Open Session A. Approval of Agenda Briefing Materials B. 1. - - PowerPoint PPT Presentation

A.

Open Session

Approval of Agenda

B.

Briefing Materials

• 1. Audit Reports

Fleet Services Performance Audit

• 2. Continuous Compliance Audits

Bi-weekly Payroll Compliance Review

• 3. Status Updates

1st Quarter FY ‘19 Fraud, Waste & Abuse Hotline Report

C.

Other Business

D.

Adjournment

E.

Next Meeting Date

2

Background

In accordance with the approved Fiscal Year 2017 Risk-Based Audit Plan, OIG performed a limited-scope audit of the Fleet Services Division and assessed compliance with WSSC policies and procedures designed to enforce/support internal and external rules, laws and regulations. We conducted the audit in accordance with the International Standards for the Professional Practice of Internal Auditing.

Audit Team:

Angela Makle Fortune – Senior Auditor Janice Hicks - Auditor

5

Objective

The objective of the audit was to provide an independent assessment of Fleet Services compliance with WSSC policies and procedures.

Scope

 Limited scope to include transactions and processes effective

during FY’s 2016 and 2017.

 Fleet Services activity affecting administrative operations.  Excluded vehicle repairs and recommend further exploration into

analyzing vehicle maintenance.

6

Findings Rating Recommendations

• 1. Lack of segregation of duties

for Materials Planners High Establish internal controls and ensure the duties of ordering, receiving, recording, and reconciling are segregated.

7

Management Response

• FSD created an intra-office procedure (IOP) titled Materials Purchasing and

Inventory Policy – effective July 30, 2018. The following requirements were added:

• Garage Supervisors now required to approve any adjustments to

inventory

• Fleet Parts Specialists (referenced as Materials Planners) will be rotated

to perform inventory counts at different garages on a regular basis.

• Supervisors will conduct independent random cycle inventory counts
• nce a quarter annually to verify the accuracy of Fleet Parts Specialists

inventories and address discrepancies

8

Findings & Management Response (Cont’d)

Management Response (Cont’d)

• Fleet Parts Specialists are now required to obtain approval of

any purchases over $1,000 by their Garage Supervisor.

• FSD has requested IT and the Procurement Department to

restructure the current P-CARD approval process to have the approval of a Fleet Parts Specialist’s P-CARD purchases go to the Garage Supervisor onsite instead of the Division Manager.

9

• 2. Unused inventory applied to

work orders, but not re- entered into the system Medium • Establish controls and procedures to mitigate loss of inventory

• Ensure proper accounting for

vehicle maintenance costs

• Enable accurate evaluation of

inventory. Management Response

• FSD’s current system has a ‘stock checkout’ module that allows unused

items to be returned to inventory. The new Materials Purchasing and Inventory Policy specifies the requirement to return parts to inventory if not used.

• FSD anticipates enhanced inventory controls with the implementation of

WAM 2.2 as part of Project Cornerstone. Findings Rating Recommendations

Findings & Management Response (Cont’d.)

Findings Rating Recommendations

• 3. Assets are not timely

recorded in TEAMS Medium Create and enforce a receiving process that mandates all assets are recorded promptly in TEAMS upon receipt. Management Response

• FSD believes that assets are recorded timely in TEAMS, the current Fleet

Asset Management system, based on when the appropriate paperwork is

• received. The “Acquisition Date” (date of acceptance) and the “In Service

Date” (date assigned and put into field) are both entered.

• FSD created a new IOP called Procedures for New Vehicle and Equipment

Intake to standardize and specify all requirements regarding receiving, inspection and data entry for such new assets. The Procedure was effective July 30, 2018.

10

Findings & Management Response (Cont’d.)

11

• 4. Inventory

adjustments can be entered into TEAMS without supervisory review or approval Medium Management work with the Information Technology Department to incorporate mandatory authorization controls regarding adjustments in the system.

Management Response

• FSD adopted the new Materials Purchasing and Inventory Policy.

Section IV.A.8 now requires supervisor approval prior to making any adjustments in the system.

• FSD will work with IT and the WAM 2.2 implementation team to

incorporate the suggested authorization controls into the new system functionality.

Findings Rating Recommendations

Findings & Management Response (Cont’d.)

Findings Rating Recommendations

• 5. Lack of formal

documented inventory procedures

Medium •

Ensure formal documented inventory procedures are created and administered for vehicles, equipment, parts and supplies.

• Adhere to mandated inventory counts of all

Fleet Services assets in the formal procedures.

• Require consistent and continual inventory

processing training for Material Planners. Management Response

• FSD developed an IOP entitled Materials Purchasing and Inventory Policy to

address the changes. Effective July 30, 2018.

12

13

• The policy formalized inventory procedures, and establishes a system

that rotates Fleet Parts Specialists between garages and requires a Garage Supervisor to assist in the monthly inventory once a quarter

• annually. FSD believes these changes provide the formalized

requirements, cross-training and oversight to ensure consistent results. FSD will look into more formalized training, should this new procedure and on-the-job training prove insufficient

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

14

• 6. Insufficient

segregation of departmental duties in the Fleet Services auction process

High

• Incorporate segregation of duties for the

auction process. Management Response

• FSD agrees with the recommendation, and will prepare the list of vehicles

available for surplus, and turn that list over to the unit assigned to handle disposition of surplus goods. That function is performed by the General Services Department (GSD), outside of FSD. The disposition of the surplus vehicles or equipment will be handled by that unit pursuant to WSSC’s Standard Procedure titled Disposition of Scrap Metal and Surplus Goods. Findings Rating Recommendations

Findings & Management Response (Cont’d.)

15

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

• The final disposition amounts will be provided to FSD by the GSD

to allow FSD to update the asset records in TEAMS or current asset management system. This change is effective as of July 30, 2018. .

Findings Rating Recommendations

• 7. Auction inventory

lists contain inventory items without identifying asset numbers Medium Establish a process to have a unique identifying number for all items leaving the Commission for auction.

16

Management Response

• FSD agrees with the recommendation, and will prepare the list of vehicles

available for surplus, and turn that list over to the unit assigned to handle disposition of surplus goods. That function is performed by the General Services Department (GSD), outside of FSD. The disposition of the surplus vehicles or equipment will be handled by that unit pursuant to WSSC’s Standard Procedure titled Disposition of Scrap Metal and Surplus Goods.

Findings & Management Response (Cont’d.)

17

Findings & Management Response (Cont’d.)

• The final disposition amounts will be provided to FSD by the GSD

to allow FSD to update the asset records in TEAMS or current asset management system. This change is effective as of July 30, 2018. . Management Response (Cont’d)

18

• 8. WSSC Motor

Vehicle and Equipment Assignment Regulation Violation High Enforce the standard procedure SP LOG 07-01 and take measures to properly monitor the use of vehicles. Findings Rating Recommendations Management Response

• FSD agrees that managers are responsible for enforcement of the stated
• Procedure. FSD recently installed AVL (Automatic Vehicle Locator)

technology that will assist in identifying vehicle usage. This information is made available to the assigned driver’s respective Section/Division Manager as well as to FSD. FSD will be reviewing the mileage and use data on a monthly basis and reaching out to managers across the Commission to follow up on unusually high mileage or outliers. This review and communication should assist the consistent application of these policies.

Findings & Management Response (Cont’d.)

19

• 9. Some assigned

vehicles do not meet the vehicle assigned usage requirement Medium Ensure the Fleet staff follow the same criteria in SP LOG 07-01 regarding vehicle request and replacement process as required of other departments and divisions. Findings Rating Recommendations Management Response

• FSD agrees that its vehicles assignments should meet the same criteria as
• thers across the Commission. The three vehicles identified in the audit

had been assigned to employees that had recently retired or resigned. Since that time, two vehicles were reassigned to Project Cornerstone and the Materials Management Division.

Findings & Management Response (Cont’d.)

20

• In addition, Fleet is analyzing AVL data to identify underutilized

vehicles and communicating those results to Section and Division Managers. After 12 months of the AVL data, FSD will be designating vehicles which don’t meet the current usage requirements and recommending them for return to the motor pool or designation as surplus. This designation and recommendation should be completed on or before December 31, 2019.

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

21

• 10. Fleet TEAMS audit

trails were not turned on until approximately 5 years after implementation Medium

• Standardize and enforce audit trail

implementation for all applicable systems to ensure data integrity and establish accountability.

• Periodically review roles and

responsibilities for the Fleet TEAMS and adjust accordingly to monitor access to the system. Findings Rating Recommendations Management Response

• Fleet Services Division Response: Fleet will work with IT to implement

this recommendation. FSD has confirmed that audit trails have been turned on in TEAMS, but both FSD and IT will be working with Project Cornerstone Team to ensure same functionality is included in WAM 2.2.

Findings & Management Response (Cont’d.)

22

• Information Technology Department Response: The senior

level management who were responsible for implementing the Fleet application were no longer employed at WSSC when the current audit took place. Because of this disadvantage, there is no way to ascertain why the audit-log function wasn’t turned on when the Fleet module was deployed to production.

• As a point of clarification on this specific finding, the Fleet

audit/log tables that were not enabled dealt primarily with the PM Forecast and the PM Master. This has since been corrected.

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

23

Findings & Management Response (Cont’d.)

Management Response (Cont’d) Information Technology Department Response (Cont’d):

• Going forward, the current senior level IT management agrees with

the audit findings and the need to standardize and enforce audit/log table trails for the implementation of all applicable systems.

• Audit/log tables and history tables will be enabled with all new

deployments.

• The IT Quality Assurance team will develop test scripts that

verify that audit logs are enabled and ready prior to being deployed to the production environment.

• IT will work will Fleet Operation to periodically review and adjust

their employees’ access, based on their roles and responsibilities

24

• 11. Standard

procedures are

• utdated and do

not reflect current practices Medium Update the standard procedures to address issues identified during the audit and incorporate new processes and systems. Findings Rating Recommendations Management Response

• FSD has begun the process of updating these standard procedures, but

this process will take time given the enterprise wide application of such

• procedures. Given the current personnel shortage and resource

constraints in FSD and enterprise wide focus on Project Cornerstone, FSD anticipates that the policies will be updated on or before December 2019.

Findings & Management Response (Cont’d.)

25

• 12. Procedures are

not documented for the Maryland Department of the Environment (MDE) regulatory audit Medium Ensure the WSSC MDE regulatory audit procedures are documented for knowledge transfer and consistent compliance with MDE regulations. Findings Rating Recommendations Management Response

• FSD will begin the process of developing a procedure to address these

requirements once it fills the Business Analyst position. The procedure will involve coordination with the Production Department – Industrial Assets Management Division and Facilities Maintenance Division as well as the Environmental Section of the Engineering and Environmental Services Division in the Engineering and Construction Department.

Findings & Management Response (Cont’d.)

26

Findings & Management Response (Cont’d.)

Management Response Cont’d)

• This process will take time given the cross enterprise

responsibilities, the current personnel shortage and resource constraints in FSD, and enterprise wide focus on Project Cornerstone.

• FSD anticipates that the Standard Procedure will be adopted on
• r before December 2019.

27

The audit report identified several areas that warrant management’s attention. Failure to address the identified issues may lead to the following potential risks for the Commission: theft of inventory, misuse of resources, fraud, waste and abuse, and

• ver/understated asset accounts. The potential risks, if

realized, may negatively affect WSSC’s financial statements and AAA Bond rating. We thank the Fleet Services Division, Accounting Division, Disbursements Division, Information Technology Department, General Services Department, Occupational Safety and Health Division, Procurement Office, and Support Services Division for their timely responses and cooperative support.

28

29

30

Background As part of our continuous Bi-Weekly Payroll Compliance Review process, we reviewed 16 different payroll reports including Total Earning Summary, Deductions Summary, Gross to Net Comparison, Salary Changes, Position and Section Changes, Merit Bonus, Salaries Under Minimum and Maximum, Overtime, Administrative Leave, Emergency Duty Pay, Hazardous Duty Pay, Suspensions, Severance Admin Pay and Temporary Employees.

Audit Team: Janice Hicks – Auditor

31

Objectives The purpose of the Bi-Weekly Payroll Compliance Review is to ensure amounts paid to employees were accurate and agreed with supporting documentation. Scope Bi-weekly payrolls processed between 6/16/2018 through 9/08/2018

32

PPE 6/16/2018 - OIG Report - Gross/Net Comparison One (1) employee appeared on this report earning an additional $22,313.87 compared to the prior pay period gross/net amount. The increase in earnings was due to a miscalculation of the employee’s hourly rate

• ver the past six years.

Exception Report Observations Note: This issue is being addressed under the Office of the Inspector General (OIG) – Year-End Payroll Review - Retro Pay audit. Management’s response and plan of action will be included in the OIG report.

Observations

33

PPE 6/16/2018 - OIG Report - Gross/Net Comparison Two (2) employees received large special pays, $4,134.00 and $2,132.46.

In accordance with personnel policy 2:24 Higher Classification Assignment section III. D. Each of the higher classification compensation during this pay period are in accordance with the policy.

Exception Report Observations (Cont.) Note: Corrected action has been taken.

Observations

34

PPE 8/25/2018 - OIG Report - Gross/Net Comparison One (1) employee appeared on this report earning an additional $20,004.29 compared to the prior pay period gross/net amount. The increase in earnings was due to a miscalculation of the employee’s hourly rate

• ver the past six years.

Exception Report Observations (Cont.) Note: This issue is being reviewed under the OIG – Year-End Payroll Review - Retro Pay audit. Management’s response and plan of action will be included in the OIG report.

Observations

36

37

Case Status:

Five (5) closed and one (1) in progress:

5, , 83 83% 1, , 17 17%

Investi tigation

• n Case S

Status us 1st Quarter Fis r Fiscal Ye l Year 2 r 2019

Closed In Progress

38

Closed Cases:

Five (5) Hotline cases closed since the last quarter. The closed cases included one (1) allegation for each of the following categories: customer relations, product quality concern, conflicts of interest, theft of time, and safety issues & sanitation.

1, , 20 20% 1, , 20 20% 1, , 20 20% 1, , 20 20% 1, , 20 20%

Clo losed C Cases B By Alle llegation Type pe 1ST Q 1ST Quar arter F Fisca cal Y Year ar 201 2019

Customer Relations Product Quality Concern Conflicts of Interest Safety Issues and Sanitation Theft of Time

39

The average number of calendar days from case opening to close was thirty-four calendar days (34), which is an improvement of 15 days from last quarter’s report of forty-nine (49) calendar days. The outcome of each closed Hotline case for the first quarter of fiscal year 2019 is captured in the table below:

METHOD OD ISSUE UE TYP YPE NUMBER CONCLUSION ION DISPOS OSIT ITION ION

Phone Customer Relations 1 Outside of WSSC’s jurisdiction Referred to appropriate authorities Web eb Product Quality Concern 1 Outside the Washington Suburban Sanitary District (WSSD) Notified reporting party Web eb Conflicts of Interest 1 Unsubstantiated No further action Web eb Theft of Time 1 Substantiated Management action taken Web eb Safety Issues & Sanitation 1 Unsubstantiated Pending claim Quarterly ly T Total: l: 5

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report

40

Based on a quarterly comparison analysis between the 4th quarter of FY 2018 and 1st quarter of FY 2019, one category of allegations appear to be trending (customer relations). (Please see table below).

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report

0.5 1 1.5 2 2.5

Closed Hotline Cases Quarterly Comparison

FY 18 4th Q FY 19 1st Q

41

Top Hotline Allegations Reported: The top Hotline allegations reported for the first quarter of fiscal year 2019 are as follows: two (2) theft of time and one (1) each for conflicts of interest, customer relations, product quality concern, and safety issues & sanitation.

Th Theft o

• f Time

me, , 2 Conflic licts o

• f Interest,

, 1 Custom

• mer R

Relation ions, , 1 Prod

• duct Q

Quali lity Concern rn, , 1 Safety I y Issu ssues and Sanit itation ion, , 1

TOP HOTLI LINE ALLEGTIONS 1ST Q QUARTE RTER R FISCA CAL YEAR 2 R 2019

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report