Presentation on theme: "July 2012 AASHTO Internal/External Audit Subcommittee Conference Alice S. Wilson, Executive Director, Office of Audits Kentucky Transportation Cabinet."— Presentation transcript:
July 2012 AASHTO Internal/External Audit Subcommittee Conference Alice S. Wilson, Executive Director, Office of Audits Kentucky Transportation Cabinet
Consists of an Executive Director and two divisions: Division of Audit Services and Division of Road Fund Audits. The Executive Director reported directly to the Secretary and the Internal Audit Committee, and now also reports to the Special Assistant to the Secretary – Cindy James. Each Division has a Director and several branches. Division of Audit Services has Internal Audit and External Audit. Division of Road Fund Audits has KIT/KYU, IFTA,UDI/IRP and Tax Compliance.
The Office has a cap of 49 employees Division of Audit Services-Assistant Director Internal Audit-9 employees External Audit-7 employees Division of Road Fund Audits-Director and 29 employees
By policy, Internal Audit reports to an Internal Audit Committee that meets quarterly OIG is included in those meetings Helpful to share concerns and issues at high level Discusses highlights of past quarter’s investigations and audits
Internal Audit Branch Manager, 2 supervisors and 6 auditors Several “letters” – CPA, CIA, CICA, CPM Various GAGAS engagements Performance Audits – related to compliance, efficiencies, financial Attestation engagements - mainly AUP “Other” - joint investigations with OIG and FHWA FIRE (Financial Integrity Review and Evaluation) review assistance OMB A-133 Desk Reviews
How does Internal develop Internal Audit Plan? Conduct Risk Analysis using a combination of factors: Expenditures Receipts Past experience “problem” areas Management concerns Assistant Director compiles, discusses with Executive Director, who then sends plan to IAC for approval Overall plan development follows….
During the last quarter of each year, the Assistant Director conducts a risk assessment of Cabinet programs and operations to determine the Annual Audit Plan for the upcoming year: Emails management and IAC members and asks if there are areas they would like for us to review Prepares a 4 year trend analysis of revenues by Department and Division Prepares a 4 year trend analysis of expenditures by Department/Division/Function While performing the trend analysis, looks for unusual fluctuations in revenues and expenditures that do not have apparent reasonable explanation as well as any new programs.
(cont.) Determines hours available in the plan year Emails and asks internal audit staff if they have any areas they think should be covered Reviews the audit universe and leads noted throughout the year Reviews notes from meetings with Division Directors throughout the Cabinet Reviews “recommendations for future audits”
(cont.) Reviews the most recent CAFR and CAFR supplement Reviews prior year audit plan for engagements that were not completed Reviews internal Financial Report to Management Reviews audit coverage organizationally Compiles list of possible engagements and sends to the IAC for approval/discussion at upcoming IAC meeting
There are two factors to consider when developing the audit plan and engagement scheduling: Hours available for audit staff Engagement timing for auditee Hours available for audit staff: Prior to completing the audit plan, IAB management must determine the number of engagement hours available for each auditor for the fiscal year. IAB management should consider the following when determining the maximum annual hours available for audit staff to perform audits:
DIRECT PROJECT HOURS AVAILABLE FOR THE FISCAL YEAR TOMJOHNJESSICA P.REBECCACHRISJESSICA S.KRISTENROZELLA TOTAL HOURS 1,950 HOLIDAYS (83) ANNUAL (113) (180) (90) SICK (90) TRAINING (40) STATUS MEETINGS (100) (50) MISC ADMIN (125) ROUNDING/REPORTS/OTHER (33) (73) AVAILABLE HOURS 1,400 1,300 1,400 REVIEWS/SUPERVISORY TIME (1,400) (1,300) PROJECT HOURS - - 1,400 8400 DIRECT PROJECT UTILIZATION RATE0.0% 71.8%
Carryover Engagements Cell Phone Towers100 Receipts150 COT Billings150 GAX Documents150 Statewide Agreements150 Reserve for Carryover Engagements700 Total Hours Available8400 Less: Reserve for Carryover Engagements-7005 engagements Less: Reserve for special requests-500This would be approx 3-4 engagements Less: Reserve for followups-300 (Follow up on old audit reports - easier than doing a new audit). Estimate of 30 @ 10 hours each Available Audit Hours6900 Approx. Avg. Audit Time:150 Number of New Audits 46.00 This puts us at approx 50 audits for the year
FY13 AUDIT PLAN Review of Prior Engagements (FY09-FY12) Purpose:To review engaements performed from FY09-FY12 for consideration of possible engagement in FY13. Source:Prior year audit reports on the N drive the FY12 analysis I reviewed the prior audits and FY12 analysis to determine where we've been from FY09-FY12. Although we do not have an established time frame for when each Office/Division should be audited, it would be ideal to at least perform at least one engagement in each area once every 5 years (depending upon risk). That is not always possible given limited resources, risks, special requests, etc. The analysis below shows where we have been during the past 4 years and the remaining areas that haven't been visited have been divided up into: 1) Engagement should be considered for FY13, 2) engagement should be considered for FY14, and 3) no plans for the next two years based upon risk. FY13-FY14 CONSIDERATIONFY12FY11FY10FY09 Department of Aviation Capital City Airport Division Greater Commonwalth Aviation Division Kentucky Airport Zoning Commission Office of Public Affairs Office of Inspector General Office of Budget and Fiscal ManagementXXX Division of AccountsXXX Division of Purchases X Office of Legal ServicesXX Office of Civil Rights & Small Business Development % Department of Highways Division of Program Management Office of Project Development Division of Planning Division of Structural Design X Division of Highway DesignX Division of Environmental Analysis Division of Right of Way and UtilitiesXXX Division of Professional Services X Office of Highway Safety Division of Incident Management Division of Highway Safety Programs X Motorcycle Advisory Commission for Highway Safety Motorcycle Safety Education Advisory Commission
Office of Project Delivery and Preservation Division of Construction XXXX Division of MaterialsXX Division of Construction Procurement Division of EquipmentX Division of Traffic OperationsX X Division of Maintenance XX X District Offices D1 To be determined at a later date D2X X D3 D4X D5 D6 D7X D8 D9X D10 D11 D12 X Office of Information TechnologyX Office of Support Services Division of Facilities Support X Division of Graphic Design and Printing Office of Audits Division of Road Fund Audit Division of Audit Services
Department of Rural and Municipal Road Aid Office of Local Programs Kentucky Bicycle & Bikeway Commission % Office of Rural and Secondary Roads X Office of Human Resource Management Division of Personnel Administration Division of Employee Management Division of Professional Development and Organizational Management%X % Office of Transportation DeliveryX Department of Vehicle Regulation Division of Motor Vehicle Licensing X Division of Motor CarriersX XX Division of Driver LicensingX Kentucky Motor Vehicle Commission Conclusion: We have reviewed engagements performed in FY09-FY12 and have determined that the areas below should be considered for FY13 engagements given the length of time since prior audit. FY13FY14 AviationProgram Management PurchasesHighway Safety PlanningFacilities support Structural DesignLocal Programs Environmental AnalysisRural and Secondary Roads Incident ManagementMVL Construction Procurement OHRM
Tickmark Legend Coverage in an inventory engagement. % Covered in an External Audit X Covered by an Internal Audit Engagement should planned in this area annually given significance. Possibility for FY13 engagement given time frame since prior audit. Possibility for FY14 engagement given time frame since prior engagement. No engagement planned due to low financial or operational risks. Receives extensive coverage by the External Audit Branch. No specific engagement needed for FY13 as they just received an audit report at the end of FY12.
Many of the engagements on our list didn’t arise from exception based analysis but instead were requests by management. We’ve had some struggles and we’ve been trying to combat that by working more closely with management…so if they see us as a tool/resource, then hopefully it will increase how we are received. Some of these engagements may not be “high priority” risk wise, they are road blocks for mgt and if we can make their lives easier/better/then they will be more receptive to us.
Things for us to consider: Total Employees Currently: 4755 Central Office: 1176 employees District Offices: 3579 employees 1975—High: 9,464 employees Less staff = more responsibility for existing employees and more contracts with outside entities
KYTC maintains 28,000 miles of highways and is the nations 8 th largest system KYTC is responsible for all modes of transportation including 300 licensed airports and heliports as well as coordination with 12 railroads and 4 recreational railroads operating more than 2500 miles of track KYTC also coordinates freight movement on nearly 1600 miles of inland waterways, oversees 12 chartered public riverports, manages 7 ferryboat services and has 4 designated US Bicycle Routes and 5 state bicycle tours KYTC licenses 4.6 million vehicles and 1.3 million drivers each year, oversees 26 public transportation systems, issues more than 105,000 permits and collects taxes from nearly 70,000 carriers annually Annual Budget of $2.2 billion
Examples of recent engagements: Construction: Highway Design Estimates, Value Engineering, Construction Procurement, Final Pay Estimates, Material Certification Process Maintenance: Salt Sharing Agreements, Permits, 98 Gallon Tanks, Fuel Usage, GPS, Site Audits Financial/Miscellaneous: Subrecipient Monitoring, Inventories, Accounts Receivable, Oil/Gas/Mineral Rights, Cell Phone Towers, Recycling
Louisville Southern Indiana Ohio River Bridges Project (LSIORBP) $2.6 billion mega project with KYTC, INDOT and FHWA Expended over $220 million to date on Design/EIS Span several years Over 70 design consultants – so will coordinate work with External Audit
Recent engagements requested by management: Emergency Preparedness (2009 Ice Storm) Overtime IRP (International Registration Plan) Accounts COT Billings Investigations Murray-Calloway Transit Authority Beaver Dam Service Area Louisville Metro Maintenance Agreement Salt Sharing Agreements Highway Safety SASHTO
We have developed audit programs and templates to follow and standardized our processes where we could. We have implemented TeamMate – an electronic audit workpaper software package that we are all learning how to use. In process of implementing TeamMate, we improved our procedure steps, pulled everything together and eventually this will result in greater efficiency, which will help us do even more audits!
For example, for FY10, Internal Audit conducted 15 engagements and 87 OMB A-133 desk reviews In FY11, Internal Audit conducted 20 engagements and 72 OMB A-133 desk reviews In FY12 to date, Internal Audit has conducted 31 engagements and 82 OMB A-133 desk reviews As you can see this is a 55% increase over last year Internal audit could potentially issue 50-60 engagements per year
The Office has ACL and is learning how to use this and apply it to our audits to gain efficiencies We recently met with our GIS coordinator and believe this is an exciting new tool we can use in our internal audit engagements Staff have dual monitors, wand scanners, as well as cameras they are encouraged to use on audits
Internal Audit Plan for FY2013 The Internal Audit Branch’s mission is to assist Cabinet management in: Ensuring effectiveness and efficiency of programs, operations, and activities Ensuring Cabinet program objectives are achieved Reviewing the Cabinet’s compliance with statutes, regulations, and policies and procedures Reviewing the Cabinet’s controls over assets to ensure they are adequately safeguarded Each year, we prepare an internal audit plan to help accomplish these objectives. The process for preparing the internal audit plan involves performing a risk assessment that includes (but is not limited to) performing the following procedures: Soliciting feedback from Cabinet management about any areas (internal or external) that are challenges for them or that they would like for us to review on their behalf Reviewing FY09-FY12 revenues and expenditures for significant changes in activity Reviewing concerns expressed by other staff throughout the Cabinet, internal auditors, and concerns identified throughout the year Reviewing each Division/Office and considering the amount of time that has passed since an engagement was last performed in that area After performing the above procedures, we accumulate the results and prioritize the engagements based upon known risks and the potential impact upon the Cabinet (positive or negative). We then determine the number of engagements that can be performed based upon staff availability in the upcoming year. Below is our list of proposed FY13 engagements based upon this analysis. Please note that we do not expect to complete all of these within FY13, however, we are requesting more engagements as a part of this year’s plan in the interest of efficiencies and not having to request approval for interim engagements during the year.
Construction / Maintenance / Traffic / Equipment Construction Inspection Focus: General program review of KYTC's internal and outsourced construction inspection processes. Potential areas affected: Division of Construction, District Offices Construction Project Reviews Focus: The Division of Construction has central office staff that perform reviews of project documentation in the districts. This engagement will look at management's quality controls over these reviews. This is a replacement for the Construction Site Audits performed by the Internal Audit Branch in FY12. Potential areas affected: Division of Construction, District Offices Fuel & Asphalt Adjustments Focus: Review various aspects of fuel and asphalt adjustments. The specific scope could be determined after meeting with management in this area, but it could include reviewing adjustments to determine: 1) if they were calculated correctly, 2) prepared in accordance with Cabinet requirements, 3) applied when required, and 4) reviewed prior to approval. Potential areas affected: Division of Construction, Division of Accounts, District Offices Contractor Performance Evaluations Focus: Review the Cabinet's process for completing contractor performance evaluations. Potential areas affected: Division of Construction, District Offices, as well as other Divisions in the Offices of Project Development and Project Delivery & Preservation
Construction Procurement Focus: The specific engagement would be determined after meeting with management, but could include reviewing construction estimates and/or the bid process. Potential areas affected: Division of Construction Procurement Environmental Analysis Focus: An engagement has not been performed in this area in several years. The specific engagement would be determined after meeting with management. Potential areas affected: Division of Environmental Analysis Constructability Review Focus: The Quality Assurance Branch within the Division of Highway Design performs reviews to intercept and resolve constructability issues prior to letting. This engagement would involve a review management's processes within the Constructability Review program. Potential areas affected: Division of Highway Design Project Warranties Focus: Staff in the Cabinet expressed a concern with the time it takes to close projects and thought that project warranties could be part of the delay. Therefore, this engagement would involve a review various aspects of project warranties such as when they are applied, how they are tracked, their impact upon project funding, etc. and look for opportunities for improvement with the hope of addressing management’s concern and trying to close out projects sooner so that funding may be used elsewhere. Potential areas affected: Division of Construction, District Offices, Division of Accounts
Materials Inspections Focus: Review the materials inspections performed in various districts. Potential areas affected: District Offices, Division of Materials Structural Design Focus: An engagement has not been performed in this area in several years. The specific engagement would be determined after meeting with management. Potential areas affected: Division of Structural Design Resurfacing Program Focus: Perform a general review of the Cabinet's resurfacing program as well as management's controls over this program. Potential areas affected: Division of Maintenance, District Offices, Office of Rural & Secondary Road Aid, District Offices Pavement Conditions Focus: Review management's quality controls over monitoring and maintaining pavement conditions throughout the state. Potential areas affected: Division of Maintenance, District Offices Bridge Inspections Focus: The specific engagement will be determined after meeting with management. The Auditor of Public Accounts (APA) performs testing in this area as a part of their annual audit, therefore we will be requesting more information about what they test and then perform an engagement in a different area so that there isn’t duplicate coverage. This engagement will likely include us reviewing procedures used to prepare/review reimbursement requests made to other states for work performed in this area. Potential areas affected: Division of Maintenance, District Offices
Emergency Call Outs Focus: Review management’s processes and controls over emergency response to maintenance issues. Potential areas affected: District Offices, Division of Maintenance Louisville Bridges Bi-State Authority Expenditure Review Focus: KYTC and INDOT provide funding to the Authority. We would perform a brief review of certain fiscal processes and expenditures of the Authority to ensure they are operating within their governing documents, expenditures appear reasonable, as well as ensure there are no double billings. Potential areas affected: Bi-State Authority, Division of Construction, District Offices Louisville Bridges – Procurement Focus: We will attend and observe procurement and other miscellaneous meetings regarding the Louisville Bridges project and review for compliance with procurement processes and regulations. Potential areas affected: Construction, Construction Procurement, District 5 Louisville Bridges – Right of Way Acquisitions Focus: Review right of way acquisition activity related to the Louisville Bridges project. Right of Way has been in the media several times over the past few months and this engagement could help demonstrate that the Cabinet is looking into the process for areas of possible improvement. Prior to starting this engagement, we will request information from the Office of Legal Services to ensure that our work will not interfere with existing litigation. Potential areas affected: Division of Right of Way, District 5 Office
Louisville Bridges – Accounts Receivable Billing Process Focus: Review processes to ensure that KYTC is billing Indiana properly, timely, and for the appropriate amount. Potential areas affected: Division of Accounts, District 5 Office Lighting & Electrical Contracts Focus: Review the district's oversight of lighting and electrical contracts to ensure they are monitored consistently and uniformly throughout the state as concerns have been expressed by KYTC staff that some contractors are given more flexibility than others. Potential areas affected: Division of Traffic, District Offices Utility & Rail Estimates Focus: Concerns have been noted with Utility & Rail estimates. This engagement will look into the Cabinet's process and controls over these estimates, consider federal regulations, and look for opportunities for improvement. Potential areas affected: Division of Right of Way, District Offices Maintenance Site Audit – 1 District Focus: Internal controls and compliance over vehicles, equipment, inventory, safety, security and time and attendance at maintenance facilities. Potential areas affected: 1 District Office’s maintenance facilities Traffic Site Audit – 1 District Focus: Internal controls and compliance inventory, safety, security, vehicles, equipment, and time and attendance at traffic facilities. Potential areas affected: 1 District’s traffic facility
Office of Budget & Fiscal Management Procard Expenditures Focus: Our last engagement in this area was issued 2 years ago that covered FY09 transactions. Although this is not an inherently high risk area, it does occasionally receive media attention, and it would be advantageous to perform another engagement so that we can utilize a new software program (ACL) to data mine expenditures and learn more about utilizing the software’s capabilities. We could also look into options to see if this tool could be utilized by Accounts on a periodic basis to help them oversee and administer the risks in this program. Potential areas affected: Division of Accounts, District Offices, Cabinet offices Accounts Receivable & Collection Process Focus: Review the controls and effectiveness of the Accounts Receivable Collection process performed by Accounts to ensure that collection activity is performed timely, is sufficient, and collects the funds due the Cabinet. Potential areas affected: Division of Accounts Review & Approval Process Focus: This engagement would briefly review the approval process performed by the Division of Accounts as well as review the type and extent of documentation kept for transactions. Potential areas affected: Division of Accounts Procurement Focus: An engagement has not been performed in this area in several years. The specific engagement would be determined after meeting with management. KYTC management did express frustrations in a few areas (EO1s, affidavits, etc) and those will be a part of this engagement. Potential areas affected: Division of Purchases
Department of Vehicle Regulation KDLIS & Driver License Review Focus: While performing the Driver Licensing audit in FY12, we noted that the Division of Driver Licensing and clerks statewide utilize this system to record driver license fees when they are received as well as to divide the money among the various recipients. The financial controls of this system should be reviewed so that any weaknesses can be corrected prior to the Cabinet investing millions of dollars in the KDLIS replacement. Potential areas affected: Division of Driver Licensing CDL Focus: Perform a program review of the CDL issuance and oversight process. Potential areas affected: Division of Driver Licensing IRP Application & Renewal Process Focus: Perform a detailed transactional review of the IRP application and renewal processes performed in Motor Carriers so that any system concerns can be incorporated into the new system being developed by OIT. Potential areas affected: Division of Motor Carriers
Aviation Use Tax Collected by the Department of Revenue Focus: These funds are collected by the Department of Revenue (Revenue) and they transfer them directly to the Aviation Development Fund. The amount collected has fluctuated considerably over the past few years ($7.7M in FY09, $4.8M in FY10, $17.1M in FY11, and $12M projected for FY12). Given that the FY11-FY12 collections are projected to decrease between $4-$5M, it would be advantageous to perform a brief review of Revenue’s processes in this area given that Revenue does not provide OBFM staff with the details to properly oversee these funds. Potential areas affected: FAC Department of Revenue Aviation Focus: An engagement has not been performed in this area in several years. The specific engagement would be determined after meeting with management, but could involve safety, inspections, contracting or relationships with airports and heliports, or other areas. Potential areas affected: Department of Aviation
Engagements In Other Areas Follow Up On FY11 APA Recommendations Focus: The APA is required by auditing standards to check on the status of prior recommendations in their next audit. The purpose of this engagement would be to review the FY11 APA audit findings and follow-up on the status and implementation their recommendations to determine if corrective actions have been taken before the APA’s FY12 audit which will be starting soon. Over time, this could help reduce repeat findings by verifying that management has taken sufficient corrective actions, which would reflect positively on Cabinet management. It also could possibly serve as extra assurance for the APA by showing that the Cabinet takes their recommendations seriously and is taking actions towards correcting them (or at least correcting the recommendations in which Cabinet management agrees with). Potential areas affected: Various Divisions throughout the Cabinet Hiring Process Focus: Review various aspects of the hiring and promotion process such as the time it takes to post registers, obtain permission to interview, offer a job, reclass staff, complete paperwork, etc. to see if the process can be streamlined so that KYTC staff can hire and promote staff quicker. This process could also review documentation (district or central office level as applicable) to ensure hiring was performed in compliance with Personnel regulations. Several KYTC management expressed concerns in this area. Potential areas affected: Office of Human Resource Management Staff Shortages Focus: This is probably the largest concern facing the cabinet. Everywhere we turn, concerns are being expressed about staff shortages and how we’re being stretched too thin. This is a Cabinet wide concern and without solutions, the Cabinet's problems will likely compound with time. The specific scope and procedures will be determined later, however, this could include reviewing changes in staff over time, looking at areas that have lost the most personnel over the years, determining if we are outsourcing more work at a greater cost, looking at areas outside the Cabinet that have increased staff size and determining how they accomplished this, etc. Potential areas affected: Office of Human Resource Management, various other Divisions Louisville Metro Maintenance Contract Focus: Review one month (May, June or July) of the Metro agreement. This engagement was requested by KYTC management. Potential areas affected: District 5
Incident Management Focus: An engagement has not been performed in this area in several years. The specific scope could be determined after meeting with management, but could include, for example, a review of KYTC's plans for how to respond to major disasters. Potential areas affected: Division of Highway Safety Password Sharing in eMARS Focus: There was a concern raised regarding password sharing among staff. Internal audit performed an engagement in this area several years ago and it would be worth performing a follow-up audit. Potential areas affected: Various Divisions throughout the Cabinet Journal Voucher Review Focus: Review the controls over the Cabinet's journal voucher processes and select a sample of journal vouchers to ensure there is adequate supporting documentation, they were appropriately approved, etc. Potential areas affected: Division of Accounts, other areas throughout Cabinet Duplicate Payment Review Focus: During FY11, the APA noted that a Cabinet office paid an invoice twice. We have also heard engineering firms mention they have received duplicate payments for design work. This engagement would review KYTC expenditures for potential duplicates transactions, investigate exceptions, request reimbursement (where applicable), and review the circumstances that caused the duplicate payment to see what can be done to prevent it moving forward. Potential areas affected: Division of Accounts, other areas throughout the Cabinet
Kentucky Public Transportation Infrastructure Authority Focus: This engagement was requested by management as KPTIA is required to be audited in accordance with KRS 175B.100 and the specific engagement will be worked out with management towards the end of FY13 or early FY14 based upon OBFM needs. Potential areas affected: KPTIA, Office of Budget & Fiscal Management Fleet Program Focus: We have heard multiple complaints about the value the Cabinet receives given the money we pay to the Division of Fleet Management in Finance. For example, one Division Director mentioned paying thousands of dollars to fleet annually for an older vehicle and indicated that although we have paid for the price of the vehicle many times over, we can’t seem to get a replacement. Another Director mentioned safety concerns. KYTC staff have expressed similar concerns – such as proper maintenance, not having the vehicles needed, as well as noting that the charges seem to be higher this year (possibly due to a system issue). Although the specific scope of this engagement has not been determined, we propose obtaining more information from staff about their specific concerns and designing an engagement (or engagements) to address these concerns. Potential areas affected: Finance Division of Fleet Management, Division of Accounts, Division of Maintenance, Division of Construction, and possibly other areas throughout the Cabinet.
Other Engagements (Lower Priority) Subcontractor Review Focus: Perform a brief review of a sample of subcontractor activity to ensure that primes aren't subcontracting out too much work (in accordance with 108.01 of the standard specifications book). Potential areas affected: Division of Construction, District Offices Contractor Overpayments Focus: Perform a review of a sample of contractor overpayments to determine what may have caused the overpayment and look for ways to prevent overpayments in the future. Potential areas affected: District Offices, Division of Construction, Division of Accounts Work Zone / Traffic Reviews Focus: Review management's quality controls over the Work Zone/Traffic Reviews performed in the Division of Construction. Potential areas affected: Division of Construction, District Offices Highway Design - Comparison of Costs of Outsourcing Design Work With Cost of Performing Work Internally Focus: Conduct an analysis to compare the cost of outsourcing design work with the cost of doing the design work in house. The objective is not so that we can bring all design work in house, but instead to determine if it is cost effective to bring more design work in house and whether the savings would be sufficient to hire additional staff to perform this work. Staff, for example, feel certain we are overpaying on smaller design projects. A key ingredient to this engagement is the compilations of negotiated and actual costs of actual design work that is currently being performed by the External Audit Branch. Potential areas affected: Division of Highway Design, Division of Professional Services Rest Area Commercialization Focus: While performing the Beaver Dam AUP in FY12, we noted we are being paid approximately $200,000 a year for a private entity to operate one rest area on state right of way. Conversely, we pay several million dollars in rest area maintenance each year. Other states (California, Iowa, Ohio and maybe WV) are starting to commercialize rest areas and this engagement would look into the means/methods other states have utilized and explore options that KYTC could consider. Being proactive in this area could possibly result in a steady, passive revenue stream instead of paying others to maintain certain rest areas, thereby resulting in more money for other projects. Potential areas affected: Division of Maintenance
Guardrail Focus: This engagement would include a review of the controls over guardrail recycling to ensure the program is operating as intended by Cabinet policy. Potential areas affected: Division of Maintenance Enhancement Value Focus: The Cabinet is required by statute to collect property enhancement values when access to roads is granted. We performed an engagement in this area in a prior year and found that this value was not being collected. This engagement would involve a follow-up on the status of the prior recommendation and look at the process in more detail. Potential areas affected: Division of Maintenance Salt Spreading Contract Services Focus: A member of management expressed a concern about the increase in quantity and cost of these services. A general review could be performed on this program to look for possible areas of improvement. Potential areas affected: Division of Maintenance Sale of Surplus Property Focus: The Cabinet received around $1.4M from the sale of surplus property in FY12. This engagement would review the Cabinet's processes to ensure adequate controls and safeguards are in place and that the program is operating as intended. Potential areas affected: Division of Right of Way, District Offices Department of Rural and Municipal Aid Focus: An engagement has not been performed in this area in a few years. The specific engagement would be determined after meeting with management. Expenditures in this area increased significantly in FY12. Potential areas affected: Department of Rural and Municipal Aid
Facilities Support Focus: Has not had a recent engagement and a FY13 engagement should be considered in this area. The specific scope could be determined after meeting with management. Potential areas affected: Division of Facilities Support Reflectorized Plates Focus: This engagement would involve a general review of this process as well as ensure there are adequate safeguards and controls in place. We did notice that payments to Kentucky Correctional Industries increased from $833k in FY11 to $1.4M in FY12 and there were potential overpayments upon a very brief review. Potential areas affected: Division of Motor Vehicle Licensing Warning Signage Review - Areas With Fatalities Focus: This engagement would perform a brief review of areas where high numbers of fatalities are occurring and ensure the Cabinet has a process in place to attempt to lower these fatalities, such as with increased warning signs. Potential areas affected: Division of Highway Safety KYTC Fleet Utilization Focus: This engagement would review KYTC's expenses for the use of fleet and determine if internal vehicles are being used efficiently and sufficiently prior to leasing extra vehicles from Finance. This engagement could also review safety considerations as well as verify if vehicles are being properly maintained. Potential areas affected: Division of Accounts, various divisions throughout the Cabinet KYTC Self-Insured Worker's Compensation Trust Focus: KYTC has a self-insured workers compensation trust fund to help pay claims when workers are injured on the job. Each year, a CPA firm performs an annual audit of this fund. Our engagement would perform a brief review of operations and processes to ensure they are operating as effectively and as efficiently as possible. Potential areas affected: KYTC Self-Insured Worker's Compensation Trust, Office of Legal Services, Division of Accounts, Office of Human Resource Management
Monthly Inventory Process Focus: Maintenance and traffic facilities statewide are supposed to be performing inventories monthly. Concerns were expressed by staff that some areas may not be performing these as required. Our annual inventory observations have indicated this as well. This engagement would briefly review documentation to determine if areas are conducting monthly inventories as required by policy. Potential areas affected: Maintenance and Traffic facilities in the Districts, Division of Maintenance, Division of Traffic Motor Carrier Impoundments Focus: Carriers who fail to pay their taxes can have their trucks impounded. This engagement could briefly review the impoundment process including how towing companies are selected (such as ensuring there aren’t conflicts of interest) and also to ensure that the Cabinet receives the funds due from these impoundments when applicable. Potential areas affected: Division of Motor Carriers Financial Integrity Review and Evaluations (FIRE) Focus: As requested, we assist FHWA conducting FIRE reviews. Potential areas affected: Accounts plus other areas determined by FHWA. OMB Oversight Focus: We conduct approximately 80 desk reviews each year to ensure that subrecipients meet auditing guideline as set in OMB Circular A-133. Potential areas affected: Local Programs, Transportation Delivery, Planning, Highway Safety, District Offices that serve as Program Managers
We are blessed with a great group of employees We work together to get things done We are a team and celebrate together! It takes a village…..
Alice S. Wilson, CPA Executive Director Kentucky Transportation Cabinet Office of Audits 200 Mero Street Frankfort, KY 40622 502-564-6760 ext.3615 Alice.Wilson@ky.gov http://transportation.ky.gov/Audits/Pages/default.aspx