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10/26/2017 - Report: RVP Audit Opinion - City Council - Audit Committee TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 300 Krenek Tap Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Councilmember Jerome Rektorik TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) TO: Matt Prochaska, Research Valley Partnership President/CEO FROM: Ty Elliott, College Station City Internal Auditor DATE: October 26, 2017 SUBJECT: Audit Report of the Research Valley Partnership – Audit Opinion The Office of the City Internal Auditor conducted this examination engagement of the Research Valley Partnership (RVP) pursuant to (1) Article III Section 30 of the College Station City Charter, which outlines the City Internal Auditor’s primary duties; and (2) the annual funding agreement between the City of College Station and the RVP, which contains a provision for the City to conduct monitoring reviews of the RVP as deemed necessary by the City so as to evaluate their compliance with the provisions of the agreement. An examination engagement consists of obtaining sufficient, appropriate evidence to express an opinion on whether the subject matter is in conformity with the criteria in all material respects. An examination engagement of the RVP’s financial internal controls was included in the fiscal year 2018 audit plan based on direction given by the City of College Station Audit Committee. The opinion expressed in this memo addresses the design and operating effectiveness of the RVP’s internal controls by considering how they were applied, the consistency with which they were applied, and by whom they were applied. It is our opinion that the Research Valley Partnership maintained effective internal control over financial accounting during fiscal year 2017. Summary of Significant Testing We conducted this examination engagement in accordance with generally accepted government auditing standards (with the exception of a peer review).1 Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following paragraphs further detail the audit procedures used to obtain this evidence. All testing of transactions and controls covered fiscal year 2017. General Controls. Most of the RVP’s accounting functions are outsourced to Thompson, Derrig & Craig (TDC), which offers bookkeeping and tax services to its clients. We reviewed all cash and cash equivalents inflows and outflows from the RVP’s checking and savings accounts to verify that all journal entries were being properly made and all funding was properly accounted for. We also reviewed process narratives provided by the RVP to give us a better understanding of current control procedures. Finally, 1 Government auditing standards require audit organizations to undergo an external peer review every three years. Our office is scheduled to receive a peer review in fiscal year 2018. City of College Station Page 2 of 2 TY ELLIOTT CITY INTERNAL AUDITOR’S OFFICE AUDIT COMMITTEE City Internal Auditor 300 Krenek Tap Mayor Karl Mooney telliott@cstx.gov College Station, TX 77840 Councilmember Jerome Rektorik TEL: (979) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) we reviewed all fiscal year 2017 bank reconciliation reports and checked them against the appropriate bank statements. Payroll. The RVP’s payroll function is currently outsourced to Questco. We verified that payroll payments were being calculated accurately and accounted for appropriately in the RVP’s accounting system. Moreover, we reviewed employee datasheets to verify that all compensation and benefit levels were properly authorized and in accordance with the RVP’s employee manual – including severance packages and salary increases. Finally, we compared the terms of the outsourcing contract with the most recent month’s payment to Questco. Accounts Receivable and Other Income. We traced all receivables to the general ledger and bank account deposits. We verified that the period-end accounts receivable aging report reconciled to the A/R account in the general ledger. We assessed the process for the allowance for doubtful accounts and determined whether the method was appropriate for the RVP’s business environment. We reviewed all write-offs and credit memos, and assessed the adequacy of related support documentation. Accounts Payable. We reviewed documentation of processes regarding recording and issuing A/P payments and confirmed, through interview, that these processes were being conducted adequately. We reviewed supporting documentation of all payments made over $5,000 for adequate business purpose and appropriate approval. Justification for any payments made that did not have adequate documentation were obtained through staff interviews and confirmed through vendor background verification. The check book and payment documentation was reviewed to verify sequential numbering and issuance.