Aviation Overtime Audit Report
Port of Seattle Internal Audit Report Aviation Division Overtime Performance Audit Current Practices in 2010 Issue Date: January 11, 2011 Report No.: 2011-04 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Table of Contents Audit Audit Internal Auditor's Report ............................................................................................................................. 3 Compliance Audit Executive Summary....................................................................................................................................... 4 Compliance Audit Scope of the Audit ......................................................................................................................................... 7 Audit Approach .............................................................................................................................................. 7 Conclusion ....................................................................................................................................................... 7 2 of 7 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Audit Audit Internal Auditor's Report We have completed a performance audit of Overtime in the Aviation Division. A total of 27 separate work units in the Aviation Division reported Overtime in 2008 and 2009. The auditCompliance Audit focused on the departmentsCompliance Audit with over 8,000 hours of reported Overtime annually. These departments were within Facilities and Maintenance, Operations and Customer Service, and Security & Emergency Preparedness. The purpose of the audit was to determine whether Port management has effectively managed Overtime usage in the Aviation Division. Specifically, whether management: o Provides adequate oversight to ensure discretionary Overtime is driven by operational necessity, as opposed to non-value-added or low risk tasks. o Manages Overtime results with transparency based on achievable and/or realistic assumptions within established budgetary goals/targets. o Manages Overtime hours with an emphasis on cost/benefits and an awareness of risk-based alternatives. Management has the primary responsibility to establish and implement effective controls over the use and reporting of Overtime. Our audit objective was to assess, and test those controls in order to establish whether the controls were adequate and operating effectively. We conducted the audit using due professional care. We planned and performed the audit to obtain reasonable assurance that the risks impacting Overtime were sufficiently mitigated. The Aviation Division has established adequate and effective controls related to Overtime. There were no significant issues noted during the audit. We however, noted an opportunities to strengthen the visibility and accountability of Overtime reporting. We extend our appreciation to management and staff for their assistance and cooperation during the audit. Joyce Kirangi, CPA Director, Internal Audit 3 of 7 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Audit Audit Executive Summary Audit Scope and Objective The purpose of the audit was to determine whether Aviation Compliance Audit Division management has effectively managed Overtime. Compliance Audit Specifically, whether management: Provides adequate oversight to ensure discretionary overtime is driven by operational necessity, as opposed to non-value added/low risk tasks. Manages overtime results based on achievable, realistic estimates and/or assumptions within established budgetary goals/targets. Manages overtime hours with an emphasis on costs/benefits with an awareness of risk-based alternatives. The scope of the audit included the current Aviation Division overtime practices. Background A total of 27 separatework units in the Aviation Division reported Overtime in 2008 and 2009. To ensure smooth 24/7 operation at the Sea-Tac International Airport, approximately 112,000 in Overtime hours were incurred during the two-year period. These hours totaled to approximately $2.8 million annually on average in Overtime expense. The audit included: Determining who had responsibility for overtime, and assess whether the arrangement was working effectively; Identifying the key risks involved with Overtime, and the mitigation strategies and controls currently in place to manage those risks; Identifying the extent of Overtime worked and test whether the key controls were working effectively to manage the identified risks; Ascertain whether Overtime requirements were being effectively communicated to managers and staff; Reviewed whether management regularly received Overtime reports, acted prudently on the need for Overtime, and periodically examined cost-effective alternatives. Audit Result Summary The Aviation Division has established adequate and effective controls related to Overtime. There were no significant issues noted during the audit. We however, noted an opportunities to strengthen the visibility and accountability of Overtime reporting. This information was communicated to management in a separate letter. 4 of 7 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Background Audit Audit Financial Information The following table represents the Port-wide totalCompliance Audit hours and dollar amounts for regular wages and OvertimeCompliance Audit amounts for 2008, 2009 and 2010 (partial). The Aviation Division accounted for an average of 43% of the Port wide regular wages and Overtime totals. The Corporate totals include the Police Department which incurs significant Overtime. (in 000's) 2008 2009 2010 Type Division Hr $ % of $ Hr $ % of $ Hr $ % of $ Reg Aviation 1,636 52,150 42% 1,568 52,925 41% 1,417 50,317 40% CDD 408 15,102 12% 413 16,146 13% 395 16,016 13% Corp 857 34,550 28% 884 39,254 31% 857 39,927 31% Real E. 295 9,561 8% 280 9,671 8% 301 10,610 8% Seaport 111 5,092 4% 110 5,331 4% 107 5,410 4% Reg Sum 3,307 116,453 94% 3,255 123,327 96% 3,077 122,280 96% OT Aviation 70 3,421 3% 42 2,208 2% 40 2,279 2% CDD 10 498 0% 13 632 0% 5 287 0% Corp 65 3,384 3% 38 2,087 2% 33 2,016 2% Real E. 10 483 0% 8 412 0% 6 336 0% Seaport 0 6 0% 0 7 0% 0 6 0% OT Sum 156 7,791 6% 101 5,347 4% 85 4,924 4% Grand Total 3,463 124,245 100% 3,356 128,675 100% 3,161 127,204 100% Source: PeopleSoft (HCM), and does not include benefits The table below represents total Overtime usage in hours for the top 12 Aviation Division work units reviewed for the audit in 2008 and 2009, as well as the Furlough initiative hours in 2009: 2009 Work unit 2008 2009 Furlough Hours AV Electrical & Electronic Sys 9,656 6,495 8,935 Fire Department 12,191 9,039 503 AV Mechanical Systems 6,644 5,496 300 Facility, Fleet, Sys & Grounds 12,796 4,127 6,108 Airfield Security 7,647 4,262 5,191 Operations Planning 1,747 3,211 507 Airport Communication Center 1,462 1,876 1,587 Customer Services 3,567 2,112 1,035 Ground Transportation 2,404 1,503 0 Employee Parking 4,876 1,525 0 Airfield Operations 973 795 1,709 Public Parking 3,931 1,138 576 Total 67,895 41,579 26,450 Source: PeopleSoft 5 of 7 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Overall, there was a significant declining trend of Overtime usage in 2009. This was expected as Port leadership has been proactiveAudit Audit in reducing costs throughout the Port. In 2008 and 2009, total Aviation Overtime costs were $3,420,941 and $2,208,465, respectively, which is within the industry standard. This represents 2.75% and 1.72% of total Aviation Division salaries and wages. Compliance Audit Best industry Overtime practices as reported by the U.S. Bureau of LaborCompliance Audit Statistics (which included all compensation including bonuses) were obtained and based on our review, averaged to 2.8% of total gross earnings after removing the Financial Services industry which skewed the overall results. In 2009, most Aviation work units participated in the Port's Furlough Initiative. The expectation of Aviation Executive Management was for these work units to not utilize Overtime as a result of the required Furlough hours. The work units tested met the Division requirement not to supplement Furlough hours with an increase in Overtime. The higher Overtime percentage in 2008 can be attributed, in part, to a significant winter storm that required an increase in approved Overtime to keep the airport operational. Drivers of Overtime Based on our audit, the key Overtime drivers in the Aviation work units are: 1. External and Internal Compliance a. FAA requirements for Fire Department, Communication Center, etc. b. To provide staffing resources for emergencies, required training, or as stipulated in the represented labor group agreements. c. Approximately accounts for 35% of the total Overtime incurred. 2. Staffing level a. To provide backfill staffing coverage during holidays, illness, vacations, and other approved leaves. b. Approximately accounts for 55% of the total Overtime incurred. 3. Discretionary a. All others, including deadlines and high work load during certain peak times of the year. b. To provide staffing resources for lower risk tasks due more to scheduling considerations rather than due to significant deadlines or operational requirements. c. Approximately accounts for less than 10% of the total Overtime incurred. Aviation management believes that a significant part of Overtime is contributed to Holidayrelated Overtime. Internal Audit confirmed over 30,000 hours of holiday Overtime for 2008, 2009 and 2010 (partial year). Overtime incurred during scheduled holidays artificially increases the total number of non-discretionary Overtime hours. 6 of 7 Internal Audit Report Aviation Division Overtime Performance Audit Audit Period: Current Practices in 2010 Reporting and Managing Overtime Audit Audit Each department in the Aviation Division is responsible for establishing its Overtime needs, policies, and reporting requirements. Additionally, labor agreement consideration of Overtime is also managed at the department level. Compliance Audit Compliance Audit There are Overtimedata and reports compiled at the Departmental Level which is shared during regularly scheduled meetings with the AV Senior Managers by their direct reports. The information filters at the Director levels on an exception basis, and reliance is placed on the Senior Managers to elevate any significant Overtime issues. There have also been on-going activities undertaken by managers to assess various approaches utilized to manage overtime hours with an emphasis on costs/benefits along with an awareness of risk-based alternatives. Scope of the Audit The scope of the audit included current practices in 2010. Audit Approach To achieve the audit objectives, we performed the following procedures: We submitted a SharePoint questionnaire to individual managers of the 12 work units that we audited. Each of these orgs had more than 1,000 hours of Overtime. The questionnaire covered the extent of department Overtime policies, determination of the main triggers of Overtime, process for scheduling/approving Overtime, concerns regarding Overtime, and the reporting of Overtime. We conducted follow-up interviews and discussions with department managers and senior divisional leadership. We specifically inquired about the impact of the 2009 furlough initiative and alternatives that were taken to minimize the use of Overtime. We obtained and reviewed department Overtime reports, division variancereports, and quarterly reports used to brief the Commission. We analyzed and evaluated the extent and appropriateness of the elevation of Overtime issues. We tested discretionary Overtime, using the lowest source document such aswork orders. Conclusion The Aviation Division has established adequate and effective controls for Overtime. T here were no significant issues noted during the audit. We however, noted an opportunities to strengthen the visibility and accountability of Overtime reporting at the Division level. This information was communicated to management in a separate letter. 7 of 7
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