Internal Audit

Cincinnati Public Schools Internal Audit Treasurer’s Office Presentation Internal Audit Plan – Fiscal Year 2009/10 Michael Alao October 8, 2009

Agenda • • • • •

Introduction Internal Audit Function Internal Control Internal Audit Plan Questions, comments, concerns…

Introduction •

Name: Michael Alao

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Education: B.S. Accounting, VCU 1999

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Certification: Certified Public Accountant (VA, OH) Certified Internal Auditor Certified Fraud Examiner

Introduction cont. •

Experience: 10 years of audit experience

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State of Virginia, Richmond, VA International Paper, Memphis, TN FedEx, Memphis, TN PricewaterhouseCoopers, DC & Baltimore Wolseley, Reading, United Kingdom

Internal Audit Function What is internal auditing? Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Internal Audit Function cont. • •

Independent Objective

Concerned with: • Effectiveness and efficiency of operations; • Reliability and integrity of financial and operational information; • Safeguarding of assets; and • Compliance with laws, regulations, and contracts.

Internal Audit Function cont. •

Independence

Board of Education Finance Committee CFO/Treasurer

Superintendent Audit Committee Internal Auditor

Internal Audit Function cont.

Internal Audit Function cont. Independence per CPS IA Charter: “…the Internal Auditor shall have no direct responsibility or any authority over any of the activities or operations subject to review. The Internal Auditor shall not develop and install procedures, prepare records, or in engage in activities which would normally be reviewed by internal auditors.”

Internal Audit Function cont. •

Objectivity

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An unbiased mental attitude Use of testing and evidence The whole picture

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Internal Audit Function cont. External Audit Internal Audit • Legal requirement • Not required • CAFR and • Financial, compliance only compliance, and operational • High materiality • Independent CPA • Low materiality • District employee firm

Internal Audit Function cont. Why have an internal audit function? • •

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SEC requirement for public companies State requirement (e.g. NY school districts) Reactive response to fraud Proactive

Internal Audit Function cont. Cincinnati Public Schools Board of Education Fiscal Accountability Pledge Approved Unanimously 2/20/2008 “To ensure fiscal accountability, the Board has established an internal audit position and an external audit committee with a commitment to report quarterly to the public on financial management.”

Internal Controls What is internal control? A process effected by the entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

Internal Controls cont. What are internal controls? Procedures to safeguard assets and make more efficient and effective use of these assets. Procedures to ensure compliance with District policy, State, and Federal laws. Examples: Budget process, reconciliations, segregation of duties, policies and procedures

Internal Controls cont. Why are internal controls important?

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Ensure mission accomplishment Reduce fraud opportunities Prevent loss of funds or other resources Establish standards of performance Assure compliance with laws Preserve integrity Eliminate adverse publicity Assure public confidence

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For our own protection

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Internal Controls cont. Who is responsible for internal controls? • •

All staff responsible for following internal control procedures Management is key • Establishes policies and procedures • Monitors and evaluates procedures • Must demonstrate commitment to abide by policies • Must set a high standard and lead by example

Internal Controls cont. Internal auditors are responsible for evaluating the adequacy and effectiveness of internal controls, and making recommendations where control improvements are needed. Management is not required to follow recommendations, but must then accept risk.

FY 2010 Internal Audit Plan Types of Internal Audit Engagements

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Audits Consulting Reviews Investigations

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Assisting External Auditors

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FY 2010 Internal Audit Plan cont. Process Assessments for Internal Audits Assessment

Definition

Satisfactory

A well-controlled process with no significant audit findings.

Marginal

A process with weaknesses in key controls which, if not corrected, could result in an unacceptable environment.

Unsatisfactory

A process with significant control issues.

FY 2010 Internal Audit Plan cont. Internal Audit Plan Development • • •

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Risk assessment Review of prior audit findings Discussions with management and staff Board and Audit Committee input and approval

FY 2010 Internal Audit Plan • • • • • • • • • •

Schedule of Expenditures of Federal Awards Consultant APD Approval Process Blanket Purchase Orders Supplemental Educational Services (SES) Providers PNC Purchase Cards Student Activity Funds Non-School Organizations (NSO) Payroll Cycle Progress on Performance Audit Recommendations Progress on Business Operations Efficiency Review Recommendations

Questions, comments, concerns…

Contact Information Michael Alao (513) 363-0433 [email protected]