Review of 2010 Biennial Audit of Capital Projects

Cyndi FoutProject Services Director

February 28, 2011

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Internal Audit Review

• Ohio Administrative Code 3333-1-29 requires State universities to undergo a biennial audit of capital projects.

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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)

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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

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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

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Internal Audit Review

Scorecard

Design PhaseCompliant with the Ohio Revised Code, University policies, and control activities in the hiring of design firms.

Pre-ConstructionPhase

Compliant with the Ohio Revised Code, University policies, and control activities in contractor bidding and the awarding of bids.

Construction Phase Compliant 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.

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Internal Audit Review

• Executive Summary– Reasonably comply with State of Ohio capital projects

regulations– Identified minor opportunities for improvement

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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

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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

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Internal Audit Review

• Records ManagementWhere 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 email is received documenting a decision or has an attachment that is a project record how do you file it?

Save email as a pdf (not HTML) to the electronic project folder. Attachment can be opened too

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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

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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.

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Internal Audit Review

• Close Out DocumentationWhat 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

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Internal Audit Review

• Close Out Documentation (cont’d)

What is the PM/CM, CA & PA responsible to complete at close out?

Close the Project Checklist items

Where is the form located?

Project Delivery 0400 Close the Project

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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.

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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

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Internal Audit Review

• User Requested Change Orders

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 Memo

Completed 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

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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.

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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

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Internal Audit Review