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  • Los Angeles Unified School District

    Office of the Inspector General

    Audit Unit

    Internal Audit Report

    Performance Audit of the Management of

    Insurance Requirements for Civic Center

    Permits and Special Events

    OA 17-1094 June 7, 2017 August 3, 2015

  • About the Office of the Inspector General

    The Office of the Inspector General reports directly to the Board of Education.

    We conduct independent audits, reviews and investigations of District

    operations, contracts and vendors in order to:

     Find ways to improve processes, programs, functions and activities.

     Provide information that supports effective decision making.

     Identify real or potential misuse of District resources.

     Prevent and detect waste, fraud and abuse within the District.

    Through our work, we strive to encourage a culture of accountability,

    transparency, collaboration and excellence and to assist the Board and the

    Superintendent in their efforts to provide a high quality education for the

    students and parents of the Los Angeles Unified School District.

  • The Management of Insurance Requirements Page 1 of 38 OA 17-1094

    for Civic Center Permits and Special Events

    EXECUTIVE SUMMARY

    We have conducted an audit of the Risk Finance and Insurance Branch (RFIB) with regard to its

    management of insurance requirements for Civic Center Permits and Special Events. The

    objectives of the audit were to determine whether: (i) controls over requests to use District

    facilities were adequate to ensure that all applications are approved and accounted for; (ii) the

    insurance approval and recordkeeping processes for the use of District facilities were adequate;

    and (iii) the review of insurance requirements for the use of District facilities was effective.

    Based on our audit, we found that controls over requests to use District facilities were not

    adequate to ensure that the RFIB accounts for and approves all applications. The insurance

    approval and recordkeeping processes used by the RFIB did not provide adequate assurance that

    the risks inherent in permitted activities are effectively assessed. The review of insurance

    requirements for applications conducted by the RFIB was not properly monitored to ensure that

    adequate insurance existed for each event.

    We found that:

    1. The application process for the use of District facilities requires re-examination and reassessment. In order to properly assess the risks related to a facility’s use by internal and

    external requestors, the RFIB needs to have a complete understanding and knowledge of all

    the activities occurring on District premises. Presently, three departments (Civic Center

    Permit Office, Leasing and Space Utilization Unit, and RFIB) can each accept and process

    applications and maintain their own individual records. The Division of Risk Management

    and Insurance Services has not created a centralized database for the different departments

    involved in the process to share new application requests and all supporting documents.

    2. The recordkeeping method of the Insurance Section of the RFIB is inadequate. The manner in which the data is stored does not allow for efficient report generation. A centralized

    database system, which would share documentation internally and with other departments

    that process applications for the use of District facilities, does not exist.

    3. The RFIB does not follow or record the results of events held at District facilities. In instances when an event’s insurance requirements were not met and the event was not

    approved by the Insurance Section, staff did not keep a record in the RFIB on whether the

    event was approved by the Leasing and Space Utilization Unit or the Civic Center Permit

    Office and/or whether the event was actually held. Claims associated with particular events

    were not recorded and tracked to facilitate future risk analysis. A macro-level review of

    claims information was not performed due to the categorization of claims by cause and not

    by type of event.

    4. The review of insurance requirements requires strengthening and improvement. Almost every application we reviewed had deficiencies related to insurance requirements. Some of

    the deficiencies included missing Certificates of Insurance, missing waivers, and insufficient

    insurance coverage.

  • The Management of Insurance Requirements Page 2 of 38 OA 17-1094

    for Civic Center Permits and Special Events

    Recommendations

    We provided the Risk Finance and Insurance Branch with 12 recommendations. Some of the

    more significant recommendations included the following:

    1. The Insurance Section of the RFIB should create a formal process to ensure that it received any new requests for the use of a District facility from the Civic Center Permit Office or the

    Leasing and Space Utilization Unit. When received, such requests should be properly

    documented in a database or log and followed up on to document the result of the

    application.

    2. The RFIB, the Civic Center Permit Office and the Leasing and Space Utilization Unit should collaborate on creating a centralized computer system that tracks and retains applications and

    supporting records for requests to use District facilities.

    3. The Risk Finance and Insurance Branch should, on a periodic basis, randomly select approved applications for review to ensure that all insurance requirements were met. Any

    deficiencies should be identified and communicated to staff to improve future review and

    assessment decisions.

    Division of Risk Management and Insurance Services Response

    The Division of Risk Management and Insurance Services agreed with all 12 recommendations.

    They stated that they either have taken or would take corrective actions. The department’s full

    response is attached as Exhibit A of this report.

    INTRODUCTION

    Every year, the District receives thousands of requests from third parties and District schools to

    use its facilities and grounds for recreational, educational, and fundraising activities. These

    activities pose risks to the District for expected and unexpected injuries and liabilities.

    The primary responsibility of the Risk Finance and Insurance Branch (RFIB) is the

    administration of the District’s self-insurance property and casualty insurance programs. For

    each program, the RFIB 1 sets the minimum insurance requirements that an applicant needs to

    have in order to conduct its activities on a District facility. If a claim occurs relating to any one

    of the permitted activities, the District is able to transfer risks and liabilities to the activities’

    owner and remain intact financially. The RFIB is tasked to review every request for the use of a

    District facility for insurance requirements to aid in the management of asset protection and risk

    minimization.

    According to the Civic Center Act 2 , “There is a civic center at each and every public school

    facility and grounds within the state…” 3 The Civic Center Act further states, “The governing

    1 The Risk Finance and Insurance Branch is one branch under the Division of Risk Management and Insurance

    Services. 2 California Education Code Section 38130-38139

    3 Ibid Section 38131(a)

  • The Management of Insurance Requirements Page 3 of 38 OA 17-1094

    for Civic Center Permits and Special Events

    board of any school district may grant the use of school facilities or grounds as a civic center

    upon the terms and conditions the board deems proper…” 4 Chapter 6 of the LAUSD’s Board of

    Education rules provide guidance to District management for the use of school facilities for non-

    school purposes. 5 Appendix 4 provides pertinent Board Rules regarding the use of school

    facilities for non-school purposes.

    There are three departments where an applicant can apply for the use of District facilities and

    applications can be processed, these are: (i) The Civic Center Permit Office, (ii) the Leasing and

    Space Utilization Unit, and (iii) the Risk Finance and Insurance Branch.

    SCOPE AND OBJECTIVE

    The objectives of the audit were to determine whether: (i) controls over requests to use District

    facilities were adequate to ensure that all applications are approved and accounted for; (ii) the

    insurance approval and recordkeeping processes for the use of District facilities were adequate;

    and (iii) the review of insurance requirements for the use of District facilities was effective.

    We conducted this performance audit in accordance with Generally Accepted Government

    Auditing Standards (GAGAS). Those standards require that we plan and perform the audit to

    obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and

    conclusions based on our audit objectives. We believ

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