2019 Semi-Annual Audit Report Commission Meeting Objectives 1. - PowerPoint PPT Presentation

2019 Semi-Annual Audit Report Commission

Meeting Objectives 1. Status of the 2019 Audit Plan 2. Audit Plan Development 3. Review 2020 Audit Plan 4. Additional Discussion or Questions GCPUD Int ernal Audit Depart ment 11/ 12/ 19 2

Status of 2019 Audit Plan Reports issued in 2019 Small and Attractive Asset Audit 1. Report issued  Ghost Employee Audit 2. Report issued  Design Build Contract Audit 3. Report issued  See summary of internal audit reports handout. GCPUD Int ernal Audit Depart ment 11/ 12/ 19 3

Status of 2019 Audit Plan Open Audits Net Metered System Load Audit 1. Field work  TBD  Overtime & Upgrade Audit 2. Field work  December 2019  2018 Voucher Audit 3. Not started  January 2020  Emphasis on PO’s and direct purchases  P-Card Audit 4. Planning stages  December 2019  GCPUD Int ernal Audit Depart ment 11/ 12/ 19 4

Internal Audit Objectives Risk Based Audit Approach 1. Annual Audit Plan Development  Risk Assessments (CXO’s, Legal, ERM, Sr Mng) • Analytical Procedures • Performance of scheduled audits  Ensure that Internal Audit Activities are 2. Consistent with Organizational Goals  Within the Risk Appetite and Risk Tolerance Set by the Board and District  Management Evaluation of Internal Controls for Adequacy, Effectiveness, and 3. Efficiencies GCPUD Int ernal Audit Depart ment 11/ 12/ 19 5

2019 Audit Plan GCPUD Int ernal Audit Depart ment 11/ 12/ 19 6

Proposed 2020 Audit Plan 1. Net Metered System Losses Audit - continued 2. Follow-up on External Safety Assessments 3. Crescent Bar Management Contract 4. Professional Services 5. Treasury Operations 6. Statutory Expenditure Review 7. Emerging Risk and Audit Requests 8. Follow-up: Monitor Audit Recommendations GCPUD Int ernal Audit Depart ment 11/ 12/ 19 7

Questions? Comments? Concerns? GCPUD Int ernal Audit Depart ment 11/ 12/ 19 8

Internal Audit Report S ummary of Engagements

Ghost Employee Audit ‐ Executive Summary November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Ghost Employee Audit. During this audit, we examined the District’s payroll policies, procedures, and practices to determine whether or not adequate controls were in place to prevent and detect fraud, waste, or abuse of District resources by creation of ghost employees. Under current District processes, the opportunity to create ghost employees exists. While no ghost employees were discovered in our review, the District does expose itself to this risk because of the following:  The HR/Payroll department does not have updated written procedures for processing payroll, which could prevent timely detection and correction of errors and fraudulent activity.  Five employees within the HR/Payroll Department have full system access rights which allows them to create new employee ID, activate the employee in the payroll system, change direct deposit information and enter payroll data.  The District does not have a standardized process to effectively assign employee access rights to different modules of the accounting system. As a result, employees inadvertently obtain more system rights than what is required to effectively perform their job duties.  The process to ensure that terminated employees are timely removed from the payroll system needs improvement. Based on these issues, we conclude that with development of stronger policies, procedures and internal controls, the HR/Payroll Department will be better positioned to ensure effective oversight and monitoring. Management’s response to our audit findings and recommendations, as well as target implementation dates, are included in the full report. We would like to thank the HR/Payroll and the Enterprise Technology departments, and their personnel for their cooperation and assistance during this audit. Dmitriy Turchik, CFE Manager of Internal Audit Ghost Employee Audit • Report Publication Date: May 7, 2019

Grant County PUD Design Build Contract Audit Review - Executive Summary November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Design Build Contract Audit Review. The purpose of this engagement was to independently assess the audit performed by a third-party consultant, Navigant, for reasonableness and completeness per the scope provided from the District and Vanir Construction Management to Navigant. Internal Audit believes that the Navigant audit contained the proper scope, critical pieces and information to determine that HDR and Wilson Construction payments were appropriate. Navigant did not obtain evidence to conclude whether HDR and Wilson Construction billings were reasonable, accurate, and adequately supported. This work was performed by Power Delivery personnel. By virtue of their testing and analysis, Power Delivery Staff are confident that HDR/Wilson invoiced their labor costs correctly. Although discrepancies were noted in both Navigant and District reviews of labor and equipment, they are immaterial and de minimis. Audit recommends that emphasis be placed on accurate monitoring of labor and equipment in future design build contracts. The District did not have a formal process in place to confirm that material distributed from material yard were delivered to construction site and used in the project. About 20% of total contractor costs went to contractor purchased building materials. There is always risk of theft and fraud of material. There were, however, reasonable measures taken by the contractor to prevent loss of material from the material yard. In addition, Power Delivery Staff performed reasonableness test to validate the amount of material used in the project. To further mitigate the risk of material theft, we recommend the District consider implementing monitoring procedures to ensure that material leaving the material yard is delivered to the construction site and used in the project. This could be achieved by having an independent person monitoring material distribution or training District inspectors to monitor material usage during their onsite inspections. In addition, Power Delivery and Audit have recommended, for future contracts of this type, material costs be segregated on invoices for improved transparency and verification. The District and the contractor developed a Guaranteed Maximum Price (GMP) that was approved by the Commission. Due to the nature of the Design Build contract, any cost underruns below the GMP represent savings to the District. The incentive payment reviewed appeared to be paid in the correct manner to both HDR and Wilson. This was also verified by an attorney specializing in Design Build contracts who was a party in crafting the District contract with HDR. Dmitriy Turchik, CFE Manager of Internal Audit Design Build Contract Audit Review • Report Publication Date: May 7, 2019

Small and Attractive Assets Audit ‐ Executive Summary November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Small and Attractive Assets. During this audit, we examined District’s policies, procedures, and practices to determine whether or not adequate internal controls were in place to safeguard small and attractive assets. Our audit identified the following:  District employees do not have clear understanding of what is considered small and attractive asset, resulting in inconsistent implementation of the District policy.  The District does not have centralized oversight over small and attractive assets.  The District does not have a systematic process in place to ensure all purchases of small and attractive assets are added to the departmental asset list.  Eleven of 19 departmental procedures reviewed had ineffective segregation of duties.  Five of 19 departments did not perform annual inventory as required by the District policy. In addition, eight of 19 departments did not keep evidence that an annual audit was performed.  Five departments had self ‐ identified missing assets prior to our audit but failed to immediately notify the Controller and the Auditor as required by the District policy. We issued the following recommendations to assist the District with management of risks identified during our audit and overall compliance with its own policy:  Make necessary changes to its small and attractive asset policy to provide clear and concise guidance to its employees.  Establish expectations regarding segregation of duties and related internal controls.  Provide additional training material to all employees that are involved with management of small and attractive assets.  Develop centralized oversight over small and attractive asset program.  Enforce current District expectations regarding supervisory review of payments and adding purchases of small and attractive assets to the departmental asset listings. Management’s response to our audit findings and recommendations, as well as target implementation dates, are included in the full report. We would like to thank the District staff for their cooperation and assistance during this audit. Dmitriy Turchik, CFE Manager of Internal Audi t Small and Attractive Asset Audit • Report Publication Date: June 10, 2019

Q3 2019 BUDGET TO ACTUALS November 12, 2019 10/30/2019 1