Audit Committee Meeting October 2020 Committee Members J. Barbas, Chair F. Borelli D. Jones R. Linn R. Mujica, Jr. Audit Committee Meeting MTA Board Room - 20th Floor 2 Broadway Wednesday, 10/28/2020 10:00 AM - 5:00 PM ET 1. PUBLIC COMMENTS 2. APPROVAL OF MINUTES Minutes of July 22, 2020 Meeting - Page 3 3. AUDIT COMMITTEE WORK PLAN 2021 WORKPLAN - Condensed - Page 5 2021 WORKPLAN - Detailed - Page 7 4. QUARTERLY FINANCIAL STATEMENTS - 2ND QUARTER 2020 Draft - Consolidated Interim Financial Statements - Q2 2020 - Page 12 5. APPOINTMENT OF EXTERNAL AUDITORS PCAOB Report on 2018 Inspection of Deloitte - Page 133 6. AUDIT APPROACH/COORDINATION WITH EXTERNAL AUDITORS (Materials previously distributed) 7. REVIEW OF AUDIT COMMITTEE CHARTER Audit Committee Charter - Page 153 8. OPEN AUDIT RECOMMENDATIONS Past Due Remediation Plans Report - October 2020 - Page 160 9. ANNUAL AUDIT COMMITTEE ACTIVITY REPORT (Materials previously distributed) 10. 2020 AUDIT PLAN PRESENTATION 2020 Audit Committee Status Presentation - October 2020 - Page 164 MINUTES OF MEETING AUDIT COMMITTEE OF THE BOARD WEDNESDAY, JULY 22, 2020 -10 A.M. RONAN BOARD ROOM - 20™ FLOOR 2BROADWAY Because of the ongoing COVID-19 public health crisis, the MTA Chairman convened a one-day, virtual Board and Committee meeting session on July 22, 2020, which included the following committees: • Long Island Rail Road and Metro-North Railroad; • New York City Transit; • MT A Bridges and Tunnels; • Finance; • Safety; • Audit; • Corporate Governance; and • Capital Program Oversight Committee To see a summary of the meeting and the actions taken by the Audit Committee, please refer to the July 22, 2020 Board minutes in the July Board Book available here on the Board materials website: https://new.mta.info/transparency/board-and-committee-meetings/july-2020. MTA Chairman Foye introduced Acting Auditor General Michele Woods (AAG). The AAG stated that there were 13 items on the Work Plan, and one item has been postponed. The IT report on Security of Sensitive Data will be made at the October Audit Committee. Six of the remaining 12 items on the plan are from our External Audit firm and require a vote to accept the reports: 1) The Financial Statements for the 1st quarter 2020 2) The 2019 Pension Audits 3) The Single Audit Report 4) The Investment Compliance Report 5) The 2019 Review of the MTA/IG's Office Expenses, and 6) The MT A's Consolidated Management Letter Report The reports on these items have been provided to the Audit Committee and are included in the Audit Committee materials. Jill Strohmeyer from Deloitte and Noemi Lopez, the Acting MTA Comptroller were available to answer any questions. A motion was made and seconded to accept these six items. There were four information items which relate to the operation of the MT A's Compliance Program. The items included: 1) The Enterprise Risk Management Update; 2) The Ethics and Compliance Status Report; 3) The Financial Interest Report; and 4) The Report on Open Audit Recommendations. Lamond Kearse, the MT A's Chief Ethics, Risk & Compliance Officer was available to answer any questions on these reports. Next, the Department of Diversity and Civil Rights has prepared an update on the status of the performance measures and compliance monitoring used by DDCR in tracking the critical tasks. Michael Garner, ________________________________________________________________________________ Master Page # 3 of 174 - Audit Committee Meeting 10/28/2020 the MT. 's Chief Diversity Officer, was available to answer any questions. The final item was the MTA Audit Si rvices' mid-year Status Report. Through the first six months of this year we have completed 34 operational and assurance audits, and issued 51 findings with recommendations to improve transparency, governance, and internal controls. These audits identified potential cost savings and efficiency opportunities of $6~ 1 million at the agencies. We also performed 176 audits related to Capital Projects. The third-party questioned costs for these audits were $3 7 .5 million year to date. MTA Audit has worked with the agencies to focus on new areas of risk during the COVID emergency, including emergency contracts and cleaning initiatives. The AAG will be working with the agency presidents to prioritize the remaining operational audits in the 2020 Audit Plan. Finally, the On-Board Program at the railroads was on pause from mid-March through June. This program was resumed on July ist. This concluded the July Audit Committee Work Plan. Respectfully submitted, ltwU ~,J~ Michele Woods Auditor General ________________________________________________________________________________ Master Page # 4 of 174 - Audit Committee Meeting 10/28/2020 2021 AUDIT COMMITTEE WORK PLAN I. RECURRING AGENDA ITEMS Responsibility Each Meeting: Approval of Minutes Committee Chair & Members Audit Work Plan Committee Chair & Members As Appropriate: Pre-Approval of Audit and Non- Committee Chair & Members Auditing Services Follow-Up Items Auditor General Status of Audit Activities Auditor General/MTA IG/ CCO/CFO/ Controllers/External Auditor/ Executive Sessions Committee Chair & Members II. SPECIFIC AGENDA ITEMS January 2021 Quarterly Financial Statements – 3rd Quarter 2020 External Auditor/CFOs/Controllers Enterprise Risk Management Update Chief Compliance Officer and Internal Control Guidelines Compliance with the Internal Control Act Chief Compliance Officer/Agency ICOs 2020 Audit Plan Status Report Auditor General 2021 Audit Plan Auditor General Information Technology Report Chief Information Officer DDCR Performance Measures Chief Diversity Officer Open Audit Recommendations Agency ICOs/Chief Compliance Officer May 2021 2020 Audited Financial Statements External Auditor/CFOs/Controllers Management’s Review of Consolidated Comptroller Financial Statements Open Audit Recommendations Agency ICOs/Chief Compliance Officer Contingent Liabilities/Third Party General Counsels/External Auditor Lawsuits (Executive Session) ________________________________________________________________________________ Master Page # 5 of 174 - Audit Committee Meeting 10/28/2020 July 2021 Quarterly Financial Statements – 1st Quarter 2021 External Auditor/CFOs Pension Audits (2020) External Auditor/Comptroller Management’s Review of Pension Audits Comptroller Single Audit Report External Auditor/CFOs Investment Compliance Report External Auditor Management Letter Reports External Auditor/CFOs/Controllers Review of MTA/IG’s Office (FY 2020) External Auditor Enterprise Risk Management Update Chief Compliance Officer Ethics and Compliance Program Chief Compliance Officer Financial Interest Reports Chief Compliance Officer MTAAS 2021 Audit Plan Status Report Auditor General DDCR Performance Measures Chief Diversity Officer Open Audit Recommendations Agency ICOs/Chief Compliance Officer October 2021 Quarterly Financial Statements – 2nd Quarter 2021 External Auditor/CFOs Appointment of External Auditors Committee Chair & Members Audit Approach Plans/Coordination External Auditor Review of Audit Committee Charter CCO and Committee Chair Security of Sensitive Data & Systems Chief Information Officer (Executive Session) Open Audit Recommendations Agency ICOs/Chief Compliance Officer Annual Audit Committee Report Committee Chair ________________________________________________________________________________ Master Page # 6 of 174 - Audit Committee Meeting 10/28/2020 2021 AUDIT COMMITTEE WORK PLAN I. RECURRING AGENDA ITEMS Each Meeting Approval of Minutes Approval of the official proceedings of the previous month’s Committee meeting. Audit Work Plan A monthly update of any edits and/or changes in the work plan. As Appropriate Pre-Approval of Audit and Non-Auditing Services As appropriate, all auditing services and non-audit services to be performed by external auditors will be presented to and pre-approved by the Committee. Follow-Up Items Communications to the Committee of the current status of selected open issues, concerns or matters previously brought to the Committee’s attention or requested by the Committee. Status of Audit Activities As appropriate, representatives of MTA’s public accounting firm or agency management will discuss with the Committee significant audit findings/issues, the status of on-going audits, and the actions taken by agency management to implement audit recommendations. Executive Sessions Executive Sessions will be scheduled to provide direct access to the Committee, as appropriate. II. SPECIFIC AGENDA ITEMS JANUARY 2021 Quarterly Financial Statements - 3rd Quarter 2020 Representatives of the MTA public accounting firm, in conjunction with appropriate agency management, will discuss the interim financial statement that was prepared for the third quarter of 2020. Enterprise Risk Management Update and Internal Control Guidelines These MTA-wide guidelines, which were adopted by the Board in 2011 pursuant to Public Authority Law Section 2931, are required to be reviewed by the Committee annually. The MTA Chief Compliance Officer will brief the Committee on the agency compliance with these guidelines and answer any questions and offer additional comments, as appropriate. The MTA Chief Compliance Officer will also brief the Committee on the status of agency compliance with the ERM guidelines and any new or emerging risk. ________________________________________________________________________________ Master Page # 7 of 174 - Audit Committee Meeting 10/28/2020 Compliance with the Internal Control Act The Committee will be briefed by