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ANNUAL REPORT FOR FISCAL YEAR 2021Yong Ju No, CPA, CFEDirector of Internal Audit

Office of InternalAudit36 Court Street – Room 411Springfield, MA 01103Yong Ju No, CPA, CFEDirector of Internal Audit(413) 784-4844yno@springfieldcityhall.comTHE CITY OF SPRINGFIELD, MASSACHUSETTSDecember 9, 2021Councilor Justin Hurst, ChairmanCouncilor Timothy AllenCouncilor Melvin EdwardsHonorable Members of the Audit Committee:Enclosed is our 2021 Annual Report. This report highlights the Office of Internal Audit’s activities andaccomplishments for Fiscal Year 2021. We thank the Mayor, Audit Committee, City Council, and Citymanagement for the support given to this Office.Respectfully submitted,Yong Ju No, CPAcc:Honorable Mayor Domenic J. SarnoHonorable Members of the City CouncilTJ Plante, CAFOMichael Nelligan, CPA, Powers & Sullivan, LLC

Table of ContentsSectionPageOverview1Highlights1Results of Fiscal Year 2021 Goals2Fiscal Year 2021 Activities4

OVERVIEWThe Office of Internal Audit (OIA) promotes accountability and integrity in City government and strivesto identify ways to improve efficiency of procedures and effectiveness of operations by providing thefollowing services: Audit and Assurance Services in which reviews of departments, processes, systems, andcompliance with City Ordinances, laws, regulations, and other requirements are completed, Consultation and Advisory Services which provide advice and information on internal controls,risk management, and sound business practices, and Investigations in response to allegations of fraud and abuse, conflicts of interest, nepotism, andother matters in violation of City ordinances, laws, regulations, or other guidance.In Fiscal Year (FY) 2021, the OIA completed the following types of services: 6 Audit and Assurance 4 InvestigationsAs of June 30, 2021, the OIA had the following types of services in progress: 5 Audit and Assurance 1 InvestigationSee Fiscal Year 2021 Activities section of this report on page 4 for a summary of these projects. Also, toaccess the reports issued by the OIA, please visit: rts.HIGHLIGHTSSome of our highlights from this past year include: Productivity. Productivity related to staff time remained consistent with the previous fiscal year.In FY2021, staff time charged to audit related projects was 76% of available staff time. Thispercentage exceeded our annual goal of 70%. Risk Based Audit Plan. Our professional standards require the Internal Audit Director toestablish a risk-based approach to determine the priorities for audit activities. A City-wide riskassessment serves as the basis for the Office of Internal Audit’s Annual Audit Plan. Certified Fraud Examiner Professional Designation. Yong No obtained the professionaldesignation of Certified Fraud Examiner (CFE) in November 2020. Certified Fraud Examiner isa professional certification available to professionals who possess expertise in preventing anddetecting fraud. According to research conducted by the Association of Certified FraudExaminers, organizations with CFEs on staff uncover fraud sooner and experience less lossesfrom fraud than organizations that do not have CFEs on staff.1

Information Technology Cybersecurity Review. We worked with outside consultants toconduct a Cybersecurity review at Springfield Public Schools. The review included a simulatedphishing attack on City employees which was done for the purpose of educating City employeeson cybersecurity risks and best practices. We plan on continuing this work related to informationtechnology in Fiscal Year 2022 by reviewing the Springfield Police department’s cybersecurityprotocols. Reduced Professional Fees. The OIA continued to work with the City’s external auditors andCity departments in reducing professional services fees. The OIA helped to reduce professionalservice fees by allocating 14,000 (eligible portion) of the City’s annual external audit fees togrants.RESULTS OF FISCAL YEAR 2021 GOALSOn February 11, 2020, the OIA presented its Fiscal Year 2021 goals to the Audit Committee. The resultsof these goals are as follows:GoalsResults1.Facilitate the implementation of auditrecommendations we provide within 1 yearof being reported.MetMost of the audit recommendations fromFY2020 had follow up audit workperformed in FY2021 in accordance withthe FY2021 Audit Plan.2.Complete 80% of the annual audit planeach fiscal year, depending on theoccurrence of unforeseen events that maycause fewer resources to be available forprojects scheduled in the annual audit plan.Not MetThe OIA devoted significant resources toconsulting projects and variousinvestigations, which resulted in fewerresources available for scheduled audits inthe FY2021 Audit Plan.3.Reassess and update the annual risk basedaudit plan to prioritize audit work used toassess the adequacy and effectiveness ofthe City’s system of internal controls.MetThe OIA presented the FY2021 Audit Planto the Mayor and Audit Committee inSeptember 2021.4.Provide independent, confidential andreliable investigations of fraud, waste orabuse that are reported via the City’s FraudHotline.MetSee Fiscal Year 2021 Activities section ofthis report on page 7 for summary of fraudrelated projects.5.Allocate 50% of audit effort to audits andaudit-related projects, 20% to maintainingthe Fraud Hotline, 30% to administration,training, development, and other.MetThe OIA spent approximately 76% of itsefforts on audits/audit related projects andmaintaining the fraud hotline andapproximately 24% on administration,training, and other.2Comments

RESULTS OF FISCAL YEAR 2021 GOALS (continued)GoalsResultsComments6.Coordinate audits with the City’s externalauditors.MetThe OIA coordinated and monitored thecompletion of the City’s ComprehensiveAnnual Financial Report for FY2020.7.Use technology based audit tools.MetThe OIA uses Auto Audit for managingour audits, which includes planning ouraudits, storing our electronic workpapersand reports, and trackingrecommendations, thereby making ourprocess more efficient.The OIA used data mining and flowcharting software where appropriate.8.MetObtain 40 hours of CPE for professionaldevelopment annually.3In addition, the audit staff was activelyinvolved in the professional organizationslisted below: The Institute of Internal Auditors, Association of Local GovernmentAccountants, Massachusetts Municipal Auditorsand Accountants Association, and Association of Certified FraudExaminers.

FISCAL YEAR 2021 ACTIVITIESRemainder of page left blank intentional

FISCAL YEAR 2021 s/CommentsAudit and AssuranceAudit of the Departmentof Public Work’s BulkTrash Sticker Programat Big YDetermine if Big Y has adequatecontrols to ensure the accuracy andthe completeness of the sales of theDepartment of Public Work’s bulktrash stickers and bulk trash stickerinventory records, and thesafeguarding of the Department ofPublic Work’s bulk trash stickers.CompleteThe OIA presented the report tothe Audit Committee onDecember 30, 2020.Follow Up Reviews –Citywide ProcurementAudit and HumanResources LifeInsurance ReviewReview, monitor, and test theimplementation status of prior auditrecommendations.CompleteThe OIA presented the report tothe Audit Committee onDecember 30, 2020.Compensatory TimeOff, also known as“Bankable Overtime,”Review at theSpringfield PoliceDepartmentReview compensatory time offpractices at the Springfield PoliceDepartment and assess compliancewith union contracts, City policies,and federal/state guidelines.CompleteThe CAFO requested thisreview.The OIA presented the report tothe Audit Committee on March16, 2021.Identify opportunities for improvedcontrols and cost savings associatedwith current practices.The Police CareerInventive Pay Program,also known as the QuinnBill, Review at theSpringfield PoliceDepartmentReview the program’s practices atthe Springfield Police Departmentand assess compliance with unioncontracts, City policies, and stateguidelines.CompleteThe CAFO requested thisreview.The OIA presented the report tothe Audit Committee on March16, 2021.Identify opportunities for improvedcontrols and cost savings associatedwith current practices.City’s InvestmentQuarterly ReviewDetermine whether the City’sinvestments comply with CityOrdinance 42-35 and MassachusettsGeneral Laws.4CompleteThere were no reportablefindings.

FISCAL YEAR 2021 ACTIVITIES ts/CommentsAnnual ExternalFinancial Audit for YearEnded June 30, 2020The City’s Ordinance requires theOffice of Internal Audit to contractwith an independent certified publicaccounting firm to conduct theannual external audit of City’sfinancial statements. The firm alsoconducts the federally requiredSingle Audit.CompleteThe external auditors presentedthe result of their FY 2020 auditto the Audit Committee on April14, 2021.Information TechnologyCybersecurity ReviewReassess the School department’svulnerability to cybersecurity andinformation theft. This assessmentwill build on the results of the 2016and 2018 information technologyreviews by examining additionalareas of potential vulnerability.In ProcessThe OIA outsourced the reviewto Wolf & Company, ITConsultants.City Benefits Review –Flexible SpendingAccountTo calculate the estimated accountbalance held by WageWorks, theCity’s third party administrator.In ProcessThe OIA estimates that thereview will be completed inJanuary 2022.City Benefits Audit –Health InsuranceDetermine whether appropriatecontrols exist for the administrationof City employee benefits – Healthinsurance.In ProcessThe CAFO requested thisreview.Determine if the Department ofPublic Works and Parks departmenthave adequate controls to ensureaccuracy and completeness ofinventory records, accountability forinventory transactions, andsafeguarding of inventory. Thereview is outsourced to the externalauditors.In ProcessAudit and Assurance (continued)Inventory ManagementAudit at Department ofPublic Works and ParkDepartment5Wolf & Company expects topresent the report to the SPSFinance Committee in January2022.We expect to complete thereview in January 2022.Work is co-sourced with theCity’s external auditors.The external auditors expect tocomplete the review by April2022.

FISCAL YEAR 2021 ACTIVITIES y with Massachusetts GeneralLaws. The Office of Internal Audit(OIA) performs the agreed uponprocedures (AUP) for two years andthe external auditors performs theAUP for the third year. SinceFY2021 represents the third year,the AUP was outsourced to theexternal auditors.In ProcessInvestigation of AllegedEthics Violations atDPW Involving NathanBill’s RestaurantInvestigated an allegation that Cityresources at DPW were unlawfullyused to benefit a private citizen,Nathan Bill’s Restaurant.CompleteInvestigation of AllegedTheft of City Wood andMisuse of CityResources at ForestryInvestigated an allegation thatForestry employee was stealingwood and using City resources indoing so.CompleteResults/CommentsAudit and Assurance (continued)Student Activity FundsAgreed UponProceduresWork is co-sourced with theCity’s external auditors.The external auditors expect tocomplete their procedures byApril 2022.InvestigationsThe OIA did not find evidenceof ethics violations at DPW.The OIA presented our report tothe Audit Committee onFebruary 24, 2021.The OIA did not find evidence tosubstantiate the allegation oftheft of City wood. However, theOIA did find evidence that theuse of City resources violatedethics laws.The OIA presented our report tothe Audit Committee on August19, 2021.Investigation of AllegedMisrepresentation ofHours Worked andMisuse of CityResources at the Officeof HousingInvestigated an allegation that anemployee from the Office ofHousing had inappropriately workedas a private home inspector while onCity time and that they used Cityresources in their private business.6CompleteThe OIA found evidence tosubstantiate the allegation.The OIA presented our report tothe Audit Committee on August19, 2021.