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This report provides a status update on recommendations made by PricewaterhouseCoopers LLP (PwC) in their 2016 year-end audit of the Toronto Transit Commission (TTC). It recommends that the TTC Board receive the report and approve forwarding it to the City Clerk. The report details the initial recommendations from PwC, management's responses, and the current status of implementing actions to address each recommendation. Both recommendations from the 2016 audit have been fully addressed.

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Sindi Yuliani
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51 views4 pages

Backgroundfile 112980

This report provides a status update on recommendations made by PricewaterhouseCoopers LLP (PwC) in their 2016 year-end audit of the Toronto Transit Commission (TTC). It recommends that the TTC Board receive the report and approve forwarding it to the City Clerk. The report details the initial recommendations from PwC, management's responses, and the current status of implementing actions to address each recommendation. Both recommendations from the 2016 audit have been fully addressed.

Uploaded by

Sindi Yuliani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Report for Action

PricewaterhouseCoopers LLP 2016 Management


Letter Follow-Up Report

Date: February 15, 2018


To: TTC Board
From: Chief Financial Officer

Summary

This report outlines a status update on the management letter on internal control
recommendations issued by TTC’s external auditors, PricewaterhouseCoopers LLP
(PwC), in their 2016 year-end audit results report.

Recommendations

It is recommended that:

1. Receive the report; and

2. Approve forwarding a copy of the report to the City Clerk for appropriate handling.

Implementation Points

The attached report was reviewed at the December 13, 2017 Audit & Risk Management
Committee1.

This report must be received at the February 15, 2018 TTC Board meeting to ensure
timely submission to the City of Toronto Audit Committee so that TTC’s management
letter update is received within six months after its issuance.

Financial Summary

The recommendations in this report have no funding implications.

1
See Item 1 at:
http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Committee_meetings/Audit_Risk_Manag
ement/2017/December_13/index.jsp
Staff report for action on PwC’s Management Letter Follow-Up Report Page 1 of 2
Equity/Accessibility Matters

This report and its recommendations have no accessibility or equity issues or impacts.

Decision History

Based on the City of Toronto Audit Committee July 2004 Report 4, Clause 2
Recommendation 3, the TTC is required to provide an update of outstanding issues
raised in the management letter, within six months after its issuance.

Comments

The 2016 year-end PwC audit results report, presented at the May 29, 2017 TTC Audit
Committee meeting2, included a management letter on internal control
recommendations and management’s initial response to these recommendations.

This attachment includes PwC’s internal control recommendation, management’s initial


response and a status update detailing the action taken thus far to address the
recommendation.

The recommendation is currently completed, as detailed in the attachment, and all


action taken to date will be subject to review by PwC during the 2017 external financial
statement audit.

Contact

Alex Cassar, Director, Budgets, Costing & Financial Reporting


(416) 393-3647
[email protected]

Signature

Tara Bal (Acting)


Chief Financial Officer

Attachments

Attachment 1 - PwC LLP 2016 Management Letter with December 2017 Update

2
See Item 1 at:
http://www.ttc.ca/About_the_TTC/Commission_reports_and_information/Committee_me
etings/Audit_Risk_Management/2017/May_29/index.jsp
Staff report for action on PwC’s Management Letter Follow-Up Report Page 2 of 2
PricewaterhouseCoopers LLP 2016 Management Letter with December 2017 Update

1) Supervisor review of cash collection overage/shortage reports is not performed in a


sufficient level of detail to detect omissions of information

Observation

Supervisor review of cash collection overage/shortage reports is not detailed enough to detect omissions
in documentation. In addition to this, it was noted that in one instance, a new employee was not provided
with the appropriate level of training to ensure that they understood their requirement to ensure this
review was performed by a supervisor.

Implications

Lack of detailed supervisor review provides opportunity for breakdowns in controls as well as errors
being undetected which may have an impact on the financial and operating results.

Recommendation

Supervisors should perform a detailed review of preparation of cash overage/shortage reports to ensure
that all aspects of the control are operating effectively.

Management Response

Area supervisors will complete detailed reviews of overage/shortage reports and investigations. This will
include reviewing anomalies brought forward by staff and ensuring that staff is diligently investigating
issues that arise and that all required documentation is provided. In addition, training has been
organized for newer staff to ensure that they are properly trained and possess the skillset needed to
complete their assigned duties.

December 2017 Update

Area supervisors continue to review in detail overage/shortage reports including any anomalies brought
forward by staff. As part of their review, supervisors ensure that investigations are performed in a timely
matter and contain complete and accurate documentation. In addition, training for new staff members
are up to date to ensure that they possess the skillset needed to complete their assigned duties.

Status

Completed

2) Segregation of duties within inventory IFS application

Observation

Management has designed the inventory business process such that store supervisors are responsible
for the end to end activities in the inventory process, including activities to perform good receipts/goods
issue, enter/change inventory, post inventory differences, and scrap inventory in IFS application etc. As
such, the role is designed to allow supervisors or any users assigned with this role to perform the above
activities.

Implications

Without properly segregating the duties of enter/change inventory and post inventory differences, this
allows users to post unauthorized transactions related to missing inventory parts. Also, this allows a
single individual to potentially under-report inventory records in IFS and fraudulently removing physical
parts from the warehouses.

Recommendation

Management should consider re-designing the role for store supervisors based on their job
responsibilities and remove broad access from their IFS roles.

Management Response

M&P Inventory Management has determined that Store Supervisors have IFS access comparative to
their area of responsibilities. All inventory related transactions performed in IFS are in the history logs
and capture the User ID that performed the transaction. M&P is committed to run reports against the
history logs to ensure that there are no fraudulent transactions created. We will ensure the historical log
reports are run on a frequent basis and properly reviewed by our management. In addition, M&P
conducts a user access audit to remove any inappropriate access for their position to avoid any
opportunity for fraud.

December 2017 Update

Senior staff members in Materials Management Controlled Stores and Inventory Planning continue to
review IFS historical log report on a weekly basis to ensure no fraudulent transactions were created. All
system access requests are reviewed by M&P Materials Management System Administrator to ensure
access is appropriate and proper management approval has been obtained. Additionally, IFS user
access audit is conducted annually to identify and investigate any employees with unusual access rights
to ensure all employees have an appropriate level of access for their position.

Status

Completed

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