AUDIT PLAN
Fiscal Years 2016-2017
INTERNAL AUDIT PLAN
Fiscal Years 2016-2017
Overview
The majority of the Audit Division activities are classified as Performance Audits, as defined
by the Government Accountability Office (GAO). Other occasional efforts include AgreedUpon Procedures (a type of attestation engagement subject to specific standards established
by the GAO) and investigations. The Audit Plan includes audits in progress, regularly
scheduled audits, and additional efforts being planned, or under consideration for later years.
We expect the City Manager’s Office and Department Heads to make special requests for
audits or other support. Internal Audit reserves a limited amount of staff time for unplanned
projects. On some occasions it may be necessary to delay a scheduled audit to address a
newly identified need.
Brief Review of FY 2015
The Internal Audit Division completed seven performance audits during fiscal year 2015, and
several were in progress at fiscal year-end:
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Finance – City-wide Cash Collections; Employee Travel Reimbursements
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Human Resources – Data Accuracy (continuous auditing pilot)
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CATS – Bus Imprest Fund (FY14); Blue Line Extension: Consultant’s
Labor/Overhead/Fees (FY14)
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Police – Vice Imprest (CY 2014)
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Managed Competition – Solid Waste Services
Performance Audits Planned for Fiscal Year 2016
In Progress – We will complete the following audits which were in progress at year-end:
1. Airport Valet Parking – At the request of Aviation management, the audit originally
focused on the previous parking management company. After finding that limited
supporting documentation was available to review prior operations, Internal Audit
focused on the agreement with the new vendor, which began in June 2014.
2. Airport Turnover (McGladrey Follow-up) – Auditors are reviewing actions taken by
Airport staff to address issues raised in the McGladrey Turnover Reviews (two
separate reports dated June 2014).
Internal Audit Plan
Fiscal Years 2016-2017
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3. Cash Collections – A report was issued in October 2014 and a follow-up report has
been drafted. Auditors met with Revenue/Finance staff in June to discuss the findings
and recommendations.
Additional feedback has been requested of the
Revenue/Finance staff and finalization of the report is expected in August. Report
issuance will follow a briefing of the CMO.
4. P-Card – Auditors examined documentation related to FY14 P-card purchases for
compliance with the City’s P-card Policy. We also tested P-card transactions
processed within the first six months of MUNIS implementation. Fieldwork has been
completed and auditors have discussed issues noted with the applicable departments.
5. City-wide Overtime – We tested payroll transactions that were processed between
July 2009 and June 2012. Following the presentation of drafts to Human Resources,
Budget and the CFO, auditors performed additional data analysis to clarify and
support the initial recommendations. Policy issues raised in the audit will be
presented to the CMO, with report issuance following.
6. Office Depot – Over the last several years, many U.S. municipalities and other
governmental entities have conducted audits and investigations of their contracts with
Office Depot. Sometimes, these efforts have resulted in significant payments to the
federal, state and local government initiating the reviews. Auditors selected a sample
of purchases from this vendor and completed a review of invoices and usage reports
to determine if City-wide purchases from the company complied with the existing
contact.
7. Purchased Assets – Auditors are verifying the existence of recently purchased assets,
(focused on FY15, with some from prior years) and reviewing internal controls which
help ensure that assets are properly recorded, safeguarded and continue to be used for
the benefit of City operations. We anticipate completing fieldwork by October.
8. Construction – The objectives of this audit are to ensure that effective controls are in
place for the identification, pricing and approval of change orders and to ensure that
allowances and contingency balances are adequately controlled. Auditors have met
with department representatives to gain an understanding of their processes and have
reviewed a sample of construction change orders. Initial observations relate to
policies, a lack of consistency throughout the city, and possible action items to be
addressed by the City’s “Contract Officers Community of Practice” (COCOP) which
has been reviewing city-wide construction activities since 2008.
Internal Audit Plan
Fiscal Years 2016-2017
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Repetitive Annual Audits – The following lists efforts which have historically been completed
on an annual basis, and which are expected to continue.
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Bus Operations Division Imprest – We will audit the CATS Imprest Fund and include
steps required to meet the needs of the external auditors for the annual (agreed upon
procedures) report, as has been done for several years.
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Travel Advance & Expense Reimbursements – A follow-up to the audit of FY13
expenses (issued February 2015) will be conducted. The review will focus on the
period April through June 2015. This brief period was chosen to ensure that new
policies which took effect in early 2015 have been understood and followed. As in
the FY13 review, auditors will examine expenses for the City Manager’s Office (all
management and staff) and all Department heads. Additional samples will be drawn
from throughout the City. We anticipate annual audits of this type will continue.
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Vice Imprest Reimbursements – Upon request from Police about every two months,
auditors conduct detailed reviews of imprest documentation before the fund is
replenished. An annual report summarizes these efforts.
Other Commitments
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An Employee Hotline, administered by the Internal Audit Division, was introduced in
FY2015. Investigations will be conducted as necessary, based upon information
supplied by anonymous phone calls to a third-party call center.
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Recommendations from each audit are tracked and followed up through completion,
as determined by Internal Audit. On occasion, a detailed review and report will be
issued; otherwise, the status of recommendations will be summarized periodically.
Planned / 2016 Initiatives – Although unplanned needs can arise and impact the priority of
audits, the following are being planned and should be substantially completed in FY16.
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Grant Accounting – We will conduct an audit of grants active in FY 2015. The
preliminary objectives are to ensure that effective controls are in place for the
processes and procedures of grant administration.
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Airport Concessions – Internal Audit will work with Airport management to identify
the priority for addressing the various concessions at Charlotte-Douglas.
Management has requested that concessions and revenue contracts (including
parking, restaurants and retail) be reviewed on a rotational basis.
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Cash Collections – The external auditors (Cherry Bekaert) have recommended that
regular audits be conducted of City-wide cash collections. The current audit is still in
progress, and a new plan for periodic testing will be developed.
Internal Audit Plan
Fiscal Years 2016-2017
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Fraud Audits – While the risk of fraud is considered in every audit, we have not
previously conducted testing for the sole purpose of detecting fraud or fraud risks.
We will announce the overall program and explain selected tests in advance.
Regardless of outcome, a summary report will address findings, if any, and associated
risks.
Under Consideration – Audit priorities are regularly updated throughout the year.
Depending upon staff availability and the level of requests received, the following audits may
be initiated during fiscal year 2016:
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ERP Controls – While the specific focus and scope of this audit has not been
developed, our review should include an evaluation of vendor authenticity controls,
which were identified in FY13 and received several responses that Munis would
addresss the existing control weaknesses. A post-implementation review of the ERP
system should be conducted by an outside contractor, with Audit as project manager.
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Union County Water Agreement – Charlotte Water has requested a review of this
contract, which became effective July 2014. Revenue and expense allocations, along
with first-year start-up costs would be examined.
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Business Investment Grants – Neighborhood & Business Services has requested a
review of this program.
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CBI’s MBE program – Charlotte Business Inc., a division of Management and
Financial Services, has requested an audit of this program.
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CMPD Secondary Employment – During our audits of payroll and overtime, auditors
were made aware of the complexities related to managing police officers’ work hours.
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Construction Audits – Based on review of construction change orders and
contingency spending, Internal Audit noted opportunities to increase controls over
capital expenditures. Internal Audit will therefore perform risk analysis of high
profile construction projects and conduct audits as warranted on selected projects.
Audits Planned for Fiscal Year 2017
a) Airport Contracts and Concessions – Internal Audit has begun planning revenue
contracts (including parking and rental cars) and concessions (restaurants and retail
operations). Aviation management is establishing additional controls and monitoring
over their management agreements. We will continue to assess risks related to the
major revenue contracts and concessions and schedule audits on a regular basis as we
are able.
Internal Audit Plan
Fiscal Years 2016-2017
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b) City-wide Authorized Contracts and Payments – A detailed review of payments made
in FY13 was completed in FY14, with favorable results. That audit focused on
entities receiving City payments totaling over $2 million. A future audit may be
structured to review payments in a different dollar range. Also, the audit may include
a review of professional service contracts.
c) Police Property – Although it has been several years since we conducted a complete
review of Police property controls, our Vice Imprest audit regularly tests a random
sample of evidence. In addition, we have observed inventory counts conducted in
compliance with CALEA (Commission on Accreditation for Law Enforcement)
standards. Working with CMPD, we will consider a performance audit that will build
on these standards as well as review other property controls.
d) Information Technology – Following the implementation of a new financial and
procurement system, we will continue to evaluate risks which can be addressed via
internal audit.
e) Procurement – After completing a number of procurement-related efforts over the
past several years, our audit approach for 2017 and beyond will be based upon any
identified risks, or the need to revisit previously identified weaknesses. Procurement
is of such primary importance that audit efforts in this area are expected to continue
annually or bi-annually for the foreseeable future.
f) CATS Construction – We will continue to conduct audits of CATS and its
contractors, who are designing and constructing the Blue Line Extension.
g) Finance Operations – Numerous important activities occur within Finance. For
example, Finance receives revenues, pays bills, makes investments and keeps an
accounting of the City's financial transactions. While the City can rely upon its
outside auditor to assess overall controls and determine that financial statements are
fairly presented, internal audits can more closely examine operations and
performance. Such an audit can choose to focus on efficiency, effectiveness and/or
compliance. We plan to work with the Finance Office and the outside auditors to
determine areas in which Internal Audit can best provide additional assurance of
effective internal controls. Current efforts in this area include cash collections and
travel reimbursements.
Audit Division Internal Efforts
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Further development of a Continuous Auditing program
Increase IT auditing capabilities
Expand risk analysis documentation
Maintain CPE for all staff
Promote CIA attainment for non-certified staff