2015 Business Meeting Minutes (DRAFT)

2015 AASHTO Internal/External Audit Sub-Committee Annual Business Meeting July 23, 2015 – Portland, Oregon

 Call To Order o 1:35 by Dan Kahnke, Minnesota, Chair

 Roll Call o Roll call of states was conducted by Darrin Player, SC, Secretary. The count yielded 32 states in attendance, which was a quorum. Bylaws state a simple majority is needed for a quorum which would be 27 states.

 Approval of the 2014 Business Meeting Minutes o Minutes were distributed to all members attending the meeting. A motion to adopt the minutes with no changes was seconded, and further approved by the members.

 Host States for Future Conferences o 2016 – Washington DC o 2017 – Montana o 2018 - Kentucky (Alice Wilson stated they were very interested however had to wait on a changeover of administration at the Transportation Cabinet to commit (should know January/February 2016). Tennessee also mentioned being interested in hosting.

 Thank You Oregon – Dan Kahnke thanked Oregon for all their hard work and hosting an outstanding conference.

 Awards – Dan Kahnke o Past Peer Review Chair Awards were presented to Alan Pinkerton and Judy Robertson on behalf of the Task Force for their outstanding work leading the Peer Review Task Force. o David Campbell Quality Award was presented to Sandra Healy, Idaho, for recognition of her many important contributions to Internal Audit over the years. Award was accepted by Carri Rosti of Idaho.

 Old Business – Marlene Hartinger, Oregon, Vice Chair o Marlene stated that SCOFA approved funding for the National Compensation Matrix. o The next step in the process is for the AASHTO Board of Directors to approve and no action has been taken yet.

 New Business – Dan Kahnke o Dan mentioned that Virginia had experienced some push back on use of the External Audit Guide and the NCM, possibly a lawsuit. The engineering firm stated the state did not adopt the Guide however Jenet, AASHTO, had all voting information and ended any action at the time. Dan stated he just wanted everyone to know this was happening and just be prepared and the Board and AASHTO is willing to help in any way it can. o A motion to revise the Audit Subcommittee Bylaws to clearly define Voting Quorum was made and language for the change was distributed to the members prior to the meeting (attached). The motion was seconded, and further approved by the members.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 1 Subcommittee Business Meeting Minutes 07/23/15 o A motion to establish a new task force for Innovative Audit Practices/Continuous Auditing/Data Analytics was made. Discussion was held regarding the task force on 7/20/15 after the regular conference agenda. A chair has been named and several members have signed up to participate. The motion was seconded, and further approved by the members

Task Force Reports o David Campbell Quality Award – award was presented earlier in the meeting by Dan Kahnke.

o Peer Review Task Force – Alan Pinkerton, Arkansas . During the past year the task force:  Completed peer reviews and issued reports for: Nevada, Missouri, Oregon, West Virginia, and Arizona  Staffed the fall 2015 peer reviews for Colorado  In the process of staffing Winter 2015, Spring 2016 peer reviews for Alabama, Idaho, and Minnesota  Received Peer Review request form from Arkansas  Updated the web pages and the peer review portal  Vickie Murphy, Montana, will be rotating off the task force. Alan Pinkerton, Arkansas, will remain on the task force for one year as past chair. The new chair will be Benito Ybarra, Texas. Tennessee will be added to the task force for next year.  A written report was submitted to the Board and distributed to the members prior to the meeting (report attached).

o Uniform Audit & Accounting Guide - Gerry Dobek, Connecticut, Co-Chair . Most updates were given during the 07/22/15 panel on the external audit guide. . Written report was submitted to the Board and distributed to the members prior to the meeting (report attached). . Gerry discussed the time line for the most recent update to the Guide. He stated the task force will not rush but hope to complete update by end of year. . Jenet, AASHTO, discussed the SCOFA voting and process . Carri, Idaho, suggested documenting the process. The members agreed and Jenet will do and add to the committee website.

o Internal Audit Guide Task Force – Alice Wilson, Kentucky and Stephen Kirk, Illinois . Written report was submitted to the Board and distributed to the members prior to the meeting (report attached) . Since the written report was issued the Internal Audit Guide task force has added 3 new practice aids

. The task force continues to work on practice aids which are mini audit programs for various types of DOT internal engagements and asked for additional members and that states send other audit programs to the task force for review and possible development of practice aids.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 2 Subcommittee Business Meeting Minutes 07/23/15 o ACEC Liaison Committee – Dan Kahnke . Dan gave an overview of the committee meeting held on Monday, 7/20/15. . A discussion was held regarding a simpler process for minor changes and the committee will be working on this process. . A survey of states was recommended by the committee regarding cognizant audits. This will be developed and distributed soon. . The committee has not met via monthly teleconference as it had in the past. This will be reactivated. . The committee meets in person at the annual Audits Conference. All state members are invited to attend and share their opinions and concerns and issues alongside the ACEC representatives.

o Other New Business . The Board met on Sunday, 7/19/15, to review the 2014 Annual Meeting financial report from Georgia. The report was accepted and distributed to the members prior to the business meeting (report attached) . Benito Ybarra, Texas, mentioned the ACGA (American Center for Government Auditing) which focuses on providing support for Government Auditors and free webinars. He stated you can find this group on the IIA website. . Carri Rosti, Idaho, stated we should update the task forces and members on the committee website. Darrin, SC, stated he would make sure he had all the task force members and work with AASHTO to get the website task forces and members updated.

o Meeting Adjourned

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 3 Subcommittee Business Meeting Minutes 07/23/15 ATTACHMENTS

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 4 Subcommittee Business Meeting Minutes 07/23/15 Proposed Changes to AASHTO Audit Subcommittee Bylaws to Define Voting Quorum

Current Text:

ARTICLE VII: Meetings There shall be an annual meeting of the subcommittee. The site shall be determined by a vote of the membership, two years in advance of the meeting. Preference will be given to geographical distribution. Special meetings may be held at a time and place established by the board of directors. The FHWA liaison and the USDOT IG or a liaison from that group shall be invited to all annual meetings. Following the annual meeting, a closeout shall be held by the host state, the next year’s host state and the officers of the subcommittee.

Proposed Revisions:

ARTICLE VII – MEETINGS AND VOTING

Meetings There shall be an annual meeting of the subcommittee. The site shall be determined by a vote of the membership, two years in advance of the meeting. Preference will be given to geographical distribution. Special meetings may be held at a time and place established by the board of directors. The FHWA liaison and the USDOT IG or a liaison from that group shall be invited to all annual meetings.

Following the annual meeting, a closeout shall be held by the host state, the next year’s host state and the officers of the subcommittee.

Voting Only members of the subcommittee shall be eligible to vote on matters before the subcommittee. A vote will be taken of all members present at the annual meeting. Except as otherwise specified herein, all votes shall be by simple majority. Each member shall have one vote and may delegate the vote to be cast on their behalf.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 5 Subcommittee Business Meeting Minutes 07/23/15 The following report is provided to members of AASHTO Audit Subcommittee regarding the activities of the ___ Uniform Audit & Accounting Guide______Task Force for the time period beginning after the August 2014 Annual Meeting to the July 2015 Annual Meeting.

Task Force Membership

Co-Chairs: Gerry Dobek John Whiteside

Members: The Audit Guide Task force is composed of members from 28 State DOTs and DC, 2 representatives from AASHTO and 3 from FHWA.

Summary of Activities and Accomplishments from August 2014 to July 2015, including recommendation to continue or disband task force / sub-task force / sub-committee

We have monthly 1 hour calls to discuss topics, issues, and sub task reporting on the first Monday of every month.

The co-chairs participate in calls with ACEC. On the conference calls we discussed the following items:  The process of updating the audit guide.  It was agreed that The Task Force’s subgroup and ACEC subgroups will discuss how they want to handle issues and drafting edits. The subgroups will discuss the items ACEC noted for review/edit noted in ACEC’s suggestion letter.  A timeline was developed for updating the audit guide.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 6 Subcommittee Business Meeting Minutes 07/23/15 The task force has been updating the audit guide. A draft of audit guide has been submitted to be posted to the AASHTO web site for review. It was anticipated having the audit guide done for AASHTO’s annual internal/external audit meeting, however, extra time was given to the subgroups to complete their tasks. In addition, unforeseen circumstances caused a delay in Scot Gormley incorporating all the updates. The work to update the audit guide included:

 Sub-groups were formed to update different sections of the audit guide.  A timeline was developed for the update.  The sub-groups worked with ACEC’s subgroups.  The audit guide and status updates were discussed on the monthly task force teleconference and the conference calls with ACEC.  The audit guide was edited.

Status Update for the Audit Guide Update Task Force Sub-groups.  Chapters 6, 7 and Overtime Premium – Randy Knoche: They met with the ACEC sub-group and have updated this section. They have submitted the updated sections to Scot Gormley for editing. There are other issues brought up by ACEC that the sub-group did not address in this revision. The issues were superior performance, ratio analysis on labor and the labor testing section. These issues will be deferred until the next update.  Chapter 8 – Marsue Morrill: They met with the ACEC sub-group and have updated this section. They have submitted the updated sections to Scot Gormley for editing.  Yellow Book Review and Report Example – Margaret Cole: This section has been updated. They have submitted the updated sections to Scot Gormley for editing. The report example will be moved from the audit guide to the AASHTO website so that it can be kept up to date.  Audit Guide Chapter 12, Cognizant and Oversight – Dan Parker: Dan updated this section incorporating the new 23CFR172. He made changes based on comments from this sub-group ACEC sub-group. The updated section has been submitted to Scot Gormley for editing.  Editor and Designer – Scot Gormley: The draft of the audit guide is finished. A copy was sent to Gerry Dobek (AASHTO Co-chair) and Dan Purvine. Gerry has sent a copy to Jenet Adem at AASHTO to be posted on the AASHTO website for review and comment.

The team has been working on the following additional areas:

 Received monthly updates from FHWA on cost recovery and proposed rulemaking (23cfr172). 23CFR172 has passed.  Discussed the Safe Harbor program and received updates from FHWA and any test states on the task force. Seems to be working well. A number of small firms have been approved to use the rate and many have contracts (mostly sub or with an LPA). The FHWA had considered opening up the program to additional states. The decision was not to extend the program to additional states.  Discussed CEI Direct Costs or “Tools of the trade” because of inconsistency between firms and probably states. May need to provide some guidance but not dictate since appears more of a contractual issue. This issue is still early in the development stage – will be working on in the future.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 7 Subcommittee Business Meeting Minutes 07/23/15  Discussed what rate to use if the consultant is a joint venture. The consensus was that the individual firms should be viewed as sub-consultants, and use their own rates.  Discussed proposed best practices guidance for the Accounting for Design-Build Projects to help develop consistent treatment of these costs throughout the industry. – will be working on in the future.

Action Items for Subcommittee Membership Voting

We will need to vote on the approval of the audit guide. [Through email voting process]

We recommend continuing the Uniform Audit and Accounting Guide Task Force.

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 8 Subcommittee Business Meeting Minutes 07/23/15 The following report is provided to members of AASHTO Audit Subcommittee regarding the activities of the Peer Review Task Force for the time period beginning after the August 2014 Annual Meeting to the July 2015 Annual Meeting.

Chair: Alan Pinkerton, AR

Members: Vickie Murphy, MT Benito Ybarra, TX Phillip Henry, DE Pam Fredrick, WY Joel Griggs, SC

Summary of Activities and Accomplishments from August 2014 to July 2015, including recommendation to continue or disband task force / sub-task force / sub-committee During the year, we:

 Completed peer reviews and issued reports for Nevada, Missouri, Oregon, West Virginia, and Arizona.  Staffed the Fall 2015 peer review for Colorado  Are in the process of staffing Winter 2015, Spring 2016 peer reviews for Alabama, Idaho, and Minnesota  Have received Peer Review Request Form from Arkansas  Updated the web pages and the peer review portal

Action Items for Subcommittee Membership Voting None

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 9 Subcommittee Business Meeting Minutes 07/23/15 The following report is provided to members of AASHTO Audit Subcommittee regarding the activities of the Internal Audit Guide Task Force for the time period beginning after the August 2014 Annual Meeting to the July 2015 Annual Meeting.

Chair: Alice Wilson, KY (co-chair) Stephen Kirk, IL (co-chair)

Members:  FHWA – Danial Parker  Georgia – Becky Greenway  Idaho – Sandra Healy  Michigan – John/Jack Cotter  North Dakota – Daryl Splichal  South Carolina – Joel Griggs  Texas – Benito Ybarra  Wyoming – Kristin Burkhart

Summary of Activities and Accomplishments from August 2014 to July 2015, including recommendation to continue or disband task force / sub-task force / sub-committee

The Internal Audit Guide task force had several teleconferences and exchanged several emails discussing practice aids to add to the AASHTO Internal/External Audit Subcommittee website for state DOTs to use when conducting internal audits. The task force finalized the Internal Audit Guide and placed it on the AASHTO Audit Subcommittee website along with two practice aids: DBE and MPO. The task force has

2015 AASHTO Internal/External Audit Committee Annual MeetingPage 10 Subcommittee Business Meeting Minutes 07/23/15 two practice aids ready for review and concurrence: Materials and Federal Aid Billing & Funds Management. We anticipate placing these Practice Aids on the website in the immediate future upon adoption of the final versions by the task force.

The task force continues to work on several other practice aids and hopes to issue more throughout the upcoming year. Some practice aids that are close to completion include: Procurement Card and Cost Allocation Plans. We have assigned Construction Contract Administration and Subrecipient Monitoring and those are in progress.

We have several practice aids that are on our list to do, and have received practice aids from a few state DOTs. These are in various stages of detail and completeness so the Task Force decided to assign them to members to format and edit as needed for posting.

Action Items for Subcommittee Membership Voting None

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