National Capitol Area Conference

1. National Capitol Area Conference Roy De Lauder, CPPM, CF November 15, 2011

2. Roy De Lauder Internal Audits and You

3. Today’s Topics • Why Audit? • What is an Audit? • How to do an Internal Audit? • Who?; What?; When?; Where? • Can you describe your Internal Audit process?

4. Why audit? Is there another choice? • Assume • Benefits • Audit or Systems Analysis • Benefits

5. Why audit? Is there another choice? • Assume • Ass u me • Audit or Systems Analysis • Benefits • Health of Property Control System • Areas for improvement • Opportunities for better, faster, cheaper, smarter • Contractual obligation • Educate and train

6. Internal vs. External Audit? • Internal? • External?

7. Analysis Close-out Property Management Disposition (Planning) (Replacement?) Acquisition Subcontractor Control (Including Buy/Build/Lease Decisions) Receiving Life Cycle of Property Inventory Maintenance Identification Utilization Records Consumption Reports Movement Storage Risk/liability

8. Audit or Systems Analysis? • “A property audit is a systematic, objective review and evaluation of an organization’s property control system, which includes the organization’s established procedures and its application of, implementation of, and compliance with those procedures.” • Management may think that they have the right procedures…

10. Key is Written Procedures • Written procedures form the foundation of the Property Control System. It is in these procedures that every organization employee will find precisely what is required of him or her in the use, maintenance, and preservation of property. • Equally indispensible is the consistent, conscientious application of those procedures. Written procedures that are not followed are functionally equivalent to no procedures at all.

11. Audit Process • State the audit’s objectives. • Define the attributes or transactions to be tested. • Define the population. • Specify an acceptance/rejection rate • Determine the sampling method. • Select the sample(s). • Perform the audit. • Analyze the defects.

12. Audit Process (cont) • Generalize from sample to population. • Determine the status of the process that is under review. • Issue the report. • Educate and Train while correcting the problems.

13. Internal Audit Planning • Develop annual audit plan. • What sites / facilities will be audited. • When will the audit(s) take place. • What will be included in the scope of each audit? • On site or remote? • How long will each audit take? • What resources will be needed? • Select Lead Auditor • Rotation within management team. • Select Audit Team / Support

14. Internal Audit Planning (cont) • Audit tools • Procedure / Instructional document(s) that clearly defines: • Whom will be audited / interviewed? • What will be audited? • What questions will be asked to whom? • What data / information will be audited? • Where will the data / information come from? • Finalize audit program and begin to implement.

15. Analysis Close-out Property Management Disposition (Planning) (Replacement?) Acquisition Subcontractor Control (Including Buy/Build/Lease Decisions) Receiving Life Cycle of Property Inventory Maintenance Identification Utilization Records Consumption Reports Movement Storage Risk/liability

16. Determining Audit Universe • Listing of contracts being reviewed • DCMA oversight? • Prime or Subcontractor? • Status: Active / In closeout? • Property Clauses. • Government Furnished Property? • Where is work being performed? • Period of Performance dates.

17. Determining Audit Universe (cont) • Listing of subcontracts • Property clauses. • Government and / or Company owned Furnished property? • Status: Active / In closeout? • Subcontract Administrators.

18. Internal Audit Preparations • Point of Contacts • Program Managers. • Contract Administrators. • Subcontract Administrators. • Receiving / Shipping Personnel. • Storeroom / Material Control Personnel. • Purchasing. • Property Custodians. • Property Specialist.

20. The Ethics of Systems Analysis • The value of a system analysis wholly depends on the knowledge, integrity, independence, objectivity, and impartiality of the auditor, whether the auditor is an outside contractor or an employee. • Particularly when an organization is undergoing public scrutiny, the conduct of the auditors must be above reproach.

21. Can you describe your Internal Audit System?

22. My Internal Audit system? • Xxxx, Inc. has had an internal audit program since October 2007. • Our internal audit program reviews & documents the condition of our Property Control System. • Our model was the DCMA PMSA audit.  • The audit is conducted by _____ Certified Professional Property Managers (CPPM) touching all the business processes on the attached chart.

23. My Internal Audit system? Analysis Close-out Property Management Disposition (Planning) (Replacement?) Acquisition Subcontractor Control (Including Buy/Build/Lease Decisions) Receiving Life Cycle of Property Inventory Maintenance Identification Utilization Records Consumption Reports Movement Storage Risk/liability

24. My Internal Audit System(cont) • Our internal audit consists of interviews, checklists, artifacts, samples, and management reviews. • The methods & results of our internal audits are reviewed with external auditors when they visit.

25. Questions? • ???

26. Questions? • ??? • What do you do when you fail an Internal Audit?