4. Fiscal Year 2020-21 Fourth Quarter ReportInternal Audit Department
Accountability Transparency Integrity Quality
215 E. McKinney St., Denton, TX 76201 (940) 349-7228
MEMORANDUM
DATE: October 22, 2021
TO: Honorable Mayor and Members of the City Council
FROM: Madison Rorschach, City Auditor
SUBJECT: Fiscal Year 2020-21 Fourth Quarter Report
FY20-21 Annual Audit Plan Status
Audit Project Status – The Internal Audit Department is responsible for
conducting audits to assess a variety of risks including internal control
weaknesses, inefficiencies in City operations, ineffectiveness of City programs,
and noncompliance with laws, regulations, and policies. Each year, an annual
audit plan is approved by the City Council to establish the workload of the
Internal Audit Department. The following table summarizes the status of each
audit project included on the FY20-21 Annual Audit Plan at the end of the third
quarter.
Table 1: FY20-21 Audit Project Status As of 09/30/21
Audit Project Status Months
Budgeted
Month
Actuals1
Overflow: Health Insurance Operations Closed 1.00 1.00
Overflow: Meter Reading & Billing: Electric & Water Utilities Closed 2.00 3.00
Utility Payment Assistance Program Closed 2.00 3.25
Municipal Court Payments Process Closed 2.00 3.00
Building Permit Processes Closed 3.00 4.00
Water System Operations: Rate Structure Closed
4.00 4.75 Water System Operations: Distribution Closed
Water System Operations: Production Closed
Emergency Medical Services: Ambulance Billing2 Fieldwork 4.00 TBD
Payroll Administration Closed 2.00 2.75
Utility Street Cuts Closed 1.00 0.50
COVID-19 Response: Disaster Reimbursements Complete 1.00 0.25
Accounts Payable Closed 1.00 1.00
Roadway Quality Management Reporting 1.00 0.50
Police Overtime Fieldwork 1.00 NA
Police Property Room: Procedures Not Started 1.00 NA
Risk Assessment Reporting 2.00 NA
1 Month actuals reflect the number of months it took to complete fieldwork on the project. This is
calculated from the date the project was initiated to the date first draft report was distributed to
management.
2 This audit project was retitled from Emergency Medical Services: Billing & Collections during the
reporting process. The scope of the audit project was not affected.
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Post-Audit Feedback Survey Results – Based on the three audit project reports
issued during the fourth quarter of fiscal year 2020-21, the Internal Audit
Department’s services were rated 5.00 out of five stars by auditee department’s
staff with a 40 percent response rate.
Ad-Hoc Project Updates – The Internal Audit Department completed the
following Consultation projects during the fourth quarter of fiscal year 2020-21:
➢ Three Advice requests from Procurement & Compliance and Parks &
Recreation.
Fiscal Year End Update
Internal Audit Department Annual Performance Metrics – Table 2 below is
intended to provide the City Council and Internal Audit Advisory Committee
with a snapshot of the Internal Audit Department’s performance over the past
fiscal year. These metrics are intended to meaningfully measure the
Department’s output, economy, efficiency, effectiveness, and outcomes as
defined below:
➢ Output: the number of audit reports – including follow-up reviews –
published during each fiscal year normalized by the number of budgeted
full-time equivalent positions;3
➢ Economy: cost per audit report published including Department salaries,
audit staff professional development, and audit tool expenses;
➢ Efficiency: the percentage of new audit projects closed compared to the
relevant fiscal year audit plan – this measure excludes overflow project
and follow-up review closures;
➢ Effectiveness: the percentage of recommendations issued that were fully
concurred – this measure excludes partial concurrence; and
➢ Outcomes: the average implementation rate for audits issued during the
past three fiscal years (i.e. for FY2020-21 audits issued during FY18, FY19, &
FY20) – this measure will change from year to year as follow-up reviews
are performed.
Table 2: Internal Audit Performance Metrics
Metric FY 2018-19 FY2019-20 FY2020-21 Proposed Goal
Audit Reports Published Per FTE 1.67 4.67 4.00 3.00
Audit Cost per Published Report $79,400 $25,500 $27,200 $30,000
On-Time Audit Plan Completion 25.0% 37.5% 85.7% 80.0%
Recommendations Concurred 85.9% 87.2% 93.1% 90.0%
Three-Year Implementation Rate NA NA 73.6% 70.0%
3 This measure has been benchmarked to other similarly sized Texas city audit shops for reference
in Attachment 1.
Avg. Q4 Internal Audit Service Rating:
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It should be noted that these metrics have not been officially adopted. These
metrics and proposed goals will be discussed with the Internal Audit Advisory
Committee before being formalized in the Internal Audit Procedures Manual.
Annual Auditing Standards Compliance Report – As required by the Internal
Audit Department’s Procedures Manual, I have completed the Fiscal Year 2020-
21 Auditing Standards Compliance Report. This report summarizes the Internal
Audit Department’s compliance with Generally Accepted Government
Auditing Standards including structural independence, staff ethics,
independence, & competence, and project compliance.
The report concludes that the Department’s quality control system as suitably
designed and operating effectively during Fiscal Year 2020-21. Additional details
can be reviewed in Attachment 2 of this report.
Post-Audit Feedback Survey Results – In order to promote continuous
improvement and facilitate communication between the Internal Audit
Department and auditees, a Post-Audit Feedback Survey is distributed after
each report issued during an audit project. For the twelve audit project reports4
issued during Fiscal Year 2020-21, the Department had a 41 percent average
response rate to this survey. The results are summarized in Table 3:
Table 3: Post-Audit Feedback Survey Results
Survey Question Percent Agree or Strongly Agree Proposed
Goal FY19-20 FY20-21
Clearly communicated Obj., Scope, & Timing 60% 92% 90%
Professional & Constructive Approach 90% 96% 90%
Responsive to Suggestions & Concerns 70% 96% 90%
Made Efforts to Minimize Disruption 100% 92% 90%
Added Value through Meaningful Results 70% 88% 90%
Unbiased & Objective Report 60% 92% 90%
Average Internal Audit Service Rating 4.00 4.79 4.25
Additional Items of Note
Fraud Response Policy Adoption – On September 28, 2021, the City Council
adopted the Fraud Response Policy. Prior to this policy, the City had established
administrative procedures for responding and investigating fraud. The adoption
of the Fraud Response policy formalized these procedures as a policy as well as
requiring the Internal Audit Department to:
➢ Coordinate a city-wide fraud prevention and detection training program;
➢ Ensure an anonymous method of reporting fraud suspicions or allegations
is made available to employees; and
4 Audit project reports include new audits and follow-up reviews.
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➢ Develop formal procedures for receiving, tracking, and managing fraud
allegations and investigations in conjunction with other members of the
Investigation Committee.
Adoption of the Fraud Response Policy fulfills one of the Internal Audit
Department’s stated goals for fiscal year 2020-21.
Attachments
1. Published Audit Report Comparison
2. Fiscal Year 2020-21 Auditing Standards Compliance Report
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Lubbock (3 FTE)Garland (5 FTE)Arlington (5 FTE)Denton (3 FTE)College Station (2 FTE)Audits per Full-Time EquivalentPublished Audit Report Comparison
2018-19 2019-20 2020-21
Effective Date: 01/26/2021
Last Updated: 09/30/2021
Auditing Standards Compliance Report
Fiscal Year: ______________________ Procedure Manual Version: _____________
Risk Assessment Type: ____________ Audit Plan Ordinance: _________________
Table 1: New Audit Projects Completed (FY 2020-21)
Project Issued
Date
Audit
Lead
Compliance
Checklist Completed
018 Health Insurance Operations 11/10/2020 Rorschach Yes
017 Utility Meter Reading & Billing: Electric
&Water Utilities 01/12/2021 Sama Yes
020 Utility Payment Assistance Program 04/06/2021 Jackson Yes
019 Municipal Court Payments 04/13/2021 Sama Yes
021 Water System Operations: Rate
Structure 06/22/2021 Rorschach Yes
022 Building Permit Processes 07/20/2021 Jackson Yes
021 Water System Operations: Distribution 07/27/2021 Sama Yes
021 Water System Operations: Production 09/14/2021 Rorschach Yes
023 Payroll Administration 09/28/2021 Sama Yes
The following assessment documents the standards under which the Internal
Audit Department’s work was conducted for one fiscal year and verifies the
effectiveness of City’s quality control program including the following critical
components:
¾ Department Independence & Ethics;
¾ Audit Staff Competence; and
¾ Performance Audit Standard Compliance.
Based on the results of the following review, it is my opinion that, the City of
Denton Internal Audit Department’s internal quality control system was suitably
designed and operating effectively to provide reasonable assurance of
compliance with Government Auditing Standards for audits published during
the period October 1, 2020 through September 30, 2021 Based on this
assessment, necessary changes have been made to the Department’s
Procedure Manual.
City Auditor: ____________________________________________ Date: __________
2020-21 2.0
Limited 21-274
10/4/2021Madison Rorschach Digitally signed by Madison Rorschach DN: dc=com, dc=cityofdenton, dc=codad, ou=Department Users and Groups, ou=General Government, ou=Internal Audit, cn=Madison Rorschach, email=Madison.Rorschach@cityofdenton.com Date: 2021.10.04 10:40:39 -05'00'
Effective Date: 01/26/2021
Last Updated: 09/30/2021
The Internal Audit Department currently follows the 2018 revision of Government
Auditing Standards as promulgated by the United States Government
Accountability Office. This checklist was developed based on these standards,
the Internal Audit Department’s Procedures Manual, and the Association of
Local Government Auditor’s Peer Review Guide for Yellow Book organizations.
The following assessments were conducted and used to inform the opinion
issued on the cover sheet.
Structural Independence
The City of Denton’s Internal Audit Department is considered structurally
independent as defined by GAGAS 3.56, if the department head:
a. Is accountable to the head or deputy head of the gov. entity or
those charged with governance; Yes
b. Reports the engagement results both to the head or deputy head
of the gov. entity and to those charged with governance; Yes
c. Is located organizationally outside the staff or line management
function of the unit under audit Yes
d. Has access to those charged with governance; and
Yes
e. Is sufficiently removed from pressures to conduct engagements and
report findings, opinions, and conclusions objectively without fear of
reprisal.
Yes
Audit Staff & Ethical Principles
Table 2 summarizes the Audit staff employed during the year as well as their
completion of the required Annual Ethics Pledge Form for this fiscal year:
Table 2: Internal Audit Staff & Annual Ethics Pledge Summary
Staff Member Title Start Date Ethics Pledge Completion Date
Madison Rorschach City Auditor 01/02/2019 01/22/2021
Neeraj Sama Senior Auditor 06/24/2019 01/21/2021
Amber Jackson Senior Auditor 12/14/2020 01/21/2021
Effective Date: 01/26/2021
Last Updated: 09/30/2021
Project Independence & Competence Evaluation
Independence Evaluations are completed separately by each auditor assigned
to each audit project and include an evaluation of previous non-audit services
performed. Competence evaluations are completed by the City Auditor for
each audit project and are based on staff previous experience and Continuing
Professional Education Compliance Reports.
Table 3 shows which auditors completed independence assessments for each
project and whether a competence evaluation was completed.
Table 3: Independence & Competence Evaluations for each Project (FY 20-21)
Project Evaluations Completed
Independence Competence
018 Health Insurance Operations Rorschach, Sama Yes
017 Utility Meter Reading & Billing: Electric
&Water Utilities Sama, Rorschach Yes
020 Utility Payment Assistance Program Jackson, Rorschach Yes
019 Municipal Court Payments Sama, Rorschach Yes
021 Water System Operations: Rate Structure Rorschach, Sama, Jackson Yes
022 Building Permit Processes Jackson, Rorschach Yes
021 Water System Operations: Distribution Rorschach, Sama, Jackson Yes
021 Water System Operations: Production Rorschach, Sama, Jackson Yes
023 Payroll Administration Sama, Rorschach Yes
Effective Date: 01/26/2021
Last Updated: 09/30/2021
GAGAS Compliance Verification
Of the audits completed during this fiscal year, three projects were randomly
selected and reviewed to ensure GAGAS was appropriately followed and
compliance was adequately documented:
Water System Ops:
Rate Structure
Water System Ops:
Production
Municipal Court
Payments
Review of Non-Audit
Projects & Legal
Proceedings
Yes Yes Yes
Evidence of Planning Yes Yes Yes
Project Risk
Assessment No Yes Yes
Understanding of
Operations & Controls Yes Yes Yes
Use of Professional
Skepticism Yes Yes Yes
Sufficiency &
Appropriateness of
Evidence
Yes Yes Yes
Elements of a Finding Yes Yes Yes
Adequate
Supervision Yes Yes Yes
Objectives, Scope, &
Methodology
Communicated
Yes Yes Yes
Management
Responses Yes Yes Yes
Issued Report Yes Yes Yes
Compliance
Statement Yes Yes Yes
Referenced Report Yes Yes Yes
Post-Audit Feedback
Survey Yes Yes Yes