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Home My WebLink AboutFCS-12-112- 2Q 2012 Audit Status Report & PresentationREPORT TO:Audit Committee DATE OF MEETING: June 25, 2012 SUBMITTED BY: Corina Tasker, Internal Auditor, 519-741-2361 PREPARED BY: Corina Tasker, Internal Auditor, 519-741-2361 WARD(S) INVOLVED: ALL DATE OF REPORT: May 31, 2012 REPORT NO.: FCS-12-112 SUBJECT: 2nd QUARTER AUDIT STATUS REPORT RECOMMENDATION: For information only. EXECUTIVE SUMMARY: The following report provides a summary of the Internal Audit activities completed during the period of March 2012 to May 2012. The chart below shows the audits and other work contained in this report. AUDIT Division / Topic Scope Stores division Follow up audit The following 2012 work plan items are currently in progress: Operations review Emergency Plan audit User fee compliance audit CSD Administration capacity review Purchasing Card follow-up audit BACKGROUND: The Internal Audit 2012 work plan was approved during the audit committee meeting held on nd November 14, 2011. This report provides a summary of the work completed during the 2 quarter of 2012. ï ó ï REPORT: Stores Division Follow-Up Audit Status: Complete, March 8, 2012 Audit Statistics Date Audit Completed February 2008 February 2010 March 2012 (Original)(Follow-up) (Follow-up) 59 # of Recommendations # of Recommendations Complete 3652 177 # of Recommendations In Progress 60 # of Recommendations Not Started Objective Each division which has been reviewed by Internal Audit in the past will participate in a follow up audit at least one year following the completion of the original audit. The purpose is to assess the outcome of the audit in terms of which recommendations have been implemented, what the impact to the division has been, and to identify any new or existing challenges the division is facing. This will help determine if a further in-depth review is required and will highlight any high risk issues proactively. In the case of this division an original audit was completed in 2008, with a follow-up audit conducted in 2010. Some of the recommendations from the original audit related to the physical move to the new KOF facility. This second follow-up audit is intended to assess the status and impact of those recommendations. Methodology The following research and analysis was undertaken for the follow up audit: 11 staff surveys, representing 100% of the division’s employees 1 interview with the supervisor of the division including a tour of the KOF stores and tool crib area Correspondence with purchasing and the director of fleet Review of relevant literature, including the original audit report, follow-up audit and output related to the original recommendations ï ó î Key Findings Overview Overall the auditor is pleased with the proactive attention that has been placed on implementing the recommendations in the previous two audits. Where ever possible action has been taken to address the underlying issues and improve controls within the Stores area. The areas which still hold some risk are due to lack of funding for additional staff which is outside of their control. Positive Impacts Staff have indicated that they like the new KOF location better than the previous 3 locations. There is more room for growth including more shelf space and it is a newer building with better amenities. The inclusion of a private change room for staff to try on clothing is appreciated. The shipping and receiving area was also mentioned by staff as an improvement. The supervisor is on site and all staff are now together rather than being dispersed across 3 locations. This makes communications and sharing of information much easier. Staff also liked the opportunity to learn more through cross training. 3 staff felt the stores processes at the KOF were more efficient than at the previous locations and 5 indicated they felt they were the same. Only 3 felt the processes were less efficient. In terms of controls, all staff now have their own terminals and access to the SAP system. The doors to the area are locked at all times and are controlled through badge access, with the exception of the door in the receiving area which is unlocked from 7 a.m. to 5 p.m. to allow suppliers to enter the receiving area. Salt and some aggregates are now located within the gated area and weigh scales have been purchased, although no process has been established as of yet to use them. The main fuel tanks are also within the gated area and are controlled through a card lock system. Security cameras have been installed in the yard and within the receiving area. The Operations / Utilities counter lobby doors are locked at 4 p.m. each day, with after-hours customers being required to go to the Fleet counter instead. Emerging Issues and New Recommendations Staff were asked if there were any areas for improvement. The following themes emerged from the survey data: Inconsistency in the way staff perform tasks; resistance by some staff to adapt to new processes Not enough staff on the Operations / Utilities side Only senior stock keepers should be able to change or add new items to stock Stock locations are not in chronological order and are difficult to locate Still use 3 different systems within SAP and 3 filing cabinets for Utilities, Operations and Fleet Communication is lacking from shift to shift Continuously out of stock on some items due to bad scans or not scanning items when they are removed from the shelf Lighting is too dim, making it hard to read part numbers Tool crib process is not efficient or effective ï ó í Staff were also asked whether they were aware of any control weaknesses in the stores area. These areas were noted: Non-stores staff have been allowed into the area to pick out their own parts; non-stores staff have also climbed over the counter when staff are too busy No control of items stored outside in the lean-to area (catch basins, pipe, sign posts, etc.) Public / suppliers enter through the shipping door without staff knowledge In addition to these issues, the auditor has observed the following control weaknesses: There is still no separation of duties due to short staffing; all staff have the ability to order, receive and disperse stock There are no proactive communications with user departments to alert them of write-offs to their cost centres The majority of aggregates are located off site with no security or process to relieve stock It is recommended that the following actions be taken to address these issues: 1. Standard operating procedures should be written and communicated to all staff. (This is currently underway – it should be fast tracked if possible). 2. Access to create, change or order stock should only be given to senior stock attendants to ensure some separation of duties and to ensure that only what is needed is ordered. 3. The supervisor should assist resistant staff in changing the way they perform their work by providing adequate training, and soliciting feedback on issues these staff are having. 4. Absolutely no non-stores staff should be allowed in the area; provide clear signage at the counter to indicate this; escalate to management if it occurs. 5. Fence in the lean-to area and establish a process for customers to obtain their stock. 6. Lock the shipping and receiving door at all times; install a louder buzzer or intercom system to alert staff when suppliers arrive. 7. Send emails to user departments to communicate when write-offs will be made and the amounts. 8. Investigate options to address the staff shortage on the Operations / Utilities counter. These could include part time staff to cover busy periods, re-assignment of tasks within the division (i.e. shift staff from the Fleet counter over to the Operations / Utilities counter), adjusting the disbursement process of both tools and stock to be more efficient (i.e. having an order taker at the counter and runners to retrieve the parts; ensuring shelf locations are updated in the system, arranging parts chronologically, etc.). Staff should be involved in brainstorming solutions to this problem. 9. Request funding through the 2013 budget for improved lighting in the area. This is a health and safety issue affecting both eyesight and morale. Next Steps The supervisor of the stores division will be required to provide quarterly status updates to the internal auditor until such time as the auditor is satisfied that the controls issues have been satisfactorily addressed. No further follow-up audits will be conducted. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Work falls within the Efficient and Effective Government plan foundation area of the Strategic Plan. The goal of Internal Audit work is to protect the City’s interests and assets through – ensuring compliance with policy, procedures and legislation ï ó ì – ensuring adequate controls are in place to protect our assets – ensuring our operations are as efficient and effective as possible This helps support the financial goal of long term financial stability and fiscal accountability to our taxpayers. The work also supports the public sector leadership goal of positioning the municipality as a leader in public sector policy, processes, and systems. FINANCIAL IMPLICATIONS: N/A COMMUNITY ENGAGEMENT: N/A ACKNOWLEDGED BY: Dan Chapman, Deputy CAO, Finance and Corporate Services ï ó ë ï ó ê ï ó é ï ó è ï ó ç ï ó ïð ï ó ïï ï ó ïî ï ó ïí ï ó ïì ï ó ïë ï ó ïê ï ó ïé ï ó ïè ï ó ïç ï ó îð