A. Open SessionApproval of Agenda

B. Briefing Materials1. Audit Reports

Fleet Services Performance Audit2. Continuous Compliance Audits

Bi-weekly Payroll Compliance Review3. Status Updates

1st Quarter FY ‘19 Fraud, Waste & Abuse Hotline Report

C. Other BusinessD. AdjournmentE. Next Meeting Date

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Background

In accordance with the approved Fiscal Year 2017 Risk-Based Audit Plan, OIG performed a limited-scope audit of the Fleet Services Division and assessed compliance with WSSC policies and procedures designed to enforce/support internal and external rules, laws and regulations. We conducted the audit in accordance with the International Standards for the Professional Practice of Internal Auditing.

Audit Team:Angela Makle Fortune – Senior AuditorJanice Hicks - Auditor

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Objective The objective of the audit was to provide an independent assessment of Fleet Services compliance with WSSC policies and procedures.

Scope Limited scope to include transactions and processes effective

during FY’s 2016 and 2017. Fleet Services activity affecting administrative operations. Excluded vehicle repairs and recommend further exploration into

analyzing vehicle maintenance.

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Findings Rating Recommendations

1. Lack of segregation of duties for Materials Planners

High Establish internal controls and ensure the duties of ordering, receiving, recording, and reconciling are segregated.

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Management Response

• FSD created an intra-office procedure (IOP) titled Materials Purchasing and Inventory Policy – effective July 30, 2018. The following requirements were added:o Garage Supervisors now required to approve any adjustments to

inventoryo Fleet Parts Specialists (referenced as Materials Planners) will be rotated

to perform inventory counts at different garages on a regular basis.o Supervisors will conduct independent random cycle inventory counts

once a quarter annually to verify the accuracy of Fleet Parts Specialists inventories and address discrepancies

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Findings & Management Response (Cont’d)

Management Response (Cont’d)

o Fleet Parts Specialists are now required to obtain approval of any purchases over $1,000 by their Garage Supervisor.

• FSD has requested IT and the Procurement Department to restructure the current P-CARD approval process to have the approval of a Fleet Parts Specialist’s P-CARD purchases go to the Garage Supervisor onsite instead of the Division Manager.

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2. Unused inventory applied to work orders, but not re-entered into the system

Medium • Establish controls and procedures to mitigate loss of inventory

• Ensure proper accounting for vehicle maintenance costs

• Enable accurate evaluation of inventory.

Management Response

• FSD’s current system has a ‘stock checkout’ module that allows unused items to be returned to inventory. The new Materials Purchasing and Inventory Policy specifies the requirement to return parts to inventory if not used.

• FSD anticipates enhanced inventory controls with the implementation of WAM 2.2 as part of Project Cornerstone.

Findings Rating Recommendations

Findings & Management Response (Cont’d.)

Findings Rating Recommendations

3. Assets are not timelyrecorded in TEAMS

Medium Create and enforce a receiving process that mandates all assets are recorded promptly in TEAMS upon receipt.

Management Response

• FSD believes that assets are recorded timely in TEAMS, the current Fleet Asset Management system, based on when the appropriate paperwork is received. The “Acquisition Date” (date of acceptance) and the “In Service Date” (date assigned and put into field) are both entered.

• FSD created a new IOP called Procedures for New Vehicle and Equipment Intake to standardize and specify all requirements regarding receiving, inspection and data entry for such new assets. The Procedure was effective July 30, 2018.

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Findings & Management Response (Cont’d.)

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4. Inventory adjustments can be entered into TEAMS without supervisory review or approval

Medium Management work with the Information Technology Department to incorporate mandatory authorization controls regarding adjustments in the system.

Management Response

• FSD adopted the new Materials Purchasing and Inventory Policy. Section IV.A.8 now requires supervisor approval prior to making any adjustments in the system.

• FSD will work with IT and the WAM 2.2 implementation team to incorporate the suggested authorization controls into the new system functionality.

Findings Rating Recommendations

Findings & Management Response (Cont’d.)

Findings Rating Recommendations

5. Lack of formal documented inventory procedures

Medium • Ensure formal documented inventoryprocedures are created and administered for vehicles, equipment, parts and supplies.

• Adhere to mandated inventory counts of all Fleet Services assets in the formal procedures.

• Require consistent and continual inventory processing training for Material Planners.

Management Response

• FSD developed an IOP entitled Materials Purchasing and Inventory Policy to address the changes. Effective July 30, 2018.

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• The policy formalized inventory procedures, and establishes a system that rotates Fleet Parts Specialists between garages and requires a Garage Supervisor to assist in the monthly inventory once a quarter annually. FSD believes these changes provide the formalized requirements, cross-training and oversight to ensure consistent results. FSD will look into more formalized training, should this new procedure and on-the-job training prove insufficient

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

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6. Insufficient segregation of departmental duties in the Fleet Services auction process

High • Incorporate segregation of duties for the auction process.

Management Response

• FSD agrees with the recommendation, and will prepare the list of vehicles available for surplus, and turn that list over to the unit assigned to handle disposition of surplus goods. That function is performed by the General Services Department (GSD), outside of FSD. The disposition of the surplus vehicles or equipment will be handled by that unit pursuant to WSSC’s Standard Procedure titled Disposition of Scrap Metal and Surplus Goods.

Findings Rating Recommendations

Findings & Management Response (Cont’d.)

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Findings & Management Response (Cont’d.)

Management Response (Cont’d)

• The final disposition amounts will be provided to FSD by the GSD to allow FSD to update the asset records in TEAMS or current asset management system. This change is effective as of July 30, 2018. .

Findings Rating Recommendations

7. Auction inventory lists contain inventory items without identifying asset numbers

Medium Establish a process to have a uniqueidentifying number for all items leaving the Commission for auction.

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Management Response

• FSD agrees with the recommendation, and will prepare the list of vehicles available for surplus, and turn that list over to the unit assigned to handle disposition of surplus goods. That function is performed by the General Services Department (GSD), outside of FSD. The disposition of the surplus vehicles or equipment will be handled by that unit pursuant to WSSC’s Standard Procedure titled Disposition of Scrap Metal and Surplus Goods.

Findings & Management Response (Cont’d.)

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Findings & Management Response (Cont’d.)

• The final disposition amounts will be provided to FSD by the GSD to allow FSD to update the asset records in TEAMS or current asset management system. This change is effective as of July 30, 2018. .

Management Response (Cont’d)

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8. WSSC MotorVehicle and Equipment Assignment Regulation Violation

High Enforce the standard procedure SP LOG 07-01 and take measures to properly monitor the use of vehicles.

Findings Rating Recommendations

Management Response

• FSD agrees that managers are responsible for enforcement of the stated Procedure. FSD recently installed AVL (Automatic Vehicle Locator) technology that will assist in identifying vehicle usage. This information is made available to the assigned driver’s respective Section/Division Manager as well as to FSD. FSD will be reviewing the mileage and use data on a monthly basis and reaching out to managers across the Commission to follow up on unusually high mileage or outliers. This review and communication should assist the consistent application of these policies.

Findings & Management Response (Cont’d.)

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9. Some assigned vehicles do not meet the vehicle assigned usage requirement

Medium Ensure the Fleet staff follow the same criteria in SP LOG 07-01 regarding vehicle request and replacement process as required of other departments and divisions.

Findings Rating Recommendations

Management Response

• FSD agrees that its vehicles assignments should meet the same criteria as others across the Commission. The three vehicles identified in the audit had been assigned to employees that had recently retired or resigned. Since that time, two vehicles were reassigned to Project Cornerstone and the Materials Management Division.

Findings & Management Response (Cont’d.)

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• In addition, Fleet is analyzing AVL data to identify underutilized vehicles and communicating those results to Section and Division Managers. After 12 months of the AVL data, FSD will be designating vehicles which don’t meet the current usage requirements and recommending them for return to the motor pool or designation as surplus. This designation and recommendation should be completed on or before December 31, 2019.

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

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10. Fleet TEAMS audittrails were not turned on until approximately 5 years after implementation

Medium • Standardize and enforce audit trail implementation for all applicable systems to ensure data integrity and establish accountability.

• Periodically review roles and responsibilities for the Fleet TEAMS and adjust accordingly to monitor access to the system.

Findings Rating Recommendations

Management Response

• Fleet Services Division Response: Fleet will work with IT to implement this recommendation. FSD has confirmed that audit trails have been turned on in TEAMS, but both FSD and IT will be working with Project Cornerstone Team to ensure same functionality is included in WAM 2.2.

Findings & Management Response (Cont’d.)

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• Information Technology Department Response: The senior level management who were responsible for implementing the Fleet application were no longer employed at WSSC when the current audit took place. Because of this disadvantage, there is no way to ascertain why the audit-log function wasn’t turned on when the Fleet module was deployed to production.

• As a point of clarification on this specific finding, the Fleet audit/log tables that were not enabled dealt primarily with the PM Forecast and the PM Master. This has since been corrected.

Findings & Management Response (Cont’d.)

Management Response (Cont’d)

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Findings & Management Response (Cont’d.)

Management Response (Cont’d)

Information Technology Department Response (Cont’d):

• Going forward, the current senior level IT management agrees with the audit findings and the need to standardize and enforce audit/log table trails for the implementation of all applicable systems. o Audit/log tables and history tables will be enabled with all new

deployments.o The IT Quality Assurance team will develop test scripts that

verify that audit logs are enabled and ready prior to being deployed to the production environment.

• IT will work will Fleet Operation to periodically review and adjust their employees’ access, based on their roles and responsibilities

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11. Standard procedures are outdated and do not reflect current practices

Medium Update the standard procedures to address issues identified during the audit and incorporate new processes and systems.

Findings Rating Recommendations

Management Response

• FSD has begun the process of updating these standard procedures, but this process will take time given the enterprise wide application of such procedures. Given the current personnel shortage and resource constraints in FSD and enterprise wide focus on Project Cornerstone, FSD anticipates that the policies will be updated on or before December 2019.

Findings & Management Response (Cont’d.)

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12. Procedures are not documented for the Maryland Department of the Environment (MDE) regulatory audit

Medium Ensure the WSSC MDE regulatory audit procedures are documented for knowledge transfer and consistent compliance with MDE regulations.

Findings Rating Recommendations

Management Response

• FSD will begin the process of developing a procedure to address these requirements once it fills the Business Analyst position. The procedure will involve coordination with the Production Department – Industrial Assets Management Division and Facilities Maintenance Division as well as the Environmental Section of the Engineering and Environmental Services Division in the Engineering and Construction Department.

Findings & Management Response (Cont’d.)

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Findings & Management Response (Cont’d.)

Management Response Cont’d)

• This process will take time given the cross enterprise responsibilities, the current personnel shortage and resource constraints in FSD, and enterprise wide focus on Project Cornerstone.

• FSD anticipates that the Standard Procedure will be adopted on or before December 2019.

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Internal controls are effective in mitigating the risks specific to the achievement of the business objectives with a few exceptions. However, opportunities for control enhancement were identified and communicated to the Fleet Services Division and IT Department. We have reviewed the results with the appropriate department management and a management action plan has been developed to address the issues identified.

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Case Status:

Five (5) closed and one (1) in progress:

5, 83%

1, 17%

Investigation Case Status1st Quarter Fiscal Year 2019

Closed

In Progress

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Closed Cases:

Five (5) Hotline cases closed since the last quarter. The closed cases included one (1) allegation for each of the following categories: customer relations, product quality concern, conflicts of interest, theft of time, and safety issues & sanitation.

1, 20%

1, 20%

1, 20%

1, 20%

1, 20%

Closed Cases By Allegation Type1ST Quarter Fiscal Year 2019

Customer Relations

Product Quality Concern

Conflicts of Interest

Safety Issues and Sanitation

Theft of Time

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The average number of calendar days from case opening to close was thirty-four calendar days (34), which is an improvement of 15 days from last quarter’s report of forty-nine (49) calendar days. The outcome of each closed Hotline case for the first quarter of fiscal year 2019 is captured in the table below:

METHOD ISSUE TYPE NUMBER CONCLUSION DISPOSITION

Phone Customer Relations 1 Outside of WSSC’s jurisdiction

Referred to appropriate authorities

Web Product Quality Concern 1 Outside the Washington Suburban Sanitary District (WSSD)

Notified reporting party

Web Conflicts of Interest 1 Unsubstantiated No further action

Web Theft of Time 1 Substantiated Management action taken

WebSafety Issues & Sanitation 1

Unsubstantiated Pending claim

Quarterly Total: 5

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report

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2 2

1 1 1

0 0 0 0

1

0 0 0

1 1 1 1 1

Closed Hotline Cases Quarterly Comparison

FY 18 4th Q FY 19 1st Q

Based on a quarterly comparison analysis between the 4th quarter of FY 2018 and 1st

quarter of FY 2019, two categories of allegations appear to be trending, customer relations and policy issues. (Please see table below).

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report

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Top Hotline Allegations Reported:

The top Hotline allegations reported for the first quarter of fiscal year 2019 are as follows: two (2) theft of time and one (1) each for conflicts of interest, customer relations, product quality concern, and safety issues & sanitation.

Theft of Time, 2

Conflicts of Interest, 1

Customer Relations, 1

Product Quality Concern, 1

Safety Issues and Sanitation, 1

TOP HOTLINE ALLEGTIONS1ST QUARTER FISCAL YEAR 2019

1st Quarter FY’19 Fraud, Waste and Abuse Hotline Report

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Background

As part of our continuous Bi-Weekly Payroll Compliance Review process, we reviewed 16 different payroll reports including Total Earning Summary, Deductions Summary, Gross to Net Comparison, Salary Changes, Position and Section Changes, Merit Bonus, Salaries Under Minimum and Maximum, Overtime, Administrative Leave, Emergency Duty Pay, Hazardous Duty Pay, Suspensions, Severance Admin Pay and Temporary Employees.

Audit Team:Janice Hicks – Auditor

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Objectives The purpose of the Bi-Weekly Payroll Compliance Review is to ensure amounts paid to employees were accurate and agreed with supporting documentation.

ScopeBi-weekly payrolls processed between 6/16/2018 through 9/08/2018

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PPE 6/16/2018 - OIG Report - Gross/NetComparison

One (1) employee appeared on this report earning an additional $22,313.87 compared to the prior pay period gross/net amount. The increase in earnings was due to a miscalculation of the employee’s hourly rate over the past six years.

Exception Report Observations

Note:

This issue is being addressed under the Office of the Inspector General (OIG) – Year End Payroll Review Retro Pay audit. Management’s response and plan of action will be included in the OIG report.

Observations

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PPE 6/16/2018 - OIG Report - Gross/NetComparison

Two (2) employees received large special pays, $4,134.00 and $2,132.46.

In accordance with personnel policy 2:24 Higher Classification Assignment section III. D. Each of the higher classification compensation during this pay period are in accordance with the policy.

Exception Report Observations (Cont.)

Note:

No further review required.

Observations

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PPE 8/25/2018 - OIG Report - Gross/NetComparison

One (1) employee appeared on this report earning an additional $20,004.29 compared to the prior pay period gross/net amount. The increase in earnings was due to a miscalculation of the employee’s hourly rate over the past six years.

Exception Report Observations (Cont.)

Note:

This issue is being reviewed under the OIG – Year End Payroll Review - Retro Pay audit. Management’s response and plan of action will be included in the OIG report.

Observations