North East Independent School District

1. North East Independent School District Internal Audit Annual Audit Plan

2. OVERVIEW • Background • Why an Annual Plan? • Development Methodology • Results - Key Projects • Anti-Fraud Action Plan • Brief Summary of FY 2007 Activity • Recommendation • Questions

3. Background • Government Accounting Office & IIA Standards require approval of an annual plan • House Bill 1 (79th Legislature) requires the internal auditor to report to the Board of Trustees and obtain approval for planned projects

4. Why an Annual Plan? • Standards • Allows Board to direct/approve audit resources • Provides framework for assessing audit contributions • Gives senior leadership opportunity to request assistance/oversight

5. Development Methodology • Obtain suggested topics from management • Risk assessment • Nine risk factors • Considers materiality, potential for fraud, change in resources, change in programs • Attachment 1 to Annual Plan • Prioritize workload based on risks • Internal Audit Director may override some priorities based on media/leadership interests • Prepare Annual Audit Plan (in packet) for Board approval

6. Weighted Factors Requested by Supt. Fraud potential Materiality Assoc. Supt. request Mandated by law Public scrutiny Mgmt. controls Prior coverage Change in resources Priority topics Composite total score is ranked Highest scores earn spot on To Do list Changes in priorities will be submitted to Board for approval Fraud or malfeasance may alter plan priorities Risk Assessment Risk

7. Results – Key Projects • Special projects • Supt. or Board requested reviews • Quick turn-around analyses/studies • Open records data verification work • Concerns received via the Hotline • Spontaneous issues requiring quick response (e.g., missing funds or equipment)

8. Key Projects (continued) • Review of Supt. contract & expenses • Community Education (operational audit) • Construction contract monitoring • Audit work for external auditors (CAFR) • Cash, payables, inventories

9. Key Projects (continued) • Campus Audits • Unannounced visits (cash and inventory verification) • Full campus audits (one high school & one middle school) • Compressed campus audits • Condensed scope; when principals and bookkeepers change

10. Key Projects (continued) • Annual Review of HEB card program • Annual Review of Conflict of Interest disclosure reports from budget managers

11. Anti-Fraud Action Plan • Attachment 3 to the Annual Audit Plan Prepared to provide direction on detecting, reporting and disposition of potentially fraudulent situations • Part I…measures to prevent, deter & detect fraud • Part II…procedures to follow in response to fraud detection • The fraud plan complements CAA(Local) CAALOCAL.htm Fraud

12. Recap of FY 2007 Activity • Operational Audits • Supplemental Pay • Textbook Inventory Management • Selected Aspects of Police Department Operations • Vehicle use & Replacement • CRMS • Unannounced Campus Audits (23) Recap

13. Recap of FY 2007 Activity • Special Projects • Wage rate update for new construction contracts • 5 campus advisory services • Accounting for ISA field trips • District wide review of credit card usage • Campus Audits (1-MS; 1-ES) • Hotline follow-up (13 concerns) Recap

14. Recommendation • Approve the 2007 – 2008 Annual Audit Plan, including the Anti-Fraud Action plan

15. EFFICIENCY is our focus QUALITY is our goal Questions?