APS Internal Audit Department

Audit Committee Internal Audit Work Plan

Recommendation

October 4, 2018

John Mickevice

Presentation Overview

• Overview of Internal Audit at APS

• Criteria Used to Select Possible Projects

• Projects Selected per Risk Assessment

• Follow-up on Prior Audits

2

Overview of APS Internal Audit

What is Internal Audit?

• Independent appraisal activity for the review of operations as a service to the administration or Board.

• Managerial control that functions by measuring and evaluating the effectiveness of other controls.

What is the purpose of Internal Audit?

• Provide operational, financial, and compliance audit services to APS

• Advisor and resource to school leadership and School Board on policy, internal controls and best practices in fiscal and business operations

3

Overview of APS Internal Audit

Internal Audit reports to the Board through the Audit Committee.

Audit Plan is developed …

• In Consultation with the Audit Committee;

• With Priorities based on

–Risk Assessment

– Input from School Board and Staff.

4

Criteria Used to Identify Possible Projects

• Discussions with APS Directors and Supervisors:

– identify exposures that may exist for APS,

– identify controls that may mitigate these exposures,

– evaluate the risk

• 60 APS process areas identified

– Each process area evaluated based on 5 factors:

• Quality and Stability of Control Environment

• Business Exposure

• Public and Political Sensitivity

• Compliance Requirements

• Data Processing and Management Reporting

5

Project Selection

• Process areas were ranked into three priority groups.

• Most areas fall in the medium risk group.

• Areas ranked low risk, while important to APS, do not warrant as close attention as the higher risk areas.

6

Internal Audit Project Recommendations

• Compare new school construction costs in Arlington to comparable school districts.

• Review Student Transportation required by IEP or Federal law. Analyze current costs and research opportunities to increase resource efficiency and effectiveness.

• Review Financial Controls at the Schools over onsite receipt collection, deposit processing and check disbursement.

• Activity Fees: Analyze fees required to participate in school activities & identify all funding sources.

7

Comparison of New Construction Costs

O’Connor Construction Mgmt. Inc. was selected to provide independent comparison of APS new construction costs to comparable school districts.

Internal Audit works with APS staff to coordinate and communicate APS requirements and APS cost information needed by the vendor to complete this project.

8

Student Transportation

• Review student transportation required by IEP and Federal and State law.

• Outline process to determine optimal transportation options.

• Analyze cost of fulfillment of current requirements.

• Research opportunities to increase resource efficiency and effectiveness.

9

Financial Controls at the Schools

• Interview Principal and Treasurer at 10 selected schools to

develop understanding of receipt collection, deposit processing

and check disbursement.

• Goal is to observe current procedures and outline any best practices currently in place.

• Follow-up with management on planned actions to institute a Best Practices Manual.

10

Activity Fees

• Summarize all fees required to participate in

each school activity.

• Outline all sources of funding, both APS and

external, for each activity.

• Update information obtained in 2014.

11

Follow-up on FY 2015 Audits

Payroll Processing and Controls

• Follow-up with management on planned actions:

– Increased restrictions on electronic access to human resources and payroll data;

– Implement a checks and balances process to ensure accurate payment adjustments;

12

Follow-up on FY 2016 Audits

Financial Controls at the Schools

• Follow-up with management on planned actions:–Document standard school treasurer financial

functions in a Best Practices Manual;–Strengthen strategies for Treasurer vacancies

and absences.

13

Follow-up on FY 2017 Audits

Design & Construction Financial Controls

Follow-up on implementation of post

occupancy steps;

Follow-up on documentation of financial

and project management controls.

14

Internal Audit Plan ApprovalNext Step isInternal Audit Plan Approval

Arlington School Board Action Item:• ARLINGTON PUBLIC SCHOOLS Policy 10-4.01 –

Internal Audit requires that “subsequent to (Audit) Committee approval, the (internal audit) plan shall be submitted to the School Board for final approval…”

15

Information Item – October 4, 2018 Board Meeting

Cost Study for Arlington Public Schools

• APS selected O’Connor Construction Management for

and independent comparison of construction costs

specified comparable school districts.

• Report includes 30 schools’ cost data including

granular, line-by-line division cost data for 13 schools

in Virginia, District of Columbia and Montgomery County.

17

Cost Study for Arlington Public Schools

APS construction costs are, on average, comparable to

those in surrounding communities.

“Particular challenges - such as restrictive site

constraints, lack of available..land, and a stringent

community engagement process, to name a few - all

add additional costs to APS’ construction projects.”

18

Market Study for Arlington Public Schools

19

Market Study for Arlington Public Schools

• 5% is advised for annual construction cost escalation.

• APS competes with both commercial and non-for-profit construction developments.

• Construction labor shortages will impact the cost of new construction projects.

• Cost of construction materials rose faster than the price of completed buildings.

20

Cost Study and Market Study for APS

Full reports of the Construction Cost and Market Studies for Arlington Public Schoolsare available on APS website:

under School Board – Internal Audit tab

21