The internal threat analysis shown in Figure 13-3 contains a listing of controls linked to risks related to the property management process. For each process risk, describe the impact on the audit for each of the following results of controls testing.

a. Controls are found to be operating effectively

b. Controls are found to be operating ineffectively

Figure 13-3

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Process Risks (1) Insufficient capacity. (2) Excess capacity. (3) Impaired asset values. (4) Excess deterioration due to poor maintenance. (5) Inefficient space utilization. (6) Casualty losses includ- ing loss of use of significant physical facilities due to natural disaster or terrorism. (7) Lack of resources to acquire assets. (8) Poor location selection. (9) Cost overruns or delays. (10) Inaccurate information processing (11) Inaccurate cost measurement. (12) Improper or unautho- rized usage. (13) Lack of compliance with regulations Controls Linked to Risks Long-term planning and budgeting Monitor current usage Adequate lead time for new facilities Establish appropriate maintenance program Establish back-up sources for peak loads Long-term planning and budgeting Procedures for authorizing and disposing of property Utilize flexible resources when possible (e.g., employee-shared space) Periodic review of asset portfolio Independent appraisals Appropriate maintenance schedules Outsourcing of maintenance activities Monitor technology and competition for possible improvements Provide appropriate training to personnel Systematic plans for space usage Long term plans for acquisitions Monitor current usage Flexible space-usage designs Periodic safety inspections Adequate insurance or self- insurance Crisis management and contingency plans Disaster recovery plans Effective capital budgeting Access to financial resources Effective management of cash flow Creative financing (e.g., leasing) Investigate all acquisitions and location characteristics Negotiate arrangements with local officials Evaluate transportation and infrastructure of area Evaluate quality of local human resources Obtain bids for acquisitions Establish acquisition plan and timing of milestones for completion Monitor acquisition costs on a timely basis Proper completion and verification of supporting documents Appropriate segregation of duties across activities Use of standard control numbers for parts, vendors, products, etc. Update files and accounting records on a timely basis Establish procedures and policies for determining asset cost Adequate documentation of acquisitions Proper allocation of internal costs for acquisitions Physical security Proper authorization procedures Maintain inventory of physical assets including location information Periodic physical inventory observation Monitor appropriate property regulations and environmental laws Periodic inspections Long-term planning to assure compliance with changes in regulations Adequate capital budgeting (14) Inaccurate Establish amortization (e.g., zoning, environmental) or unreasonable amortization. (15) Safety hazards. policies and procedures by asset type Monitor economic and technology trends that may impact assets Comparative analysis with other organizations and competitors Monitor safety and health regulations Perform periodic safety inspections Performance Measures Total capacity measures Space utilization statistics Space shortages Revenue per square foot Repair costs Space utilization statistics Time-in-use measures Revenue per square foot Value received for asset disposals Market value of assets Market value per square foot Time-to-sell property assets Percent markdown on disposed assets Maintenance budgets Cleanliness ratings Equipment breakdowns Repair costs Days lost to equipment failures Rate of production defects due to equipment problems Space utilization statistics Frequency and cost of reconfigurations Cost per square foot Revenue per square foot Square feet per employee Value of casualty losses Insurance claims Uninsured losses Days lost to crisis or damage conditions Insurance premiums and deductibles Tests of disaster recovery plans Cost of borrowed funds for project Percentage of funds from outside sources Amount of debt service relative to cash flow from project Internal rate of return Cost to acquire property Local demographics Travel time to primary customers or from key suppliers Travel or transportation costs Value of incentives or abatements from local authorities Actual cost compared to budget Days late on acquisitions Project progress relative to milestones Percent of transactions subject to processing errors Size of transaction adjustments Number of transaction adjustments Actual costs compared to budget Percentage of internal costs allocated to capital assets (e.g., interest) Asset costs relative to appraised value Value of lost assets Book to physical adjustments for physical assets Number of known violations Fines and penalties for violations Days lost due to violations Cost of environmental clean-up Useful life of assets by type Useful lives relative to tax standards Useful lives relative to competitors Percentage of assets in use that are fully depreciated Average gain/loss on asset disposals Number of worker injuries Cost of time lost to worker injuries Worker's compensation costs Regulatory (e.g. OSHA in United States citations)