Accountability Audit Report: Island County Public Transportation Benefit Area (Island Transit)

8/10/2019 Accountability Audit Report: Island County Public Transportation Benefit Area (Island Transit)

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Accountability Audit

Report

Island

County

Public Transpo

rtation

Benefit

Area

(Island

Transit)

-.Island

County

For

the

period

January

1, 20L3

through

December

31

,2013

Published

Report

No.


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Washington

State

Auditor

Troy

Kelley

issue

Date

-

(Issued

by

OS)

Board of Directors

Island

Transit

Coupeville, Washington

Report

on

Accountability

Thank

you

for

the

opportunity

to work with

you

to

promote

accountability,

integrity

and

openness

in

government.

The

State

Auditor's

Office takes

seriously

our

role of

providing

state

and

local

govemments

with

assurance and accountability

as

the independent

auditor of

public

accounts. In this

way,

we

strive

to

help

government

work

better, cost less,

deliver higher

value

and earn

greater

public

trust.

Independent

audits

provide

essential

accountability

and

transparency

for

Transit

operations. This

information

is

valuable

to

management,

the

governing

body

and

public

stakeholders

when

assessing the

government's

stewardship of

public

resources.

The

attached comprises

our

report

on

the Transit's

compliance

and

safeguarding

of

public

resources.

Our independent

audit

reporl

describes

the

overall results

and

conclusions

for areas

we examined.

We

appreciate

the

opportunity to

work

with

your

staff

and

we

value

your

cooperation during

the audit.

Sincerely,

Signature Here

(Please

do not remove

this line)

TROY KELLEY

STATE

AUDITOR

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Insurance Building,

P.O. Box 40021

'l

Olympia, Washington 98504-0021

I

(360)

902-0370

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TDD

Relay

(800)

833-6388


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AUDIT SUMMARY ..............

...........4

SCHEDULE

OF

AUDIT FINDINGS

AND

RESPONSES

............ ...................5

STATUS

OF PRIOR

AUDIT FINDINGS............... .........9

RELATED

REPORTS

....................

10

INFORMATION ABOUT THE

AUTHORITY

............. 11

ABOUT

THE

STATE

AUDITOR'S OFFICE ...............12

Washington State

Auditor's

Office

Page 3


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Results

in brief

In

most

areas we

audited,

Transit

operations

complied

with

applicable

requirements

and

provided

adequate

safeguarding

of

public

resources. The Transit

also

complied

with

state

laws

and regulations and its

own

policies

and

procedures

in

the

areas

we examined.

However,

we

identified

areas

in

which

the Transit could

make

improvements

in

payroll.

We

recommended

the Transit

establish

intemal

controls

and

processes

to ensure:

.

Salary

schedules are reviewed and approved

by

the Board.

o

Adequate

oversight

and

monitoring

over

the Executive

Director's

position

by the

Board,

which

includes

approval of

salary,

performance

evaluations

and

oversight of

leave.

o

Compensation

time is adequately tracked,

monitored

and approved

per

an established

PolicY.

These recommendations

were included

in

our report

as a

finding.

About

the

audit

This report

contains the

results

of

our independent

accountability

audit

of Island

Transit

from

January

1,2013 through

December

31,2013.

Management is

responsible

for

ensuring compliance

and adequate

safeguarding

of

public

resources

from

fraud,

loss

or abuse. This includes

the

design, implementation

and maintenance

of intemal controls

relevant

to these objectives.

Our audit involved

performing

procedures

to obtain

evidence

about

the Transit's

uses

of

public

resources,

compliance

with

state laws and regulations

and its

own

policies

and

procedures,

and

intemal

controls

over

such

matters.

In

keeping

with

general

auditing

practices,

we

do not examine

every

transaction,

activity

or

area.

Instead,

the areas

examined

were those representing

the

highest

risk of fraud,

loss,

abuse,

or

noncompliance.

The

following

areas

were examined

during

this

audit

period:

o

Open

Public

Meetings

Act

.

Financial Condition

o

Bond covenants

o

Payroll

and leave

.

Take home vehicles

.

Fuel

card use

Washington

State

Auditor's

Office

Page 4


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The

Trunsit

does

not llove

udequate

oversight

of

puyroll

to

stfeg uard

p

ublic

resources.

Background

The Transit

paid

55,926,768

and

$5,938

,049

rn

payroll

during

2012 and2013,

respectively.

The Transit has

a

responsibility

to ensure

disbursements

of

public

funds,

including employee

wages,

are

adequately

supported, approved and made

in

accordance

with

its own

policies

and

procedures.

D es cripti

o

n

of

C

o

n ditio n

The Transit's

personnel

policy

requires

the

salary

schedule

for all

Transit

employees

be

approved by

the Board

of

Directors.

We

found

no

evidence

of the Board

approving

the

salary

schedule. The

only evidence

of

salary approval

is

in

the

budgeting

process

in

deparlmental

lump

sum amounts.

The

contract

between

the

Transit

and the

former

Executive

Director

requires

the

Board

to

review

annually

the

Executive

Director's

performance,

contract

and salary.

However,

this

annual review

did

not occur.

The last documented

review

was

conducted

in

1996.

The former

Executive

Director

received

salary increases

approximately

every

two

years

without

specific

Board approval.

We identified

a

lack

of

oversight

of

the fbrmer

Executive

Director's

leave

usage.

The

Executive

Director

was

self-approving and

self-reporting

any leave

used

to

the

Payroll

Specialist. The

lbrmer Executive Director's

calendar

identified

the following:

o

Attendance

at

a conference for

16 days

in

April

2013

when flight

records

indicate

the

Director

was

only in the

same

city as

the

conference

for

four

days.

o

Vacation

for

four

weeks that

spanned July

and

August

of 2013

o

Attendance

at

a

conference

for

19

days

in

September

2013 when

flight

records

indicate

the

Director

was only in

the same

city

as the

conference

for

five

days.

o

Vacation

for

three

weeks that

spanned June

and

July

of 2Ol4

Despite

the

above

items

noted

on the former

Executive

Director's

calendar,

we

identified

only

six days

of

leave

were deducted

from the former

Executive

Director's

leave

balances

from

August2012

to

September

2014.

Washington

State Auditor's

Office

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We also identified

that salaried exempt employees

track

their own

accrual and

usage

of

compensation

time, which is

time

worked

beyond

the

standard

40 hour

work

week. The

Transit does not

have

a

method

of tracking

this

time

to ensure

its use is

accurate.

Cause

of

Condition

The Board

members did not know

about the

policy

requiring

approval

of

the

salary schedule.

Also

they were not

awate

of

the former Executive

Director's

contract requirements

and did

not

provide

adequate

oversight of

the former

Executive

Director's

salary,

performance

or

leave

usage.

The Transit

has not established

controls over compensation

time

accrual

and use for

exempt

employees.

Effect of

Condition

Although

budgets were

created and approved

based on

salary

schedule figures,

the Board

did

not

review or

approve

changes

to the

salary

schedule.

Without

adequate

oversight

and

monitoring

of the

salary schedule, the Board

is unable

to make

informed

decisions

that affect

payroll

amounts

and

cannot ensure employee

wages

are

appropriately

set based

on

job

classification.

Without

adequate

oversight and monitoring

of the Executive

Director

position,

the Board

has

not

limited

pay,

adequately

evaluated

the

Executive's

performance,

and has

not had

the

ability

to ensure

leave

accruals

are accurate

and

not

in

violation

of

the

constitutional

prohibition

of

extra

compensation.

Due

to

the

lack

of

documentation

of

the

former Executive

Director's

time

off

and

leave use,

we were unable

to determine

if

ending leave

balances

were

correct.

The

Transit

cannot ensure

the use

of

compensation

time

for

salaried exempt

employees

is

appropriate

due

to the lack

of documentation

and tracking

of

this

time.

Recommendstion

We

recommend

the

Transit

establish

internal

controls

and

processes

to ensure:

o

Salary

schedules

are reviewed

and approved

by

the Board.

o

Adequate

oversight

and monitoring

over

the

Executive

Director's position

by the

Board,

which

includes

approval

of salary,

performance

evaluations

and oversight

of

leave.

o

Compensation

time

is adequately

tracked,

monitored

and

approved.

Washington

State Auditor's

Office

Page 6


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Trunsit's

Response

1.

Island Transit

agrees

with

the

audit

recommendation.

Island Transit's

salary schedule

witt

be

reviewed

and approved by

the Board

during

the annual

budget

approval

process

to

ensure

adequate oversight and

monitoring

of

employee

wages.

Island Transit agrees to review the

Executive

Director's

salary,

performance

evaluation

and

oversight of leave

at

the

first

Board of

Director's

meeting in November of each

year

according to Board

policy.

Island Transit

does

have

a compensation time

policy

in

the Employee Policy Manual,

Section

1.4.4

A Exempt

Administration

Employees

-

Compensation

Time

(Comp

Time)

that allows

for

the

accrual

of

compensation time.

At

the recommendation

of the

auditor,

Island

Transit

has established a methodfor exempt

employees to track

this time to ensure

use is accurate.

Auditor's

Remurks

We appreciate

the

Board's

commitment to addressing the

audit recommendations.

We

will

review the comective

action taken during our next audit.

Applicuble Luws and Regulution

Budgeting, Accounting

and Reporting System

(BARS)

Manual

-

Part

3, Accounting,

Chapter

1,

Accounting Principles

and Internal Control

Island Transit Personnel

Policies Manual, Section 4.04

*

Compensation

states:

The salary schedule

for all

Island Transit

employees

shall

be implemented and

stated by

Resolution,

as approved by the Board

of

Directors

of

trsland

Transit. The

salary schedule

shall be made available

to Island

Transit

employees

and

the

public

upon request.

It is

the

policy

of

Island

Transit to

pay

compensation

which is nondiscriminatory.

A11

compensation

policy

decision must

take

into

consideration

Island

Transit's

overall

economic

condition

and

competitive

position.

Initially, all

new

hourly

employees

will

be

hired

at

the starling

rate

assigned

to

their

job

grade.

The

Executive Director

has the authority

to

place

andlor

promote

employees

at

the

proper

wage step

depending upon

previous

experience,

job

qualifications,

or

meritorious

achievements.

SECTION

25

EXTRA

COMPENSATION PROHIBITED.

The legislature

shall never

grant

any extra

compensation

to any

public

officer,

agent,

employee,

servant, or contractor,

after the

services shall have been rendered,

or

the

contract

entered into, nor

shall the

2.

3.

Washinglon State

Auditor's

Olfice

Page 7


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compensation

of any

public

officer be

increased

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during

his term

of office.

&i

Nothing in this section

shall

be deemed

to

prevent

increases

in

pensions

after

such

pensions

y

shall

have been

granted.

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The status

of findings

contained

in the

prior

years'

audit reports

of the Island Transit is

provided

below:

1.

The

Transit

did

not

adequately

monitor

take

home vehicles

and

fuel

card

use to

ensure

they are only used

for official

purposes.

Report No.

1011059,

dated

l2l30ll3

Bockground

The Transit

did

not

adequately

monitor

the use of

fuel

cards

or

vehicles to ensure

they are

used only

for

official

purposes.

Vehicles

assigned to

employees for take-home

purposes put

the

Transit

at

risk for misappropriation.

Vehicles

belonging to

the Transit

and assigned to

employees as take-home vehicles were

not

marked

as assets

of the

Transit,

as required by

RCW 46.08.065.

Stutus

The

condition reported

during

the

2012 audit is

partially

resolved.

The Transit has

marked

the

vehicles "for official

use"

and has

improved

tracking

and

reporting over vehicle use;

however, is

still

working

on

increasing controls

to

ensure

actual mileage

is

compared

to

vehicle

and

fuel

use.

Washington State Auditor's

Offrce

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9


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Financial

Our opinion

on the Transit's

financial

statements

and

compliance

with federal

grant

program

requirements

is provided

in

a

separate

report,

which

includes

the

Transit's financial

statements.

That

report

includes

a finding

regarding

how

the Transit's

financial

condition

has impacted

current

service levels

and

puts

it

at

risk

of not being

able to

meet

financial

obligations.

Federal

grant

programs

We evaluated intemal

controls

and tested

compliance with

the federal

program

requirements,

as

applicable, for

the Transit's

major federal

program,

which

is

listed in

the Federal

Summary

section

of

the

financial

statement

and single audit

report.

That

report

includes

a federal

finding

regarding

inadequate

intemal

controls

to

ensure

compliance

with

requirements

of

the

State of

Good Repair

Grants Program.

Washington

State Auditor's

Office

Page

10


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The Island County Public Transportation Benefit Area,

doing

business as Island

Transit,

was

established in September 1980

and

began

transit

services

on

December l, 1987.

The

Transit

provides

public

transportation

to

approximately

4,000 riders

daily

to

Whidbey and

Camano

Island citizens.

A

five-member elected Board

of

Directors

governs

the Transit. The

Board

is

comprised

of

one

board

representative

from

Island County,

City

of Oak Harbor,

City of

Langley, and the

Town

of

Coupeville.

The

Board appoints an

Executive Director

to

oversee.the

Transit's

daily operations

as

well

as its

approximately

104 employees.

The Transit

collected revenue

of approximately

921.4

million

in fiscal

year

2013.

Audit

history

You can find

current and

past

audit reports

http

://portal.

sao.wa.

gov/ReportS

earch.

for the Island

Transit

at

Contact

information

related

to this report

Address: Island

Transit

19758

SR 20

Coupeville,WA 98239

Contact: Bob Clay, Board Chair

Telephone:

(360)

678-7771

Website: www. islandtransit.

org

Information current

as of report

publish

date.


Office

Page 1 I


12/12

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The State Auditor's

Office is established in the

state's Constitution

and

is

part

of

the executive

branch of state

government.

The

State

Auditor

is

elected

by

the citizens

of

Washington

and

serves four-year terms.

We

work with

our audit clients and

citizens

to

achieve our

vision

of

govemment

that works

for

citizens,

by

helping

governments

work

better, cost

less,

deliver

higher

value, and eam

greater

public

trust.

In

fulf,rlling our mission to hold

state

and local

governments

accountable

for

the use

of

public

resources,

we

also

hold

ourselves accountable

by continually

improving

our audit

quality

and

operational

efficiency

and

developing

highly engaged

and committed

employees.

As

an elected

agency,

the State Auditor's

Office has

the

independence

necessary

to

objectively

perform

audits

and

investigations.

Our audits

are

designed to

comply

with

professional

standards

as well as

to

satisfy the requirements of federal,

state, and local

laws.

Our audits look at financial information

and compliance

with

state, federal

and

local laws

on the

part

of

all

local

governments,

including

schools, and

all

state

agencies,

including

institutions

of

higher

education. In

addition, we conduct

performance

audits

of

state

agencies

and

local

govemments

as well as

fraud,

state whistleblower and citizen

hotline investigations.

The results

of

our

work are widely

distributed

through a

variety

of

repofts,

which

are available

on our website

and through

our free, electronic subscription

service.

We

take

our role

as partners

in

accountability

seriously, and

provide

training

and

technical

assistance to

governments,

and have

an

extensive

quality

assurance

program.

Contact

information

for

the

State

Auditor's

Office

Deputy

Director

for

Communications

Thomas

Shapley

Tho mas.

S hap I

[email protected].

gov

(360)

e02-0367

Public

Records

requests

(360)

72s-s617

Main telephone

(360)

902-0370

Toll-free

Citizen Hotline

(866)

902-3e00

Website

www.sao.wa.gov


Office

Page 12

Documents

Accountability Audit Report: Island County Public Transportation Benefit Area (Island Transit)