Internal Audit An Effective Governance Tool Presented By: Program - PowerPoint PPT Presentation

1 Internal Audit An Effective Governance Tool Presented By: Program Partner of

Introductions Cheyanne Rolf, PMP Grayle James, Greg Gibson, CPA, Program/Project Board of Trustees President Manager Member

Today’s Topics What is Internal Audit Anyway 01 What Would Internal Audit 02 Look Like for Us What do Results Look Like 03 How do I Implement an 04 Internal Audit Program ? Questions 05

What is 01 Internal Audit Anyway

Internal Audit Defined 01 Assurance and Consulting Activity Independent and Objective 02 Examines, Monitors, and Analyzes Looks at activities related to an organization’s operation 03 Identifies potential threats to Mitigates Risks an organization’s goals

A 1 Opinion on financial accuracy 2 May include observations made External Audit 6

B 1 Looks beyond finances 2 Higher level of rigor and scrutiny 3 Not required Internal Audit 7

Who’s the Boss Historically under the Superintendent or Business Office Now must report directly to the Board (Texas Education Code Section 11.170 (2006))

What Would Internal Audit 02 Look Like for Us

What’s in an Audit…

Audit Universe Academic 01 Operational 02 Administrative 03

Benefits of Internal Audit Helps ensure compliance with Identify risks before applicable laws, they become regulations, and headlines board policy A D Demonstrate continuous district improvement B Ensure funds are used efficiently; streamline internal operations so that Ensure that district staff can work more assets are effectively safeguarded C F 12

Internal Audit Lifecycle Risk Assessment Annual Update Special Audit Plan Needs Audit Audit Audit Audit Audit Projects Projects Projects Projects Projects Follow ‐ up

What’s in an Internal Audit Report?  Policy and regulatory framework  Description of operations, processes, systems, and organization  Key operating statistics and performance measures  Analysis: ― Transaction testing ― Data analytics ― Organizational, efficiency, process, internal controls, and compliance analysis  Audit findings and recommendations

What Do 03 Results Look Like

Human Resources  Selected for audit because personnel costs represent 80% of district budget  New leadership; new HR strategic plan  Major audit findings: ― Personnel file management largely manual and not well controlled ― Opportunities exist for additional automation and for integration of information systems ― Minor TRS compliance exceptions noted

Human Resources 80 70 60 50 40 30 20 10 ‐ Jun‐14 Jul‐14 Aug‐14 Sep‐14 Oct‐14 Nov‐14 Dec‐14 Jan‐15 Feb‐15 Mar‐15 Apr‐15 May‐15 Jun‐15 Jul‐15 Aug‐15 Sep‐15

Human Resources Priority No. Recommendation 1 Clarify HR department titles so that they generally reflect their individual functions. Add more specificity to the HR strategic plan by establishing priorities for completing 2 projects for the most immediate needs with detailed steps in action plans that establish lead person(s) responsible, deadlines, and completion dates. 3 Implement performance measures and establish performance targets for HR. Update Board Policies DIA (LOCAL) Freedom from Discrimination, Harassment, and 4 Retaliation and FB (LOCAL) Equal Education Opportunity to list the names and other requirements of the two coordinators who have been designated. Post EEO and ADA posters in conspicuous work locations within both the Fort Bend ISD administration building and the HR Division in accordance with federal EEO and ADA laws 5 and board policies. Place EEO and ADA statements on each opening page of the district’s website. Secure immediately and protect the confidentiality of personnel folders and files in the files 6 room.

Construction Management  Unique because audit was pre-emptive – evaluated district readiness for bond program before it started  District selected program manager  Major recommendations included: ― Improved management reporting ― Reconsider construction management approaches ― Enhanced safety and security standards for schools  Follow-up study conducted following year to ensure implementation

Results Implementation Tracking As more audits are conducted, difficult for Board to keep up with 1 Increased accountability 2 Ensure you are good stewards of taxpayer investments 3 Spreadsheets are OK 4

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How Do I Implement an 04 Internal Audit Program

01 02 03 Internal Audit In ‐ house vs. One ‐ Time Audit Program Outsource Projects based on Program Driven by risk In-house staff on actual or perceived risk assessment and long- payroll versus or problem term plan outsourced function

In-House  Pros Full-time staff dedicated to ― audits In-House In-House ― Staff develop deep understanding of operations Lower cost per hour ― Outsource Outsource  Cons ― Staff do not have deep knowledge of all potential audit areas Fixed investment ―

Outsource  Pros Broader skill sets and ― experience available In-House In-House ― Outside, independent, third-party Variable investment ― Outsource Outsource  Cons ― Higher cost per hour ― Not as accessible

Fort Bend ISD History  Had an internal audit department that audit committee was responsible for but in practical terms could not manage on a daily basis  Audit Committee of 2013-14 recommended termination of this department and retained outside consultant  Tried a blend of internal auditor and outside consultant  Now have 100% outsourced this effort  12 audits, 2 follow-up audits, over 160 recommendations made in past 5 years

How it Works at Fort Bend ISD 02 Approve Execute Audit Audit 01 03 Monitor Review Results Results 06 04 Conduct Present Follow- Results up Audit 05

How it Works at Fort Bend ISD 01 Approve Audit 02 Audit Committee approves Approve Execute Audit Audit 01 audit to commence based on risk assessment/audit plan or 03 special needs of the district Monitor Review Results Results 06 04 Conduct Present Follow- Results up Audit 05

How it Works at Fort Bend ISD 02 Execute Audit 02 Auditor meets with Approve Execute Audit Audit 01 department to be audited to establish “rules of the road”. 03 Monitor Review Auditor conducts audit. Results Results 06 04 Conduct Present Follow- Results up Audit 05

How it Works at Fort Bend ISD 03 Review Results 02 Department reviews results Approve Execute Audit Audit 01 and provides feedback. 03 Auditor meets with Monitor Review department and Results Results administration to review results and provides an 06 opportunity for 04 Conduct administration to respond to Present Follow- Results up Audit audit. 05

How it Works at Fort Bend ISD 04 Present Results 02 Auditor conducts detailed Approve Execute Audit Audit 01 report results briefing with Board Audit Committee. 03 Monitor Review Once approved, Auditor Results Results presents results to the full Board. 06 04 Conduct Present Follow- Results up Audit 05

How it Works at Fort Bend ISD 05 Conduct Follow ‐ up Audit 02 Auditor performs follow-up Approve Execute Audit Audit 01 audit 12-15 months later to determine status of 03 recommendation implementation. Monitor Review Results Results Reports results to 06 department/administration, 04 Conduct the Board Audit Committee, Present Follow- Results up Audit and full Board. 05

How it Works at Fort Bend ISD 06 Monitor Results 02 Board Audit Committee Approve Execute Audit Audit 01 monitors administration’s implementation efforts. 03 Monitor Review Results Results 06 04 Conduct Present Follow- Results up Audit 05

Investing in Internal Audit

$ = < of 1 % of TOTAL budget

HOORAY Internal Audit Internal Internal is SO Helpful! Audit is the Audit! Best! Board AND Superintendent need to be invested

CONTINUOUS IMPROVEMENT

QUESTION S

Greg Gibson, President Cheyanne Rolf, Project Manager ggibson@gibsonconsult.com crolf@gibsonconsult.com (512) 685-2679 (512) 328-0885