RTD Board eyes fixes in wake of critical report on internal audit division
The RTD Board of Directors this week heard a bleak analysis of its internal audit division and immediately pledged to make changes.
The report, conducted as a peer review by the American Public Transportation Association (APTA), did not pull punches. The report listed 17 blunt recommendations to improve the audit division’s systems, procedures, planning, charter, reporting structure, staffing, follow-through, independence, record-keeping and its own quality assurance process.
Overall, the report said the division fails to meet the Institute of Internal Auditors International Professional Practices Framework, also known as “The Standards,” 171 pages of “authoritative guidance on the internal audit profession.” The IPPF book, now on order for RTD staff as a reference document, “presents internationally consistent mandatory and strongly recommended guidance for the practice of internal auditing anywhere in the world.”
The report said the RTD staff members in the division have the talent and training to handle the task.
“Where improvement is needed is the application to the standards,” said Michael J. Fucilli, former auditor general for the Metropolitan Transportation Authority in New York City.
Fucilli was one of five transit peers who conducted the report. Others were from Cleveland and Washington, D.C.
Given the size of RTD’s budget, Fucilli said, the division should employ five staff members. Currently, two staff members are assigned to the division (though the budget calls for three). San Francisco’s public transit system, with a similar budget size, has nine staffers in its internal audit division.
“Absolutely sobering,” RTD Director Shontel Lewis said, echoing the thoughts of many other directors. “Essentially, the Board needs to step up and get started.”
RTD Board Chair Angie Rivera-Malpiede called the report “incredible work” that will serve as a “resource guide” that will “serve our agency and our community for decades to come.”
The peer review audit – conducted as a demonstration model of how such internal audits should be organized, conducted, prepared and presented – grew out of a request to APTA from RTD General Manager and CEO Debra A. Johnson and Rivera-Malpiede. The audit request was made in January and the work, including interviews with 12 members of RTD leadership, was conducted in February and March.
The resulting 71-page report found a need to revisit RTD’s bylaws so they include explicit language about the intent of the internal audit division and also detail the roles and responsibilities of the Board in overseeing the division’s work. The division reports directly to the General Manager and CEO but should also have a “dotted line” connection to report to the Board as well, the report states.
Getting the foundational structures right was hammered home in the report on major points around communication – between the internal audit division and RTD leadership, around communication with the Board and its finance committee, and between the finance committee chair and the internal audit manager, “particularly when the auditor reasonably believes that a matter would impact the health, safety and welfare of RTD, its riders or its employees, or would otherwise constitute an emergency in the mind of a reasonable person.”
The report found fault in the division’s inability to follow up on recommendations it was making to improve effectiveness and efficiency of RTD operations.
“If you’re not going to follow up on the recommendations, don’t do the audit,” Fucilli said. However, he complimented the staff for its “robust” choice of topics and subjects to investigate. “They are not picking easy audits,” he said.
The report found that RTD audits don’t clearly outline their plan or approach to the work ahead. RTD internal auditors don’t clearly state each audit’s objective, and auditors don’t do a good job of keeping track of the time put into each analysis. “We have to be efficient and effective if we are going to measure other people’s efficiency and effectiveness,” Fucilli said.
The report also found that some of RTD’s audit report conclusions did not match the audit objectives. The conclusions also did not incorporate the official five elements of an audit’s finding – criteria, conclusion, impact, management response and recommendation.
“This is a good opportunity to really know what we need to do,” RTD Director Vince Buzek said. He complimented General Manager Johnson and Board Chair Rivera-Malpiede “for getting the audit report going.”
RTD Director Bobby Dishell called the findings “really illuminating” and said they provide highly detailed recommendations for “the changes we need to make.”
“We have a lot of problems here, and we own those as a Board,” said Director Erik Davidson, who underscored the need for the Board to have a working relationship with the internal audit division.
Johnson called the report “an opportunity to course-correct. There is an opportunity for us to level-set what we are doing collectively. This will chart our path forward. As I shared with you all before I came into the organization, I was going to turn over the rocks, and we’re uncovering more rocks. But you know we’re in a quarry, and that doesn’t mean we can’t get out. And now it gives us an opportunity to step back and discern what it is we need to do.”
RTD Director Peggy Catlin thanked the authors of the report for writing it in such a way that it serves as a “resource guide” going forward. Making the changes, she said, “is vitally important for this organization and for the risks that we face. As hard as it is for many of us to receive it, I think it needed to be done, and it's a good starting point.”