Cincinnati Public

Schools
Internal Audit

Treasurer’s Office Presentation

Internal Audit Plan – Fiscal Year
2009/10
Michael Alao

October 8, 2009
Agenda
• Introduction
• Internal Audit Function
• Internal Control
• Internal Audit Plan
• Questions, comments, concerns…
Introduction
• Name: Michael Alao

• Education: B.S. Accounting, VCU 1999

• Certification:
Certified Public Accountant (VA, OH)
Certified Internal Auditor
Certified Fraud Examiner
Introduction cont.
• Experience:

10 years of audit experience

• State of Virginia, Richmond, VA

• International Paper, Memphis, TN
• FedEx, Memphis, TN
• PricewaterhouseCoopers, DC & Baltimore
• Wolseley, Reading, United Kingdom
Internal Audit Function
What is internal auditing?

Internal Auditing is an independent,

objective assurance and consulting activity
designed to add value and improve an
organization’s operations.

It helps an organization accomplish its

objectives by bringing a systematic,
disciplined approach to evaluate and
improve the effectiveness of risk
management, control, and governance
processes.
Internal Audit Function
cont.
• Independent
• Objective

Concerned with:
• Effectiveness and efficiency of operations;
• Reliability and integrity of financial and
operational information;
• Safeguarding of assets; and
• Compliance with laws, regulations, and
contracts.
 Internal Audit Function
cont.
• Independence

Board of Education

Finance Committee
CFO/Treasurer Superintendent
Audit Committee

Internal Auditor
Internal Audit Function
cont.
 Internal Audit Function
cont.
Independence per CPS IA Charter:

“…the Internal Auditor shall have no direct

responsibility or any authority over any of
the activities or operations subject to
review. The Internal Auditor shall not
develop and install procedures, prepare
records, or in engage in activities which
would normally be reviewed by internal
auditors.”
 Internal Audit Function
cont.
• Objectivity

- An unbiased mental attitude

- Use of testing and evidence
- The whole picture
 Internal Audit Function
cont.
External Audit Internal Audit
• Legal requirement • Not required
• CAFR and • Financial,
compliance only compliance, and
• High materiality operational
• Independent CPA • Low materiality
firm • District employee
 Internal Audit Function
cont.
Why have an internal audit function?

• SEC requirement for public companies

• State requirement (e.g. NY school
districts)
• Reactive response to fraud
• Proactive
 Internal Audit Function
cont.
Cincinnati Public Schools
Board of Education
Fiscal Accountability Pledge
Approved Unanimously 2/20/2008

“To ensure fiscal accountability, the Board

has established an internal audit position and
an external audit committee with a
commitment to report quarterly to the public
on financial management.”
 Internal Controls
What is internal control?

A process effected by the entity’s board of

directors, management, and other
personnel, designed to provide reasonable
assurance regarding the achievement of
objectives in effectiveness and efficiency
of operations, reliability of financial
reporting, and compliance with applicable
laws and regulations.
 Internal Controls cont.
What are internal controls?

Procedures to safeguard assets and make more

efficient and effective use of these assets.

Procedures to ensure compliance with District

policy, State, and Federal laws.

Examples:
Budget process, reconciliations, segregation of
duties, policies and procedures
 Internal Controls cont.
Why are internal controls important?

• Ensure mission accomplishment

• Reduce fraud opportunities
• Prevent loss of funds or other resources
• Establish standards of performance
• Assure compliance with laws
• Preserve integrity
• Eliminate adverse publicity
• Assure public confidence

• For our own protection

 Internal Controls cont.
Who is responsible for internal controls?

• All staff responsible for following internal control procedures

• Management is key
• Establishes policies and procedures
• Monitors and evaluates procedures
• Must demonstrate commitment to abide by policies
• Must set a high standard and lead by example
 Internal Controls cont.
Internal auditors are responsible for evaluating
the adequacy and effectiveness of internal
controls, and making recommendations where
control improvements are needed.

Management is not required to follow

recommendations, but must then accept risk.
FY 2010 Internal Audit
Plan
Types of Internal Audit Engagements

• Audits
• Consulting Reviews
• Investigations

• Assisting External Auditors

FY 2010 Internal Audit Plan
cont.
Process Assessments for Internal Audits

Assessment Definition
Satisfactory A well-controlled process with no
significant audit findings.

Marginal A process with weaknesses in key controls

which, if not corrected, could result in an
unacceptable environment.

Unsatisfactory A process with significant control issues.

FY 2010 Internal Audit Plan
cont.
Internal Audit Plan Development

• Risk assessment
• Review of prior audit findings
• Discussions with management and
staff
• Board and Audit Committee input
and approval
FY 2010 Internal Audit
Plan
• Schedule of Expenditures of Federal Awards
• Consultant APD Approval Process
• Blanket Purchase Orders
• Supplemental Educational Services (SES) Providers
• PNC Purchase Cards
• Student Activity Funds
• Non-School Organizations (NSO)
• Payroll Cycle
• Progress on Performance Audit Recommendations
• Progress on Business Operations Efficiency Review
Recommendations
Questions, comments,
concerns…
 Contact Information

Michael Alao
(513) 363-0433
alaomic@cps-k12.org