Review of 2010 Biennial Audit of Capital Projects Cyndi Fout Project Services Director February 28, 2011

2 Internal Audit Review Ohio Administrative Code requires State universities to undergo a biennial audit of capital projects.

3 Internal Audit Review Objectives are to assess the effectiveness of: –Risk Management –Internal Control –Compliance with University policies and procedures and applicable laws and regulations (ORC 9, 123, 153, 4115, and 4703)

4 Internal Audit Review Scope to accomplish objectives: –Identify & evaluate risk exposures –Discuss project delivery processes with management and staff –Observe operating process –Random review of transactions –Not all construction procedures were evaluated

5 Internal Audit Review Project Selection Criteria –$4M+ State Funds received between 2008 and 2009 biennium –Varying size and complexity –Various stages of completion Projects Identified –Thompson Library –Jennings Hall –Cunz Hall –College of Medicine Renovation/Addition

6 Internal Audit Review Scorecard Design Phase Compliant with the Ohio Revised Code, University policies, and control activities in the hiring of design firms. Pre-Construction Phase Compliant with the Ohio Revised Code, University policies, and control activities in contractor bidding and the awarding of bids. Construction PhaseCompliant with the Ohio Revised Code, University policies, and control activities in the execution and management of contractor contracts. Scorecard Legend Generally complies with policies and control activities. Generally complies with policies and control activities. Minor opportunities for improvement exist. Partially complies with policies and control activities. Opportunities for improvement exist. Partially complies with policies and control activities. Substantial opportunities for improvement exist. Routinely does not comply with policies and control activities. Immediate improvement is necessary.

7 Internal Audit Review Executive Summary –Reasonably comply with State of Ohio capital projects regulations –Identified minor opportunities for improvement

8 Internal Audit Review Pre-Construction Phase – compliance with ORC 153  Finding: documentation demonstrating compliance with some of the required procedures for hiring contractors was not consistently maintained  Some projects were missing the following information: –Public advertisement for construction bids –Valid certificate of compliance with affirmative action programs –Declaration of Material Assistance forms

9 Internal Audit Review Pre-Construction Phase – compliance with ORC 153 (cont’d)  Internal Audit Recommendation  Strengthen procedures and controls to ensure the University maintains appropriate documentation to support compliance with all applicable State laws and regulations.  FOD Management Response  Review document management practices with staff

10 Internal Audit Review Records Management Where are records management tools located? Project Delivery Website under Reference Documents, Guidelines and Policies When do you use the responsibility checklist? To determine what documents are to be filed where and who is responsible Can project documents be kept at your desk? Yes……the in/out card is to be placed in the project file…. short period of time only If an is received documenting a decision or has an attachment that is a project record how do you file it? Save as a pdf (not HTML) to the electronic project folder. Attachment can be opened too

11 Internal Audit Review Records Management (cont’d) Remember to: Verify all required documentation is attached before filing Required approvals are on the document being placed in the file Electronic files are readable – including back-up receipts Any updates to the checklist are sent to Cindy Barron

12 Internal Audit Review Construction Phase - Warranty Commencement  Finding:  4 out of 16 forms were not approved by the PM  1 out of 16 forms were not approved by the external CM  Internal Audit Recommendation:  Strengthen procedures and controls to ensure the Certification of Warranty Commencement forms are properly approved and maintained.  Management Response:  Review documentation required as part of project closeout and related document management practices.

13 Internal Audit Review Close Out Documentation What documents are required to be attached to the contractors final payment application? Payment Release Affidavit Certificate of Contract Completion Certificate of Warranty Commencement Who is required to approve the contract completion and warranty commencement form? Contractor, A/E, External CM (if applicable), OSU PM or CM, DoP (completion only) What is the A/E to submit with their final payment? Professional Services Contract Completion Checklist

14 Internal Audit Review Close Out Documentation (cont’d) What is the PM/CM, CA & PA responsible to complete at close out? Close the Project ChecklistClose the Project Checklist items Where is the form located? Project Delivery 0400 Close the Project

15 Internal Audit Review Construction Phase – User Requested Change Orders  Finding:  User requested change orders for one project were not approved by the appropriate senior vice president  Internal Audit Recommendation:  Strengthen procedures and controls to ensure that all change orders are properly approved in accordance with University policies.

16 Internal Audit Review Construction Phase – User Requested Change Orders (cont’d)  Management Response:  During discussions with the staff member responsible for this project it was revealed that while there was no documented approvals, these items were discussed with representatives from B&F at periodic project review meetings. Process review will also be conducted for the project management staff

17 Internal Audit Review User Requested Change Orders Memo dated 10/15/03 Memo dated 10/15/03 – clarified University policy When is A&P required to approve user requested change order? Each change order $50K or greater and cumulative change orders greater than $250K Where is the form located? 0300 Change Order Approval MemoChange Order Approval Memo C ompleted by the PM and DoP Project Services (Teresa) sends to Lynn’s office for approval Lynn sends to Jeff for approval Form is returned to Project Services (Teresa) Teresa will forward change order to Contracts with approval letter

18 Internal Audit Review User Requested Change Orders (cont’d) Can bond funds be utilized for user requested change orders? No Can state funds be utilized for user requested change orders? No Can grant funds be utilized for user requested change orders? Needs to be part of the grant requirements. Note: You should not include user contingency on the budget template if the project is funded with100% bonds or state funds.

19 Internal Audit Review Summary –Follow records management policies and guidelines –Verify required back-up documentation is attached to documents –Official file copy has all required signatures –Follow the user request change order process/policy

20 Internal Audit Review