Internal Audit Department Status Report to the Board of Supervisors
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EXHIBIT A IAD’S MONTHLY ACTIVITY REPORT FOR DECEMBER 2006 TO THE BOARD OF SUPERVISORS Recipient of the Institute of Internal Auditors “Award for Excellence” The Internal Audit Department is an independent audit function reporting directly to the Orange County Board of Supervisors. by the Director of Internal Audit Dr. Peter Hughes, MBA, CPA Certified Information Technology Professional (CITP), Certified Internal Auditor (CIA), Certified Fraud Examiner (CFE) Assistance in assembling this report provided by: Eli Littner, Deputy Director, CPA, CIA, CFE, CFS, CISA Alan Marcum, Audit Manager, MBA, CPA, CIA, CFE Michael J. Goodwin, Audit Manager, CPA, CIA Autumn McKinney, Audit Manager, CPA, CIA, CGFM Board Date: January 30, 2007 Exhibit A, Page 1 of 9 MONTHLY SUMMARY – December 2006 Status Report to the Board of Supervisors by IAD DECEMBER AUDIT ACTIVITY: WE FINISHED 5 PROJECTS FOR THIS MONTH AS SUMMARIZED BELOW: We completed 1 Audit: 1. District Attorney – Spousal Abuser Prosecution Program We found the financial statement presents fairly, in all material respects, the approved budget, expenditures, and costs claimed and accepted for the District Attorney’s Office Audit of Spousal Abuser Prosecution Program, for Fiscal Year Ending June 30, 2006. We issued 2 Reports of Monthly Computer Assisted Audit Techniques (CAATs) for the Months of November and December 2006: 2. Auditor Controller - Duplicate Payments ...
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EXHIBIT A
Board Date:
January 30, 2007
Exhibit A,
Page 1 of 9
IAD’
S
M
ONTHLY
A
CTIVITY
R
EPORT
FOR
DECEMBER
2006
TO THE
BOARD OF SUPERVISORS
Recipient of the Institute of Internal Auditors “Award for Excellence”
The Internal Audit Department is an independent audit function reporting directly to the Orange County Board of Supervisors.
by the Director of Internal Audit
Dr. Peter Hughes, MBA, CPA
Certified Information Technology Professional (CITP),
Certified Internal Auditor (CIA), Certified Fraud Examiner (CFE)
Assistance in assembling this report provided by:
Eli Littner, Deputy Director
, CPA, CIA, CFE, CFS, CISA
Alan Marcum, Audit Manager
, MBA, CPA, CIA, CFE
Michael J. Goodwin, Audit Manager
, CPA, CIA
Autumn McKinney,
Audit Manager
,
CPA, CIA, CGFM
MONTHLY SUMMARY – December
2006
Status Report to the Board of Supervisors by IAD
DECEMBER AUDIT ACTIVITY:
WE FINISHED 5 PROJECTS FOR THIS MONTH AS SUMMARIZED
BELOW:
We completed 1 Audit:
1.
District Attorney – Spousal Abuser Prosecution Program
We found the financial statement presents fairly, in all material respects,
the approved budget, expenditures, and costs claimed and accepted for
the District Attorney’s Office Audit of Spousal Abuser Prosecution
Program, for Fiscal Year Ending June 30, 2006.
We issued 2 Reports of Monthly Computer Assisted Audit Techniques
(CAATs) for the Months of November and December 2006:
2.
Auditor Controller - Duplicate Payments to Vendors
We identified
1
duplicate payments made to vendors, totaling
$142
or
.0001%
of the
$106
million of vendor invoices processed during October
2006 that are being pursued by the Auditor-Controller.
3.
Auditor Controller - Duplicate Payments to Vendors
We identified
7
duplicate payments made to vendors, totaling
$252,462
or .11% of the $80
million
of vendor invoices processed during
November 2006 that are being pursued by the Auditor-Controller.
One
of the duplicate payments was for
$223,670
. The Auditor-Controller
informed us that it has contacted the applicable department (HCA) and a
full credit is expected to be received by December 29, 2006.
Due to the large dollar amount involved, we will further review this issue
to determine the cause of the duplicate payment and will document our
findings in a separate report.
We completed 2 Follow-Up Audits:
4.
JWA - Avis Rent A Car Systems
1
st
Follow-Up Audit and Final Close-Out of the Limited Lease Review of
Avis Rent A Car.
Corrective action was taken on all
3
recommendations.
Board Date:
January 30, 2007
Exhibit A,
Page 2 of 9
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January XX, 2006
Exhibit A,
Page 3 of 9
5.
RDMD - Sand Canyon LLC (Strawberry Farms Golf Club)
2
nd
Follow-Up Audit and Final Close-Out of the Limited Lease Review
of Sand Canyon LLC (Strawberry Farms Golf Club).
Corrective action
was taken on all
3
remaining
recommendations.
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 4 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
MATERIAL FINDING:
Department and Description
Comments
None issued during December 2006.
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 5 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
NON-MATERIAL FINDINGS
Department and Description
Comments
1.
DEPT:
District Attorney
TITLE:
Audit of Spousal Abuser
Prosecution Program (Grant
Award No. 05SA12B017)
Audit No.:
2612
ISSUED:
December 27, 2006
Scope:
We audited the District Attorney (DA) Office’s financial statements for the Grant
to determine that budgeted amounts, expenditures, and costs claimed and accepted were
fairly stated, i.e., the amounts are recorded accurately, completely, and timely.
Also, in
planning and performing our audit we reviewed internal controls over financial reporting
and performed tests of the DA Office’s compliance with certain laws, regulations and grant
requirements.
Conclusion:
In our opinion, the financial statements presents fairly, in all material
respects, the approved budget, cumulative expenditures, and allowable costs.
In addition,
we found no matters involving the internal controls that we considered a material weakness
and nothing came to our attention that caused us to believe that the DA office’s had not
complied with the laws, regulations, and grant requirements tested.
Background:
The grant is funded by the California Department of Justice, and the
2005/2006 fiscal year grant award totaled $95,033.
The grant requires the DA to provide a
20% ($19,007) in-kind match, which is funded from the County General Fund.
The grant agreement requires that the DA obtain an annual audit of the financial
statements.
The DA has the option of outsourcing the audit to an outside CPA firm or
requesting that the County Internal Audit Department conduct the audit.
Type of Recommendations:
None
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 6 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
Department and Description
Comments
2.
DEPT:
Auditor-Controller
Human Resources
CEO/Purchasing
TITLE:
CAAT November
Audit No.:
2620-E
ISSUED:
December 21, 2006
S
COPE
:
The monthly CAAT routines are automated queries applied to large amounts of
electronic data searching for specified characteristics.
We currently perform 5 CAATs
routines utilizing selected payroll and vendor data.
Depending on the nature of the CAAT,
we perform them monthly, annually, or as necessary.
C
ONCLUSION
:
•
Duplicate Payments to Vendors:
We identified
1
duplicate payment made to vendors,
totaling
$142
or
.0001%
of the
$106 million
of vendor invoices processed during
October 2006.
We perform this analysis monthly to identify duplicate payments made
to vendors. We analyzed 14,807 invoices paid in October 2006 amounting to
$106,456,006. The Auditor-Controller currently has a recovery rate of about
71%
on
these duplicate payments.
Our prior research has indicated that the duplicate
payments are typically caused by a compounded human clerical error.
•
Deleted Vendors:
No findings.
B
ACKGROUND
:
The CAATs differ from our traditional audits in that the CAATs can query
100% of a data universe whereas the traditional audits typically test but a sample of
transactions from the population.
The resulting matches identified by the CAATs are subjected to further review and analysis
by the Internal Audit Department.
We then forward any resulting findings to the A-C, HR,
or CEO/Purchasing for their review and concurrence, and subsequent correction/recovery.
We also work with these departments to identify internal control enhancements with the
purpose of preventing future occurrences of the type of findings identified by the CAATs.
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 7 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
Department and Description
Comments
3.
DEPT:
Auditor-Controller
Human Resources
CEO/Purchasing
TITLE:
CAAT December
Audit No.:
2620-F
ISSUED:
December 28, 2006
S
COPE
:
The monthly CAAT routines are automated queries applied to large amounts of
electronic data searching for specified characteristics.
We currently perform 5 CAATs
routines utilizing selected payroll and vendor data.
Depending on the nature of the CAAT,
we perform them monthly, annually, or as necessary.
C
ONCLUSION
:
•
Duplicate Payments to Vendors:
We identified
7
duplicate payments made to vendors,
totaling
$252,462
or
.11%
of the
$234 million
of vendor invoices processed during
November 2006.
We perform this analysis monthly to identify duplicate payments made
to vendors. We analyzed 17,937 invoices paid in November 2006 amounting to
$234,353,950. The Auditor-Controller currently has a recovery rate of about
71%
on
these duplicate payments. Our prior research has indicated that the duplicate payments
are typically caused by a compounded human clerical error.
One of the duplicate payments was for
$223,670
.
The Auditor-Controller informed us
that it has contacted the applicable department (HCA) and a full credit is expected to be
received by December 29, 2006.
•
Deleted Vendors:
No findings.
B
ACKGROUND
:
The CAATs differ from our traditional audits in that the CAATs can query
100% of a data universe whereas the traditional audits typically test but a sample of
transactions from the population.
The resulting matches identified by the CAATs are subjected to further review and analysis
by the Internal Audit Department.
We then forward any resulting findings to the A-C, HR,
or CEO/Purchasing for their review and concurrence, and subsequent correction/recovery.
We also work with these departments to identify internal control enhancements with the
purpose of preventing future occurrences of the type of findings identified by the CAATs.
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 8 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
Department and Description
Comments
4.
DEPT:
John Wayne Airport
TITLE:
Final Close-Out - First
Follow-Up Audit of Limited Lease
Revenue for Avis Rent A Car
Systems, Inc.
(Original Audit No.
2585)
Audit No.:
2650-D
ISSUED:
December 18, 2006
S
COPE
:
1
st
Follow-Up Audit and Final Close-Out of Limited Lease Revenue Review for
Avis Rent A Car to determine the implementation status of recommendations made in our
original audit report dated July 31, 2006. In that audit, we identified
3
control findings
resulting in
3
recommendations.
C
ONCLUSION
:
We are pleased to report that satisfactory corrective action has taken place
on all
3
recommendations.
As such, this report represents the final close-out of the
original audit.
B
ACKGROUND
:
The original audit was a limited review of lease revenue pertinent to the
lease agreement between the County and Avis Rent A Car System, Inc., dated December
14, 2000. Avis became a wholly owned subsidiary of Cendant Car Rental Group (Cendant)
and the lease agreement was assigned to Cendant in June 2001. The lease agreement was
for the operation of a rental car concession at John Wayne Airport.
T
YPE OF
R
ECOMMENDATIONS
:
Lease compliance or improvements to internal controls
regarding:
a reporting error for fuel reimbursements; format of the monthly gross receipts
statement; and unapproved vending machines.
MONTHLY SUMMARY – December 2006
Status Report to the Board of Supervisors by IAD
Board Date:
January 30, 2007
Exhibit
A, Page 9 of 9
For a copy of the complete audit report that contains the audit objective,
scope, findings, recommendations, and management’s response,
contact the Internal Audit Department’s website at http://www.ocgov.com/audit/
Department and Description
Comments
5.
DEPT:
Resources Development
and Management Department
TITLE:
Final Close-Out - Second
Follow-Up Audit of the Limited
Lease Review of Sand Canyon
LLC (Strawberry Farms Golf
Club) (Original Audit No. 2340)
Audit No.:
2654-C
ISSUED:
December 21, 2006
S
COPE
:
2
nd
Follow-Up Audit and Final Close-Out of Limited Lease Revenue Review of
Strawberry Farms Golf Course to determine the implementation status of
3
recommendations not fully implemented at the time of our 1
st
Follow-Up Audit, dated
October 4, 2006.
No material or significant issues were identified in the original audit
report.
C
ONCLUSION
: We are pleased to report that satisfactory corrective action has taken place
on the remaining
3
recommendations.
As such, this report represents the final close-out
of the original audit.
B
ACKGROUND
:
The original audit was a limited review of lease revenue pertinent to the
lease agreement between the County and Sand Canyon LLC (Strawberry Farms Golf
Club), dated November 8, 1996.
The lease agreement is primarily to operate an eighteen-
hole golf course, driving range, and pro-shop on properties owned by the County and the
Irvine Ranch Water District.
T
YPE OF
R
ECOMMENDATIONS
:
Lease compliance or improvements to internal controls
regarding: rent owed due to reallocation of advance reservation fees, pro-shop fees, tee
pack fees, and environmental fees; categorization of banquet/event equipment rentals;
categorization of other site fees; approval for handicap and membership fees; required
financial statements; reimbursement of audit costs; supervisory review of vending cart
sales; and documentation of register voids.
