2008-01-AU Limited Scope Performance Audit Report Department of Public Works CIP Contract Change Orders and Supplements for FY 2006-2007

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CHAPTER I AUDIT STANDARDS AND PLAN Government Auditing Standards — The Yellow Book In his introductory letter issuing the July 2007 revision of "Government Auditing Standards" (commonly referred to as the "Yellow Book "), U. S. Comptroller General David Walker stated: "The principles of transparency and accountability for the use of public resources are key to our nation's governing processes. Government officials ... are responsible for carrying out public functions efficiently, economically, effectively, ethically, and equitably, while achieving desired program objectives. High- quality auditing is essential for government accountability to the public and transparency regarding linking resources to related program results. Auditing of government programs should provide independent, objective, fact - based, nonpartisan assessments of the stewardship, performance and cost of government policies, programs, and operations. Government audits also provide key information to stakeholders and the public to maintain accountability; help improve program performance and operations; reduce costs; facilitate decision making; stimulate improvements; and identify current and projected crosscutting issues and trends that affect government programs and the people those programs serve." Risk Assessment and Audit Plan In accordance with the foregoing Yellow Book standards, the Legislative Auditor initiated a County -wide risk assessment process in FY 2006 -2007. The risk assessment process included input from County executives and department managers and County Council members on more than 30 risk criteria. The purpose of the risk assessment was to provide a standardized, objective mechanism to determine which specific County departments, programs or activities present the greatest "business risk," or the likelihood that events or circumstances will occur that will prevent departments, programs or activities from attaining their purpose, goals and objectives in an effective and efficient manner. The purpose of this limited scope performance audit is to provide an independent objective opinion as to whether "business risks" relating to CIP contract modifications are being managed or reduced to an acceptable level. Based on results of the FY 2006 -2007 County -wide risk assessment, the Legislative Auditor developed an audit plan that was presented to the County Council on August 1, 2007, as Communication No. 580, which ranked the Department of Public Works first for review. Audit Scope and Methodology When considering which DPW responsibilities and activities should be reviewed, we considered risks common to public works projects such as significant reliance on third -party contractors, insufficient segregation of duties of government staff, and recent industry -wide scrutiny of abuse, collusion and /or fraud in the award and management of public works contracts. Based upon this preliminary analysis, the Legislative Auditor's Office conducted a limited scope performance audit of the Department of Public Works' practices, policies, and procedures 3