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Audit Report

DIA: Airport Security

The objective of this audit was to assess the effectiveness of Denver International Airport’s Security function as it relates to the badging and credentialing processes. In addition, we reviewed the management of the contract with HSS, Inc., for security guard services as well as financial controls for revenue collection.

Watch the Audit Committee presentation here once available.

The airport is losing out on nearly half a million dollars as a result of overdue or foregone collection of fees for the security badges it issues to thousands of workers. This audit was important because it took a close look at one of the biggest sources of revenue for the Airport’s Security Section. Auditor O’Brien directed his team to evaluate the Airport Security Section to determine whether its monitoring and enforcement of controls were adequate to ensure airport badges are properly accounted for and controlled. The team found weaknesses in badging billing, as well as inconsistencies in contract monitoring for a third-party security company.
Our audit of Airport Security at Denver International Airport found that the airport’s controls were insufficient to ensure that all badge-related revenue was collected in a timely manner. Additionally, we found weaknesses in Airport Security’s oversight of their security guard services contract to ensure that the provider, HSS, Inc., (HSS) was successfully complying with the contract’s terms. We found that Airport Security did not have formal procedures documenting how all badge revenue is billed or a process to monitor the collection of badge revenue. Additionally, we determined that procedures were not in place for both Airport Security and the airport’s Finance Department to coordinate in order to ensure that the timely billing and collection of all badge revenue, including any accrued late fees or interest, is being completed. Weaknesses in Airport Security’s oversight of the security services contract included a lack of formal documented procedures describing Airport Security’s contract monitoring activities, such as invoice review and reconciliation for billed security services, audits of vehicle mileage accrued while providing services, and billed paid time off for HSS security personnel. Additionally, we observed that Airport Security failed to ensure the contract terms provided for vehicle mileage reimbursement as intended. Therefore, approximately $2.3 million dollars was paid between July 2011 and July 2017 before the contract was amended to identify these payments as allowable. To improve timely collection of all badge-related revenue and ensure that the airport’s security guard services are provided by HSS in accordance with contract terms, we offer nine recommendations. Four recommendations are directed to the Director of Airport Security, three recommendations are directed to both the Director of Airport Security and Senior Vice President of Financial Management, and two recommendations are directed to the Senior Vice President of Financial Management.

1.1 Integration of Systems of Record – The Senior Vice President of Financial Management should coordinate with the Director of Airport Security to discuss streamlining the billing invoice process. Auditee Response: Agree, Implementation Date – March 31, 2019

1.2 Process for Follow-Up – The Director of Airport Security should work with the Senior Vice President of Financial Management to develop a process to collaboratively reconcile and follow-up on and collect overdue invoice revenues. Auditee Response: Agree, Implementation Date – November 30, 2019

1.3 Overdue Invoice Revenues – The Senior Vice President of Financial Management should ensure that past due payments for badging invoices will be investigated and payment sought. Auditee Response: Agree, Implementation Date – November 30, 2019

1.4 Late Payment Fees and Interest Penalties – The Senior Vice President of Financial Management should institute late payment fees and interest charges for payments received after the due date. Auditee Response: Agree, Implementation Date – December 31, 2018

1.5 Billing Reminders – The Senior Vice President of Financial Management should coordinate billing reminders to incentivize vendors to pay their invoices on time. Auditee Response: Agree, Implementation Date – November 30, 2018

1.6 Indirect Billing Operating Instruction – The Director of Airport Security should develop an operating instruction to identify the roles and responsibilities of Airport Security and Finance for the indirect billing invoice and reconciliation process. Auditee Response: Agree, Implementation Date – November 30, 2018

2.1 Contract Compliance Operating Instruction – The Director of Airport Security should develop an operating instruction for procedures to monitor HSS’s compliance with the contract terms. Auditee Response: Agree, Implementation Date – November 30, 2018 2.2 Contract Amendment with Payment Terms – When an allowable expense agreed to by both parties is found to be missing from future legal contracts, the Director of Airport Security should immediately issue an amendment to include the missing payment terms, and it should be back dated to the start of the contract period. Auditee Response: Agree, Implementation Date – Complete 2.3 Regular Review of Paid Time Off – The Director of Airport Security should establish a recurring audit of the contractor’s accrual and billing of paid time off to ensure compliance with the contract terms. Auditee Response: Agree, Implementation Date – November 30, 2018
Follow-up report

A follow-up report is forthcoming.

Other related reports

None at this time.

Audit Team: Katja E.V. Freeman, Sonia Montano, Darrell Finke, David Hancock, William Morales