700 Wilsh ire Center Mai lcode 136648

UCLA AU D I T & AD V I S O R Y SE R V I C E S

Edwin D. Pierce, CPA, CFE

Director

10920 Wilshire Boulevard, Suite 700 Los Angeles, California 90024-1366

310 794-6110

Fax: 310 794-8536

January 30, 2012

VICE CHANCELLOR STEVEN A. OLSEN SENIOR VICE PRESIDENT/CHIEF COMPLIANCE & AUDIT OFFICER SHERYL VACCA:

Re: Facilities Management Maintenance & Alterations – General Operations Audit Report #12-2002

Enclosed is the report for our audit of the Maintenance & Alterations (M&A) division’s general

operations functions within the Facilities Management (FM) department. Management’s responses are incorporated in the report. The purpose of the audit was to review and evaluate M&A division practices

related to employee time and attendance reporting, purchasing process, employee training and

documentation.

The scope of the audit included evaluations of division practices and procedures for monitoring and documenting employee attendance, approving and recording employee leave, and ensuring the accuracy

of employee attendance data in the departmental automated system (Kronos). Purchasing procedures

were reviewed to evaluate authorization controls and documentation practices. Invoice and purchase order aging reports were examined to evaluate monitoring effectiveness. Training records and practices

were reviewed to evaluate procedures for determining the adequacy of the training provided, and how

training participation is documented.

Based on the results of the work performed within the scope of the audit, the M&A division's systems of

internal controls over employee time and attendance reporting, purchasing, and employee training are generally adequate and conducive to achieving its business objectives. There are, however, some

procedures that should be implemented or amended to ensure that controls consistently function as

intended. Specifically, management should review and strengthen existing procedures that relate to monitoring purchase invoice status so that any items placed on “hold” or “incomplete” can be addressed

promptly and resolved; enhance oversight capabilities of staff through enabling or expanding access to

university Online Financial System Reports (OFSRs) and other online tools; coordinate with Facilities

Management Purchasing staff to review all open and unresolved orders and determine whether the goods were ever received and, if so, whether or not the vendor was paid; and reinforce to supervisors the

importance of completely and consistently documenting employee training received by staff.

The corrective actions implemented or planned by management are satisfactory. In accordance with our

follow-up audit policy, we will conduct a review to assess implementation of the audit recommendations approximately three months from the date of this letter.

Please contact us if we can be of further assistance.

Edwin D. Pierce, CPA, CFE Director

cc: J. Powazek

G. Cowling 120130-1 COR

CONFIDENTIAL

CONFIDENTIAL

CONFIDENTIAL

FACILITIES MANAGEMENT

MAINTENANCE & ALTERATIONS

GENERAL OPERATIONS

AUDIT REPORT #12-2002

Audit & Advisory Services

January 2012

FACILITIES MANAGEMENT

MAINTENANCE & ALTERATIONS

GENERAL OPERATIONS

AUDIT REPORT #12-2002

Background

In accordance with the Administration audit plan, Audit & Advisory Services (A&AS)

conducted an audit of internal controls and related procedures over employee time and

attendance reporting, purchasing process, and employee training within the

Maintenance & Alterations (M&A) division of the Facilities Management department.

M&A is comprised of the Custodial Services unit (north and south zones), 11 trade

shops consisting of skilled and semi-skilled trades-people responsible for the

maintenance and repair of University facilities, Hospital Zone crew, night crew, and an

Administrative unit. Custodial Services provides support for the campus’ 12 million

square feet and maintains all areas of the university, including specialized areas such

as vivaria, recreational facilities, wet and dry laboratories and patient care areas.

Support is also provided for special events and emergency response. On a recharge

basis, M&A also provides a variety of trades-related services. These include minor

construction, refurbishment and alterations up to $50,000, key and sign production,

custom furniture making and refinishing, and repair and maintenance of University

Health Science medical facilities.

For fiscal year 2010-11, the M&A division had expenditures of about $6 million and

recharge activity of about $5.5 million. As of August 2011, M&A reported 739.5 filled

positions, the majority of which are allocated to the Custodial Services unit (356

positions or 48.1%). (See Table 1)

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Allocation of Filled Positions by Unit As of August 2011

Table 1

Unit / Shop # of

Positions % of

Positions

Custodial Services 356.0 48.1%

Electrical / Elevator 111.0 15.0%

Carpentry / Sheet Metal 69.0 9.3%

Paint / Mason / Roofing / Sign 67.1 9.2%

Plumbing 55.0 7.4%

Hospital Zone 28.0 3.8%

Flooring / Night Crew 22.0 3.0%

Administrative Unit 20.2 2.7%

Hardware 11.3 1.5%

Total 739.5 100.0%

Purpose and Scope

The purpose of the audit was to review and evaluate M&A division practices related to

employee time and attendance reporting, purchasing process, employee training and

documentation.

The scope of the audit included evaluations of division practices and procedures for

monitoring and documenting employee attendance, approving and recording employee

leave, and ensuring the accuracy of employee attendance data in the departmental

automated system (Kronos). Purchasing procedures were reviewed to evaluate

authorization controls and documentation practices. Invoice and purchase order aging

reports were examined to evaluate monitoring effectiveness. Training records and

practices were reviewed to evaluate procedures for determining the adequacy of the

training provided, and how training participation is documented.

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The review was performed in accordance with generally accepted auditing standards

and included tests of records and other auditing procedures considered necessary to

achieve the audit purpose.

Summary Opinion

Based on the results of the work performed within the scope of the audit, the M&A

division's systems of internal controls over employee time and attendance reporting,

purchasing, and employee training are generally adequate and conducive to achieving

its business objectives. There are, however, some procedures that should be

implemented or amended to ensure that controls consistently function as intended.

Specifically, management should review and strengthen existing procedures that relate

to monitoring purchase invoice status so that any items placed on “hold” or “incomplete”

can be addressed promptly and resolved; enhance oversight capabilities of staff through

enabling or expanding access to university Online Financial System Reports (OFSRs)

and other online tools; coordinate with Facilities Management Purchasing staff to review

all open and unresolved orders and determine whether the goods were ever received

and, if so, whether or not the vendor was paid; and reinforce to supervisors the

importance of completely and consistently documenting employee training received by

staff.

The results of the audit and corresponding recommendations follow.

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Audit Results and Recommendations

Time and Attendance Controls

Discussions were conducted with M&A personnel and other Facilities Management

managers and staff to identify the procedures used to monitor their employees' time and

attendance, including approval process and documentation requirements for vacation

and sick leave. Staffing reports were reviewed to determine the employee composition

of the division and assess supervisory coverage; employee leave documents were

reviewed and tested, on a sample basis; and Kronos access and edit controls were

reviewed to evaluate their adequacy for ensuring that employee time data is complete

and accurate.

No significant control concerns were found in this area.

Purchasing Process and Controls

M&A and Materiel Management unit personnel were interviewed and purchasing

records were reviewed to evaluate purchasing authorization controls, and to identify

purchase volume, vendor, and types of items being purchased. This included analysis

of university Online Financial System Reports (OFSRs) to identify any unresolved,

unpaid, or pending M&A division purchase invoices or orders. In addition, a review of

Post-Authorization Notification (PAN) activity was performed to identify outstanding

notifications and evaluate the timeliness of reviewer response.

A. Procedures for monitoring invoice processing need improvement

Using the UCLA OFSRs, A&AS generated Invoice Status reports for the two

department codes used by the M&A division – 3415 (Maintenance & Alterations) and

3425 (Custodial Services) – to identify and review possible open and unresolved

invoices on “hold” or “incomplete” (H or I) status. The transactions on H or I status

represent unresolved items or payments and reimbursements that are being delayed

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for a variety of reasons, such as the purchase order was incorrect or already closed,

the order was not posted properly or at all, receiving was not completed on the

order, etc.

As of September 13, 2011, the M&A division had 149 unpaid invoices for a total of

$109,175. Of these, department code 3415 had 111 (74%) of the invoices for

$85,138, and department code 3425 had 38 invoices (26%) for $24,037 of

unresolved payments.

For Maintenance & Alterations (dept. 3415), the average open invoice amount was

$767 per invoice. The number of days that invoices have been in H or I status (the

invoice creation date counting up to our review date) varied from a low of 4 days to a

high of 2,830 days (nearly 8 years). The average number of days that invoices have

been in an open status is 410 days (about 13 months).

For Custodial Services (dept. 3425), the average open invoice amount was $633 per

invoice. The number of days that invoices have been in H or I status varied from a

low of 286 days to a high of 2,681 days (about 7.5 years). The average number of

days that invoices have been in open status is 1,425 days (nearly 4 years).

Recommendation: Management should review and strengthen existing procedures

that relate to monitoring purchase invoice status so that any items placed on “hold”

or “incomplete” can be addressed promptly and university vendors and suppliers can

be paid timely. In addition, if key M&A personnel do not currently have access to

view OFSRs for invoice monitoring purposes, management should consider enabling

access to pertinent OFSRs, and expanding access to other relevant online tools, to

enhance the oversight capabilities of staff.

Response: We concur. M&A Management will work closely with Facilities

Management Accounting Department to resolve unpaid invoices in particular those

that are on H&I status. They will meet on a monthly basis (or sooner) to address

unresolved issues regarding invoices. Currently, Chief Operating Officer is working

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with Facilities Management – Finance and Information Systems Director and

Principal Administrative Analyst - Accounting to improve invoice processing and

communication between both departments. Additionally, we look forward to the final

roll-out of the Bruin Buy interface which will aid in resolving H& I issues on a more

timely basis.

B. Purchase orders not closed timely

Using the UCLA OFSRs, A&AS generated “hold” or “in-progress” (H or I)

Order Status reports for department codes 3415 (M&A) and 3425 (Custodial

Services), as of September 13, 2011, to identify and review possible open and

unresolved purchase orders. Purchase orders are placed on H or I status generally

due to a mismatch that is created when a vendor invoices the university following a

purchase transaction, but because the purchase order has not yet been posted to

BruinBuy, the invoice and purchase cannot be paired together to allow the vendor

payment to be made.

From the OFSRs, we reviewed each department code’s activity and identified nine

open orders for department code 3415 and 13 open orders for department code

3425. The amount of time elapsed for "in-progress" orders for department code

3415 varied from a low of 49 days to a high of 3,107 days (about 8.5 years). The

average time elapsed for these nine open orders is 751 days (about 2 years). For

department code 3425, the average number of days elapsed in an open status

varied from a low of 816 (2-years, 3-months) days to a high of 6,265 days (about 17

years). The average elapsed time for these 13 open orders is 3,950 days (nearly 11

years).

Recommendation: Management should coordinate with Facilities Management

Purchasing staff to review all open and unresolved orders and determine whether

the goods were ever received and, if so, whether or not the vendor was paid. For

those especially dated orders (more than 6 months old), M&A personnel should

request that Facilities Purchasing staff close out the orders so they no longer appear

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on university financial records in "open" status. Going forward, management should

determine the best method to ensure that adequate attention and oversight is given

to M&A-initiated purchase orders throughout their life cycle, up to and including

payment and timely closure.

Response: We concur. M&A administration will run an H & I Invoice Report on a

monthly basis and will work proactively with Facilities Management Purchasing to

monitor M&A initiated purchase orders throughout their life cycle and to ensure

timely invoice payment. Additionally, Chief Operating Officer will meet on a bi-

weekly basis with Purchasing staff to resolve issues. The current process is being

evaluated to improve communication between both departments. Supervisors and

superintendents will work with Purchasing to close and/or clear pending POs on an

ongoing basis.

Employee Training

Training practices were discussed with M&A personnel to assess procedures for

ensuring that training needs are being met and that training is adequately documented.

In addition, a sample of training documents from 10 training classes from fiscal year

2010-11 were reviewed to identify training topics provided, employee attendance, and

whether documentation was completed.

A. Training documentation not consistently completed

M&A supervisors are not ensuring that employee attendance for training sessions is

completely and consistently documented. As a general procedure prescribed for all

Facilities Management divisions, each employee scheduled to attend a training

session is listed on the session’s training roster and is required to sign the roster to

document their attendance. Division supervisors are expected to verify that

attendees sign in and also to note explanations on the roster for any scheduled

attendees who did not participate.

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A&AS obtained and tested a sample of 10 employee training class documents from

the following periods: January 4, 2011 (two classes); January 13, 2011; February 2,

2011; March 5, 2011; April 6, 2011; May 25, 2011; June 8, 2011; June 20, 2011; and

June 22, 2011. Based on our review, we noted that of the 295 possible

opportunities for employees to sign-in (indicating either present or absent with an

explanation), 38 separate instances (13%) were identified where the employee's

attendance was not clearly documented. For the 10 training documents, exception

percentages varied from 0% (all sign-ins completed) in three classes, to another four

classes that exceeded 20% of their sign-ins without proper notations. The highest

exception level was noted in one class with 9 of 27 (33%) sign-ins left blank.

Without an employee signature or clear explanation of absence, proof of whether a

particular training course was attended would become increasingly questionable

over time. As a prerequisite to additional or changing job responsibilities, possible

use in a workers’ compensation claim or legal proceeding, management should have

a comfort level that training documents are completely and consistently filled out by

their staff.

Recommendation: Management should take appropriate measures to ensure that

all supervisory staff, and those with training responsibilities, fully understand and

consistently comply with Facilities Management department practice to have

attendees sign the training session roster and/or annotate the roster with an

explanation for those employees who were scheduled to attend, but missed the

session.

Response: We concur. Director and Chief Operating Officer will work with

supervisory staff and outline their responsibilities in regards to completing paperwork

including having staff sign-in to the trainings and fill in the blanks left when

employees are not at the training. For example, if an employee is on vacation, the

sign-in sheet will include a note specifying it. Additionally, when possible, copies of

materials will be kept with the signatures to reference as necessary.

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Maintenance Kb02

111123-3 REP