Auditor recommends better internal controls, procurement practices for Inland Port Authority

Estimated read time: 3-4 minutes

SALT LAKE CITY — The Utah Inland Port Authority lacks internal controls that resulted in noncompliance with revenue bond reporting requirements in 2023 and needs to revamp its procurement policy to conform with best practices, according to a report released by the state auditor Thursday.

The state auditor's office released a pair of reports on the Utah Inland Port Authority, after examining its financial statements and procurement practices. The procurement audit found "weaknesses" in the authority's policies, while the annual financial audit noted "significant deficiencies" including "errors in preparing the financial statements and not complying with bond reporting requirements," a news release from the office stated.

The procurement audit was based on a complaint called in to the office's hotline.

"Given the public's expectations for the Utah Inland Port Authority, it is critical that the authority continue to strengthen its internal controls and its procurement policies and practices," state Auditor John Dougall said.

Auditors recommend that the authority follow state procurement code when it comes to securing contracts, even though the authority is exempted from the rules governing most government agencies.

The report notes that "these statutory exemptions reduce transparency, oversight, and accountability for these types of entities. Thus, it is vital that exempted entities develop strong policies and procedures." It recommends the authority review its procurement policy and consider including portions of the state code in its policy.

Auditors also suggested removing a policy provision governing "very specialized or confidential services," which they say are inconsistent with best practices.

The financial audit found that the Inland Port Authority "does not have adequate internal controls" to ensure certain expenses are "properly reported in the financial statements in accordance with generally accepted accounting principles."

Because of this, the report states that several adjustments were made to the authority's financial statements, including adjustments of $4,037,365 for lease liabilities, $808,594 for pension liability, $307,326 for pension expenses, and $345,722 to another pension account.

"These adjustments occurred due to turnover of key financial positions in fiscal year 2023, inadequate review and analyses, and inadequate understanding in the preparation of the financial statements," according to the audit.

It also found that the authority was not in compliance with revenue bond reporting requirements in fiscal year 2023, after submitting a pair of reports several months after the deadline.

The Utah Inland Port Authority agreed with the findings and recommendations of the financial audit and said it is working to remedy the findings.

"These audits are critical to the ongoing improvements that UIPA has been working through over the last 14 months," said Ben Hart, executive director of the authority. "We take the state auditor's findings seriously and are fully committed to implementing necessary improvements. Enhancing our processes and maintaining the highest standards of accountability and transparency is our top priority."

A legislative audit completed last year found a few similar concerns, including "financial commitment without adequate planning, gaps in organizational structure that reduce internal controls, and the need for stronger procurement and contract management," and a similar report from the Utah Office of the State Auditor shortly after said the authority should adjust its contract policy, which auditors said "lacks adequate transparency and accountability."

That report also noted that auditors were concerned that Utah Inland Port Authority President Jack Hedge was given "sole discretion" to make decisions on contracts. This resulted in sole-source contracts making up 80% of all inland port contracts, including a deal with a vendor started by one of Hedge's former co-workers, according to auditors.

Hart, who took over as executive director of the Utah Inland Port Authority last year, told lawmakers in January there was "some super sketchy crap going on at the inland port," but said changes were already in motion.

Bridger Beal-Cvetko covers Utah politics, Salt Lake County communities and breaking news for KSL.com. He is a graduate of Utah Valley University.

A year-end, good news story on agency financial management at HUD

The Department of Housing and Urban Development (HUD) received some good news as the year closed. It achieved a clean financial audit opinion, with no material weaknesses. It even won praise from its inspector general. For how this happened, the Federal Drive with Tom Temin spoke with Chief Financial Officer Vinay Singh.

Tom Temin And I guess the significant thing is not that this is not the first time and now for a lot of agencies. Great. We got a first clean opinion. Tell us more. Why not your first and why not? Being the first is significant.  

Vinay Singh You know, first is always great, but this is about sustainability and a continued focus on what an unqualified or clean audit opinion means. In addition to this is the first time without a material weakness and a material weakness obviously, as you know, there are significant deficiencies over internal controls, over financial reporting. So that itself is significant. In addition, this year, we also hit the timeline of November 15th, which has been eluding us for quite some time. So what it’s showing is the sustainability and the ability of our teams to start really leveraging our rigorous processes that we’ve put in place to not only get that clean opinion, to do it on time, to do it, removing the material weakness. I mean, this continues to show and should enable the public trust.  

Tom Temin And for those of us that aren’t enthralled by federal finance, which I find fascinating personally, but maybe everybody doesn’t. Sure. What is the process by which the opinion is rendered and who renders it?   

Vinay Singh Yes, this is opinion. We have an external auditor, Clifton Lawson Associates, Clay. In the past it was done by our Office of Inspector General, or I.G. But having a third party, external party free, you know, independent is critical. So the processes, you know, during the year they will evaluate or controls, they will look at our processes, talk to management, talk to the programs, and really test whether all our financial statements are free of material errors.   

Tom Temin Yeah, interesting. And just again, on the civics side of this, you’re the CFO and the chief financial officer has one function, kind of a comptroller type of function, but then the accounting function is not necessarily within that channel. Maybe just a brief backgrounder on how that works.   

Vinay Singh Actually, the accounting is sort of the CFO role has several functions and really getting this clean audit opinion, it does take a village financial management of which MelaJo Kubacki, our Assistant CFO, runs the core elements of financial management it controls. But the accounting team where I have Nita Nigam, who is the Assistant CFO, they’re our systems team, which looks at the financial systems. They all play a role together along with the programs. So the CFOs sole role is obviously financial stewardship, ensuring we do have clean audit opinions. But there’s a lot more that happens behind the scenes in a CFO function.   

Tom Temin Yeah, sure. It’s a pretty complex function and it’s been developed almost like a nurturing porridge over the past 35 years or so since the CFO ACT And you mentioned that this time there were no material weaknesses, which was the last one to get excised out of here.   

Vinay Singh There was the validation of grant accruals, which was the last one, and that was across several programs.   

Tom Temin Well, that’s a big one, though, because HUD is a major granting agency. And if you look across government, grants management is the object of a lot of oversight, A lot of I.G., a lot of GAO, a lot of congressional concern over the years. So to not have a material weakness in something so crucial that’s also uniquely federal. That sounds like a big deal.   

Vinay Singh Yes, it has been. And the teams have been working on this. This is not like something that happened within 12 months or 18 months of me being here. This goes back to continued management focus on this. You know, HUD has been set up as a decentralized agency where the programs do have their own financial analysts. They put out the grants and we work with them. So it’s different than just kind of a private sector organization where you have more of an autocratic, you know, the CFO controls everything. So to be able to do it this way is also, you know, I think substantial is it shows that kind of connective tissue with the programs and the CFO continue to build that relationship so that this will continue. It’s not just a one off.   

Tom Temin We’re speaking with Vinay Singh. He is the chief financial officer at Housing and Urban Development. And from the CFO standpoint, sitting in your chair, what are the things, the indicators, the dashboard lights that you watch day to day to make sure that this vast and complicated and very hard to see inside of functions like finance and accounting and cash control and all the rest of it is operating the way it should, and that nothing horrible is brewing under the surface.   

Vinay Singh Yeah, that’s a great question. I have several dashboards that I look at, one around the controls that we talked about, where financial management looks at things like the single audit compliance and other aspects of accounting and looking at balances. Receivables. But in addition, it’s about kind of some of the compliance around systems. So, you know, one of the other key progress areas that we’ve made is that all HUD systems are now FFMIA compliant, which is the Federal Financial Management Improvement Act, and we resolved our last system noncompliance. So even getting our systems and you know, you’re obviously following government, that’s a significant piece. We’ve got budget reports that I look at. I look at something we call the air reports around assurance, integrity. There’s several key pieces that I monitor daily, some weekly, some monthly, and then have discussions with the team around.   

Tom Temin I would guess the magic in this is being able to spot things before they turn into material weaknesses or some worse kind of financial leakage, which, you know, they pop up from time to time fraud, improper payments and the like.   

Vinay Singh Correct. And we do have dashboards around that, our risk team. And that’s also sits in CFO, you know, monitors a variety of risks that we continue to monitor and mitigate. And if you will, you’re correct when we say, you know, catch things before they happen. So our teams have really continued to perform readiness reviews and risk exams, and it’s kind of an ongoing process. So it’s year long even though our financial year is fixed and then September 30th, the teams are always looking three months out, six months out and monitoring what is coming down the pipe.   

Tom Temin And is there an information technology type of enhancement that can help people because of many of the financial systems? I think HUD for a while there had some of the oldest systems still running in government. And I think you’ve done a lot of modernization over the last few years. So it seems like the CIO is a good partner as you’re trying to get best CFO practice established.   

Vinay Singh 100%, 100% CIO is fully integrated with us. Our teams all have great relationships and have built processes where we work together. And so that mentioning, you know, our compliance with our FFMIA, is critical. But also, you know, financial management overall was removed as a top management challenge for the department where the OIG has said, you know, HUD has shown that sustained progress. But it does require technology and tools. We have had antiquated and continue to have some that we continue to try to make progress on. But we’re starting to leverage, you know, tools that are a little bit more common, such as the BI tools, the business intelligence tools. I know our teams are aggressively looking and using robotic process automation, RPA bots, but just the ability to be able to process and transaction do data mining and DNA analytics, that’s the critical part. That’s where I think we started to make progress in why this the fourth year in a row? Because, you know, relying on those older systems, it was very difficult to get comfort for the auditors around what we have. But now that we have more progressive systems, more information showing up in real time or closer to near time, it starts to give comfort and assurance to the auditors that we’re understanding our transactions. We’re seeing what’s happening now, able to monitor the risks that could happen. And it’s just that sharing of information, that transparency and that ability to cut across.   

Tom Temin And I would think that for a shrewd program manager, in fact, I’ve told hundreds of them over the years, your best friend in program management can be the CFO because they can help you be an ally in what you want to get done, but just don’t try to do it without them. And so I’m guessing that having full control over financial management and getting that clean audit and knowing your processes are accurate can make you a better and more informed counselor to programs that are trying to find ways financially to get things done.   

Vinay Singh Absolutely. I mean, what HUD’s been doing is leveraging these process improvements and those I.T resources you referenced to really reduce the monitoring burden on grantees where the programs can rely on our processes and that reduces a lot of the manual efforts on many sides and increases that data integrity. So we use, obviously, as you said, you know, technology, innovation to connect, analyze, visualize data. And that just lets our officers prioritize where the weak spots are. So now it’s not just everything is on fire. We really are able to take a step back, understand where, you know, we spots are and focus our efforts on strengthening the high risk controls.   

Tom Temin And when you go to the Hill, you probably have a lot more credibility as an agency.   

Vinay Singh Yeah, I think so. I believe so. And I think that’s what coming back to what I started with on public trust. I mean, that’s what I try to instill in a lot of folks that don’t understand that are not non CFO right up to the program officers others. Why is this so important? I mean, a lot of this is compliance and you know, a lot of folks push back and say, why are we doing so much? It’s so much else to do. But I you know, I try to convey the essence of the mission is if we’re able to give you that clean audit opinion, that public trust has improved, the Hill and other stakeholders believe that we are able to have good financial stewardship of the monies and make improvements on our mission. And so therefore, yes, it’s a it’s a circle is a lifecycle, and it continues.   

Tom Temin In just briefly, your own background to come to CFO because you sound passionate about this type of work.   

Vinay Singh Absolutely. I mean. It started as an accountant, senior accountant. I did have a zigzag life, but I have held positions. As I told my team in almost every function the CFO has. I used to be an auditor. I used to be a staff accountant. I used to do risk work. I used to do controls work. I did work and kind of analysis. So for me, that path up and, you know, most recently I was at SBA, but before that I was a partner at KPMG and I do have a CPA certified public accountant. You know, I love numbers because numbers tell a story. So now in my role, it’s not only making sure we’ve got this great stewardship, but also conveying that story like I mentioned, about public trust so that others across the agency understand why CFO is important, continue to deepen our collaboration, and that just helps us get more transparency in real time and information and monitor these risks.   

Tom Temin So you’re one of those guys that reads the footnotes on financial statements.   

Vinay Singh I learned early on that everything is actually in the footnotes. Everything else doesn’t matter. Actually, you should read the footnotes first.  

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