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

Internal Audit

An Effective Governance Tool

Program Partner of

Presented By:

1

Introductions

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

Today’s Topics

01 02 03 04 05

What is Internal Audit Anyway What Would Internal Audit Look Like for Us What do Results Look Like How do I Implement an Internal Audit Program Questions

?

01

What is Internal Audit Anyway

Internal Audit Defined

01 Assurance and Consulting Activity

Independent and Objective

03 Identifies potential threats to

an organization’s goals

Mitigates Risks

02

Looks at activities related to an

• rganization’s operation

Examines, Monitors, and Analyzes

6

A

External Audit 1 2

Opinion on financial accuracy May include observations made

7

Internal Audit

B

1 2

Looks beyond finances Higher level of rigor and scrutiny

3

Not required

Who’s the Boss

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

02

What Would Internal Audit Look Like for Us

What’s in an Audit…

Audit Universe

01 02 03

Academic Administrative Operational

12

Benefits of Internal Audit

A B C D F

Identify risks before they become headlines Demonstrate continuous district improvement Ensure that district assets are safeguarded Helps ensure compliance with applicable laws, regulations, and board policy Ensure funds are used efficiently; streamline internal

• perations so that

staff can work more effectively

Internal Audit Lifecycle

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

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

03

What Do 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

‐ 10 20 30 40 50 60 70 80 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. 2 Add more specificity to the HR strategic plan by establishing priorities for completing 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. 4 Update Board Policies DIA (LOCAL) Freedom from Discrimination, Harassment, and Retaliation and FB (LOCAL) Equal Education Opportunity to list the names and other requirements of the two coordinators who have been designated. 5 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 and board policies. Place EEO and ADA statements on each opening page of the district’s website. 6 Secure immediately and protect the confidentiality of personnel folders and files in the files room.

• 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

Construction Management

Results Implementation Tracking

1 2

As more audits are conducted, difficult for Board to keep up with Increased accountability

3

Ensure you are good stewards of taxpayer investments

4

Spreadsheets are OK

21

04

How Do I Implement an Internal Audit Program

01 02 03

One‐Time Audit

Projects based on actual or perceived risk

• r problem

Internal Audit Program

Program Driven by risk assessment and long- term plan

In‐house vs. Outsource

In-house staff on payroll versus

• utsourced function

• Pros

― Full-time staff dedicated to audits ― Staff develop deep understanding of

• perations

― Lower cost per hour

• Cons

― Staff do not have deep knowledge of all potential audit areas ― Fixed investment In-House

Outsource

In-House

Outsource

In-House

• Pros

― Broader skill sets and experience available ― Outside, independent, third-party ― Variable investment

• Cons

― Higher cost per hour ― Not as accessible Outsource

Outsource

In-House

Outsource

In-House

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 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

01 Approve Audit Audit Committee approves audit to commence based on risk assessment/audit plan or special needs of the district

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

02 Execute Audit Auditor meets with department to be audited to establish “rules of the road”. Auditor conducts audit.

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

03 Review Results Department reviews results and provides feedback. Auditor meets with department and administration to review results and provides an

• pportunity for

administration to respond to audit.

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

04 Present Results Auditor conducts detailed report results briefing with Board Audit Committee. Once approved, Auditor presents results to the full Board.

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

05 Conduct Follow‐up Audit Auditor performs follow-up audit 12-15 months later to determine status of recommendation implementation. Reports results to department/administration, the Board Audit Committee, and full Board.

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

How it Works at Fort Bend ISD

06 Monitor Results Board Audit Committee monitors administration’s implementation efforts.

02 03 04 05 06 01 Approve Audit Execute Audit Review Results

Present Results Conduct Follow- up Audit

Monitor Results

Investing in Internal Audit

$ = <

• f 1%
• f TOTAL

budget

Internal Audit is SO Helpful! HOORAY Internal Audit! Internal Audit is the Best!

Board AND Superintendent need to be invested

CONTINUOUS IMPROVEMENT

QUESTIONS

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