FROM: Amy McInerny, Chief Financial Officer
SUBJECT: Internal Audit Workplan
RECOMMENDATION:
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Recommend that the Board approve and adopt the Internal Audit Workplan for the fiscal year ending June 30, 2027.
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BACKGROUND:
The existing Internal Audit Charter requires that the Audit Committee review and the Board of Retirement (Board) annually approve the Internal Audit Workplan (workplan) and its progress for the internal audit function at SBCERA.
Based on the continued assessed risk and SBCERA process changes and improvements, staff propose three areas as the workplan for the fiscal year ending June 30, 2027.
Both recommended areas are performed by SBCERA staff; therefore, staff recommends that both areas be addressed through Agreed Upon Procedures (AUP) performed by independent, external auditing firms. SBCERA will issue an RFP for each area and bring recommendations to the Board for selection.
Death Benefit Process - In 2021, this area was selected as part of the Internal Audit Workplan. The 2021 report illustrated findings surrounding the process and delayed notifications of deaths. In response to this report, staff created a new process. In 2024, the area was selected for follow-up testing to evaluate the new process. The 2024 report illustrated a continued deficiency in timeliness of death notifications and payments. It also provided recommendations for improving timeliness and creating written procedures. In response to the continued findings, SBCERA created a new department, the Survivor Benefits Unit. This unit is staffed by the Survivor Benefits Manager, a Survivor Benefits Technician, and a half-time Office Specialist. An AUP engagement should be performed to ensure that the process is well designed, especially as it pertains to internal control, and is operating as designed.
Cash Management - This area was tested as part of the workplan in 2021 and there were no findings identified. New General Ledger software was implemented after the engagement, the area is considered high-risk, and is performed by staff. For these reasons, an AUP engagement should be performed to ensure the process is well designed, especially as it pertains to internal control, and is operating as designed.
Wire Transfer Process - This area was tested as part of the Internal Audit Workplan in 2021 and no findings were identified. Wire transfers are utilized to fund capital calls, pay management fees, transfer funds for benefit payment, and SBCERA payroll. The area is considered medium risk but is performed by SBCERA staff across two departments. For these reasons, it is prudent to include this area. An AUP engagement should be performed to ensure the process is operating as designed.
BUDGET IMPACT:
Costs for this item are included in the current year administrative budget.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Amy McInerny
ATTACHMENTS:
None.