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InternalAuditAnEffectiveGovernanceTool
ProgramPartnerof
PresentedBy:
1
Introductions
JimRice– AuditCommitteeChair,FortBendISD
GrayleJames– BoardofTrusteesMember,FortBendISD
GregGibson,CPA–President,GibsonConsultingGroup,Inc.
CheyanneRolf,PMP– InternalAuditProgramandProjectManager,GibsonConsultingGroup,Inc.
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TopicsforToday
FortBendISDhistory
Whatisinternalauditanyway?
Whatwouldinternalauditlooklikeforus?
Whatdoresultslooklike?
HowdoIimplementaninternalauditprogram?
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FortBendISDHistory4
FortBendISDHistory
Hadaninternalauditdepartmentthatauditcommitteewasresponsibleforbutinpracticaltermscouldnotmanageonadailybasis
AuditCommitteeof2013‐14recommendedterminationofthisdepartmentandretainedoutsideconsultant
AuditCommitteefeltweshouldhaveasingleInternalAuditoronstafftoretaininstitutionalknowledgeandcoordinatewithoutsideconsultant
HireddistrictDirectorofInternalAudit
Triedablendofinternalauditorandoutsideconsultant
Nowhave100%outsourcedthiseffort
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WhatisInternalAuditAnyway?6
InternalAudit:Defined
Independent,objective assuranceandconsultingactivity
― Assurancetellsmanagershowwellthesystemsandprocessesareworking
― Consultinghelpsimprovesystemsandprocesseswherenecessary
Examination,monitoring,andanalysisofactivitiesrelatedtoanorganization’soperation
Identifiespotentialthreatstoanorganization’sgoalsandmakessuggestionsformitigatingtherisks
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InternalAuditvs.ExternalAudit
ExternalAudit
― Expressesanopinionontheaccuracyoffinancialstatementswithinmaterialitylimits
― Auditor’smanagementlettermayincludeobservationsmadeduringtheaudit
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InternalAuditvs.ExternalAudit
ExternalAudit
― Expressesanopinionontheaccuracyoffinancialstatementswithinmaterialitylimits
― Auditor’smanagementlettermayincludeobservationsmadeduringtheaudit
Internal Audit
― Looksbeyondfinancestoconsiderwiderissuessuchasprocesses,securityofassets,andregulatorycompliance– 360viewofoperationalperformance
― Higherlevelofrigorandscrutiny
― Notrequiredtobeconducted
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Who’stheBoss?
HistoricallyundertheSuperintendentorBusinessOffice10
Who’stheBoss?
HistoricallyundertheSuperintendentorBusinessOffice
NowmustreportdirectlytotheBoard
― TexasEducationCode,Section11.170(enacted2006)
Ifaschooldistrictemploysaninternalauditor:
(1)theboardoftrusteesshallselecttheinternalauditor
(2)theinternalauditorshallreportdirectlytotheboard
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WhatWouldInternalAuditLookLikeforUs?12
What’sinanAudit…13
AuditUniverse
01
02
03
Academic
Administrative
Operational
InternalAuditLifeCycle15
RiskAssessment
AuditPlan
AuditProjects
SpecialNeeds
AuditProjects
AuditProjects
AuditProjects
AuditProjects
Follow‐up
AnnualUpdate
What’sinanInternalAuditReport?
Policyandregulatoryframework
Descriptionofoperations,processes,systems,andorganization
Keyoperatingstatisticsandperformancemeasures
Analysis:
― Transactiontesting
― Dataanalytics
― Organizational,efficiency,process,internalcontrols,andcomplianceanalysis
Auditfindingsandrecommendations
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BenefitsofInternalAudit
A
B
C
D
F
Identifyrisksbeforetheybecomeheadlines
Demonstratecontinuousdistrict
improvement
Ensurethatdistrictassetsaresafeguarded
Helpsensurecompliancewithapplicablelaws,regulations,andboardpolicy
Ensurefundsareusedefficiently;
streamlineinternaloperationssothatstaffcanworkmore
effectively
WhatdoResultsLookLike?18
HumanResources
Selectedforauditbecausepersonnelcostsrepresent80%ofdistrictbudget
Newleadership;newHRstrategicplan
Majorauditfindings:
― Personnelfilemanagementlargelymanualandnotwellcontrolled
― Opportunitiesexistforadditionalautomationandforintegrationofinformationsystems
― MinorTRScomplianceexceptionsnoted
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HumanResources20
‐
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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
AuditCommendation:AverageNumberofDaysfromRecommendationtoOfferSignificantlyReduced
HumanResources21
RecommendationChart– ColorIndicatesPriority
Priority No. Recommendation
1 Clarify HR department titles so that they generally reflect their individual functions.
2Add more specificity to the HR strategic plan by establishing priorities for completing projects forthe 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.
4Update Board Policies DIA (LOCAL) Freedom from Discrimination, Harassment, and Retaliation andFB (LOCAL) Equal Education Opportunity to list the names and other requirements of the twocoordinators who have been designated.
5Post EEO and ADA posters in conspicuous work locations within both the Fort Bend ISDadministration building and the HR Division in accordance with federal EEO and ADA laws and boardpolicies. 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.
ConstructionManagement
Uniquebecauseauditwaspre‐emptive– evaluateddistrictreadinessforbondprogrambeforeitstarted
Districtselectedprogrammanager
Majorrecommendationsincluded:
― Improvedmanagementreporting
― Reconsiderconstructionmanagementapproaches
― Enhancedsafetyandsecuritystandardsforschools
Follow‐upstudyconductedfollowingyeartoensureimplementation
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ResultsImplementationTracking23
Asmoreauditsareconducted,difficultforBoardtoto keepupwith
Increasedaccountability
Ensurethatyouaregoodstewardsoftaxpayerinvestments
Spreadsheetsareokforsuperintendentandstafftracking
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HowdoIImplementanInternalAuditProgram?
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FortBendISDProcess
AuditCommitteeapprovesanaudittocommence.
Auditormeetswithdepartmenttobeauditedtoestablishrulesoftheroad.
Auditorconductsaudit.
Auditormeetswithdepartmentandadministrationtoreviewresultsofaudit.Providesanopportunityforadministrationtorespond.
Auditoranddepartment/administrationmeetwithAuditCommitteetoreviewaudit.
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FortBendISDProcess(continued)
OnceAuditCommitteeissatisfiedwiththeaudit,auditormakespresentationtothefullboard.
Auditorperformsafollowup10monthslatertoensureallrecommendationshavebeenimplemented.
Auditorthenmeetswithdepartment/administrationandAuditCommitteetoreportonresults.
Auditcommitteecontinuestomonitoradministrationeffortsgoingforwardandthenestablishesatimelineforthenextauditofthissamedepartment.
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InvestinginInternalAudit
Investmentcommensuratewithdistrictsize
BoththeBoardandSuperintendentneedtobe“invested”
Avisiblecommitmenttocontinuousimprovement
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QUESTIONS
