Receiving a Performance Audit Steven P. McKerney, CPA Director of Internal Audit Washington State Department of Transportation Association of Government Accountants Olympia, WA November 2, 2006

2 Performance Audits Compared to Other Audits Performance Audits Performance Audits Generally assess a program’s effectiveness, efficiency, and results. May also assess compliance with legal or policy requirements. Authority for Current Performance Audits at WSDOT: Authority for Current Performance Audits at WSDOT: Senate Bill (ESSB) 6839 Senate Bill (ESSB) 6839 Initiative 900 Initiative 900 Fiscal Audits Fiscal Audits Assess how assets are safeguarded, the integrity and reliability of financial data, internal controls, accounting practices, and compliance with financial related laws.

3 Current Performance Audits of WSDOT July 2006 – September 2007 Highway Program Highway Program Ferries Division Ferries Division Administration and Organizational Structure Administration and Organizational Structure Traffic Congestion Traffic Congestion (Management & Improvement to the State Highway System) Collection of State Debt Collection of State Debt

4 Performance Audit Standards Government Auditing Standards Revision Requirements of Auditors Requirements of Auditors (Value to the Public and the Auditee) General Standards General Standards Address the auditor’s independence to allow for an objective view, free of personal, external, and organizational impairments. Also contains specific requirements for professional judgment, competence of staff, and quality control by the audit organization. Address the auditor’s independence to allow for an objective view, free of personal, external, and organizational impairments. Also contains specific requirements for professional judgment, competence of staff, and quality control by the audit organization. Fieldwork Standards Fieldwork Standards Contains requirements for adequate planning and supervision of each audit, as well as gathering and use of evidence in an audit. Contains requirements for adequate planning and supervision of each audit, as well as gathering and use of evidence in an audit. Reporting Standards Reporting Standards Addresses the content and critical elements of each audit report, requiring that each report be complete, accurate, and objective. This section of the standards states that “…the entire report be balanced in content and tone.”

5 Preparing for the Audit Involve Agency Management Involve Agency Management Audit Protocols Audit Protocols Audit Scope Audit Scope Government Auditing Standards Government Auditing Standards Establish a Point of Contact for Your Agency Establish a Point of Contact for Your Agency Establish Working Groups Establish Working Groups

6 Preparing for the Audit Assign Roles Assign Roles Analyze Audit Scope Analyze Audit Scope Work with agency experts Work with agency experts Anticipate and gather information helpful for the audit before it starts Anticipate and gather information helpful for the audit before it starts Consider possible Audit Criteria Consider possible Audit Criteria Provide orientation sessions for the auditor Provide orientation sessions for the auditor Field questions Field questions Fill document requests Fill document requests Set interviews Set interviews Monitor audit progress Monitor audit progress Track and report time spent Track and report time spent Official response to audit reports Official response to audit reports

7 Coordination with the Auditors Written Protocols with the Auditor Written Protocols with the Auditor Assign Contacts for each Audit Objective Assign Contacts for each Audit Objective Contacts provide direction on requests for documents and interviews Contacts provide direction on requests for documents and interviews Biweekly Meetings with the Audit Staff Biweekly Meetings with the Audit Staff Audit Conclusions and Recommendations – In writing throughout the audit Audit Conclusions and Recommendations – In writing throughout the audit

8 Communication Early and Frequent Communication Early and Frequent Communication Copy of Documents Provided to the Auditor Copy of Documents Provided to the Auditor Regular Updates on Audit Status to Agency Executives Regular Updates on Audit Status to Agency Executives

9 Lessons Learned – So Far Facilitating Access to Staff and Records Facilitating Access to Staff and Records -WSDOT has put much effort into this- Beyond simply a legal requirement Beyond simply a legal requirement Helps establish much needed trust in this process Helps establish much needed trust in this process State Audit staff have expressed appreciation State Audit staff have expressed appreciation Time Commitment Time Commitment At many levels of the organization for each audit At many levels of the organization for each audit Audit Criteria Audit Criteria Important to review this with the auditor Important to review this with the auditor Also important to let this develop throughout the audit Also important to let this develop throughout the audit

10 Lessons Learned – So Far Management Involvement Management Involvement Good Lines of Communication Good Lines of Communication

11 Thank You Contact Information Steve McKerney WSDOT Director of Internal Audit (360) Eric Thomas Performance Audit and Performance Reporting Manager (360)

12 Attachment - Audit Scope- Current Performance Audits of WSDOT July 2006 – September 2007 Highway Program Highway Program Audit Scope Consumable Inventory & Supply Management Consumable Inventory & Supply Management Hot Mix Asphalt procurement strategy Hot Mix Asphalt procurement strategy Maintenance operations Maintenance operations Highway Project Delivery Highway Project Delivery

13 Attachment - Audit Scope- Current Performance Audits of WSDOT July 2006 – September 2007 Ferries Division Ferries Division Audit Scope Capital Construction Capital Construction Vessel Refurbishment Vessel Refurbishment Terminal Maintenance Terminal Maintenance Operations Operations (Management Policies, Risk Management, Purchasing) Performance Measures Performance Measures Human Resources Human Resources Revenue Opportunities Revenue Opportunities Pooling IT Systems Pooling IT Systems

14 Attachment - Audit Scope- Current Performance Audits of WSDOT July 2006 – September 2007 Administration & Organizational Structure Administration & Organizational Structure Audit Scope Administrative Costs Administrative Costs Organizational Structure’s impact on resources Organizational Structure’s impact on resources

15 Attachment - Audit Scope- Current Performance Audits of WSDOT July 2006 – September 2007 Traffic Congestion Traffic Congestion (Management & Improvement to the State Highway System) Audit Scope Transportation project selection Transportation project selection WSDOT's use of performance measures to assess its efficiency and effectiveness to address congestion. WSDOT's use of performance measures to assess its efficiency and effectiveness to address congestion. WSDOT’s use of resources to address traffic congestion WSDOT’s use of resources to address traffic congestion Compliance with RCW (2) (Multimodal corridor analysis) Compliance with RCW (2) (Multimodal corridor analysis)

16 Attachment - Audit Scope- Current Performance Audits of WSDOT July 2006 – September 2007 Collection of State Debt Collection of State Debt Audit Scope Collection Efforts for Accounts Receivable Collection Efforts for Accounts Receivable Account Write Offs Account Write Offs