new mexico state university office of audit...

New Mexico State University Office of Audit Services

Facilities Operations and Utilities (OFS) Special Audit Follow-up

June 30, 2009 (Project No. 0918-160)

Attachment 1

1.1 Partially Resolved 13.1 Partially Resolved1.2 Recommendation Withdrawn 8.1 13.2 Partially Resolved

8.2 13.3 Partially Resolved8.3 13.4 Unresolved - Progress Noted8.4 13.5 Unresolved - Progress Noted

2.1 Resolved 8.52.2 Resolved 8.62.3 Resolved2.4 Recommendation Withdrawn 14.1 Resolved

14.2 Resolved14.3 Resolved

9.1 14.4 Resolved9.2 14.5 Partially Resolved

3.1 Substantially Resolved 14.6 Resolved3.2 Partially Resolved - New Action Planned

10.110.2 15.1 Substantially Resolved

4.1 Substantially Resolved 10.3 15.2 Partially Resolved4.2 Resolved 10.4 15.3 Resolved4.3 Resolved 15.4 Resolved4.4 Resolved 15.5 Resolved4.5 Substantially Resolved 15.6 Resolved4.6 Substantially Resolved 11.1 15.7 Resolved

11.2 15.8 Resolved11.3 15.9 Partially Resolved

15.10 Resolved5.1 Resolved 15.11 Substantially Resolved5.2 Resolved 15.12 Resolved

15.13 Substantially Resolved15.14 Partially Resolved

6.1 Partially Resolved 12.16.2 Unresolved - Progress Noted 12.26.3 Partially Resolved 12.36.4 Substantially Resolved 12.4 16.1 Partially Resolved

12.5 16.2 Resolved12.6 16.3 Resolved12.712.812.9

7.1 Resolved 12.107.2 Substantially Resolved 12.117.3 Resolved 12.12

All Recommendations 36 46%

1 1%17 22% No Additional

2 3% 72% Follow-up Required18 23%

1 1%3 4% Additional0 0% 28% Follow-up Required

Total 78

Resolved at Time of Report

Office of Audit ServicesOFS Follow-Up - Follow-up Status Summary

Audit Year 2008 - 2009

Obs #1 - The Office of Facilities and Services does not have a formal, internal policies and procedures manual to provide guidance and promote effective, efficient and consistent operations.

Obs #8 - Drug and Alcohol testing policies and procedures are outdated and ineffective as currently administered. Responsibilities for administering the program are not adequately defined.

Obs #13 - Inadequate estimates and cost overruns were noted on several internal construction projects.

ResolvedResolved

Obs #2 - Management reporting within OFS is not as effective as it could be and, therefore, does not contribute to effective management oversight of operations.

ResolvedSubstantially Resolved

Substantially Resolved Obs #14 - OFS cannot provide adequate support or justification for their internal service center rates. Related accounting and budget practices should be evaluated.

Obs #9 - Temporary employment status is not being used as a temporary labor solution. Temporary employees have been kept in temporary status for extended periods of time, effectively denying them access to most benefits and due process.Obs #3 - Feedback from customer surveys on OFS performance is not communicated to OFS employees,

which results in missed opportunities to address deficiencies or emphasize strengths in processes. Substantially ResolvedResolved

Obs #5 - Controls are needed to ensure that time charged to Shop/Indirect time is reasonable and appropriate.

Partially Resolved

Obs #10 - There are little to no controls over the purchase and safeguarding of materials and supplies. Petty cash and procurement cards are used excessively for these purchases. Obs #15 - Existing controls do not ensure the proper and effective management of work

orders.Obs #4 - Controls are needed with regard to overtime to ensure that all overtime authorized is appropriate, equitable, and does not negatively affect productivity.

Substantially ResolvedResolvedResolvedResolved

Obs #11 - Warehouse controls are in need of improvement to ensure projects are charged correctly, and to prevent inventory from being diverted for inappropriate or personal use.

ResolvedResolved

Obs #12 - The management and control over NMSU’s transportation resources need improvement in order to ensure that: 1) NMSU complies with tax laws and regulations, 2) the purchase, maintenance storage and disposal of vehicles is done in an efficient and cost-effective manner, 3) vehicles and equipment are used for approved business purposes, and 4) departmental lease agreements are reasonable and adhered to properly.

Obs #6 - Prescribed timekeeping procedures are not followed in practice, resulting in inconsistencies between shops, errors in amounts charged to projects, and the potential for fraudulent claims.

Partially Resolved Obs #16 - Additional controls are needed within the Work Order System for data integrity purposes, and the underlying IT support structure for the Work Order System should be reviewed.

Substantially ResolvedPartially Resolved

Substantially Resolved

Partially ResolvedSubstantially Resolved

Obs #7 - Conflict of Interest / Commitment Disclosure Forms are not being filled out or reviewed properly. Individuals with businesses in the same line of work as their NMSU employment did not disclose these activities, and supervisors who knew of these activities approved the forms. Potential conflict activities cannot be managed or prohibited unless they are disclosed.

Substantially ResolvedPartially ResolvedSubstantially ResolvedResolvedResolvedPartially ResolvedPartially Resolved

ResolvedResolved at Time of Report

Recommendation WithdrawnPartially ResolvedPartially Resolved - New Action PlannedUnresolved - Progress NotedUnresolved

NMSU Office of Audit Services First Follow-up on OFS Special Audit Report Observations & Recommendations

Fiscal Year 2006/2007 (Report dated 12/17/2007)

ACTION PLAN (as of 06/30/2009)

Fiscal Year of Follow-

up

SUMMARY OF FINDING OR CONDITION CORRECTIVE ACTION TO BE TAKEN

RESPONSIBLE PERSON

TARGET DATE STATUS

08/09 Obs. 1

The Office of Facilities and Services or OFS (formerly the Office of Facilities Operations and Utilities) does not have a formal, internal policies and procedures manual to provide guidance and promote effective, efficient and consistent operations.

1.1 – Develop an internal operating manual to serve as a central guide for OFS managers and employees. 1.2 – Develop policies and procedures at the shop level, to address the unique operations of the various shops.

Bill Mack, Susan Grotevant Glen Haubold

6-30-08 7-01-09

Partially Resolved. An electronic division-level procedures manual has been developed. Only directors are able to access it currently, but plans are to make the manual available to all employees. In addition, there are plans to make a complete copy of the division-level procedures manual available to all employees at the OFS front office. In the meantime, shop supervisors receive procedural information from directors and can request copies of procedures from the OFS Accounting Office. Operating performance measures and standards are separately addressed in a document titled “Outline for Excellence at OFS” developed by the Assistant VP of Facilities Administration & Services in December 2008 [see Obs. 3.2]. Recommendation Withdrawn. Management decided to abandon the development of shop specific manuals. Instead, all OFS employees are required to comply with division level procedures, which were evaluated against NMSU Policy for compatibility/consistency. We believe that the division-level procedures manual addresses the critical shop level risks identified in our review.

08/09 Obs. 2 Management reporting within OFS is not as effective as it could be; therefore, it does not contribute to effective management oversight of operations.

2.1 – Communicate objectives, responsibilities, and performance requirements to all OFS management personnel.

Bill Mack, Susan Grotevant Ophelia Watkins

9-30-08

Resolved. Shop functions and major initiatives have been defined, and a status report of turnaround initiatives is maintained. In addition, weekly meetings are held for all supervisory personnel, which include discussions regarding goals and objectives at various levels of the organization. Individual goals were established and

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Typewritten Text

Attachment 2



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2.2, 2.3 – Evaluate existing management reports for relevance. 2.4 – Develop and provide training to OFS managers on how to access information in the work order system.


9-30-08

reviewed as part of the annual performance evaluation process. Resolved. Existing reports were evaluated against current information needs. While some of the reports continue to be used, new reports have been created to address management information needs more adequately. In addition, ad hoc reports can be requested when necessary. Information and reporting needs will continue to be evaluated with the scheduled implementation of the new facilities management software system. Recommendation Withdrawn. All parties agreed that it did not make sense to spend time and resources to train employees on a system that was scheduled for replacement.

08/09 Obs. 3 Feedback from customer surveys on OFS performance is not utilized by management or communicated to employees, which results in missed opportunities to address deficiencies or emphasize strengths in processes.

3.1 – Formalize procedures with regard to utilizing customer surveys in a meaningful way, including tracking and documenting responses/resolution. 3.2 – Establish performance targets and tailor surveys to address targets.

Bill Mack, Susan Grotevant Glen Haubold, Ophelia Watkins Bill Mack, Susan Grotevant Glen Haubold

12-31-08

12-31-08 8-31-09

Substantially Resolved. Customer survey feedback is being provided to directors and supervisors for review and follow-up. Procedures are being developed to track and document survey responses/resolution. Partially Resolved - New Action Planned. Management will evaluate OFS performance at the department level. The use of metrics and comparisons to evaluate OFS performance is formalized in the “Outline for Excellence at OFS” plan. Key performance measures and targets are based on the APPA¹ Facilities Performance Indicators Survey, and metrics will be obtained for use in evaluating performance and business



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practices relative to other comparable university facilities operations. Customer surveys will be modified to a 5-point system to conform to APPA¹, so they can be used for benchmarking. In addition, OFS will develop and distribute an annual survey to Building Monitors to request feedback on overall performance throughout the year. The Assistant VP of Facilities Administration & Services has extensive experience with professional facilities organizations and is knowledgeable in developing and applying performance indicators. ¹APPA - Association of Higher Education Facilities Officers (formerly the Association of Physical Plant Administrators)

08/09 Obs. 4 Overtime controls are needed to ensure that all overtime authorized is appropriate, equitable, and does not negatively affect productivity.

4.1 – Review existing NMSU overtime policies and consider imposing limits on overtime allowed and requiring appropriate approvals.

4.2 – Establish OFS procedures for authorizing, approving and monitoring overtime, including periodic review and analysis of overtime by top management.

D’Anne Stuart Bill Mack, Susan Grotevant Ophelia Watkins

12-31-07

1-30-08

Substantially Resolved. Human Resource Services (HRS) management decided not to change NMSU policy regarding overtime because of contractual issues involving the labor union. To mitigate the risk of overtime abuse, HRS designed and implemented a review process to monitor activity and report questionable overtime (based on percentage thresholds and reasonableness levels) to appropriate administrators. Additionally, there are plans to implement quarterly trend analysis to identify potential problems. Resolved. OFS procedures regarding overtime have been documented and communicated to OFS management. Overtime is approved at the director level and supervisors are required to submit requests in advance for approval of expected overtime. In addition, a form was designed for supervisor use to request after-the-fact approval for “on-call” or emergency overtime. Pay-period and



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4.3 – Analyze whether it would be more efficient and cost-effective to outsource larger facilities projects vs. performing them internally. 4.4 – Analyze position duties and responsibilities to determine whether adjustments are needed to titles, pay and/or status (exempt vs. non-exempt). 4.5 – Benchmark OFS practices against other comparable facilities operations.

Bill Mack Susan Grotevant Glen Haubold Bill Mack, D’Anne Stuart

Bill Mack, Susan Grotevant Glen Haubold

6-30-08

3-01-08

6-30-08

quarterly overtime reports, generated from central Payroll [see Obs. 4.1], are distributed to directors and executive management for their review, and supervisors are required to review monthly OFS reports that contain information regarding overtime usage. To evaluate the impact of overtime controls, Audit Services performed an analysis for selected shops, which indicated an approximate decrease of 70% in overtime from 2007 to 2009. Resolved. OFS management believes that the decision to outsource a project or perform it in-house should be based on the resources required for the successful and cost-effective execution of the particular project. A decision process involving all levels of management was developed and implemented, which considers labor hours, skill, experience, available equipment and specialty requirements not available in-house, in making a determination on a project-by-project basis. Resolved. OFS shop supervisor positions were reviewed and redefined to qualify for exempt status. Non-exempt and skilled positions were reviewed in conjunction with the Mercer salary study. HRS has made adjustments within the confines of available budget. This will be an ongoing effort. Substantially Resolved. As stated in ‘new action planned’ under Obs. 3.2, OFS recently participated in an APPA Facilities Performance Indicators Survey, which will provide benchmark information to evaluate performance in relation to other university facilities operations, and aid in developing performance indicators. Management also plans to obtain metrics from a company specializing in



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4.6 – Develop and implement procedures for assigning emergency overtime calls and perform periodic checks of overtime claims against police dispatch records.


3-31-08

providing facilities-related services and information to enhance performance analysis. Substantially Resolved. New after hours on-call procedures have been implemented, which route after-hours maintenance calls through Housing managers instead of through Police dispatch. Although emergency callbacks will still go through dispatch, OFS management does not believe that periodic record checks will be of great value because the majority of after-hours calls are maintenance related. Additional control measures already described in this document [See Obs. 4.1 and 4.2], help to mitigate the risk of abuse. In addition, employees on callback are required to swipe an identification card when entering and exiting the main gate at OFS, which records arrival and departure times electronically. This information is used in reports provided to supervisors for the purpose of validating overtime, prior to seeking director level approval.

08/09 Obs. 5 Controls are needed to ensure that time charged to Shop/Indirect time is reasonable and appropriate.

5.1 – Develop guidelines with regard to the types of activities to be recorded as shop/indirect time, and establish reasonable time limits for the activities. 5.2 – Develop and implement oversight procedures and reports to aid management in monitoring and controlling shop/indirect time charged.

Bill Mack, Susan Grotevant Glen Haubold, Ophelia Watkins Bill Mack, Susan Grotevant Glen Haubold, Ophelia Watkins

6-30-08

6-30-08

Resolved. A procedure that defines shop time activities and provides guidance for the amount of time considered reasonable for each activity, has been formalized and communicated to OFS personnel with management responsibilities. Resolved. Using the guidance discussed in Obs. 5.1, OFS shop supervisors conduct a high-level monthly review of shop time to ensure it falls within reasonable limits. Audit Services performed a limited analysis of shop time for fiscal year 2009, which demonstrated that average shop time fell within established guidelines. Additional analysis of



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four shops confirmed that the average shop time per employee, as well as the practice of reporting full days of shop time, decreased markedly between FY07 and FY09.

08/09 Obs. 6 Prescribed timekeeping procedures are not followed in practice, resulting in inconsistencies between shops, errors in amounts charged to projects, and the potential for fraudulent claims.

6.1 – Implement procedures whereby each employee completes a timesheet daily, with two levels of supervisory review and approval. 6.2 – Develop and implement periodic employee training on timekeeping procedures. 6.3 – Develop and implement a quality assurance review process to ensure the proper charging of time to various projects. 6.4 – Implement controls for accurate entry of

Bill Mack, Susan Grotevant Glen Haubold Ophelia Watkins Diane Madrid, Glen Haubold Bill Mack, Susan Grotevant Glen Haubold Lori Gobble, Ophelia Watkins

3-31-08 7-01-09

6-30-08 8-31-09

6-30-08 7-01-09

12-31-07

Partially Resolved. OFS developed a time reporting procedure that was finalized during our follow-up review. The procedure requires each employee to fill out his or her own timesheet each day, daily shop supervisor approval, and a high-level monthly review at the director level. We reviewed 20 randomly selected timesheets from March and April 2009 and noted that the procedure was not being followed consistently. In some instances, it appeared that hours were being entered by someone other than the employee (i.e. – a supervisor), and/or the supervisor approval was missing. Unresolved – Progress Noted. Timekeeping procedures have been discussed with the shop supervisors; however, a formal training plan and pilot training program is still being developed. Based on the results of the review described in Obs. 6.1, additional training is considered necessary. Partially Resolved. A procedure has been developed that requires directors to print, review, sign and date monthly labor hour reports, which show the amount of time charged to various projects. At the time of the follow-up review, the director positions had just been filled, so Audit Services will address this item in the next follow-up. Substantially Resolved. A review of timesheets by Audit Services in October showed that data entry



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timesheet data into the work order system.

was not being verified. A subsequent review of 20 timesheets from March and April 2009 was conducted. Some of the March timesheets lacked verification; however, all of the April timesheets had been verified.

08/09 Obs. 7 Conflict of Interest / Commitment Disclosure Forms are not being filled out or reviewed properly. Individuals with outside businesses in the same line of work as their NMSU employment, did not disclose these activities, and supervisors who had knowledge of these activities approved the forms.

7.1 – Develop guidance (in English and Spanish) to assist in the proper completion and review of Conflict of Interest (COI) forms. 7.2 – Hold periodic trainings to communicate requirements and expectations with regard to conflicts of interest or commitment, particularly as related to secondary jobs and personal businesses. 7.3 – Perform a thorough review of FY07 COI forms.

D’Anne Stuart D’Anne Stuart Bill Mack

6-30-08

3-30-08

3-30-08

Resolved. Modified, bilingual instructions for the Conflict of Interest forms were developed and provided to OFS employees for use in completing FY08 forms. Special instructions regarding completion of the forms were provided by HRS to the OFS human resources team to assist individual employees. Substantially Resolved. OFS senior management received training on how to complete the COI forms for the 2007/2008 review period; however, Audit Services reviewed five COI forms for 2008 on individuals known to have outside businesses and found problems with all of the forms. On 5/13/2009, prior to the 2008/2009 COI disclosure due date, HRS conducted a special training session for all OFS managerial staff and plans to continue training. Audit Comment: Audit Services believes that the ultimate success or failure of this program hinges not just on training, but on HRS following through to ensure that all forms are properly filled out and turned in, and conflicts are appropriately managed or prohibited, with consequences for noncompliance. This will be the topic of a future system-wide audit. Resolved. Given the timing of the final audit report, it was determined that a thorough review of FY08



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Ensure that any missing or improperly completed forms are completed, approved and forwarded to Human Resource Services (HRS).

forms was more appropriate. Forms for all individuals still employed were completed, approved and forwarded to HRS. As noted in Obs. 7.2, Audit Services found problems with forms reviewed. HRS performed an additional review, and determined that some problems stemmed from the complicated nature of the form, which has been and continues to be addressed in an ongoing effort to develop a user-friendly form and clear instructions. Other problems appeared to be due to a lack of supervisor understanding or commitment to the process. Some of these supervisors are no longer with NMSU and others received additional training as noted in Obs. 7.2.

08/09 Obs. 8 Drug and Alcohol testing procedures are outdated and ineffective as currently administered. Responsibilities for administering the program are not adequately defined.

8.1 – Update NMSU procedures to ensure compliance with U.S. Dept. of Transportation (DOT) Regulations. 8.2 – Clearly define and assign responsibilities for administering the program. 8.3 – Formalize the agreement with the testing company, with responsibilities and expectations clearly outlined.

Dorothy Anderson Dorothy Anderson Dorothy Anderson

6-30-08

6-30-08

6-30-08

Resolved. The existing guidelines have been modified to reflect DOT requirements. Resolved. HRS assumed the responsibility for administrative functions of the drug and alcohol testing process from the Employee Assistance Program. In addition, HRS developed internal procedures to administer the program, along with a Frequently Asked Questions reference for managers regarding drug and alcohol testing. Resolved. HRS has formalized an agreement with HireRight to perform drug and alcohol testing. In addition, HRS has elected to expand the alcohol and drug-testing program to include the community colleges and other remote locations.



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8.4 – Develop a plan to ensure that every employee is tested at least once a year. 8.5 – Although not required by regulations, consider the use of more stringent test methods, such as hair analysis used by the NMSU Police. 8.6 – Provide regular training to supervisors on the testing program.

Dorothy Anderson Dorothy Anderson Dorothy Anderson

6-30-08

6-30-08

6-30-08

Substantially Resolved. HRS decided to continue performing purely random tests, which meets DOT requirements but does not ensure that all employees are tested at least annually. HRS has developed specific actions to be taken when an applicant or employee refuses to take a drug test, which are addressed in the revised Drug and Alcohol Testing Policy, but this does not address individuals who are absent. Audit Comment: In our opinion, all employees subject to the policy who are not selected for or are absent from random testing, should be tested at least annually as a matter of safety and liability. Doing this would add to, but not affect the randomness of, regular testing. By deciding to continue with purely random drug testing, HRS management has knowingly accepted the risk and responsibility for this decision. Resolved at time of original report. Substantially Resolved. HRS developed training for supervisors on the drug and alcohol policy, and conducted an initial training for OFS management- level employees. HRS has identified other individuals in the NMSU system employed in units subject to testing requirements, and has begun to schedule dates for future trainings.



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08/09 Obs. 9 Temporary employment status is not being used as a temporary labor solution. Employees have been kept in temporary status for extended periods of time, effectively denying them access to most benefits and due process.

9.1 – Review existing policies, procedures and practices with regard to temporary employment status and revise as necessary. 9.2 – Perform an analysis of labor requirements and costs in OFS to determine whether there is a need for additional regular positions.

D’Anne Stuart Bill Mack, Susan Grotevant Glen Haubold, Ophelia Watkins

6-30-08

3-31-08

Substantially Resolved. HRS reviewed the policy on temporary employees and concluded that the problem was not with the policy, but rather with the enforcement of the policy. Internal processing procedures were developed to guide staff members in ensuring that the current policy of a one-year maximum for full-time equivalents greater than half-time, with a 90-day required break in service between temporary assignments, is being enforced. Resolved. A labor utilization analysis was performed by management to determine whether temporary positions could be converted to permanent or eliminated. This resulted in twenty-one temporary positions being converted to regular, eight temporary positions being eliminated, and the determination that temporary labor is only needed for shops with seasonal fluctuation in workload. Utilization of labor hours has also been incorporated into the monthly budget review process.

08/09 Obs. 10 There are little to no controls over the purchase and safeguarding of materials and supplies. Petty cash and procurement cards are used excessively for these purchases.

10.1 – Perform an analysis of warehouse inventory needs, vendor relationships, and internal controls related to operations. 10.2 – Institute additional controls over petty cash transactions and minimize amounts kept on-hand.

Michael Abernethy Michael Abernethy

6-30-08

9-30-07

Substantially Resolved. An analysis of warehouse inventory needs was performed, with the analysis being an educated estimate, given the past lack of accurate warehouse records. The analysis resulted in an inventory plan and development of vendor purchase agreements. The number of individuals authorized to purchase through newly created open purchase orders is limited, and activity is monitored by Purchasing. Procedures for shop stock are being established. Resolved. Petty cash funds have been removed from the warehouse and all OFS shops.



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10.3 – Apply restrictions on issuance and use of procurement cards. 10.4 – Analyze petty cash and procurement card usage on a monthly basis.

Bill Mack, Susan Grotevant Bill Mack, Susan Grotevant

6-30-08

6-30-08

Resolved. Only four procurement cards are assigned to OFS employees, and transaction activity reviewed indicates that the cards are only being used for warehouse purchases. Resolved. OFS no longer keeps petty cash. At the time of fieldwork, the Director of Procurement Services and Risk Management was reviewing procurement card usage for OFS on a monthly basis.

08/09 Obs. 11 Warehouse controls are in need of improvement to ensure projects are charged correctly, and to prevent inventory from being diverted for inappropriate or personal use.

11.1 – Develop and enforce basic written control procedures. 11.2 – Require properly filled out and approved requisitions for all items issued from warehouse. 11.3 – Require employees to provide proper ID and sign for requisitioned items, and require warehouse employees to issue receipts and provide copies to OFS accounting for reconciling against weekly warehouse reports.

Susan Grotevant Jim McDonough Jim McDonough Glen Haubold

6-30-08

6-30-08

6-30-08 7-01-09

Resolved. Warehouse procedures were developed and distributed to warehouse personnel and to all OFS supervisors. The procedures provide clear, basic guidelines for routine warehouse operations. Resolved. Purchase requisition forms, approved by the shop supervisor, are required to obtain stock from the warehouse. All requisitions reviewed were filled out properly, included a work order number, and were signed and dated by the appropriate supervisor and employee receiving the supplies. Partially Resolved. Employees are required to show proper identification and sign for receipt of materials and supplies. Warehouse employees issue receipts to shop employees when materials/supplies are received, which are turned into the Shop Supervisor for reconciliation to a monthly warehouse transaction report. Audit Services believes that someone outside of the shop should perform the reconciliation or formally review the reconciliation and supporting documentation, for proper separation of duties.



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08/09 Obs. 12 The management and control over NMSU’s transportation resources need improvement in order to ensure that: 1) NMSU complies with tax laws and regulations, 2) the purchase, maintenance storage and disposal of vehicles is done in an efficient and cost-effective manner, 3) vehicles and equipment are used for approved business purposes, and 4) departmental lease agreements are reasonable and adhered to properly.

12.1 – Clearly define policies and procedures involving the purchase, assignment, use and taxability of University vehicles. 12.2 – Perform an analysis with regard to the central authority for managing the University’s transportation resources and the implementation of a Fleet Asset Management Program. The analysis should consider outsourcing options. 12.3 – Develop a plan and timeline for implementing a Fleet Management Program. 12.4 – Designate Transportation Services as the official owner and custodian of transportation resource records, and implement data integrity controls over the records. 12.5 – Develop clear lines of communication

Lori Gobble, Angela Throneberry Bill Mack Glen Haubold, Tammy Anthony Lori Gobble, Bill Mack Tammy Anthony, Angela Throneberry Robert Valdez, Steve McCarty Angela Throneberry Lori Gobble, Tammy Anthony Lori Gobble Robert Scaling

12-31-07 7-31-09

12-31-08

12-31-08 12-31-09

12-31-08 9-30-09

12-31-07

Partially Resolved. A policy addressing the purchase, assignment, and use of university vehicles (Vehicle Assignment Policy) was drafted and presented to Administrative Council in June 2009, for review and approval. Passage and implementation of the policy without substantive changes will resolve this issue. Substantially Resolved. Transportation and Parking Services were combined under Auxiliary Services in June 2009. Heavy Equipment is now under the OFS Mechanics Shop and the campus Shuttle Service has been outsourced to the City of Las Cruces. A decision has reportedly been made to eliminate the leasing program, and an analysis is currently being performed, regarding whether to keep or outsource rental vehicles. Partially Resolved. A timeline has been developed. The development of operating guidelines is planned to begin now that Auxiliary Services has assumed responsibility for the program. Partially Resolved. Auxiliary Services assumed responsibility for the Transportation Services resource records and for the maintenance of required information in the Banner Property system in June 2009. Next steps involve the development and full utilization of the Fleet Management System software under the administration of Auxiliary Services. Substantially Resolved. Treasury Services (TS) developed a quarterly review process that Audit



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regarding the purchase, assignment and taxability of new vehicles. 12.6 – Perform a formal review of existing vehicle assignments to determine propriety in accordance with existing NMSU policy and applicable laws and regulations. 12.7 – Perform an annual inventory of all vehicles against assignment, use and tax records. 12.8 – Perform a formal vehicle needs analysis in OFS. 12.9 – Establish internal policies for OFS requiring that commuter vehicles be

Bill Mack Angela Throneberry Angela Throneberry Glen Haubold O. Watkins, L. Garcia Angela

12-31-08

12-31-08 7-31-09

12-31-08

12-31-08

Services believes will provide reasonable assurance that personal use of university owned vehicles will be properly reported and taxed. Purchasing currently notifies TS of new vehicle purchases. Upon passage of the Vehicle Assignment Policy discussed in Obs. 12.1, TS will determine the appropriate tax valuation method upon approval of vehicle assignment as noted on a Vehicle Assignment Authorization form. Substantially Resolved. Existing assignments were analyzed for compliance with tax law. The propriety of existing assignments will be revisited upon passage of the Vehicle Use Policy [see Obs. 12.1]. Partially Resolved. An annual review is included in procedures associated with the Vehicle Use Policy [see Obs. 12.1 and 12.6]. Substantially Resolved. A review of the vehicle allocation has been conducted and it has been determined that OFS has more vehicles than necessary. On June 5, 2009, OFS initiated a vehicle reduction plan. The first step was the elimination of all commuter vehicles and most individual vehicle assignments. The vehicle reduction plan will be completed over a 3-year period. Resolved. OFS eliminated take home vehicles effective June 5, 2009.



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returned to campus when employees are on vacation or extended leave. 12.10 – Consider installing GPS tracking units on vehicles and heavy equipment in the OFS fleet. 12.11 – Standardize Transportation Services lease agreements and ensure that lease fees are reasonable and can be supported. Develop and publish standard prices for routine services. 12.12 – Perform a review of lease billings and adjust/refund as necessary. Institute a process for periodic review of lease charges.

Throneberry Bill Mack Angela Throneberry, Tammy Anthony Lori Gobble Glen Haubold, Ophelia Watkins

12-31-08

12-31-08 8-31-09

12-31-08 7-01-09

Resolved. Management has considered the cost/benefit of such action and decided not to utilize GPS devices on university vehicles. Management believes that other controls being implemented, including the Vehicle Assignment Policy pending approval, will significantly reduce the need for such devices. Partially Resolved. As stated in Obs. 12.2, per management, a decision has been made to eliminate the lease program. Once accomplished, the recommendation will be withdrawn. Partially Resolved. The elimination of the lease program will eliminate the need for periodic review of lease charges. Transactions were being processed at the time of this writing, to bring billings on current leases up-to-date, and to process additional corrections from current and prior years. Audit Services will address this item in the next follow-up.

08/09 Obs. 13 Inadequate estimates and cost overruns were noted on several internal construction projects.

13.1 – Establish formal policies and procedures to address all aspects of internal construction projects. Consider

Jim McDonough, Susan Grotevant Glen Haubold, Jack Kirby

3-31-09 7/31/09

Partially Resolved. Procedures for project management processes, based on Best Practices, are in the process of being formalized. Completion is expected by July 2009. Management has decided that specific dollar thresholds will not be used to



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establishing dollar thresholds for contracting projects to external parties. 13.2 – Require OFS estimates for all larger projects, with project management handled through a Projects Office. 13.3 – Require meaningful, dated estimates, along with properly documented and approved change orders. Consider “not-to-exceed” estimates. 13.4 – Establish accountability measures for evaluating performance.

Jim McDonough, Susan Grotevant, Glen Haubold, Jack Kirby Jim McDonough, Susan Grotevant, Glen Haubold, Jack Kirby Jim McDonough, Susan Grotevant, Glen Haubold

3-31-09 7-31-09

3-31-09 7-01-09

3-31-09 8-31-09

determine whether projects are outsourced or performed by OFS [see Obs. 4.3]. Partially Resolved. Management plans to incorporate the estimating function into the new Facilities Management (FMS) system. The project management function within OFS has been enhanced with changes to the organization structure. According to project initiation procedures developed by OFS, all projects are now managed by a Project Manager. A requirement that all projects have a detailed cost estimate is planned for implementation in July 2009. Partially Resolved. A Project Approval Form generated by the current work order system is being utilized, which includes the date of the estimate and detail regarding the scope of work. The customer is required to sign and submit the form to acknowledge acceptance of the estimate and stated scope before the project is scheduled. Documentation in use during FY09 did not include a formal approval process for revisions to project scope or budget; however, forms for this purpose have been developed and provided to Audit Services and, per management, will be used beginning 7-01-09. Implementation of the planned process will resolve this issue. Unresolved – Progress noted. Formal guidelines for project management are being developed to 1) include emphasis on budget and schedule monitoring, 2) establish thresholds for identifying exceptions, and 3) require approval for additional



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13.5 – Maintain estimates in a central project file and distribute copies to customers and shop supervisors.

Jim McDonough, Susan Grotevant, Glen Haubold

3-31-09 8-31-09

funding and explanations for deficits. Unresolved – Progress noted. Full implementation of Obs. 13.1 - 13.4 will result in sufficient documentation to address this recommendation. In addition, business specifications for the new Facilities Management (FMS) system require central retention of project documentation. Audit Comment: NMSU currently has two construction project management functions – one within OFS and one within the Facilities Planning & Construction (Architect’s) Office, which was separated from OFS after the conclusion of the special audit. It is important to note that the project management function outside of OFS has not been addressed in this follow-up. In addition, it is our understanding that the Architect’s Office does not plan to move to the new FMS system along with OFS [see also, Obs. 14.3 note].

Obs. 14 OFS cannot provide adequate support or justification for their internal service center rates. Related accounting and budget practices should be evaluated.

14.1 –Develop a reasonable method for analyzing recovery rates and segregating billable and non-billable work. 14.2 – Develop a methodology based on cost accounting guidelines to support the allocation of indirect costs.

Susan Grotevant Lori Gobble, Jean Carsey, Ophelia Watkins Susan Grotevant Lori Gobble, Jean Carsey, Ophelia Watkins

12-31-08

12-31-08

Resolved. The OFS work order system data was reviewed to determine whether a rate analysis could be reasonably performed. It was determined that the work order system data did not provide meaningful information, and thus, the existing information was not used for further analysis. Resolved. The Cost Accounting and Reporting office has developed a methodology to allocate indirect costs to I&G and apply the unsupported portion to the billing rates.



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14.3 – Perform an analysis of the OFS rates and adjust as necessary. 14.4 – Implement standard internal rate procedures for the University under the guidance and oversight of the Business Office. 14.5 –A joint annual evaluation performed by OFS & the Business Office of actual vs. expected OFS performance, with rates adjusted as necessary. 14.6 – A Business Office review of the OFS budget to determine whether changes/reallocations are needed.

Susan Grotevant Lori Gobble, Jean Carsey, Ophelia Watkins Susan Grotevant Lori Gobble, Jean Carsey, Ophelia Watkins Susan Grotevant Lori Gobble, Jean Carsey, Ophelia Watkins Susan Grotevant Anna Price, Ophelia Watkins

12-31-08

12-31-08

12-31-08 8-31-09

12-31-08

Resolved. The existing rates were reviewed and determined that they were, for the most part, unsupportable. A new methodology has been developed and the rates have been refined¹. ¹ Because the Facilities Planning & Construction (Architect’s) Office was separated from OFS as discussed in the Audit Services note for Obs. 13, rates and controls for the design function within the Architect’s office were not addressed in this review. It is our understanding that the Cost Accounting & Reporting department is currently performing a separate rate review of this function. Resolved. The Cost Accounting and Reporting Office (CAR) has implemented standard Internal Service Center rate procedures, available online, to provide guidance in this area. Partially Resolved. A key component of the rates are estimated billable hours, which are compared to actual hours as part of the monthly review process. A review and comparison to actual expenditures will not be completed until the new rates have been in place for a full year. This analysis will be performed by Cost Accounting and Reporting, and future rates will be adjusted annually, according to any surplus or deficit incurred. Resolved. A budgetary analysis based on the revised billing rates and other fiscal related changes was completed. A monthly review of budget to actual is performed for OFS, to assist with the determination of proper budget levels.



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Obs. 15 Existing controls do not ensure the proper and effective management of work orders.

15.1 – Implement procedures for managing and documenting work order billing adjustments. 15.2 – Evaluate adequacy of work order system access controls. 15.3 – Assess the timeliness and efficiency of the process for revising established standard rates and for creating new ones. 15.4/15.5 – Develop an appropriate process to calculate and charge project estimation costs, administrative support labor costs and project management fees to project work orders. 15.6 – Assign Transportation Services to make specified improvements in the procedures for managing heavy equipment usage

Jim McDonough, Susan Grotevant Jim McDonough, Susan Grotevant Glen Haubold, Diana Madrid, Grace LaTorra Lori Gobble, Jean Carsey Jim McDonough, Susan Grotevant Ophelia Watkins, Lori Gobble, Jean Carsey Jim McDonough, Susan Grotevant

12-31-08

12-31-08 7-01-09

12-31-08

12-31-08

12-31-08

Substantially Resolved. Procedures for work order billing adjustments were modified to include enough documentation and approval requirements to mitigate the primary risks, verified through a random review of six adjustments from FY09. Partially Resolved. Financial Services Administration (FSA) completed a security review of the work order system. Noted issues related to separation of duties were corrected as part of a reorganization of technical support for the OFS work order system to ICT and FSA and, per management, access control issues were being addressed at the time of this writing. Resolved. [See Obs. 14.3 and 14.4] Resolved. Project estimation costs, once charged to shop time, were resolved through implementing controls as discussed in Obs. 5. Administrative costs are included in overhead and appropriately applied to projects through the new rates as discussed in Obs. 14, and project management fees are a standard percentage of the project estimate for reimbursable (non I&G) jobs. Resolved. Procedures were developed for managing heavy equipment usage, and include several controls to ensure proper oversight of usage and charging to work orders. Audit Services reviewed process documentation and observed the controls being followed.



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and charging related services to work orders. 15.7 –Ensure that invalid fuel charges are cleared from suspense and charged to the correct work orders on a timely basis. 15.8 – Review the fuel key interface codes and process to determine the reason for the large volume of invalid fuel charges. 15.9 – Develop procedures to ensure that completed work orders are closed in a timely manner to avoid posting charges to these work orders in error.

Jim McDonough, Susan Grotevant Jim McDonough Diane Madrid, Susan Grotevant Jim McDonough, Susan Grotevant Glen Haubold, Jack Kirby

12-31-08

12-31-08

12-31-08 7-01-09

Resolved. A system solution was developed that redirects suspended fuel charges to the correct work order prior to posting to an invalid fuel work order. Resolved. Oversight of the TRAK Fuel Management System was reassigned from OFS to FSA. A manual created for the system includes procedures related to system maintenance/monitoring, and key assignment and distribution. Reimplementation of the TRAK software virtually eliminated problems associated with fuel keys linked to incorrect vehicles or work orders. Partially Resolved. Shop managers analyze a weekly open work order report, and each shop is responsible for closing completed work orders in a timely fashion. The Executive Director for Operations (EDO) is in the process of reviewing all open work orders and, at the time of this writing, had identified a number that may be candidates for closure, but additional work is needed to verify the status. The EDO has committed to perform a monthly review of open work orders from this point forward and, per management, has identified reports in the current system that can assist with monitoring until the new FMS system is implemented.



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15.10 – Maintain central project files. 15.11 – Implement procedures to ensure that all pertinent information is entered into the work order system and that estimate and actual work orders are cross-referenced. 15.12 – Periodically compare work order budgets and estimates against actual expenditures. 15.13 – Require use of the project feature in the Work Order System. 15.14 –Require that all requests to create a work

Jim McDonough, Susan Grotevant Jim McDonough, Susan Grotevant Jim McDonough, Susan Grotevant Jim McDonough, Susan Grotevant Jim McDonough, Susan Grotevant

12-31-08

12-31-08

12-31-08

12-31-08

12-31-08 7-01-09

Resolved. There are no central paper files; however, projects with multiple work orders are now cross-referenced, and a project log containing work order information is updated on a daily basis. These measures address the problem of not having all information related to a particular project in one place, when more than one work order is involved. Substantially Resolved. Procedures for creating work orders have improved to include better project documentation and multiple work order cross-referencing, when necessary. The practice of creating multiple work orders for single projects has decreased significantly due to stronger controls over work order creation. It is expected that the linking of multiple projects and multiple funding sources will be further enhanced with the implementation of the new FMS software. Resolved. The Project Office staff meets weekly to review project budgets and expenditures. A spreadsheet with total budget, total expenditures to date (work order total), and remaining budget (work order balance) is maintained and updated daily. This spreadsheet is used in the weekly meetings to track costs and completion dates. Substantially Resolved. A decision was made not to use the project feature in the current work order system due to enhanced procedures and controls discussed in Obs. 15.11 above. Management plans to use the project feature in the new FMS system, once it is implemented. Partially Resolved. An internal policy covering initiation of work orders was approved during our



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order be for the requestor’s shop only, and have appropriate approvals.

Glen Haubold review. The policy does not specifically limit authority regarding work order initiation, with the exception of projects funded by sources outside of OFS. Additional procedures developed at the time of this writing establish the circumstances under which internal work orders may be initiated, with each proposed work order subject to a two-level review that is to include OFS Accounting and the receiving shop supervisor.

Obs. 16 Additional controls are needed within the Work Order System for data integrity purposes, and the underlying IT support structure for the Work Order System should be reviewed.

16.1 – Perform a review of the Work Order System to confirm that adequate internal controls are in place relative to initiation documents, data input validation, transaction limits, exception reporting, and reconciliations for expenditures posted to work orders for labor, materials, and supplies. 16.2 - Perform a review of the underlying IT support structure for the Work Order System based on the list of considerations proposed by Audit Services.

Susan Grotevant, Diane Madrid, Glen Haubold Susan Grotevant, Diane Madrid

4-30-08 7-15-09

6-30-08

Partially Resolved. A review of the current Work Order System was performed, which included a security review [see Obs. 15.2]. Given the expected implementation of a new Facilities Management System (FMS), new controls are not being built into the current system. Rather, OFS has implemented several controls outside of the system, to mitigate risks associated with initiation documents and data input validation. System controls were in place for interdepartmental charges from the OFS system to Banner, including exception reporting review; however, this represented the only control over data output in place at the time of our review. Management has committed to performing a full reconciliation of the work order system to Banner for FY09 prior to year-end close, in order to ensure the proper recording of expenditures. Resolved. All computer and system related support has been removed from the OFS organizational structure. Services and support transferred to ICT include: Network configuration and support, OFS server backups and upgrade support, and Work order system maintenance support. Application support and PC support have been transferred to FSA.



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16.3 – Consider replacing the current “homegrown” system.

Susan Grotevant, Diane Madrid

7-30-09

Resolved. The decision was made to replace the current Work Order System with a new Facilities Management System (FMS). Implementation is planned for the first quarter of FY10.

Manager, Senior Business

Organizational Chart:OFS

Office of Facilities and Services

OperationsUtilities, Maintenance,

Building ServicesAdministration

DirectorUtilities Services

Assistant Vice President

Project Development &

Engineering

Executive Director Executive Director

DirectorBuilding Operations

DirectorFacilities Maintenance

Director OFS ProjectsEngineer, Civil

Engineer III

Engineer III

Engineer

May 7, 2009

rjustus

Typewritten Text

Attachment 3

new mexico state university office of audit...

Documents