Office conducted a number of interviews with City staff to document compliance with the COSO Internal Control Framework, which municipalities are required to be in alignment with under the Uniform Guidance for Federal Awards. This work resulted in a completed COSO Matrix, five flowcharted major fiscal processes, and a number of work papers. We believe that the work completed and documented during this project will not only aid us in developing and performing future audits, but also aid the new external auditors in conducting their work. Moving forward, our Office hopes to develop and finalize a Fraud Response Plan to help ensure that fraud or malfeasance, if suspected, is properly handled. In addition, we plan to update the COSO Matrix documentation and design and implement a continuous auditing program, which will help focus our activities in the future. Finally, we hope to complete one performance audit and will continue to respond to hotline allegations and Council inquiries as needed. Sincerely, Ty L Elliott CIA, CFE, CGAP, COSO City Internal Auditor TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 1101 Texas Ave. Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Councilmember James Benham TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) TO: Honorable Mayor and City Council FROM: Ty Elliott, City Internal Auditor DATE: September 25, 2018 SUBJECT: Fiscal Year 2019 Potential Audit Plan During fiscal year 2018, our Office received permission from the Audit Committee to design and implement a continuous auditing program and to develop and finalize a Fraud Response Plan. In addition, towards the end of fiscal year 2019, we will need to update the COSO Matrix and process documentation. Despite these prior commitments, we believe we have enough resources to conduct one small scope audit during FY19 – most likely during October. A description of each potential audit topic follows: Performance Evaluations: Over the course of the FY17 Risk Assessment and the COSO Assessment, we found that Employee Performance Evaluations differ greatly across City departments and divisions. An audit of this topic would focus on identifying where employees are treated differently across the City and evaluating if this is reasonable. City-wide User Access: Based on the COSO Assessment, an analysis of City-wide user access of key systems may be warranted. An audit of this topic will involve reviewing user access policies and procedures, and identifying and analyzing user access to key systems. Software Acquisition and Use: An audit of software acquisition and use would investigate software used throughout the City and the associated licenses, as well as, software acquisition policies and procedures. Parkland Dedication: Since our Office was formed in 2007, we have conducted two audits of the Parks and Recreation Department, however, both were focused on the recreation side. An audit of the Parkland Dedication program would focus on compliance with City ordinances as well as efficient and effective achievement of the program’s mission, goals, and objectives. Financial Indicators: This would entail examining the Comprehensive Annual Financial Report and other financial documents and is intended to: 1) identify significant existing or emerging financial problems, 2) put the City’s finances in context, and 3) encourage discussion of City finances. Commodity Purchases: A previous audit of purchasing processes was conducted in 2008 with a follow- up in 2010; however, these audits did not specifically address purchasing processes involving commodities – or raw materials that the City buys and stores in bulk. An audit of commodity purchases would include a review of policies, procedures, processes and practices. City of College Station City Internal Auditor’s Office 2 | P a g e Vendor Database: Based on the COSO Assessment, an in-depth analysis of the City’s Vendor Database may be needed. This includes areas such as vendor performance, inappropriate vendor-employee relationships, and database controls and access. Payroll Aspect Audit: An audit of a specific payroll aspect would involve review and testing over internal controls as well as analysis. Specific payroll aspects that could be covered include: Fire and Police Move- Up Pays, Short-Term Disability Payments, a specific Fringe Benefit (i.e. cell phone allowance, car allowance, etc.), or a specific department’s overtime usage (i.e. Fire, Police, Public Works overtime, etc.). The aspects of payroll identified as risks during the COSO Assessment include Move-Up Pays and Short-Term Disability Payments. Police Evidence Disposal: An audit of Police Evidence was begun during fiscal year 2016, but was never completed. Based on this previously completed work, an audit of Police Evidence disposal would evaluate the City’s current evidence disposal policies and procedures and their effectiveness. Based on this, a potential audit schedule would be as follows: Figure 1: Potential FY19 Schedule Sincerely, Ty L Elliott CIA, CFE, CGAP, COSO City Internal Auditor 10/1/2018 12/31/2018 4/1/2019 7/1/2019 9/30/2019 Potential Audit Fraud Response Plan Continuous Auditing Implementation COSO Update