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BOARD of REGENTS

AUDIT COMMITTEE MEETING

Thursday, October 18, 2012 at 8:00 am Scholes Hall, Roberts Room

The University of New Mexico Board of Regents’ Audit Committee

October 18, 2012 - 8:00 AM Roberts Room

Revised Agenda

ACTION ITEMS 1. Approval of Meeting Minutes from September 20, 2012

2. Approval of REDW CY2013 Contract

EXECUTIVE SESSION

3. Vote to close the meeting and to proceed in Executive Session as follows:

a. Presentation of FY12 External Financial Audit pursuant to exceptions at Section 10-15-1H NMSA (1978) and Section 12-6-5 NMSA (1978) (Moss Adams, KPMG, and Ava Lovell, Senior Executive Officer for Finance and Administration for UNM Health Sciences Center).

b. Discussion of Final Internal Audit Reports, pursuant to limited personnel matters exception at

Section 10-15-1.H(2) NMSA (1978) and exception for matters subject to attorney-client privilege pertaining to threatened or pending litigation at Section 10-15-1.H(7), NMSA (1978)

c. Schedule of Audits in Process, pursuant to exceptions at Sections 10-15-1H(2 and 7), NMSA

(1978) d. Proposed FY13 Audit Workplan exceptions at Sections 10-15-H(2 and 7), NMSA (1978)

e. Vote to re-open the meeting

4. Certification that only those matters described in Agenda item #3 were discussed in Executive Session and if necessary ratification of action, if any, taken in Executive Session.

INFORMATION ITEMS 1. Advisors’ Comments 2. Follow-Up Items from September 20, 2012 Meeting 3. Internal Audit Department Draft Annual Report for FY12 (Manu Patel, Internal Audit Director)

4. Status of Audit Recommendations as of October 8, 2012 (Chien-chih Yeh, Internal Audit Manager)

Past Due Cleared Not Past Due

The University of New Mexico Board of Regents’ Audit Committee

October 18, 2012 - 8:00 AM Roberts Room

Revised Agenda

5. Internal Audit Department Proposed Budget for FY14 a. Office Space b. Compliance Personnel

6. Director of Internal Audit Status Report (Manu Patel, Internal Audit Director)

7. Adjournment

THE UNIVERSITY OF NEW MEXICO

Board of Regents Special Audit Committee Meeting

September 20, 2012 – Meeting Minutes

Members Present: Vice Chair Lt. Gen. Bradley Hosmer, Regent James Koch (Quorum).

Other Attendees: President Robert Frank, David Harris, Helen Gonzales, Ava Lovell, Chaouki

Abdallah, Liz Metzger, Ellen Wenzel, Lee Peifer, Chris Vallejos, Stuart

Freedman, Maureen McGuire, Cynthia Reinhart (KPMG), Francisco Archuleta

(KPMG), Jennifer Hall (KPMG), Purvi Modi (Moss Adams), Ella Watt, Steve

McKernan, Amy Neel, Ruby Santos, Erin Doles, Rita Abeyta, Manu Patel,

Chien-chih Yeh, Avedona Lucero, Lola Neudecker, William Cottrell, Amy

O’Donnell.

Vice Chairman Hosmer led the meeting in the absence of Chairman Gallegos. He called the meeting to

order at 10:00 a.m. in ROBERTS ROOM, Scholes Hall, UNM.

ACTION ITEMS:

The Committee approved the minutes from August 16, 2012 by unanimous consent.

INFORMATION ITEMS:

Vice Chairman Hosmer asked for any advisors’ comments. There were none.

Vice Chairman Hosmer reviewed follow up items from the last meeting. The first item is the

external Quality Assessment Review (QAR) for the Internal Audit Department. Internal Audit

Director Patel stated that he did send an agreement to the Director of New Mexico State

Internal Audit who will lead the review. Director Patel further stated that he received a

response from the QAR reviewer that the agreement will be signed and returned. The Review

will take place at the end of October or early November. The report will hopefully be complete

by the end of November. The other item for follow up is the Hospital risk assessment. This will

be covered at this meeting in Executive Session.

Director Patel reviewed the remaining items on his Director’s Report (the QAR information

above was also on this report). The remaining FY13 Audit Committee meetings are scheduled

for October 18, 2012, February 21, 2013, and May 16, 2013. The proposed FY 13 audit plan

includes 5 audits in field work, of which 2 are in the report writing stage, and 11 new audits are

proposed. Director Patel informed the Committee that he did get input and feedback from them

as well as from the President. The Department is reserving 1100 audit hours for new topics that

might come up during FY13. There are 37 open complaints that are at various stages of

investigation. The Department is working with Human Resources and other departments

regarding status of their portions of the investigations.

Vice Chairman Hosmer asked for comment on the level of analysis for complaints relating to

trending indicators. Director Patel stated the Department has identified the 3 areas that get the

most complaints and the Department could provide that data at the next meeting. The data can

include what the most frequent subject areas are. Vice Chairman Hosmer is interested if the

complaint system is working to our advantage. For example, can we make good use of it in a

way that helps inform the University about more than just individual issues? Helen Gonzales,

Vice President of Human Resources, commented that on their end they do categorize the

Summary of the Regent’s Special Audit Committee

September 20, 2012

2

complaints, look for trends, and have done interventions in areas that have a significant

number. President Frank asked if we also track number trends over time. Vice President

Gonzales stated that Human Resources recently started working with Internal Audit to capture

that information. Director Patel stated there is not a central system where everything comes to

one place; this makes it difficult to capture all data. The University is switching providers for

the compliance system on October 1st. The new system will have more robust tools. The new

provider will also ask customized questions on the hotline. This will give us more information

than we are getting now.

Vice Chairman Hosmer wants to establish goals for the complaint system, to at least include the

ability to trend down to the specific issues, and that the information itself is specific enough to

find root causes. President Frank asked if this data includes only signed complaints or if it also

includes anonymous complaints. Director Patel replied that it is both. Vice President Gonzales

noted a large majority of the complaints are anonymous. Director Patel reported that based on

Federal law and the State Whistleblower Protection Act, anonymous complaints are welcome

and accepted; we cannot turn them down.

Director Patel reviewed the Department’s budget summary report. It is early in the fiscal year,

but as it stands now, the Department may have a carry forward balance of $200,000 at the end

of the year.

There are two UNM Hospital audits for discussion in Executive Session.

There is one vacant auditor position. Internal Audit plans to post the position next week and

start interviewing in October.

The Department has started using the new electronic work paper software on a current audit.

There will be further electronic work paper training every other week. The software should

help departmental efficiency and assist in keeping the audit projects on track.

Vice Chairman Hosmer asked Director Patel if the availability of the new hire is built into the

work hours budget. Director Patel confirmed the new hire hours are included.

Internal Audit Manager Chien-chih Yeh presented the status of audit findings. There are no

past due items at this time. The next section includes findings that have been addressed and

verified; they are cleared. The final report includes items still outstanding that are not past due.

President Frank noted there are multiple Gallup Campus items, but nothing past due, so he

appreciates the work in resolving these. The President also mentioned that there was some

difficulty with units following up on audit findings, and appreciating the seriousness of audit

findings and the recommendations need action. Director Patel stated Internal Audit has worked

closely with the departments and they do understand how important it is to meet the deadlines

and implement recommendations. This was an issue several years ago, but has not been a

recent problem. If the Department does not get a satisfactory response from a department,

Director Patel kicks it up one level above, and that works.

Vice Chairman Hosmer asked for any public comment. None was received.

Summary of the Regent’s Special Audit Committee

September 20, 2012

3

The meeting went into Executive Session for the reasons stated in the agenda. (Motion: Regent Koch,

Second: Vice Chairman Hosmer).

a. Discussion of Final Internal Audit Reports, pursuant to limited personnel matters exception

at Section 10-15-1.H(2) NMSA (1978) and exception for matters subject to attorney-client

privilege pertaining to threatened or pending litigation at Section 10-15-1.H(7), NMSA

(1978)

b. Schedule of Audits in Process, pursuant to exceptions at Sections 10-15-1H(2 and 7),

NMSA (1978)

The meeting returned to open session (Motion: Regent Koch, Second: Vice Chairman Hosmer).

Certification that only those matters described above were discussed in Executive Session.

The Committee approved the following UNMH audits:

Purchasing, dated October 2011 (Motion: Regent Koch, Second: Vice Chairman Hosmer)

Risk Assessment, dated February 2012 (Motion: Regent Koch, Second: Vice Chairman

Hosmer)

There being no further business, the meeting was adjourned at 12:29 p.m. (Regent Koch, Second: Vice

Chairman Hosmer).

Approved:

____________________________ Audit Committee Chairman

G:\SHARE\Audit Committee\Meeting Materials\October 2012\IARenewalRecommendation 2013_1.doc

Board of Regents Audit Committee Recommendation for Internal Audit Services Contract Renewal

October 18, 2012

Internal Audit Recommendation by: Ella Watt, Chief Financial Officer; Manilal Patel, UNM Director of Internal Audit; and JoAnn Woolrich, Executive Director Compliance & Audit. The current contract for Internal Audit services was awarded to REDW, LLC in October 2011 for a one-year contract effective January 2012, with a provision to renew annually for up to two additional years. Background: The Request for Proposal (RFP) for outsourcing internal audit services was emailed to eight accounting and audit firms on August 31, 2011. The accounting and audit firms were selected from the Office of the State Auditor Approved Audit Firms 2011 list. In addition, a public advertisement was placed in the Albuquerque Journal, as required, on September 5, 2011. Only two accounting and audit firms responded, Atkinson/Brown Smith Wallace, LLC and REDW, LLC. The two RFP’s were then scored by the Internal Audit Services selection committee, which was comprised of Ella Watt, Chief Financial Officer; Manilal Patel, UNM Director of Internal Audit; and JoAnn Woolrich, Executive Director of Compliance and Audit for UNM Hospitals. Florencio Gallegos, Purchasing Director, provided purchasing oversight. Evaluation criteria were based on the following four categories:

• Demonstrated Ability to conduct Internal Audits of Healthcare Facilities and Quality of Sample Work – 30 points

• Contractor’s Experience and References – 20 points • Personnel Committed – 20 points • Fee Schedule – 30 points

The selection committee completed its scoring on October 4, 2011 and REDW was scored the most points. Recommendation: UNM Hospitals’ management recommends renewing the internal audit contract for calendar year 2013 for REDW to continue providing contracted internal audit services for year two of the three-year contract. It is anticipated that approximately 1,500 audit hours will be contracted, for a cost of $184,575 per year, including gross receipts tax. There is no rate increase for 2013 from the current 2012 rate. The contract will contain a 30-day termination clause.

EXECUTIVE

SESSION

There

is no

Handout

for this

Item

The University of New Mexico Internal Audit Department Draft Annual Report July 1, 2011 - June 30, 2012

Manu Patel, Internal Audit Director

2

______________________________________________________________________________ Table of Contents

Introduction ............................................................................................. 3

Fiscal Year 2012 Audit Plan ................................................................... 4

Fiscal Year 2012 Audit Plan Detail........................................................ 5

Fiscal Year 2012 Accomplishments ....................................................... 6

Plans for Improvement ........................................................................... 7

Performance Goals for Fiscal Year 2012 Completed .......................... 8

The Internal Audit Department's Hours by Category ........................ 9

The Internal Audit Department’s Hours by

Department/School/College......................................................... 11

The Internal Audit Department’s Hours for Fraud, Misconduct, and

Consulting ..................................................................................... 12

Internal Audit Department Staffing .................................................... 13

Service to the Profession and Public Service ...................................... 13

3

__________________________________________________________________________ Introduction The University of New Mexico Internal Audit Department’s (Department) mission is to assist personnel in effectively, efficiently, and economically fulfilling their assigned responsibilities by providing objective analyses of the activities reviewed. In doing so, we work together with University departments to develop, improve, and implement policies and procedures, streamline processes for most efficient use of time and resources, and enhance training. The limited staff resources and investigations resulted in decreased hours spent on risk-based scheduled audits. The Department lacked an audit manager for the year; this also greatly hampered efforts in meeting goals. The size and scope of audits conducted and the time spent on investigating reported complaints greatly affected the number of audits completed. Chart 1 illustrates the percentage of audit work hours performed, by audit type, for FY08 through FY12.

0%

10%

20%

30%

40%

50%

60%

70%

FY08 FY09 FY10 FY11 FY12

FY08 through FY12 - Percentage of Direct Audit Hours by Audit TypeChart 1

Audit Plan

Management Advisory Services

Unscheduled Audits - Fraud andMisconduct

Unscheduled Audits - ManagementRequest

The Department adds audits to the work plan in the following ways:

• The Department includes risk based (planned) audits based on a risk assessment performed by the Department, with input from the University administration.

• Via Management request - special requests made during the fiscal year by the President, Board of Regents, and Management. Because of the source of the request, these audits are also risk based and are high priority.

• The Audit Director adds fraud or misconduct audits - resulting from allegations, which after a preliminary review, may result in a significant risk to the University.

Other services provided include training, consulting, and receiving and reviewing complaints of fraud or misconduct.

4

______________________________________________________________________________ Fiscal Year 2012 Audit Plan The FY12 audit plan included 14 audits, consisting of:

• 6 audits in progress at the end of FY11, and • 6 proposed audits approved by the Audit Committee on the initial FY12 audit plan. • 2 audits were added to the audit plan during FY12 due to risk or reported misconduct or

fraud. See Chart 2 below for the status of the FY12 audit work plan. Factors contributing to the 36% completion rate (although an increase over the FY11 completion rate) of FY12 audits are:

• Audits were larger in scope than the originally budgeted man hours. • Significant loss of man hours due to staff vacancies.

36%

22%

21%

21%

Chart 2 - Status of Audit Work Plan FY12

Complete

In Process

Deferred

Not Started

5

______________________________________________________________________________ Fiscal Year 2012 Audit Plan Detail

Report No

Report Name Audit Type Status

2007-10 Audit of Internet Native Banner Application Security Risk Based Complete 2010-04 Provost General Administration Risk Based Follow-Up 2010-08 Audit of Real Estate Operations Risk Based Follow-Up 2010-15 IT Firewalls Risk Based Not Started 2011-04 Admissions Risk Based Not Started 2011-05 Registration Risk Based Not Started 2011-07 Health Sciences Center Emergency Medicine Contracts

and Grants Risk Based Complete

2011-11 HSC Medical Faculty Risk Based Not Started 2012-01 Lobo Energy Risk Based Not Started 2012-02 Robert Wood Johnson Foundation Center for Health

Policy Risk Based Report

Writing 2012-03 Audit of Vendor Safeguards for Protecting Private Data Risk Based Not Started 2012-04 University President Travel and Entertainment

Expenses Management Request*

Complete

2012-05 Championship and North Golf Course Revenue and Receipt Audit

Fraud and Misconduct

Fieldwork

2012-06 UNM Foundation Risk Based Fieldwork * As noted in the Introduction, Management Requests are risk based because of the nature of the request.

6

______________________________________________________________________________ Fiscal Year 2012 Accomplishments

• Included Performance Audit components in the Provost General Administration audit. Performance auditing helps to determine whether the University is achieving the objectives established by the Board of Regents and is managing its resources in an effective, economical, and efficient manner.

• The Director and all auditors attended TeamMate training in June 2012. • Collaborateded with Anderson School of Management to hire this department’s first

student professional intern. • Collaborated with HSC compliance on a regular basis. • Coordinated with and assisted external auditors on UNM Main Campus Bookstore

inventory. • Continued participation with the University of New Mexico Hospital’s internal audit

function and served on the Selection Committee for the Request for Proposal process for the new UNMH audit contract.

• Expanded coordination with the external auditors to ensure appropriate coverage of audit risk and collectively reduce audit duplication and trim external audit fees.

• Streamlined processes and found opportunities to accomplish more with fewer resources. • Increased average overall after-audit survey score as well as average value-added score. • Complainant notification letters done on a timely basis increased 35% prior to April 1,

2012, and 85% after April 1, 2012.

The Department has not accomplished the following prior items due to lack of staff and/or resources:

o Developing and posting on line training. o Offering an overview of Internal Audit processes at employee orientation (for all

new employees). o Increasing awareness of the hot line via listserv, training sessions, and web sites. o Updating and presenting training modules for fraud and payroll. o Notifying all complainants within 10 days of action taken.

7

_____________________________________________________________________________ Plans for Improvement The Department plans to improve their efficiency and image, assist employees, and enhance internal processes, by:

• Increasing emphasis on performance auditing, i.e. search for opportunities to incorporate performance auditing in every appropriate audit performed.

• Beginning use of the new electronic workpaper software for new audits. • Initiate twice-monthly training sessions for the electronic work paper software to improve

and increase planned audit completion rates. • Expanding cost savings and/or revenue enhancements - when appropriate, and if

applicable. • Improving/enhancing complaint database capabilities and communications between

departments for complaint investigations. • Filling the vacant audit manager position. • Acquire additional office space, including a conference room that can accommodate all

staff (we are already at max capacity without adding additional staff). • Continue to work with the Anderson School of Management to hire student professional

interns, thus providing these students with practical internal audit experience.

8

______________________________________________________________________________ Performance Goals for Fiscal Year 2012 Completed Performance Goal 1 - Provide quality audit reports that are useful to auditee's, management, and the Board of Regents’ Audit Committee.

Measure Target Results for FY12 Audits and reviews are relevant and address risks.

50% of completed audits and reviews originate from the risk-based audit plan.

100%*: 5 of the 5 completed audits identified as risk-based on the audit plan. At fiscal year-end , 2 risk-based audits were in process.

Audits and recommendations add value.

75% of recommendations implemented within specified dates.

76% of recommendations implemented within specified dates.

After-audit surveys rate value-added at 4 or above (on a 1 – 5 scale).

Average value-added rating 4.57 and average overall rating of 4.46.

Audits are timely. Complete 75% of audits within 15% of budgeted hours.

100% of completed audits were within 15% of budgeted hours.

Performance Goal 2 - Audits result in more efficient and effective University operations. Measure Target Results for FY12

Audits and reviews identify potential cost savings and increases to revenue.

Potential savings, cost avoidance, and increased revenues are greater than or equal to 100% of the Department budget.

None identified.

Audit recommendations address University-wide issues.

50% of reports include University-wide recommendation(s).

67% of completed audits include University-wide recommendations. This represents 2 of 3 reports. The other 2 reports did not have any recommendations, so they were not counted in this computation.

Performance Goal 3 - Reduce potential liability to the University by coordination of investigations of allegations of fraud and employee misconduct.

Measure Target Results for FY12 Coordinate investigations and report on allegations.

Work with Human Resources, University Police, University Counsel, and State Auditor to conduct timely investigations.

Improved coordination with other departments. 57 reports of misconduct referred to other departments.

Increase accountability by assisting University in documenting wrongdoing by employees.

All cases of potential fraud or potential violations of criminal statutes turned over to proper authorities for prosecution.

1 letter to the State Auditor reporting potential violations. Coordination across the University is improving.

Provide follow-up information to individuals who allege misconduct at the University.

Notify individuals within 10 days of action taken. When investigation is complete, notify complainant within 10 days.

Average of 4.5 out of 10 complainants notified (not including anonymous, as they cannot be notified) within 10 days of action taken. From April 1 to end of FY12, 9 of 10 non-anonymous complainants were notified. This is a major improvement from last FY.

Performance Goal 4 - Prevent potential problems through proactive consulting, training, and communication. Measure Target Results for FY12

Present training on various topics to University faculty and staff.

Continue participating in Grants management training.

Target not met because of other priorities. Limited staff does not allow for this at this time

Revise and present fraud training. Target not met because of other priorities. Limited staff does not allow for this at this time.

Communicate corrective actions University-wide to address systemic problems.

University-wide communications provide Audit Tip of the Month through the list serve, or on Department web page.

Target not met because of other priorities. Limited staff does not allow for this at this time.

* As noted in the Introduction, Management Requests are risk based because of the nature of the request.

9

______________________________________________________________________________ The Internal Audit Department's Hours by Category The Department’s professional staff worked a combined total of 8,842 hours. The Department tracks hours worked on detailed time reports, showing the specific audit or other category where the professional employee spent his or her time. The auditors may work on multiple audit projects at any given time; therefore, auditors track time spent each day on various projects. The table below shows the total hours, with non-audit/investigation classifications of hours subtracted out, leaving a remainder of 5,459 net hours devoted to audit and investigatory work.

FY12 Audit Hours Hours

Total Available Hours 8842

Less: Network and Database Admin 71

Training Attended 443

Leave 1311

Administrative and Other Duties 1558

Net Audit and Investigative Hours Available 5,459 Chart 3 below breaks down the percentage distribution of the audit and investigative hours by category. Detailed explanation of each category follows.

0%

20%

40%

60%

80%

100%

FY08 FY09 FY10 FY11 FY12

Chart 3 - Percentage of Audit and Investigative Hours by Category

FY08 through FY12

Direct Audit Hours

Committee Work

Misconduct & Consulting

Training Presented

10

Direct Audit Hours - Direct Audit Hours are the hours the professional audit staff spent on specific audits or projects, including significant work related to reporting misconduct. Hours spent on follow-up procedures are included in this category.

Committee Work - University committees may invite the Department's personnel to participate.

Misconduct and Consulting Work - This category represents hours spent on reports of fraud and misconduct that do not result in extensive work by the Department. Methods to report fraud and misconduct include hotline calls; interviews with complainants; e-mails; letters; concerns expressed by administrators; and other “tips.”

Training Presented - The Department participates in presenting the mandatory Grants Management Program.

Network Administration and Database Maintenance Performed for the Department - The Information Systems Auditor provides support for the Department’s technology and databases.

Training Attended - Each professional staff member in the Department must attend a minimum of 40 hours of continuing professional education each year.

Leave - This category captures sick, annual and holiday leave. Employees take leave in accordance with University policy.

Administrative and Other Duties – Administrative activities include attending Regents’ meetings, attending high-level University meetings, reading professional literature, preparing monthly and quarterly reports, preparing for Audit Committee meetings, preparing correspondence to the State Auditor and other officials, attending Departmental staff meetings, reviewing internal payroll and other financial documents, and other varied duties.

11

_____________________________________________________________________________ The Internal Audit Department’s Hours by Department/School/College Chart 4 illustrates a breakdown of the Department’s professional staff hours by category: Department/School/College. The percentage of time spent in these areas varies each year based on the audit plan, audit follow-up, management requests, committee and consulting work, and investigations of fraud or misconduct.

5% 2%

14%

11%

38%

13%

5%9% 3%

Chart 4 - Percentage of Hours by Department/School/College FY12

Gallup Branch

President

Provost AdministrativeUnitsSchool of Medicine

University-Wide

UNM Foundation

VP HSC Administration

VP Institutional SupportServicesOther

Note: Other hours total 174 hours and consist of hours charged for follow-up, consulting, committee and reviewing reports of misconduct. The areas included under other are Associate VP Student Life, Controller, EVP Administration, Information Technology Services, Intercollegiate Athletics, and VP Research & Economic Development. Hours charged to these areas range from a high of 81 hours charged to the Controller to a low of 4 hours charged to the VP for Research & Economic Development.

12

_____________________________________________________________________________The Internal Audit Department’s Hours for Fraud, Misconduct, and Consulting University policy designates the Department as the point of contact for reporting fraud or misconduct. The Department also provides consulting. The amount of Department time spent in FY12 on intake, providing guidance and reviewing reports of fraud and misconduct and consulting totaled 2,323 hours. Chart 5 below shows the number of contacts received over the past five fiscal years, and Chart 6 identifies the percentage of contacts by type. The contacts are from e-mails, letters, phone calls, in person visits, or through the University hotline.

71

87

46

63

92

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012

Chart 5 - Number of ContactsFY08 through FY12

0%

10%

20%

30%

40%

50%

60%

70%

80%

Fraud or MisconductReporting

Human Resources Related Consulting

Chart 6 - Percentage of Contacts by TypeFY08 through FY12

FY08

FY09

FY10

FY11

FY12

13

The misconduct and fraud process is as follows:

• Intake - includes interviewing complainant, reviewing e-mails, letters and hotline reports. • Review - includes reviewing information provided by the complainant, interviewing

other involved parties, reviewing University documents, and other evidence as necessary. The review process includes documenting interviews and analyses.

• Referral - in some cases, refer complaints to another University office or to University management for resolution. The Department provides the referred party with the documentation and analysis developed during the review process.

• Audits - the Department will perform an audit based on the information received from the complainant, if the information may result in significant risk to the University.

• Tracking - the Department tracks referrals from intake through resolution. ______________________________________________________________________________ Internal Audit Department Staffing Separations of Staff

Name Job Title Action Date Betsye Ackerman Auditor III Resigned 07/05/2011

Appointments of Staff Name Job Title Action Date

Victoria Gorman Student Intern Hired 01/09/2012 Victor Griego Auditor II Hired 04/23/2012 (replaced an Auditor III) Vacant Positions Job Title Action Date Open Position Audit Manager Open since 06/2009 Open Position Auditor III Open since 02/2010

_____________________________________________________________________________ Service to the Profession and Public Service Department personnel are dedicated University employees and active members in both their profession and the community. The audit staff members belong to the following professional organizations:

• Association of College and University Auditors • Institute of Internal Auditors • Information Systems Audit and Control Association • Association of Certified Fraud Examiners • New Mexico Society of Certified Public Accountants • American Institute of Certified Public Accountants • Institute of Management Accountants • Association of Local Government Auditors • National Association of College and University Business Officers

Internal Audit DepartmentStatus of Audit Recommendations - Past Due Findings

As of October 10, 2012

Report Name Audit Comm. Apprv.

Finding Recommendation No. and Description Response - Responsible Party Response-Corrective Action Response - Implement. Date

Followup Status (Open/ Complete)

Verified Date

#Type!

Thursday, October 11, 2012 Page 1 of 1Status of Audit Recommendations - Past Due Findings

Internal Audit DepartmentStatus of Audit Recommendations - Cleared Findings





Verified Date

10/20/2011 ACC (Lobo Village) Ground Rent Distribution

8 The Executive Vice President for Administration should determine who (what department) in the University is charged with processing revenue associated with the lease, as well as any potential distribution amongst campus departments and organizations. The Executive Vice President for Administration should present this determination to the Board of Regents for review and approval.

David Harris, EVP for Administration

concur - As the ACC student housing is implemented, the Executive Vice President for Administration will make recommendations to the University President for the use of ground rent income from Lobo Village and will advise the BOR of such determination.

10/2012 completed - verified 09/2012

2010-08 Audit of Real Estate Operations

4/24/2012 NEW FACULTY LINES 1 The Provost's Office should provide status of faculty hiring reports to the ASAR committee twice a year.

Chaouki Abdallah, Provost and EVP for Academic Affairs

concur - The Provost's Office will present status of faculty hiring to Academic/Student Affairs & Research Committee twice a year, starting in the fall of 2012.

09/2012 completed - verified 10/2012

2010-04 Provost General Administration

Thursday, October 11, 2012 Page 1 of 1Status of Audit Recommendations - Cleared Findings

Internal Audit DepartmentStatus of Audit Recommendations - Not Past Due Findings





Verified Date

1/20/2011 EMPLOYMENT DATA CENTERS - Review Faculty Assignment, Contract Revision Process

9 Review the faculty contract process and ensure that faculty contracts are in place prior to the commencement of the academic year.

Jane Slaughter, Associate Provost concur - Will establish a calendar for determination of SACs and STCs so that contracts for regular and part-time faculty are in place prior to the beginning of the academic year and in time to meet hiring and payroll deadlines.

09/2013 open - verified 09/2012

2010-07 Audit of Selected Payroll Processes

1/20/2011 EMPLOYMENT DATA CENTERS - Review Faculty Contract Deadlines

10 Review the hiring and payroll processes at Faculty Contracts for compliance with faculty hiring guidelines and payroll processing policies.

Jane Slaughter, Associate Provost concur - Will review and reinforce deadlines with the Deans and Chairs of the Colleges and Schools for hiring part-time faculty so that the UNMJobs portion of the data entry is complete before hires are input into Banner for payroll.

09/2013 open - verified 09/2012


1/20/2011 EMPLOYMENT DATA CENTERS - Review Faculty Contract Hiring Processes

11 Design and implement an effective hiring process to ensure timely completion prior to employee start date, and prior to commencement of payroll payments.

Jane Slaughter, Associate Provost concur - Will work with Faculty Contracts to review the current hiring process and make any necessary modifications to ensure hires are completed before the employee start date and before commencement of payroll payments.

09/2013 open - verified 08/2012


4/14/2011 COMPLIANCE WITH UNM AND REGULATORY POLICIES AND PROCEDURES

7 SRS involvement during preconstruction, construction and renovation should be reviewed by all stakeholders to determine best practices in order to address liability and future costs and maintenance issues associated with decisions made during construction planning and design.

Carla Prando-Domenici, Interim Director of Safety and Risk Services

concur - ERM Council will appoint a Task Force headed by the University Architect to review and evaluate the proper degree of SRS involvement during preconstruction and construction. Recommendations will be submitted to the EVP of Administration. SRS will be a member of the Capital Planning Process/Retreat.

12/2012 open - partially completed -

verified 09/2012

2010-13 Safety and Risk Services Audit of Operations and Compliance

4/14/2011 LIFE SAFETY/FIRE SAFETY 12 UNM Administration needs to make fire safety a priority. This requires all stakeholders to participate in upgrading the fire safety program at UNM. All UNM housing facilities should be brought up to NFPA standards and a Fire Safety Task Force should be implemented.

Denece Kessler, Enterprise Risk Management Council Chair

concur - ERM Council will review and evaluate the status of the Fire Safety Program and will establish a Fire Safety Task Force if necessary. The ERM Council will make recommendations to the EVP for Administration pertaining to retrofitting or sprinkling all UNM living facilities. Fire Safety Capital Funding Report will be prepared annually.


verified 09/2012


Thursday, October 11, 2012 Page 1 of 4Status of Audit Recommendations - Not Past Due Findings




Verified Date

4/14/2011 DATA MANAGEMENT 16 Turnover within the IT area of SRS has played a significant detrimental role in the lack of direction and proper technology in meeting the SRS needs. SRS should collaborate with UNM IT to establish an overall strategic plan for technology in the department.

Carla Prando-Domenici, Interim Director of Safety and Risk Services

concur - SRS will consult with UNM IT to develop a strategic plan for technology in the SRS Department.

11/2012 open - verified 10/2012


6/16/2011 ALLOWABILITY OF TRAVEL EXPENSES FOR COACHES’ FAMILIES

The Financial Services Division should include travel expenses for coaches' families as taxable employee benefits on the coaches’ W-2s.

Ava Lovell, VP for Finance and University Controller

concur - The Financial Services Division will include these expenses as taxable employee benefits on the coaches W-2s.

02/2013 open - verified 03/2012

2011-02 Department of Intercollegiate Athletics Men’s Basketball Audit of Undeposited Cash

6/16/2011 BOOKSTORE - PRISM Inventory System Inaccuracies

21 The Bookstore Manager should develop a policies and procedures manual to document Bookstore inventory procedures and should reconcile the Banner account index of purchases to the Bookstore inventory system on a monthly basis.

Sylvia Andrew, Executive Director of UNM-Gallup; Director of Business Operations

concur - The reconciliation of the Bookstore inventory system and Banner will be part of the Bookstore Operations Manual.

12/2012 open2011-06 Gallup Branch Audit of Business Processes

6/16/2011 BOOKSTORE - Purchasing Card for Inventory Purchases

23 The Bookstore should utilize the purchasing card for all bookstore inventory purchases and ensure duties are properly segregated.


concur - The Director of Business Operations will work with the Bookstore staff to implement changes in procedures.


6/16/2011 BOOKSTORE - Reconciliation of Cash Drawers

24 The Business Office should obtain and review Gallup Branch purchasing card reconciliations to monitor departmental budgets and spending. The personnel in the Gallup Branch Business Office should obtain purchasing card and financial system reporting training.


concur - Effective July 2011, all P-Card reconciliations will be sent to the Gallup Business Office for review.


10/20/2011 RED - Procedures Manual 1 RED administration should develop and implement a comprehensive procedures manual. The procedures manual should include a process to ensure that required documents (survey, title insurance, warranty deed, Tax and Revenue appraisal review, purchase agreement, contracted attorney approval, documentation of HED and SBOF approval, and documentation of accordance with the Master Plan) are included in RED files.

Kim Murphy, Director, Real Estate Department

concur - Draft and implement a comprehensive RED Procedures Manual that conforms with University and State policies for real property transactions.

10/2012 open - verified 09/2012






Verified Date

10/20/2011 RED - Documentation of Contracted Services

2 RED files should contain all required supporting documentation, including support for contracted services obtained to complete real property transactions. As noted in the recommendation addressing the RED procedures manual, RED should include documentation of contracted services as a step in the procedures.


concur - Include copies of all requests to and approvals from University Counsel for outside counsel in each transaction file.


verified 09/2012


10/20/2011 RED - Space Allocation Committee Requirement

3 To facilitate compliance with UBP 5200, the RED Director should appoint someone from the RED staff to attend all Space Allocation Committee meetings. This will help ensure that RED has a comprehensive catalogue of all University leases.


concur - RED Director will appoint a RED staff person to attend all Space Allocation Committee meetings when leased space is being considered.


verified 09/2012


10/20/2011 RED - Signatures on Leases 9 The Real Estate Department Director should ensure that University leases contain signatures required by UBP 2010.


concur - RED will provide for both EVP for Administration and CPO signatures on all long-term lease forms and reference compliance with UBP 2010 in the RED Procedure Manual.


verified 09/2012


10/20/2011 ATM Utility Expenses 12 The SUB should either determine a method to bill for utility expenses attributable to each ATM, or amend the ATM contracts, eliminating reference to utility expenses.

Timothy Backes, Associate Director Business Operations, SUB

concur - The SUB will be working with the Real Estate Department as each ATM contract is renewed eliminating reference to utility expenses.**Note - Internal Audit will track/verify the change through the first ATM contract renewal due date (August 31, 2012).

10/2012 open - verified 10/2012


4/24/2012 ACADEMIC PROGRAM REVIEW - Development of Action Plans

2 The Provost's Office should provide guidelines for developing actions plans.


concur - The Provost's Office will form a team of key stakeholders to review current processes and provide solutions for tracking deliverable action plans.


verified 10/2012


4/24/2012 ACADEMIC PROGRAM REVIEW - Development of Action Plans

3 Academic units should provide annual status reports to the Provost on progress toward action plans.


concur - The Provost's Office will form a team of key stakeholders to review the process and develop procedures for annual reporting of performance on action plans.


verified 10/2012


4/24/2012 ACADEMIC PROGRAM REVIEW - Improving APR effectiveness

4 The Provost's Office should review the APR Process and consider alternatives toward automating and streamlining the process.


concur - The Provost's Office will establish a Provost-level IT APR Automation Project to be tested as a pilot before deploying the system campus wide.


verified 10/2012


4/24/2012 ACADEMIC PROGRAM REVIEW - Continuous Improvement Process

5 The Provost's Office should establish a Continual Improvement Process for the APR.


concur - The Provost 's Office will form a team of key stakeholders to create assesment mechanisms associated with APR improvement process.


verified 10/2012






Verified Date

4/24/2012 FACULTY ADMINISTRATIVE COMPENSATION - Special Administrative Components

6 The Provost's Office should develop and implement guidelines for administering Special Administrative Components of faculty contracts.


concur - The Provost's Office will develop clear guidelines for the use and approval process for Special Adminsitrative Components.

10/2012 open - verified 10/2012


4/24/2012 FACULTY ADMINISTRATIVE COMPENSATION - Special Teaching Components

7 The Provost's Office should develop guidelines and procedures that govern approval and payment of Special Teaching Components.


concur - The Provost's Office will clarify procedures and monitor use of Special Teaching Components.

10/2012 open - verified 10/2012


8/16/2012 GOVERNING INSTRUMENTS - Compliance with Governing Instruments

1 The University and Foundation should review governing instruments and correct inconsistencies in the MOA and Bylaws, and ensure compliance with the Consolidated Investment Policy.

Henry Nemcik, UNM Foundation President/CEO

concur - University and Foundation will review MOA and Bylaws; work with University Counsel to ensure conformity; and, review the Consolidated Investment Policy for compliance with allowable investments.

12/2012 open2012-06 UNM Foundation

8/16/2012 FUNDRAISING AND DEVELOPMENT ACTIVITIES - Report of Giving

2 The Foundation should discuss the differences between CASE campaign counting rule and GAAP in the annual Report of Giving.


concur - The Foundation will include a narrative and a table in the annual Report of Giving explaining the differences between the CASE counting rules and GAAP.


8/16/2012 CONSOLIDATED INVESTMENT FUND - Foundation Business Plan

3 The Foundation should work with UNM's President to develop a business plan in anticiapation of upcoming fundraising campaigns.


concur - The Foundation will work with UNM's President to prepare a business plan in anticipation of future fundraising campaigns.



Internal Audit Department FY14 Budget Request

The Internal Audit Department’s fiscal year 2014 budget need is indicate in the following table.

Description FTEs Amounts Administrative Professional Staff 8 $672,000 Staff Expansion Request – Complaint/Compliance 1 $80,000 Administrative Assistant III 1 $37,600 Student Professional Intern 1 $20,000 Sub-total 11 $809,600 Other Operating Expenses $60,000 Total budget request $869,600 Allocations of Pooled Resources (FY13) ($759,371) Use of Budget Reserves from FY13 ($110,229) Estimated Reserves at June 30, 2014 $80,000

The above budget request includes an expansion of one professional staff person to manage the complaints and compliance work load, including the centralize complaint data tracking system for the University. This expansion position will be responsible for the compliance coordination with other subject matter expert in such area as human resources, student affairs, equal opportunity, fiscal management, contracts and grants, research, etc. The department’s FY13 budget is $804,320. The department is estimating a reserve balance of approximately $200,000 at the end of fiscal year 2013.

Internal Audit Department Space Request

• A request for additional office and larger meeting room space was submitted on the September 12, 2012 to the Space Allocation Committee.

• The Space Allocation Committee discussed the Internal Audit Department’s space request at the October 1, 2012 meeting.

• The Space Allocation Committee agreed that the adjacent suite that connects to the IAD (Bldg. 20) would be the best option for the expansion.

• This space is currently allocated to the Robert Wood Johnson Center (RWJC), hence a need to negotiate with the RWJC to meet their space need.

• The Space Committee will meet in early November to make a decision regarding this request.

Internal Audit Director’s Status Report October 18, 2012

1

ACTION ITEMS Approval of REDW Calendar Year 2013 Audit Contract. The University of New Mexico Hospital’s Request for Proposal summary for the Internal Audit services is included at Tab 2. The current contract for Internal Audit services was awarded to REDW, LLC in October 2011 for a one-year period effective January 2012. The UNM Hospital’s management recommends renewing this contract for the calendar year 2013 with a 30-day termination clause. It is anticipated that approximately 1,500 audit hours will be devoted for the Internal Audit services at a cost of $184,575, including gross receipts tax. External Financial Audit for Fiscal Year (FY) Ended 2012. KPMG and Moss Adams will present the external financial audit report in Executive Session for a recommendation to the full Board of Regents. Liz Metzger, Interim University Controller, will also be present to answer any questions. INFORMATION ITEMS Audit Committee Meeting Calendar for Fiscal Year 2013. The following dates are the approved dates for remaining FY13 meetings. The Committee meets at 8:30 AM in the Roberts Room. This schedule will accommodate the entrance conference in May 2013 for the 2013 financial audit. February 21, 2013 May 16, 2013 Internal Audit Draft Annual Report for FY12. The Draft FY12 Internal Audit Department Annual Report is provided for your review at Tab #3. The report includes comparisons of percentage of audit hours spent in various areas over the last five years. The limited staff resources and increased demand on management requests and investigations resulted in decreased hours spent on risk-based scheduled audits. The Department plans to staff all auditor positions during FY13. The Department’s professional staff worked a combined total of 8,842 hours of which at least 3,160 hours were devoted to audit and 2,300 hours to investigatory and consulting work. Audit Plan Status. Fiscal Year 2013 (FY13) audit plan consists of 16 audits, including those carried over from FY12 and audits added because of concerns brought to Internal Audit. The budget to actual report for the current audit plan is at Tab #7b. The status of the plan as of October 10, 2012 is:

Completed 3 Fieldwork 2 Assigned/Planning 4 Subtotal 9 Unassigned/Delayed 7 Total 16

Internal Audit Director’s Status Report October 18, 2012

2

Complaints. Since July 1, 2012, the department received 22 reports of misconduct or fraud; and, as of October 10, 2012, the department has 34 open complaints.

Carry Forward from FY10 2 Carry Forward from FY11 4 Carry Forward from FY12 56 Complaints Opened in FY13 22 Total Complaints Open in FY13 84 Complaints Closed in FY13 50 Total Open Complaints 34

Following is the status of open complaints: Referred to HSC Compliance Office 1 Referred to Human Resources 6 Referred to HSC Clinical Affairs 1 Referred to Office of Equal Opportunity 6 Referred to Office of Equal Opportunity &Vice Provost 1 Referred to Interim VP of Research 1 Referred to Senior Vice Provost 2 Referred to Vice Provost & Human Resources 1 Referred to HSC Information Security 1 Referred to Parking and Transportation Services 1 Referred to HSC Compliance, HSC Clinical Affairs & School of Medicine

1

Internal Audit Open Review 4 Pending 8 Total 34

Department Financial Report. At Tab 6 is the Internal Audit Department’s FY13 budget status report for your review. The FY13 adjusted budget is $804,320 and actual expenditures including encumbrances are $675,727 as of September 30, 2012. Audit Vacancies. The department has one Internal Auditor III position vacant at this time. The Department has reclassified the position as Auditor II. The Department posted the position in UNMJobs. The department has received 26 applications for this position and is expecting to complete the hiring process by the middle of November 2012. Peer Review. We have the signed agreement for the Quality Assessment Review (QAR). We are continuing to complete all needed QAR self-assessment documents. The QAR team will visit the Internal Audit Department at the end of October or early November 2012.

Account Description Adopted Adjustments AccumulatedCurrent Month Fiscal YTD

Encumbrances/ Available PercentPercent Percent

Operating Ledger SummaryThrough The Month of SEP 2012

FOH0002 Run Date/Time: 10/11/12 04:04 PM

INDEX: 676000: 113280-AUDIT DEPARTME-General Activ

BalanceBudget (FYTD) Actuals

Page 1 of 3

Revenue1640 - Allocations Pooled Allocati1660 - Allocations Other Gen1900 - Reserves1901 - Budgeted Use of Reserves

$759,371.00$0.00$0.00

$38,349.00

$0.00$6,600.00

$0.00$0.00

$759,371.00$6,600.00

$0.00$38,349.00

$0.00$6,600.00

$0.00$0.00

0.00%100.00%

0.00%0.00%

$759,371.00$6,600.00

$242,720.18$0.00

100.00%100.00%

0.00%0.00%

$0.00$0.00$0.00$0.00

$0.00$0.00

($242,720.18)$38,349.00

0.00%0.00%0.00%

100.00%

Revenue Total: $797,720.00 $6,600.00 $804,320.00 $6,600.00 $1,008,691.18 $0.00 ($204,371.18)0.82% 125.41% (25.41%)

Expenses2020 - Administrative Professional2060 - Support Staff Salary Detail20J0 - Student Salaries Gen20P0 - Temporary Salary Gen3100 - Office Supplies General3110 - Books Periodicals Gen3140 - Computer Software Gen3150 - Computer Supplies <$5,0013180 - Non Capital Equipment <$5,031A0 - Business Food - Local31C0 - Dues Memberships Gen31J0 - Parking Permits Gen31K0 - Postage Gen31M1 - Staff Recruitment Expense G3800 - In State Travel Gen3820 - Out Of State Travel Gen3825 - Out State Travel-Per Diem S3830 - Out State Trvl-Per Diem Non39Z1 - Travel Non UNM Employee-Non6000 - Telecom Charges Gen6020 - Long Distance Gen6040 - Telephone Line Spec Circuit6060 - Voice Mail Box Gen6300 - Alarm System Gen63A0 - Conference Fees Gen63A2 - Seminars/Training Fees63C0 - Copying Gen63T0 - Contract Services Gen63V1 - Consultant Fees & Svcs-Fore69Z0 - Other Professional Services

$677,069.00$35,151.00$20,500.00$15,000.00

$3,150.00$500.00

$3,988.00$100.00$800.00$700.00

$4,250.00$460.00$100.00

$1,500.00$1,500.00$5,000.00

$0.00$0.00$0.00

$3,043.00$300.00$500.00$690.00$350.00

$6,000.00$1,000.00

$50.00$1,500.00

$600.00$2,479.00

$5,500.00$1,100.00

$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

$682,569.00$36,251.00$20,500.00$15,000.00

$3,150.00$500.00

$3,988.00$100.00$800.00$700.00

$4,250.00$460.00$100.00

$1,500.00$1,500.00$5,000.00

$0.00$0.00$0.00

$3,043.00$300.00$500.00$690.00$350.00

$6,000.00$1,000.00

$50.00$1,500.00

$600.00$2,479.00

$51,833.67$2,703.93$1,547.00

$0.00$463.90$212.00

$0.00$0.00$0.00

$141.00$0.00$0.00$2.62$0.00$0.00

$941.78$72.00$33.60

$0.00$270.00

$2.31$0.00

$45.00$11.25$0.00$0.00

$12.00$0.00$0.00

$324.99

7.59%7.46%7.55%0.00%

14.73%42.40%

0.00%0.00%0.00%

20.14%0.00%0.00%2.62%0.00%0.00%

18.84%0.00%0.00%0.00%8.87%0.77%0.00%6.52%3.21%0.00%0.00%

24.00%0.00%0.00%

13.11%

$157,073.52$9,454.08$5,127.20

$0.00$812.55$399.00

$77.00$0.00$0.00

$307.00$1,796.00

$444.00$17.06

$0.00$251.00

$1,197.98$72.00$33.60

$0.00$810.00

$8.03$0.00

$135.00$111.15$920.00$280.00

$12.00$0.00$0.00

$1,024.48

23.01%26.08%25.01%

0.00%25.80%79.80%

1.93%0.00%0.00%

43.86%42.26%96.52%17.06%

0.00%16.73%23.96%

0.00%0.00%0.00%

26.62%2.68%0.00%

19.57%31.76%15.33%28.00%24.00%

0.00%0.00%

41.33%

$466,503.03$27,039.20

$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

$58,992.45($242.28)

$15,372.80$15,000.00

$2,337.45$101.00

$3,911.00$100.00$800.00$393.00

$2,454.00$16.00$82.94

$1,500.00$1,249.00$3,802.02

($72.00)($33.60)

$0.00$2,233.00

$291.97$500.00$555.00$238.85

$5,080.00$720.00

$38.00$1,500.00

$600.00$1,454.52

8.64%(0.67%)74.99%

100.00%74.20%20.20%98.07%

100.00%100.00%

56.14%57.74%

3.48%82.94%

100.00%83.27%76.04%

0.00%0.00%0.00%

73.38%97.32%

100.00%80.43%68.24%84.67%72.00%76.00%

100.00%100.00%

58.67%







Page 2 of 3

70E1 - Computer Software Maintenan70F0 - Equipment Rent Expense Gen80K0 - Banner Tax80K2 - Foundation Surcharge

$7,220.00$3,800.00

$420.00$0.00

$0.00$0.00$0.00$0.00

$7,220.00$3,800.00

$420.00$0.00

$0.00$439.07

$29.72$455.14

0.00%11.55%7.08%0.00%

$408.05$1,283.46

$103.99$455.14

5.65%33.78%24.76%

0.00%

$0.00$0.00$0.00$0.00

$6,811.95$2,516.54

$316.01($455.14)

94.35%66.22%75.24%

0.00%

Expenses Total: $797,720.00 $6,600.00 $804,320.00 $59,540.98 $182,613.29 $493,542.23 $128,164.487.40% 22.70% 15.93%







Page 3 of 3

Parameters:

Transactions as of SEP 2012


Groupings:

$804,320.00 $6,600.00 $1,008,691.18 $0.00 ($204,371.18)0.82% 125.41% (25.41%)$797,720.00 $6,600.00

$804,320.00 $59,540.98 $182,613.29 $493,542.23 $128,164.487.40% 22.70% 15.93%$797,720.00 $6,600.00

$0.00 ($52,940.98) $826,077.89 ($493,542.23) ($332,535.66)0.00% 0.00% 0.00%$0.00 $0.00

Total Revenue:

Total Expenses:

Net:

Report Summary:

Warning: This report shows only fiscal year activity. For inception to date activity for grants please use FRH0001&2 reports.

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