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PeopleSoft IT General Controls

Performance Audit

December 2009

Office of the Auditor


Audit Services Division
City and County of Denver

Dennis J. Gallagher
Auditor
The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is
responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the
proper and efficient use of City resources and providing other audit services and information to City
Council, the Mayor and the public to improve all aspects of Denver’s government. He also chairs the
City’s Audit Committee and oversees the City’s Comprehensive Annual Financial Report (CAFR).

The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee
assists the Auditor in his oversight responsibilities of the integrity of the City’s finances and operations,
including the integrity of the City’s financial statements. The Audit Committee is structured in a manner
that ensures the independent oversight of City operations, thereby enhancing citizen confidence and
avoiding any appearance of a conflict of interest.

Audit Committee
Dennis Gallagher Maurice Goodgaine
Robert Haddock Jeffrey Hart
Charles Husted Bonney Lopez
Timothy O’Brien

Audit Staff
John Carlson, Deputy Audit Director, JD, CIA, CICA
Stephen E. Coury, IT Audit Supervisor, CISA
Robert Pierce, Lead IT Auditor, CISA
Aaron Pratt, Senior IT Auditor, CISA
Brandon Blomquist, Staff IT Auditor

You can obtain free copies of this report by contacting us at:

Office of the Auditor


201 W. Colfax Avenue, Dept. 705  Denver CO, 80202
(720) 913-5000  Fax (720) 913-5026

Or view an electronic copy by visiting our website at:


www.denvergov.org/auditor
City and County of Denver
201 West Colfax Ave., Dept. 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247
www.denvergov.org/auditor
Dennis J. Gallagher
Auditor

December 17, 2009

Molly Rauzi, Chief Information Officer Claude Pumilia, Chief Financial Officer
Technology Services Department of Finance
City and County of Denver City and County of Denver

Dear Ms. Rauzi and Mr. Pumilia:

Attached is the Auditor’s Office Audit Services Division’s report of their audit of PeopleSoft IT
General Controls for the period of October 1, 2008 through September 30, 2009. The purpose of
the audit was to examine and assess the IT general controls related to the PeopleSoft Human
Resources and Financial Management applications to ensure they provide sound foundations to
support the proper operating and security of these information systems. Audit work focused on
change control, security settings, access management, and operations as they pertain to the
PeopleSoft Human Resources and Financial Management applications.

The audit revealed deficiencies in the process for disabling systems access of terminated
employees as well as the need for process improvements to help ensure system password
settings are effective. The audit also identified a need to perform a disaster recovery test for the
PeopleSoft Human Resources and Financial Management applications.

If you have any questions, please call Kip Memmott, Director of Audit Services, at 720-913-5029.

Sincerely,

Dennis Gallagher
Auditor

DJG/ect

cc: Honorable John Hickenlooper, Mayor


Honorable Members of City Council
Members of Audit Committee
Ms. Roxane White, Chief of Staff
Mr. David T. Roberts, Chief Services Officer
Mr. David Fine, City Attorney
Mr. L. Michael Henry, Staff Director, Board of Ethics
Ms. Lauri Dannemiller, City Council Executive Staff Director
Ms. Beth Machann, Controller
Mr. Al Rosabal, Deputy Chief Information Officer

To promote open, accountable, efficient and effective government by performing impartial reviews and other audit
services that provide objective and useful information to improve decision making by management and the people.
We will monitor and report on recommendations and progress towards their implementation.
City and County of Denver
201 West Colfax Ave., Dept. 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247
www.denvergov.org/auditor
Dennis J. Gallagher
Auditor

AUDITOR’S REPORT

We have completed an audit of PeopleSoft IT General Controls for the period of October 1, 2008
through September 30, 2009. The purpose of the audit was to examine and assess the IT general
controls related to the PeopleSoft Human Resources and Financial Management applications to
ensure they provide sound foundations to support the proper operating and security of these
information systems. Audit work focused on change control, security settings, access
management, and operations as they pertain to the PeopleSoft Human Resources and Financial
Management applications.

This audit was included in the Auditor’s Office Audit Services Division’s 2009 Annual Audit Plan
and is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1,
General Powers and Duties of Auditor, and was conducted 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.

The audit revealed deficiencies in the process for disabling systems access of terminated
employees as well as the need for process improvements to help ensure system password
settings are effective. The audit also identified a need to perform a disaster recovery test for the
PeopleSoft Human Resources and Financial Management applications.

We extend our appreciation to the personnel who assisted and cooperated with us during the
audit.

Audit Services Division

Kip Memmott, MA, CGAP, CICA


Director of Audit Services

To promote open, accountable, efficient and effective government by performing impartial reviews and other audit
services that provide objective and useful information to improve decision making by management and the people.
We will monitor and report on recommendations and progress towards their implementation.
TABLE OF CONTENTS

EXECUTIVE SUMMARY 1

INTRODUCTION & BACKGROUND 3


What is PeopleSoft? 3

What are IT General Controls (ITGCs)? 3

SCOPE 6

OBJECTIVES 7

METHODOLOGY 8

FINDING 1 9
Procedures for Removing System Access Are Not Fully Effective 9

FINDING 2 10
Password and Physical Access Controls Are Not Consistently Aligned with
City Policies and Procedures 10

FINDING 3 12
Disaster Recovery Procedures Are Not Tested on a Periodic Basis 12

AGENCY RESPONSE 13
EXECUTIVE SUMMARY
Audit work revealed deficiencies in the process for disabling systems access of
terminated employees as well as the need for process improvements to help ensure
system password settings are effective. The audit also identified a need to perform a
disaster recovery test for the PeopleSoft Human Resources and Financial Management
applications.

These deficiencies were found in three of the four areas of Information Technology
General Controls (ITGCs) reviewed for the PeopleSoft application and supporting
infrastructure. The three areas with deficiencies were access management, security
settings, and operations. No deficiencies were found based on the testing we performed
in the change control area.

Access Management

Through the use of Computer Assisted Auditing Techniques (CAATs) we independently


matched terminated employees to the full database of 11,159 active network accounts
and found that 76 former employees (over 6% of the 1,235 terminated) from 16 agencies
still had active network accounts. Further analysis of the 76 terminated employee
accounts showed that 14 had accessed City systems after termination. These users had
much of the same access as if they were still a current employee. We also found that
eight had the capability to connect remotely to the City network from outside City
facilities. Of those eight with remote access, three had logged in subsequent to
termination. The failure to disable the login accounts of terminated employees exposes
City information systems and data to unauthorized modification, disclosure or
destruction.

Security Settings

Some users with access to PeopleSoft, Oracle, or the AIX operating system do not have
adequate controls over their passwords. It is important that users follow good password
practices as set by management. Passwords provide the primary control over user
access to computer resources and their effectiveness tends to diminish over time. A lack
of security parameters weakens security controls, which could lead to unauthorized
access to the system and the subsequent disclosure, misuse and/or destruction of City
data. Specifically, these security weaknesses could result in unauthorized individuals
gaining access to the system and possibly changing, modifying, or deleting sensitive
system files, or viewing confidential documents stored within the information systems
environment.

Audit work also identified data center access cards that were not assigned to specific
authorized persons. Without full accountability for who has access to the data centers,
unknown persons could cause system disruption, physical damage or steal valuable
assets.

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Operations

Business owners and Technology Services have not performed a test of the existing
disaster recovery plan supporting PeopleSoft and its supporting infrastructure within the
last year. Hardware, software, and personnel changes occurring over time could cause
parts of the plan to become obsolete. Without periodic testing there is a risk that the
disaster recovery plan will not work properly when needed.

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INTRODUCTION
& BACKGROUND
What is PeopleSoft?
The City and County of Denver uses the PeopleSoft Enterprise system for a variety of key
business functions, such as, Human Resources (Payroll, Employee Benefits, Time and
Labor) and Financials (General Ledger, Purchasing, Payables, Projects and Grants, Asset
Management). PeopleSoft is an Enterprise Resource Planning (ERP) system that allows for
integration of business functions and a single access control model.

Although many city agencies use the various PeopleSoft modules, we identified the
Office of the Controller as a key business owner and user of PeopleSoft. The Technology
Services organization provides the technical support and IT general controls environment
for PeopleSoft through its Enterprise Applications Services and Operations groups.

What are IT General Controls (ITGCs)?


Information Technology General
Controls (ITGCs) are those “behind the
scenes” controls that serve as the
foundation for the proper operating
and security of information systems.
They help to ensure the operational and
data integrity upon which City systems
rely. ITGCs interact with each other like
pieces in a puzzle. Each control process
supports the others and without one,
the control structure is incomplete.

Following are descriptions the ITGC


areas of Change Control, Security
Settings, Access Management, and
Operations.

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Change Control
Strong procedures over change control ensure
that changes introduced into production are
authorized and tested to maintain the integrity
and availability of both software applications
and data.

To ensure the PeopleSoft systems operate as


intended and continue to operate without
disruption, the City tests and implements
changes through three separate processing
environments known as Test, Quality
Assurance, and Production. Effective change
controls provide for separation of duties between software developers, system testers,
and production users.

The software developer makes system changes in the Test environment but cannot
implement the changes into production. Persons other than the software developer
perform software testing functions in the Quality Assurance environment. After approval
by the requesting party or business owner, the change is then implemented into the
Production environment.

Controls that provide a separation of duties ensure that no single person can implement
a change into production. The processing and testing of changes through the three
environments of Test, Quality Assurance and Production helps to ensure that changes are
authorized, tested, and approved. The overall result of these controls helps to preserve
the integrity of the production environment’s system and data, and prevents
unnecessary disruption of production systems.

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Security Settings
There are four levels of security controls for the PeopleSoft
application: the Application Level, the Database Level, the
Operating System Level, and the Physical Security Level.

Application Level – Users can login to PeopleSoft in one


of two ways. Most access the system via a Web
interface that uses their general network ID and
password. Some sign directly onto
PeopleSoft using an ID and
password separate from their
network credentials, which are
stored and maintained within
PeopleSoft itself.

Application Level security settings


affect the design and functioning
of login IDs and passwords for
direct logins, such as their
minimum length and how often
they must be changed. Changing
passwords periodically helps
prevent unauthorized system
access through compromised passwords.

Database Level – The PeopleSoft application stores data in an Oracle database.


Database Administrators perform configuration and maintenance of the
database. These individuals have highly privileged access, including the
capability to modify data if necessary outside of the application controls. The IDs
and passwords at this level are controlled by settings within the Oracle database.
Again, changing passwords periodically helps prevent unauthorized system
access through compromised passwords.

Operating System Level – Both the PeopleSoft application and the Oracle
database run on servers controlled by the AIX operating system. System
Administrators configure servers to support the integrity and protection of the
data. System Administrators can have local accounts on the server that are
separate from their general network logins. Password controls over these local
accounts are configured in the AIX operating system. Changing passwords
periodically helps protect unauthorized system access in the event passwords are
unknowingly compromised.

Sometimes System Administrators need to access the server through a special


built-in account called “root” which has the proverbial “keys to the kingdom.” As
root does not require identification of the user, there is no accountability for who

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uses it. The root password should be changed periodically and changed
immediately when anyone knowing the password transfers out of the department
or terminates employment with the City.

Physical Security Level – The physical servers that support all the aforementioned
levels reside in a protected data center. Proximity badge readers control access
to the data center. The City issues access security cards to authorized individuals.
These individuals scan the cards by a specialized reader mounted near the door,
which verifies the card and unlocks the door accordingly. As the card is the sole
control for physical access, a person should have only one card and every card
should be registered to a known and authorized individual.

Access Management
Employees are granted access rights to
the City’s information systems upon being
hired. Job requirements determine
specific access rights and such rights are
modified when job responsibilities change.
Access is disabled or removed when
individuals terminate their employment
with the City. These controls are designed
to ensure that only authorized individuals
have access to City systems and data
and that such access is limited according
to their specific job requirements.

Operations
Controls over operations of systems help to ensure the confidentiality, integrity, and
availability of information systems. These controls include regularly backing up system
data, storing backup media offsite, and regularly testing system recovery capability in
the event of a disaster.

SCOPE
The audit examined and evaluated IT general controls related to the City’s PeopleSoft
Human Resources and Financial Management applications. The audit tested IT general
controls in the areas of change control, security settings, access management, and
operations. The audit focused on agencies that directly use PeopleSoft and are
supported by Technology Services, which excludes the Denver International Airport. The
audit period extended from October 1, 2008 through September 30, 2009.

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OBJECTIVES
Audit objectives included evaluating the Information Technology General Controls for the
following areas:

Change controls providing separation of processing environments for test, quality


assurance, and production, and separation of duties for the roles of software
developers, system testers, and end users. Including system changes being
authorized, tested, and approved before implemented into production.

Security settings limiting access to authorized individuals for PeopleSoft at the


application, database, operating system, and physical security levels.

Access management controls ensuring employee access is limited to specific job


functions and access to City systems and data is removed when individuals terminate
their employment with the City.

Operational controls providing for system backup and recovery capability for the
PeopleSoft applications.

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METHODOLOGY
We utilized multiple methodologies to achieve audit objectives. These evidence gathering and
analysis techniques included, but were not limited to:

Interviewing personnel in the Controller’s Office and Technology Services and


reviewing selected policies and procedures related to PeopleSoft and its
infrastructure.

Independently executing queries to obtain complete populations of new and


changed users within PeopleSoft and testing for supervisor approval.

Utilizing Computer Assisted Auditing Techniques (CAATs) to compare the population


of 1,235 employees terminated during the audit period to the entire population of
11,159 Active Directory accounts, and the population of 13,068 employees with
access to PeopleSoft.

Directly observing physical access controls in place at the data centers and ensuring
that none of the 1,235 terminated employees had access to the data centers
supporting the PeopleSoft application.

Observing the execution of queries to obtain a complete population of changed


database objects for the Human Resources and Financial Management
applications. Changed objects included software patches, HR tax updates, salary
grade changes, benefit selections, stimulus grant reporting, and changes to access
privileges.

Independently testing a sample of changes from the Human Resources and Financial
Management applications using Stat, the change and access management tool
used by Technology Services.

Directly observing environmental controls in place at the data centers supporting the
PeopleSoft application through onsite inspection and examination of maintenance
records.

Examining evidence of backup and off-site storage of media.

Obtaining access to Active Directory Users and Computers (ADUC) for examining
login account access and information.

Executing scripts to extract system and password configuration settings for the
infrastructure supporting PeopleSoft (Oracle database and AIX servers).

Verifying that default passwords have been changed on highly privileged accounts
for the Oracle database and AIX operating system.

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FINDING 1
Procedures for Removing System Access Are Not Fully Effective
Through the use of Computer Assisted Auditing Techniques (CAATs) we independently
matched terminated employees to the full database of 11,159 active network accounts
and found that 76 former employees (over 6% of the 1,235
76 Terminated Employees terminated) from 16 agencies still had active network
Still Had Active Network accounts. One of the 76 still had access to PeopleSoft.
Login Accounts Further analysis of the 76 terminated employee accounts
showed that 14 had accessed City systems after
termination. These users had much of the same access as if they were still a current
employee. We also found that eight had the capability to connect remotely to the City
network from outside City facilities. Of those eight with remote access, three had logged
in subsequent to termination. The failure to disable the login accounts of terminated
employees exposes City information systems and data to unauthorized modification,
disclosure or destruction.
Terminated Employees with Active Logins
The number of terminations
Type Number of Employees
used above (1,235) occurred
during the audit scope period of Terminated Employees 1,235
October 1, 2008 through
Active Login Accounts 76
September 30, 2009. The actual
number of terminated Accessed Since Termination 14
employees with active network
Remote Access Capability 8
accounts may increase if the
time period were expanded to Accessed since termination 3
include prior years. and have Remote Access

Recommendations Have Access to PeopleSoft 1

Working with the Controller’s Office, we recommend that Technology Services:

1. Investigate and immediately deactivate all terminated employee login accounts,


including those from prior years.

2. Determine the root cause for the breakdown within the termination process.

3. Revise procedures to improve the effectiveness of the termination process.

4. Add compensating controls to support the revised termination procedures. For


example, scanning inactive accounts or adopting a periodic comparison of
active accounts against terminated employees.

5. Consider the implementation of more sophisticated or automated access


management tools.

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FINDING 2
Password and Physical Access Controls Are Not Consistently
Aligned with City Policies and Procedures
Some users with access to PeopleSoft, Oracle, or the AIX operating system do not have
adequate controls over their passwords. It is important that users follow good password
practices as set by management. Passwords provide the primary control over user
access to computer resources and their effectiveness tends to diminish over time. By
requiring periodic passwords changes, the City will reduce risk of unauthorized access to
applications and the information stored within them. A password character setting
requiring too few characters can result in more easily guessed passwords, and an
undefined threshold of bad password attempts could result in users continued attempts
to access unauthorized systems without having their ID suspended.

A lack of security parameters weakens security controls, which could lead to


unauthorized access to the system and the subsequent disclosure, misuse and/or
destruction of City data. Specifically, these security weaknesses could result in
unauthorized individuals gaining access to the system and possibly changing, modifying,
or deleting sensitive system files, or viewing confidential documents stored within the
information systems environment.

PeopleSoft Password Controls are not configured for users authenticating outside of
Active Directory

The majority of PeopleSoft users authenticate (gain access) to PeopleSoft using their
Active Directory user ID and password. However, there are 43 users that access
PeopleSoft outside of the Active Directory authentication. As a result, these users do not
follow the Active Directory required password settings. Permitting access to PeopleSoft
without using Active Directory password controls allows users to circumvent the Active
Directory password requirements. There are no password requirements configured in
PeopleSoft for users that do not authenticate through Active Directory.

Inadequate Password Controls for Oracle Accounts

Audit work reviewed password controls related to Oracle databases supporting


PeopleSoft HR and Financials and determined that no password controls are enabled for
Oracle user accounts. Inadequate password controls could lead to unauthorized
individuals gaining access to the system and possibly changing, modifying, or deleting
sensitive system files, key financial data/programs or viewing confidential documents
stored within the Oracle environment.

Password Controls Not Enforced for AIX Administrative and User Accounts

During our review of the AIX servers hosting Oracle databases for PeopleSoft HR and
Financials, audit work found that highly privileged administrative accounts as well as 18
user accounts for HR and 20 user accounts for Financials do not meet City and County of

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Denver Acceptable Use Agreement or password standards. We reviewed AIX files
indicating the last password change date for accounts and noted highly privileged
administrative and user accounts without any forced password change date. Some
highly privileged accounts have not had their password changed since 2005.

Unaccountable Physical Access to Data Center

In addition to issues involving password control weaknesses, audit work also identified
data center access cards that were not assigned to specific authorized persons. Without
full accountability for who has access to the data centers, unknown persons could cause
system disruption, physical damage or steal valuable assets.

The majority of ID cards which grant access to the City’s data centers are logged in the
C*Cure system with a unique card number. Audit reviewed C*Cure access listings for two
data centers and noted the following:

Four active cards on the data center access lists that had no identifiable card
number.

Five cards within the C*Cure system had no employee or contractor listed as the
card owner.

Six test cards were still active.

Four individuals were assigned multiple cards with access to one or both of the
data centers.

Recommendations
We recommend that Technology Services:

1. Enforce Established Password Controls

Technology Services should configure password requirements within PeopleSoft software,


Oracle databases, and AIX operating systems to ensure that all users follow City and
County of Denver password requirements outlined in the Acceptable Use Policy. An
excerpt of the Acceptable Use Policy relating to password requirements is listed below:

Users shall construct passwords with at least eight (8) characters, including three
of the following four character types: upper case alphabetic, lower case
alphabetic, numeric, special characters (symbols, punctuation marks). For
additional security, Users are recommended to create “pass phrases” that
contain at least fifteen (15) characters. Passwords are case sensitive. Passwords
will expire after 90 days and Users will not be permitted to reuse any of the last
fifteen (15) passwords used. After five (5) failed login attempts, the User’s account
will be disabled. The User must then personally contact Technology Services to
manually reset their account.

2. Overhaul Data Center Access Lists

We recommend Technology Services remove data center access from all cards which
are not identifiable by card number or assigned to an individual. Technology Services
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should complete a review of all cards with access to the City’s data centers for
appropriateness and consider establishing formal, regular review procedures for physical
access listings. Review procedures should identify and remedy: inactive badges, badges
belonging to transferred or terminated personnel, duplicate IDs, and any inappropriate
access not commensurate with a user’s job function.

FINDING 3
Disaster Recovery Procedures Are Not Tested on a Periodic Basis
Business owners and Technology Services have not performed a test of the existing
disaster recovery plan supporting PeopleSoft and its supporting infrastructure within the
last year. Testing is an essential part of disaster recovery planning. An effective disaster
recovery plan requires testing on a periodic basis, or there is a risk that the plan will not
work when needed.

Recommendation
1. Coordinating with business owners, Technology Services should perform regular tests
of the City’s disaster recovery capability for the PeopleSoft applications and supporting
infrastructure. The frequency of such tests should be dictated by system criticality, and
should occur at least every 12 to 18 months.

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AGENCY RESPONSE

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