THE UNIVERSITY OF TEXAS AT DALLAS
OFFICE OF AUDIT & COMPLIANCE
800 West Campbell Rd., ROC 32 RICHARDSON, TEXAS 75080 (972) 883-2693 fax (972) 883-6864
June 26, 2013
Dr. Daniel:
We have completed an audit of Property Administration as part of our Fiscal Year 2013 Audit Plan, and the detailed
report is attached for your review. The objective of this audit was to provide assurance that adequate controls exist
over Property Administration to ensure the safeguarding of assets, the effectiveness and efficiency of operations,
compliance with applicable laws, and the reliability and integrity of financial and operational information.
Overall, we found that controls can be strengthened over the University’s property administration process. The
attached report details five recommendations to enhance compliance and internal controls over property
administration. These recommendations include strengthening controls over the administration of property,
property accounting processes, compliance with records retention, updating the Risk Assessment and Monitoring
Plan, and updating policies and procedures.
Management has reviewed the recommendations and has provided responses and anticipated implementation
dates. Please let me know if you have any questions or comments regarding this audit.
Toni Stephens
Executive Director of Audit and Compliance
The University of Texas at Dallas
Mr. Peter Bond, Assistant Vice President of Procurement
Mr. Craig Thorp. Director of Logistics
Members of the UT Dallas Audit and Compliance Committee
Dr. Hobson Wildenthal, Executive Vice President and Provost
Dr. Calvin Jamison, Vice President for Administration
Mr. Terry Pankratz, Vice President for Budget and Finance
Dr. Andrew Blanchard, Vice President for Information Resources and Chief Information Officer
Dr. Bruce Gnade, Vice President for Research
Dr. Darrelene Rachavong, Vice President for Student Affairs
Mr. Curt Eley, Vice Provost for Enrollment Management
Dr. James Marquart, Vice Provost
Ms. Leah Teutsch, Chief Information Security Officer
Mr. Timothy Shaw, University Attorney
Ms. Lisa Choate, Partner, Ultimate Health Resources
The University of Texas System
Dr. Pedro Reyes, Executive Vice Chancellor for Academic Affairs
Mr. Alan Marks, Attorney
Mr. J. Michael Peppers, CIA, CRMA, CPA, FACHE, Chief Audit Executive
Ms. Moshmee Kalamkar, CPA, CIA, Audit Manager
State of Texas Agencies
Legislative Budget Board
Governor’s Office
State Auditor’s Office
Sunset Advisory Commission
Auditors Assigned
Scot St. Martin, CIA, CGAP, CRMA, Assistant Director of Internal Audit, In-Charge
James Shiveley, CIA, IT Staff Auditor
Namra Farooq
Ian Connors
Salvijus Bercys
Amrita Moghe
AN EQUAL EMPLOYMENT/AFFIRMATIVE ACTION UNIVERSITY
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Table of Contents
EXECUTIVE SUMMARY ................................................................................................. 3
BACKGROUND ............................................................................................................... 4
AUDIT OBJECTIVE ......................................................................................................... 5
SCOPE AND METHODOLOGY ...................................................................................... 5
AUDIT RESULTS AND MANAGEMENT’S RESPONSES ............................................... 5
1.
2.
3.
4.
Strengthen Controls over the Administration of Assets ......................................... 6
Strengthen Controls over Property Accounting Processes ................................... 7
Comply with Texas Records Retention Schedules ............................................... 9
Review and Update the Property Administration Risk Assessment and
Monitoring Plan (RAMP) ....................................................................................... 9
5. Update Policies and Procedures ......................................................................... 10
OTHER ISSUES ............................................................................................................ 10
CONCLUSION ............................................................................................................... 11
2
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Executive Summary
Property
Administration
Responsible Parties:
Auditors Assigned:
 Peter Bond, Assistant Vice  Scot St. Martin, CIA, CGAP, CRMA, InPresident of Procurement
Charge
 Terry Pankratz, Vice
 James Shiveley, CIA, IT Auditor
Audit Report No. 1325
President for Budget and
 Namra Farooq
Audit No. O5
Finance
 Ian Connors
 Dr. Calvin Jamison, Vice
 Salvijus Bercys
President of Administration  Amrita Moghe
Audit Objective: To provide assurance that adequate controls exist over Property Administration to
ensure the safeguarding of assets, the effectiveness and efficiency of operations, compliance with
applicable laws, and the reliability and integrity of financial and operational information.
Summary of Audit Recommendations: The audit resulted in no recommendations considered
significant to University operations. However, we offer the following recommendations to enhance
compliance and internal controls over property administration:
(1) Strengthen Controls over the Administration of Assets: Property Administration should take
advantage of PeopleSoft applications and work with university resources to develop an online,
automated, controlled workflow to better manage the transfer of assets between departments,
locations, custodians, or agencies to allow for a consistently maintained and reportable chain of
custody that enhances the overall accountability for assets within the University. In addition, Property
Administration should discontinue the practice of removing tag numbers from assets as they arrive in
the surplus warehouse and hold the recycling vendor partner accountable for performance on the
contractual clause to report sales back to the University by the asset tag number.
(2) Strengthen Controls Property Accounting Processes: Finance should plan an approach to
correct the misstated depreciation amounts in accumulated depreciation and depreciation expense.
Also, Finance and Property Administration should partner to create a way for capital assets to be
disposed of such that the reconciliation of the capital asset proceeds against the capital assets’ net
book value at the time of disposal can occur.
(3) Comply with Texas State Record Retention Schedules: Property Administration should develop a
process for identifying the vouchers and documents related to capitalized assets and retain them
through the retention period specified by the state of Texas.
(4) Review and Update Property Administration’s Risk Assessment and Monitoring Plan (RAMP):
The Property Administration department should update the existing RAMP to reflect current risks,
policies, procedures, monitoring, training, and reporting processes.
(5) Update Property Administration Policies and Procedures: Property Administration should review
and update current policies and procedures, including updates to the website.
Conclusion: Based on the results of the audit work performed, controls should be strengthened over
the Property Administration process.
Does Management Agree with
Estimated Date of Implementation:
Recommendations?
All recommendations to be implemented by August 31,
Yes  No
2013.
3
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Background
Property Administration tracks the acquisition, movement, and disposal of controlled and capital
assets and administers the annual inventory process. Property Administration is responsible for
tagging all of the University’s controlled assets with a unique asset identifier and maintaining this
asset data within the PeopleSoft accounting system which has been in process of
implementation over the past few years. Property Administration shares administration duties
related to accounting for asset costs and depreciation with the Office of Budget and Finance.
The Property Administration organizational chart, presented below, shows the reporting
structure for the department. The Property Administration team reports up through the director
of logistics, and the Office of Procurement, to the Vice President of Administration.
The administrative finance duties fall to the property accountants, supervised by the Assistant
Director of Accounting Operations in the Office of Budget and Finance. As of 8/31/2012, on the
UTD Annual Financial Report (AFR), the net book value of capital assets was $615,653,240.
4
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Audit Objective
The objective of this audit was to provide assurance that adequate controls exist over Property
Administration to ensure the safeguarding of assets, the effectiveness and efficiency of
operations, compliance with applicable laws, and the reliability and integrity of financial and
operational information.
Scope and Methodology
The scope of this audit was fiscal year 2012 to present, and our fieldwork concluded on March
4, 2013. To satisfy our objectives, we performed the following:





Interviewed personnel to gain an understanding of Property Administration processes
and procedures.
Obtained an understanding of applications and data used.
Reviewed policies and procedures including compliance activities.
Verified the disposition of assets throughout their life cycle at the University, from
acquisition, to movement, and finally disposal.
Recalculated and verified PeopleSoft depreciation and capitalization records.
Where applicable, our examination was conducted in accordance with guidelines set forth in
The Institute of Internal Auditors’ International Standards for the Professional Practice of Internal
Auditing. The Standards set criteria for internal audit departments in the areas of independence,
professional proficiency, scope and performance of audit work, and management of the internal
auditing department.
Audit Results and Management’s Responses
A significant recommendation is defined as one that may be material to operations, financial
reporting, or legal compliance. This would include an internal control weakness that does not
reduce the risk of irregularities, illegal acts, errors, inefficiencies, waste, ineffectiveness, or
conflicts of interest to a reasonable low level. There were no recommendations considered
significant to University operations.
Audit Results
Property Administration management is proactive in formulating strategies and undertaking
initiatives to make improvements. During our audit work, we noted the following opportunities to
enhance the University’s property administration processes even further.
5
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
(1) Strengthen Controls over the Administration of Assets
The University of Texas at Dallas Business Policy 3066 (UTDBP3066), Property Administration,
outlines the purpose and procedures for property administration for the campus community as
well as the policies regarding the annual inventory process.1
In testing for compliance with this policy, we found the following opportunities to strengthen
controls over the administration of the University’s fixed assets:
Movement of Controlled Assets In-Service
We selected a judgmental sample of 235 controlled assets currently listed as in-service to
validate the accuracy and completeness of asset records listed in PeopleSoft. The table below
summarizes our findings:
Number of Assets
Dollar Value
Total Sample
235
$3,401,893.00
Assets Not in
Location Per
Inventory Records
62
$238,914.12
Assets Not Found
10
$ 210,306.92
Asset Disposal
We selected two judgmental samples to validate the accuracy and completeness of inventory in
the surplus warehouse. The following was noted:
1

The first sample of 19 items were taken from PeopleSoft surplus records and inspected
for existence within the surplus warehouse. We could not locate 12 items or confirm their
disposition.

The second sample of ten items was selected from the surplus assets present on the
warehouse floor and traced back to PeopleSoft surplus records. We determined 60% of
the assets were listed as still in-service on campus. Further, 20% of the assets were
listed as disposed (i.e.: sent to recycling or sold at auction). Disposed assets are subject
to limited accountability and review as noted below.

Through observation and interview, we determined the method for requesting assets to
be transferred to surplus is a manual form driven process initiated via email between
University employees and the Inventory and Surplus Control Manager. The requests to
surplus assets are stored in an email format within the Inventory and Surplus Control
Manager’s email. When Inventory and Surplus Control initiates an asset pick-up, a
record or checklist of the transaction to validate the asset transfer to Surplus is not
maintained. Controlled assets that are transferred to the recycling vendor and sold at
auction are also not uniquely identified and cannot be reconciled to University asset
records to insure appropriate disposition.
http://policy.utdallas.edu/utdbp3066
6
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration

June 2013
We noted that as soon as controlled assets enter the surplus warehouse, their unique
identifying University tag numbers are removed. This is performed, despite the recycling
vendor’s contractual requirement to report back to UT Dallas all sales proceeds that are
identified by University tag numbers. As a result, for all controlled assets disposed, we
are unable to reconcile surplus inventory of controlled assets with disposal sales.
Recommendations:
1. Property Administration should take advantage of PeopleSoft applications and work with
university resources to develop an online, automated, controlled workflow to better
manage the transfer of assets between departments, locations, custodians, or agencies
to allow for a consistently maintained and reportable chain of custody that enhances the
overall accountability for assets within the University.
2. Property Administration should discontinue the practice of removing tag numbers from
assets as they arrive in the surplus warehouse and hold the recycling vendor partner
accountable for performance on the contractual clause to report sales back to the
University by the asset tag number.
Management’s Response and Action Plan:
1. E-mail is being utilized to document these requests and will electronically be retained in
PeopleSoft to reflect changes in asset status and location. The new policy will reflect this
process change. Automated processes within PeopleSoft will not support the Custodial
ID used as it does not reside in the Chartfield string.
2. As of May 1st property tags are not removed prior to sending to the Recycle Vendor.
Estimated Implementation Date: May 1, 2013
Responsible Person: Craig Thorp, Director of Logistics
(2) Strengthen Controls Property Accounting Processes
As a State agency, UT Dallas follows the Texas State Comptroller requirements regarding the
accounting of fixed assets and depreciation.2 Without accurate accounting for depreciation, the
University’s net asset position may not be presented in a way that promotes comparability
across periods or adheres to the conceptual framework historical cost principle.3 To ensure
compliance with the Comptroller requirements, we performed procedures to recalculate
depreciation and compared it to the 2012 University AFR. The results of that recalculation are
summarized in the table below, with the net result being an overstatement in the University’s
2012 AFR accumulated depreciation ending balance of $2,163,272:
2
3
https://fmx.cpa.state.tx.us/fmx/pubs/spaproc/ch1/1_1.php
http://highered.mcgraw-hill.com/sites/dl/free/0072994029/0073130087_001_1795.jpg
7
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
Depreciation
Recalculation
Beginning
Balance
Depreciation
Expense
Deletions
Ending
Balance
AFR 8/31/2012
June 2013
Variance
$267,660,817.09
$268,734,376.55
$1,073,559.46
$40,573,739.40
$(6,814,188.45)
$39,187,915.35
$(4,338,651.72)
$(1,385,824.05)
$2,475,536.73
$301,420,368.04
$303,583,640.18
$2,163,272.14
The differences we noted in depreciation in our recalculation as compared to University records
arose from a variety of factors, including:



Some componentized buildings from Spartan were converted to non-componentized
buildings in PeopleSoft.
The conversion of accumulated depreciation balances from Spartan into the PeopleSoft
Asset Management system caused PeopleSoft to recalculate the depreciation schedule
for each asset.
The allocation of and subsequent removal of costs to some assets caused some assets
to have a balance in accumulated depreciation with no assigned costs.
Additionally, we determined that the proceeds from the sales of capital assets are not being
reconciled against the net book value to determine a gain or loss on the sale as prescribed by
the State. The Texas Comptroller requires that a gain or loss be reported in the annual report
when cash is exchanged and the amount received does not equal the net book value of the
asset. The University has disposed of non-building capital assets with aggregate salvage value
of $190,140.80.
Recommendations:
1. Finance should plan an approach to correct the misstated depreciation amounts in
accumulated depreciation of $2,163,272 and in depreciation expense of ($1,385,824).
2. Finance and Property Administration should partner to create a way for capital assets to
be disposed of such that the reconciliation of the capital asset proceeds against the
capital assets’ net book value at the time of disposal can occur.
Management’s Response and Action Plan:
1. Accounting and Financial Reporting will analyze the $303.6M of accumulated
depreciation to validate the PeopleSoft calculations and make any required adjustments.
2. Finance and Property Administration will collaborate to implement a method for disposing
of capital assets that allows tracking of proceeds by asset.
Estimated Implementation Date: August 31, 2013
Responsible Person: Dr. Reda Bernoussi, Director of Accounting and Financial Reporting
8
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
(3) Comply with Texas Records Retention Schedules
The State of Texas records retention schedule requires that records substantiating the cost of
capital assets, such as payment vouchers, be retained for the life of the capital asset plus an
additional three years.4 Noncompliance with State of Texas property regulations could result in
reduced funding from the State.
We judgmentally selected five vouchers for in-service capital assets from outside of
Procurement’s normal voucher retention window of three fiscal years after the year of purchase,
and requested copies of the voucher from Procurement and from Property Administration. The
vouchers could not be produced and were not stored in OnBase.
Recommendation: Property Administration should develop a process for identifying the
vouchers and documents related to capitalized assets and retain them through the retention
period specified by the state of Texas.
Management’s Response and Action Plan:
Voucher and PO numbers are maintained in the comments field of all converted (FRS to PS)
records. Assets originating in PS have internal PO and voucher documents information attached
while packing lists are maintained externally in OnBase.
Estimated Implementation Date: July 31, 2013
Responsible Person: Craig Thorp, Director of Logistics
(4) Review and Update the Property Administration Risk Assessment and Monitoring
Plan (RAMP)
Risk Assessment and Monitoring Plans (RAMPs) document the risks, compliance monitoring,
training, and reporting programs for areas designated as high-risk at the University. Property
Administration has been designated as a high-risk area at UT Dallas. Without an effective
RAMP, compliance with policies and procedures may not be properly monitored and risks may
not be properly mitigated.
The RAMP, prepared by Property Administration, has not been updated and is no longer
reflective of the department’s business process. The RAMP lists controls that are not performed
by the department, controls that were designed for the previous recycling process, and does not
consider monitoring or providing for training to all asset custodians.
Recommendation: The Property Administration department should update the existing RAMP
to reflect current risks, policies, procedures, monitoring, training, and reporting processes.
4
https://www.tsl.state.tx.us/slrm/recordspubs/rrs4.html
9
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Management’s Response and Action Plan:
Existing RAMP will be updated to reflect current risks, policies, procedures, monitoring, training
and reporting processes.
Estimated Implementation Date: August 31, 2013
Responsible Person: Craig Thorp, Director of Logistics
(5) Update Policies and Procedures
We reviewed and evaluated policies and procedures and found that many were out of date and
no longer reflective of the current business processes. The Property Administration website was
also outdated. Without updated policies and procedures, employees are not aware of the
proper policies to follow in managing the University’s assets. This could result in a loss of
property.
UTDBP3066, the policy governing Property Administration, is the accumulation of former
policies F15-100 through F15-150, which were last updated in 2007. Since then, significant
changes have occurred to the department’s operating environment, such as the onboarding of a
new scanner based inventory process, job duties being executed primarily through PeopleSoft,
property accountability when items are taken off campus, and changes in the sourcing of
recycling vendors.
Recommendation: Property Administration should review and update current policies and
procedures, including updates to the website.
Management’s Response and Action Plan:
Policies and Procedures and website content will be updated. Three policies will be provided:
responsibilities & definitions, inventory control and surplus management.
Estimated Implementation Date: July 31, 2103
Responsible Person: Craig Thorp, Director of Logistics
Other Issues
Other issues such as segregation of duties over account changes, the incomplete SQL used to
populate the inventory scanners, the sample inventory process, the conversion data used in the
conversion from Spartan to PeopleSoft, PeopleSoft roles, controlled assets purchased with
purchasing cards, cash handling, and capitalization were discussed with management.
Management has acknowledged these issues and will address them as best meets the needs of
their departments and the University as a whole.
10
Report No. 1325
The University of Texas at Dallas Office of Internal Audits
Property Administration
June 2013
Conclusion
Controls over the Property Administration process should be strengthened to better provide for
accountability over University assets, proper segregation of duties, reliability and integrity of
records and financial information, and compliance with applicable policies and laws.
We appreciate the courtesy and cooperation received from the management and staff in the
Property Administration and Finance teams during this audit.
11
Report No. 1325