Audit Report

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Airport Capital Assets

Objective: To assess the Denver Department of Public Health and Environment’s ability to oversee the Caring for Denver Foundation based on city ordinance and contract terms, and to assess how the foundation’s strategic plan and its operations align with Public Health and Environment’s strategic plans, city rules and regulations, and leading practices in nonprofit management.

Capital assets are used in operations and have an initial useful life of more than one year. Denver International Airport’s capital assets consist of tangible assets — such as buildings, roadways, taxiway and runway improvements, machinery, equipment, infrastructure, and land — as well as intangible assets such as software. The airport had $4.2 billion in net capital assets as of Dec. 31, 2019.

An effective asset management program includes methods to determine which assets to acquire or create and how to operate and maintain them, as well as detailed and documented processes to repair, decommission, and/or dispose of assets.

Airport officials need to improve internal controls and processes at Denver International Airport to better ensure the airport properly manages its capital assets. In addition, the airport needs a comprehensive preventive maintenance program to ensure consistent and timely maintenance

of capital assets to promote continued performance throughout the assets’ lives. Finally, the airport needs to improve processes to ensure its computerized maintenance management system has accurate data, so that it can effectively budget for future costs, such as maintenance and staffing.

Denver International Airport’s Internal Controls Need Improvement to Ensure Capital Assets Are Properly Tracked and Recorded and that Information in Systems Is Complete and Accurate

  • The airport’s internal controls need improvement to ensure it properly oversees its capital assets.
  • The airport has inadequate contract monitoring processes and cannot ensure airport contractors responsible for asset maintenance comply with contract terms.
  • The airport does not adequately communicate processes to all divisions responsible for managing capital assets.

Denver International Airport Lacks a Comprehensive Preventive Maintenance Program to Ensure All Assets Are Maintained and that It Can Effectively Budget for Future Costs

  • Preventive maintenance activities are backlogged, and the information system lacks accurate data.
  • The airport lacks documented processes for scheduling preventive maintenance and other routine activities.

1.1 Review and Revise Policies and Procedures – Denver International Airport’s Finance Division should review and revise its policies and procedures to include necessary details related to the use of and exceptions to “transfer of property” forms, surplus proceeds activities, and virtual tags.

Agency Response: Agree, Implementation Date – March 1, 2021

1.2 Update “Transfer of Property” Forms – Denver International Airport’s Finance Division should update the property transfer forms to remove fields no longer in use and to include information necessary to provide adequate support for the proper transfer and disposal of assets.

Agency Response: Agree, Implementation Date – March 1, 2021

1.3 Improve Asset Disposal Documentation – Denver International Airport’s Finance Division should retain better supporting documentation for asset disposals to validate proper transfer and disposal of assets and ensure compliance with procedures. This should include retaining receipts that demonstrate transferred and/or disposed assets reach their intended destinations. Applicable policies and procedures should be updated with the revised procedures.

Agency Response: Agree, Implementation Date – March 1, 2021

1.4 Improve Consistency of Capital Asset Data between Information Systems – Denver International Airport’s Finance and Sustainability divisions should coordinate and determine a common identifier for the airport’s capital assets, such as an asset ID or tag number, to ensure necessary asset descriptions are captured identically in Workday and Maximo and to improve efficiency in capital asset identification between the two systems. In addition, other capital asset information, such as serial or model numbers, should be included in both systems to improve consistency of capital asset information between the systems.

Agency Response: Disagree Auditor’s Addendum: See page 58

1.5 Improve Asset Location Information in Workday – Denver International Airport’s Finance Division should document and implement a process to ensure specific asset location information missing in Workday is added and that specific asset location information is revised as assets are transferred and disposed of.

Agency Response: Agree, Implementation Date – June 1, 2021

1.6 Improve Processes for Validating Assets Reported as Lost – Denver International Airport’s Finance Division should document and implement a process to validate and track claims of lost capital assets. Processes should include, but not be limited to, determining the cause of the lost asset and ensuring Workday information is updated and accurate.

Agency Response: Agree, Implementation Date – March 1, 2021

1.7 Enforce Contract Terms – Denver International Airport’s Operations and Maintenance Contract Administration Division should enforce contractual terms related to penalties for noncompliance.

Agency Response: Agree, Implementation Date – Dec. 1, 2020

1.8 Develop and Implement Centralized Monitoring – Denver International Airport’s Operations and Maintenance Contract Administration Division should develop and implement a centralized tool for contract administrators to track and monitor third parties’ compliance with contract terms.

Agency Response: Agree, Implementation Date – June 30, 2021

1.9 Use Available Resources for Monitoring Contracts – Denver International Airport’s Operations and Maintenance Contract Administration Division should identify and use all resources available to assist in monitoring compliance with third-party asset maintenance contracts, such as internal reports developed by other airport divisions.

Agency Response: Agree, Implementation Date – Maximo Data: Jan. 31, 2016 Power BI: Dec. 31, 2018

1.10 Update Standard Operating Procedures – With the implementation of recommendations 1.7 and 1.8, Denver International Airport’s Operations and Maintenance Contract Administration Division should update its standard operating procedures to reflect updated monitoring processes.

Agency Response: Agree, Implementation Date – Jan. 31, 2021

1.11 Collect Prior Missed Collections – Denver International Airport’s Operations and Maintenance Contract Administration Division should review invoices, contractors’ reports, and other necessary documentation and collect contractual penalties not previously assessed.

Agency Response: Agree, Implementation Date – Aug. 14, 2020

1.12 Improve Communication among Airport Divisions – Divisions responsible for managing Denver International Airport’s assets — including the Maintenance, Sustainability, and Finance divisions — should develop, document, and implement a method to coordinate and communicate concerns with one another when assets are discovered that are not recorded in an information system. Steps should also be taken to identify and document the reason why such assets were not properly recorded in an information system and to resolve the issue by adjusting procedures.

Agency Response: Disagree Auditor’s Addendum: See page 58

1.13 Develop and Document Communication Method for Procedures – Denver International Airport’s Finance Division should develop and document proper procedures to let airport divisions know about how to properly transfer and dispose of assets.

Agency Response: Agree, Implementation Date – March 1, 2021

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2.1 Improve Data Integrity in Maximo – Denver International Airport’s Sustainability and Maintenance divisions should develop, document, and implement procedures to address data integrity issues in Maximo.

Agency Response: Agree, Implementation Date – March 31, 2021

2.2 Determine Staffing Needs – Denver International Airport’s Sustainability and Maintenance divisions should determine the adequate staffing levels they need for preventive maintenance program activities — including discovering and entering assets in Maximo, scheduling preventive maintenance, and addressing the backlog of preventive maintenance work orders.

Agency Response: Agree, Implementation Date – 
July 1, 2021, for fleet, facilities, and maintenance administration assets 
Sept. 1, 2021, for field maintenance

2.3 Define Preventive Maintenance Budget Criteria – Denver International Airport’s Maintenance Division should define the criteria for preventive maintenance budgeting, to include actual work requirements such as staffing, materials, equipment, and other significant costs. This information will help the airport quantify the resources it needs to ensure preventive maintenance is performed consistently and in a timely manner.

Agency Response: Agree, Implementation Date – 
July 1, 2021, for fleet, facilities, and maintenance administration assets 
Sept. 1, 2021, for field maintenance

2.4 Develop a Comprehensive Preventive Maintenance Program – Denver International Airport’s Sustainability and Maintenance divisions should develop a comprehensive preventive maintenance program for facility assets and address the recommendations in the 2017 “Asset Management Observations and Gap Assessment Report.” As processes are finalized, the divisions should also use the analyses performed from Recommendation 2.3 to help determine adequate resources and budgeting necessary to implement an effective preventive maintenance program. Results should be documented and shared with airport officials to ensure proper funding is considered during budget activities.

Agency Response: Agree, Implementation Date – July 1, 2021

2.5 Develop Policies and Procedures for Routine Maintenance Activities – Denver International Airport’s Sustainability and Maintenance divisions should develop, document, and implement policies and procedures for routine maintenance activities for all necessary assets. Policies and procedures should include, but not be limited to, the process of deviating from operations and maintenance manuals when developing preventive maintenance schedules.

Agency Response: Agree, Implementation Date – Sept. 1, 2021

2.6 Define a Central Documentation Repository – Denver International Airport’s Sustainability and Maintenance divisions should define a central repository for key asset documentation, such as warranties, and ensure necessary personnel have access.

Agency Response: Agree, Implementation Date – March 31, 2021

The objectives of our audit of capital assets at Denver International Airport were to determine whether capital assets were properly tracked, recorded, accurate, and complete within information systems and whether the assets were properly maintained. I am pleased to present the results of this audit.

The audit found the airport risks inaccuracies in tracking its capital assets and has gaps in managing asset maintenance requirements. The successful management of over $4 billion in assets is critical to the success of the airport to meet its mission of fiscal responsibility, service, and safety for the public.

The airport needs to add details to policies and procedures, improve documentation within information systems, and improve processes related to lost assets. In addition, the airport lacks a comprehensive preventive maintenance program, and it needs to document processes related to preventive maintenance scheduling and other routine maintenance activities. By formalizing and documenting processes, improving policies and procedures, and improving communication among airport divisions, Denver International Airport will be better equipped to manage and maintain its capital assets.

I am disappointed the airport has chosen to disagree with recommendations that would clearly enhance the airport’s ability to manage its capital assets. Further explanation is included in the Auditor’s Addendum on page 58.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor.” We conducted this performance audit in accordance with generally accepted government auditing standards. 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 believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We extend our appreciation to the personnel at Denver International Airport who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Follow-up report

A follow-up report is forthcoming. 

Audit impact

The airport agreed to most recommendations to improve several of its asset management and preventive maintenance processes and to improve integrity of maintenance management system data. It also agreed to implement centralized monitoring of contracts, enforce the terms of those contracts, and collect contractual penalties where necessary.

Audit Team: Dawn Wiseman, Sonia Montano, Amy Barnes, Kate Kornacki, June Samadi, James Warren

Methodological Support: Sam Gallaher, William Morales Ferrer