HomeMy WebLinkAboutFCS-13-183 - 4th Quarter Audit Status ReportStaff Report
l t finance and Corporate Services Department wvwuu kitchener ca
REPORT TO: Audit Committee
DATE OF MEETING: December 9, 2013
SUBMITTED BY: Corina Tasker, Internal Auditor, 519 - 741 -2200 EXT 7361
PREPARED BY: Corina Tasker, Internal Auditor, 519 - 741 -2200 EXT 7361
WARD(S) INVOLVED: ALL
DATE OF REPORT: December 1, 2013
REPORT NO.: FCS -13 -183
SUBJECT: 4th 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 September 2013 to November 2013. The chart below shows the audits and other
work contained in this report.
AUDIT
Division /Topic
Scope
Parking
Controls
Physical Inventory
Count Verification
Confidential Investigation
Asset Damage
The following 2013 work plan items are currently in progress and will be brought forward at a
future audit committee meeting in 2014:
• The Aud and Arenas review
• Elections process
BACKGROUND:
The Internal Audit 2013 work plan was approved during the audit committee meeting held on
December 3, 2012. This report provides a summary of the work completed during the 4th
quarter of 2013.
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REPORT:
1. Parking -Controls
Status: Complete, November 12, 2013
As part of a routine controls check a report was run from the parking system showing all active
transponders and matched to a report showing payroll deductions. Five individuals were
identified for further review where they had an active transponder but no corresponding payroll
deduction. Four situations were explained by special circumstances. One situation was found
where the payroll deduction instruction had been missed when the employee was set up in the
system in July. They have now been retro - actively billed for that period.
No material weaknesses in internal controls were uncovered as part of this audit. Internal audit
will continue to periodically check the process as part of a cycle of random control audits.
2. Physical Inventory — Controls
Status: Complete, November 2, 2013
Internal Audit participated in the annual physical inventory counts at the Kitchener Operations
Facility (KOF) location. Standard floor -to -sheet and sheet -to -floor audits were done to confirm
the physical quantity of parts on hand compared to what staff had counted. The audit covered
24% of the total value of inventory. The sheet -to -floor audits covered the top 40 unit values and
top 40 total values. The floor -to -sheet audits consisted of 30 random shelf locations. Only four
variances were found and were fully explained.
In general the accuracy of the ongoing inventory records has improved greatly since the
controls audit in 2008. Write -downs have decreased from $158,474 in 2007 to $93,012 in 2012
to only $7,849 in 2013. This represents 0.1 % of the total inventory purchases for the year of
$5.9 million which is a phenomenally low shrinkage rate. Industry standards indicate that up to
2.5% is an acceptable rate. In the past the City's shrinkage rate was 1.5 %. The ending
inventory balance was $2,087,013.
Of the 2013 variances, only $2,636 was from controllable stock (i.e. stock which the stores staff
have direct control over with regards to purchases and usage). This is comparable to the 2012
write -down of $2,585.
The remaining $5,212 of write -downs is related to stock which is located in unsecured outside
locations which are not under direct supervision by the stores division. This means that other
staff have unrestricted access to take the inventory for use in their jobs without notifying stores
staff to relieve inventory in the system. A fence has been constructed around some of these
items but there is still no process to keep the gate locked. This figure is down year over year
from $90,426 in 2012.
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The write -downs for both years included:
Inventory Type
2012 Variance
2013 Variance
Manholes and catch basins
$7,698
$1,153
Pipe and Tubing
$4,860
$1,426
Sign shop supplies
$4,989
($1,243) (write -up)
Aggregates
$72,539
$5,133
Welding equipment / supplies
$340
$103
Total
$90,426
$5,212
The largest improvement is in the aggregates. This is due to a new procedure which was
implemented which requires staff using the aggregates to submit the amount of usage to Stores
so that the inventory on hand may be decreased in the system. While this has improved the
write -offs considerably it is still not a perfect process as it relies on staff handing in paperwork
which does not always happen. In addition, a proactive approach was taken to measure the
quantity on hand on a more frequent basis rather than waiting until year end to process the
write -down.
The reason for the write -up in sign shop supplies relates to a return which was not captured in
the inventory system for $4,327. Without this return, the variance would have been $3,087
write -down.
Overall, the physical inventory process is in control and the variances are considered very
small.
3. Confidentiallnvesti_gation
A confidential investigation was conducted at the request of senior management regarding a
citizen allegation of damage to City assets on private property by City staff. Evidence collected
during the investigation does not support this claim.
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
— 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.
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FINANCIAL IMPLICATIONS:
►HeMe Me-
COMMUNITY ENGAGEMENT:
Members of the community have been informed of the results of this audit status report through
the posting of this report on the internet on December 4, 2013.
ACKNOWLEDGED BY: Dan Chapman, Deputy CAO, Finance and Corporate Services
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