Assets Management Audit
Brownsville Edinburg HarlingenAssets Management AuditReport No. 17-05May 2017Office of Audits & Consulting Services
May 26, 2017Dr. Guy Bailey, PresidentThe University of Texas Rio Grande Valley2102 Treasure Hills Blvd., Suite 3.115Harlingen, TX 78550Dear Dr. Bailey,As part of our Audit Plan for fiscal year 2016, Audit & Consulting Services has completed theAsset Management Audit at The University of Texas Rio Grande Valley (UTRGV). Theobjective of this audit was to assess the adequacy and effectiveness of the internal controls overassets management. This includes those items that are below 5,000 in value and are notclassified as capital assets.Our examination was conducted in accordance with guidelines set forth in The University ofTexas System’s Policies UTS 129 and the Institute of Internal Auditors’ International Standardsfor the Professional Practice of Internal Auditing (Standards). The Standards set criteria forinternal audit departments in the areas of independence, professional proficiency, scope andperformance of audit work, and management of internal auditing department. UTS 129 requiresthat we adhere to the Standards.The recommendations in this report represent, in our judgment, those most likely to provide agreater likelihood that management’s objectives are achieved. Implementation of therecommendations will strengthen internal controls over property administration, ensure thesafeguarding of assets, increase effectiveness and efficiency of operations and providereasonable assurance that the University is operating in compliance with applicable laws,policies, procedures, rules and regulations.Office of Audits and Consulting Services The Woods 140Sugar Road Annex 1.101One West University Blvd.1201 West University Driveutrgv.eduBrownsville, Texas 78520-4933Edinburg, Texas 78539-2999(956) 882-7023(956) 665-2110
We appreciate the assistance provided by UTRGV’s management and other personnel. We hopethe information and analyses presented in our report are helpful.Sincerely,Eloy R. Alaniz, Jr., CPA, CIA, CISAChief Audit Executivecc:Mr. Rick Anderson, Executive Vice President for Finance and AdministrationMrs. Karla Loya, Interim Associate VP for FinanceUTRGV Internal Audit CommitteeUT System Audit OfficeGovernor’s Office of Budget, Planning and PolicySunset Advisory CommissionState Auditor’s OfficeLegislative Budget BoardOffice of Audits and Consulting Services The Woods 140Sugar Road Annex 1.101One West University Blvd.1201 West University Driveutrgv.eduBrownsville, Texas 78520-4933Edinburg, Texas 78539-2999(956) 882-7023(956) 665-2110
Assets Management AuditTable of ContentsEXECUTIVE SUMMARY 1BACKGROUND 2AUDIT OBJECTIVE 3SCOPE OF WORK 3AUDIT RESULTS 4CONCLUSION 16
Assets Management AuditEXECUTIVE SUMMARYAs part of the approved audit plan included in FY2016, we completed the Assets ManagementAudit at the University of Texas Rio Grande Valley (UTRGV).The objective of the audit was to assess the adequacy and effectiveness of internal controls overassets management focusing on strengthening the overall internal control environment. Thisincluded items below 5,000 in value and that were not classified as capital assets.Based on the procedures performed, areas of weaknesses were identified within AssetsManagement resulting in inefficient and ineffective operations. Specifically, audit work found: Lack of documented policies & proceduresControl processes not adequately established and/or communicatedInefficient fixed asset recording processesIneffective oversight of assetsLack of sufficient training and guidanceOverall, we found that processes and controls over assets management do not provide reasonableassurance that operations are performed effectively and efficiently and in compliance withapplicable laws, policies, procedures, rules and regulations. In addition, the fixed assets recordsin the UTRGV’s Assets Management system are inaccurate and incomplete. Implementation ofthe recommendations in this report will strengthen internal controls over property administration,ensure the safeguarding of assets, increase effectiveness and efficiency of operations and providereasonable assurance that the University is operating in compliance with applicable laws,policies, procedures, rules and regulations.1
Assets Management AuditBACKGROUNDThe University of Texas Rio Grande Valley (UTRGV) was created by the Texas Legislature onDecember 7, 2012, and it combined the resources and assets of The University of Texas-PanAmerican (UTPA) and the University of Texas-Brownsville (UTB) effective September 1, 2015.UTRGV has locations in Brownsville, Edinburg and Harlingen and it continues its transitionalphase working through various strategic, operational and logistical challenges.The Department of Assets Management reports directly to the Office of Accounting andReporting which falls under the Office of Finance & Public Policy within the Division ofFinance & Administration. The Department of Assets Management is housed at the AcademicSupport Facility in the Edinburg campus and has the following structure:Director ofAccountingManager of AssetManagementAccountingTechnicianAccountant IIAccountant IIWork StudyThe Department of Assets Management is dedicated to support the Divisional and Universitymission in identifying and accounting for all capital assets of the Institution according to therules and regulations of The University of Texas System, State Property Accounting guidelines,and the Texas State Comptroller, as well as University Policies and Procedures. Additionally,providing support to the Facilities Planning and Operations Division with everything related totheir accounts, including funding requests, account reconciliations, reports, various analysis,assistance identifying funds and/or accounts, etc. It is the goal of Assets Management to complywith state law, to exercise good inventory control practices, and to emphasize accountability ofUniversity Property. Assets Management oversees the following functions: Coordinate the Annual Physical Inventory as mandated by the State of TexasComptroller’s Office Prepare annual financial reports for Unexpended Plant and Investment in Plant, andmonitor these fund groups on a monthly basis, as well as provide projections for theMonthly Financial Report (MFR) Submit necessary reports to UT System and State of Texas Comptroller’s Officeincluding:o Annual Financial Report2
Assets Management AuditProperty Value UpdateOversee the Fixed Assets Oracle module, and provide appropriate training for end-usersMonitor and maintain all controlled and capital assets as per State Property Accounting(SPA) guidelinesObtain and verify funding for construction and/or renovation projectsOversee the billing for the B-RAHC facility owned by UT HoustonReconcile all accounts under the Facilities Management department (Construction andM&O)Reconcile other applicable accounts under the Office of Finance & Public PolicyAssist the Director of FP&C, M&O, and the Comptroller with other annual projects,including the budget cycle, merit cycle, Action Plans, Assessment Reports, etc.o As of August 31, 2016, UTRGV had the following personal property:AUDIT OBJECTIVEThe objective of the audit was to assess the adequacy and effectiveness of internal controls overassets management focusing on strengthening the overall internal control environment. Thisincluded items below 5,000 in value and that were not classified as capital assets.SCOPE OF WORKThe scope of our testing included the Department of Assets Management and consisted ofFY2016, September 1, 2015 through August 31, 2016, and included UTRGV transactionsconducted through June 30, 2016. See audit results for the detailed audit steps that wereperformed.Our examination was conducted in accordance with guidelines set forth in The University ofTexas System’s Policies UTS 129 and the Institute of Internal Auditors’ International Standardsfor the Professional Practice of Internal Auditing (Standards). The Standards set criteria forinternal audit departments in the areas of independence, professional proficiency, scope andperformance of audit work, and management of internal auditing department. UTS 129 requiresthat we adhere to those Standards.3
Assets Management AuditAUDIT RESULTSAssets Management OperationsBased on interviews conducted with the manager for Assets Management, we determined that,currently, there are weak controls and lack of operational guidance over Assets Management.The following observations were identified:Policies & ProceduresThere are no formal UTRGV policies and procedures to provide uniform guidance for managingoperations, define the responsibilities for property management, establish written criteriarequiring the Institution to physically inventory,SPA Users Guideaccount for, and safeguard each fixed asset underIn accordance with State Comptroller’s policy,their control, and identify the escalation processthe responsibility for the custody and care ofstate agency property lies with the agencyfor instances of non-compliance. Informalhead. Each agency head must designate aprocedures for the department are deferred toproperty manager and the agency head shouldSPA guidelines, which as per Government Code,ensure that the agency maintains adequateinternal control procedures. The agency headChapter 403, Subchapter L, Section 403.2715,must ensure that the procedures forinstitutions of higher education (institutions) areaccountability and safeguarding of theexempt from reporting to the State Propertyagency’s property are distributed. All agencyprocedures must comply with Comptroller’sAccounting System, but must still comply withoffice rules and requirements.Comptroller state property accounting policiesand procedures. Without policies and procedures,employees are not aware of the proper procedures to follow in managing the University’s assetscreating inefficiencies in operations and increasing the risk of loss of property or noncompliancewith rules, laws & regulations. TrainingAs a newly created institution, training becomes very important to employees. The trainingoffered for assets management is ineffective and insufficient. The current training provided isnot comprehensive and excludes an overview of assets management, roles & responsibilities ofinventory custodians, inventory definitions (capitalized, controlled and expensed), expense typesavailable and the life cycle of an asset (acquisition, tagging, transfers and disposals).UTRGV offered seven training sessions and training focused on the annual certification processonly. The training is presented by the Training Coordinator from the Business InformationSystems Office, and although an individual from the Department of Assets Management ispresent, the training is agenda driven by theTraining DataTraining Coordinator. As of August 23,Number of Account Managers in Oracle3552016, UTRGV listed 355 account managersTotal # of Account Managers which attended training31%responsible for inventory, of which onlyTotal # of Attendees54three (1%) account managers attended thetraining.4
Assets Management AuditWe determined that account managers, inventory custodians and/or administrative staff assignedto assist with the inventory process lack sufficient training and guidance for fixed assetmanagement. For most, fixed asset duties are not their primary job responsibilities, and guidanceis needed for those assigned to assist as well as occasional refresher training and a clear methodfor submitting and receiving responses to asset management questions.WebsiteAt the time of the engagement, the Assets Management’s departmental website was underconstruction and unavailable. Benefits of a website include providing employees withinformation regarding definitions, roles & responsibilities, processes, annual certifications,training dates, due dates, additional references and links to training guides and rules ®ulations pertaining to assets management such as Texas State Government Code, StateProperty Accounting (SPA) System, Federal Acquisition Regulations (FAR) System, & UTSystems Requirements.The absence of formal policies & procedures, documented processes, a departmental website andinadequate training creates inefficiencies in operations and increases the risk of noncompliancewith regards to assets management.Recommendation #1:Policies & Procedures over Assets Management should be formalized to ensure adequatecontrols are in place, processes are identified and roles and responsibilities are clearlycommunicated.The manager of Assets Management should provide initial training or guidance for allUTRGV employees, including Assets Management personnel. Training should be drivenby the Department of Assets Management and should provide an overview of assetsmanagement, roles & responsibilities, definitions of inventory, expense types availableand the life cycle of an asset. The training should provide tools and tips for accountmanagers and assigned administrative staff to complete their inventory transactionssuccessfully. Training should also include consequences for non-compliance and bestrongly encouraged for each departmental inventory contact. Additionally, managementshould provide updated information or annual training to all account managers and/oradministrative staff assigned to assist with the inventory process as needed, to ensure thatcustodians understand and follow policies and procedures related to assets management.An annual certification training could be conducted prior to the annual physical inventoryto help as a refresher course to enhance the accuracy and reliability of the informationsubmitted.In addition, the manager of Assets Management should also update the departmentalwebsite to include policies and procedures, training information, references and links torules and regulations and additional tools necessary to keep the departments informedregarding assets management.5
Assets Management AuditManagement’s Response:The manager of Assets Management will develop formal UTRGV policies andprocedures to provide uniform guidance for managing operations, define theresponsibilities for property management, establish written criteria requiring theInstitution to physically inventory, account for, and safeguard each fixed asset under theircontrol, and identify the escalation process for instances of non-compliance. Policies andprocedures will be published on the Assets Management website for easy accessibility bythe entire University community. Policies and procedures will be ready for campus useby May 2017.The manager of Assets Management, along with the staff, will provide mandatorycomprehensive training to all asset custodians/Project Managers on a periodic basis.Topics covered will include all tools necessary for custodians to ensure accurateaccounting for assets throughout the year, such as an overview of assets management,roles & responsibilities of custodians, definitions of inventory & assets, appropriateexpense types, workflows to transfer custodianship or location of an asset, disposal of anasset, and consequences for non-compliance. In addition to the comprehensive training,sessions will be offered prior to the annual inventory certification to address specificquestions and enhance accuracy of the annual inventory submitted. Initial trainings forProject Managers/custodians will begin in May 2017 and will continue until allcustodians are trained.The manager of Assets Management will ensure the Assets Management staff complete,on an annual basis, the online State Property Accounting (SPA) trainings provided by theState Comptroller’s Office. Staff will complete training for the 2017 fiscal year byJanuary 31, 2017.The manager of Assets Management will continue to update the departmental website toadd resources for users to include definitions, roles & responsibilities, policies &procedures, references & links to rules & regulations, and any other available resources.Website development will be complete with the completion of policies and procedures inMay 2017.Implementation Date:UTRGV Policies & Procedures: May 2017Mandatory Trainings: May 2017 and will continue until all custodians are trainedAssets Management Training: January 31, 2017Assets Management Website Updates: May 20176
Assets Management AuditTracking & Monitoring of AssetsOne of the elements of a good asset management process is the maintenance of accurate recordsof the physical location of assets, their custodian andTexas Government Code § 403.272.periodic and systematic physical verification of theResponsibility for PropertyAccountingexistence and condition of assets. Audit workidentified several causes that inhibit the UTRGV’s(b) All personal property owned by theability to maintain an accurate fixed asset inventorystate shall be accounted for by theagency that possesses the property.records.Annual Physical InventorySince inventory from UTB was not transferred to UTRGV until June 2016, the Office of AssetsManagement conducted two annual inventory certifications for the initial UTRGV year. The 1stcertification was UTPA assets which were already recorded in the Oracle Fixed Assets Systemand UT Health Science Center San Antonio (UTHSCSA) transfer assets. An email was sent outto account managers from the accounting technician in the Department of Assets Managementon June 29, 2016, indicating that certifications were due July 27, 2016. The 2nd annual inventorywas for the UTB transfers. That email was sent to account managers on August 15, 2016,indicating that the certifications were due August 26, 2016.Although we did not test the detail of the annual certifications submitted, we noted the followingweaknesses in the process:¾ The annual certification process and methodology is yet to be formally documented. Toensure that physical verification of fixed assets is performed consistently in accordancewith an approved process, the process needs to be formally documented as anorganizational policy and formally communicated to account managers, inventorycustodians, assigned administrative staff and departments. (Refer to Policies &Procedures Section)¾ Training provided is inadequate and insufficient. (Refer to Training Section)¾ There is no periodic review by the Department of Assets Management of thecertifications submitted to verify accuracy. A periodic review would provide assurancethat account managers are submitting information regarding changes to their assetinventories. Equipment can potentially get lost or be susceptible to theft if not properlyand timely accounted.¾ Informal verification process for assets reported as missing. Missing items noted on theannual certifications should be promptly followed up by management to find out whetherthe items are indeed missing or whether they may have been misplaced in an alternatelocation. During the FY 2016 Annual Financial Audit, we noted that UTRGV listed over 11 million in missing assets.¾ Asset responsibility is assigned at a high level or is inconsistent. Overall, responsibilityis mostly assigned at the level of funding for the asset. (Refer to Additions Section)In addition, although we did not test the off-boarding process, we did review the action taken bythe Department of A
May 26, 2017 · Assets Management Audit 3 o Property Value Update Oversee the Fixed Assets Oracle module, and provide appropriate training for end-users Monitor and maintain all controlled and capital assets as per State Property Accounting (SPA) guidelines Obtain and verify funding for construction and/or renovation projects
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