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HomeMy WebLinkAbout09/25/2018 - Regular Minutes - City Council - Audit CommitteeCITY OF COIL FGE STATION Mayor Home of Texas AcW University' Karl Mooney Mayor Pro Tem James M. Benham Interim City Manager Jeff Capps Minutes CITY COUNCIL AUDIT COMMITTEE Tuesday, September 25, 2018 at 3:30 PM City Hall Administrative Conference Room 1101 Texas Avenue College Station, Texas 77840 Audit Committee Members Present: Karl Mooney, Mayor James Benham, Mayor Pro Tem Linda Harvell, Councilmember Mike Ashfield, Committee Member Nathan Sharp, Committee Member City Staff: Ty Elliott, Internal Auditor Madison Rorschach, Assistant Internal Auditor Jeff Capps, Interim City Manager Jeff Kersten, Assistant City Manager Carla Robinson, City Attorney Yvette Dela Torre, Deputy Local Registrar Mary E. Leonard, Finance Director Melissa Chadd, Accounting Manager/Controller Council Members Bob Brick Jerome Rektorik Linda Harvell Barry Moore John Nichols Regular Agenda Item No. I — Call to Order and Announce a Quorum is Present. With a quorum present, the Audit Committee of College Station was called to order by Mayor Mooney at 3:33 p.m. on September 25, 2018 in the Administrative Conference Room of the City of College Station City Hall. Regular Agenda Item No 2 - Presentation, possible action, and discussion of minutes for the Audit Committee meeting held on July 23, 2018. MOTION: Upon a motion made by Councilmember Benham and a second by Councilmember Harvell, the Audit Committee voted three (3) for and zero (0) opposed, to approve the July 23, 2018 Audit Committee minutes. The motion carried unanimously. Regular Agenda Item No 3 - Presentation, possible action, and discussion of the City Internal Auditor's Office Peer Review. Internal Auditor, Ty Elliott presented to the Audit Committee two recommendations from the Peer Review. One being to use Generally Accepted Government Auditing Standards specified language when stating the audit's compliance with these standards. The auditor's office had not used this language in some of the audits within the Peer Review's scope, but has since begun using the correct language. The second recommendation was in the CPE requirements. Generally Accepted Government Auditing Standards require 80 hours of CPE in each 2 -year reporting period. The standards suggest that 20 hours be completed each year. There was one year that a member of the auditor's office did not complete 20 hours in one year. MOTION: Upon a motion made by Councilmember Benham and a second by Councilmember Harvell, the Audit Committee voted three (3) for and zero (0) opposed, to accept the Peer Review report. Regular Agenda Item No. 4 - Presentation, possible action, and discussion of the Invitation to Bid 18- 104 Attestation Engagement. Internal Auditor, Ty Elliott presented the Invitation to Bid 18-104 Attestation Engagement and asked for questions from the Audit Committee. There was no discussion. MOTION: Upon a motion made by Councilmember Benham and a second by Councilmember Harvell, the Audit Committee voted three (3) for and zero (0) opposed, to accept the Invitation to Bid 18-104 Attestation Agreement as presented. Regular Agenda Item No. 5 - Presentation, possible action, and discussion of the completion of the City- wide COSO Assessment. Internal Auditor, Ty Elliott updated the Audit Committee on the City-wide COSO Assessment. The Auditor's office has provided the information to Fiscal department. Fiscal department has submitted key information of the COSO Assessment to the City's external auditors, so they can conduct their audit. All the components, principles and points of focus have been completed. The internal auditor believes that the external auditors will be able to review the documentation and determine that the City of College Station has an adequate the internal control framework. There were two additional recommendations. The first has to do with updating the City's IT Disaster Recovery Plan and the second has to do with opening the City's current fraud hotline to citizens. It is the recommendation of the Audit Committee to implement the IT Disaster Recovery Plan and not to expand the Fraud Hotline. The Auditor's Office recommended expanding the Fraud Hotline at a later date. Regular Agenda Item No. 6 - Presentation, possible action and discussion of the FY18 City Internal Auditor's Office Annual Report. Internal Auditor, Ty Elliott presented the FYI City Internal Auditor's Office Annual Report. The annual report summarizes the accomplishments of the last fiscal year and the performance metrics that will be used for future annual reports MOTION: Upon a motion made by Councilmember Harvell and a second by Councilmember Benham, the Audit Committee voted three (3) for and zero (0) opposed, to accept the FYI City Internal Auditor's Office Annual Report. Regular Agenda Item No. 7 — Presentation, possible action and discussion of the FY19 Potential Audit Plan. Internal Auditor, Ty Elliott reminded the Audit Committee of their previous direction to develop a Fraud Response Plan and implement a continuous auditing program. Internal Auditor provided a potential FY19 audit schedule. The Internal Auditor proposes the Fraud Response Plan, the implementation of a continuous Auditing Program and at least one small scope audit. The Audit Committee directed the department to follow up on the 2017 Sanitation Audit and conduct an audit of the Parkland Dedication Program. Regular Agenda Item No. 8 - Presentation, possible action and discussion regarding future agenda items. No future agenda items Regular Agenda Item No. 9 — Adjourn. There being no further business, Mayor Mooney adjourned the meeting at 4:13 p.m mon Tuesday, September 25, 2018. 1 A - // 7 ATTEST: �L � Gi'J' '�J � Y tte Dela Torre, Deputy Local Registrar CITY ter- Cala r STATION Home ofTexru.AcW Uniuenity" TO: Honorable Mayor and City Council FROM: Ty Elliott, City Internal Auditor DATE: September 25, 2018 SUBJECT: Fiscal Year 2018 Council Update of the City Internal Audit Office Over the course of this fiscal year, we released four audits: the Sanitation Audit, the Procurement Card Audit, the Research Valley Partnership Attestation, and the Invitation to Bid 18-104 Attestation. The associated reports and opinions for these audits can be seen on the City Internal Auditor's website. Per the Audit Committee's direction, we also completed a City-wide COSO assessment of the City's internal control framework and implemented an Audit Follow -Up Program. As part of this Program, we received implementation responses for seven previous audit engagements going back through November of 2015. In addition, our Office received a Distinguished Knighton Award from the Association of Local Government Auditors for our audit of the Sanitation Division and the highest peer review opinion possible. The following table show our performance metrics: Table 1: Performance Metrics Performance Metric FY16 — FY18 FY18 Proposed FY Goal Number of Audits Published 9 4 Complete Audit Plan GALAS Compliance Rate' 98.6% 99.3% 100% Number of Recommendations 44 17 NSA Concurment Rate 88.6% 100.0% Greater than 90% Full Concurment Rate 81.8% 88.2% Greater than 85% Follow -Up Reviews 7 2 All Audits Number of Reviewed Recommendations 39 12 N/A Implementation Rate 84.6% 100.0% Greater than 80% Full Implementation Rate 33.3% 41.7% Greater than 75% Cleared Implementation Rate NA NA Greater than 85% Neglected Rate 5.1% 0.0% Less than 5% "In Spite Of" Recommendations 3 0 N/A Average Time Between Follow -Up & Audit 16 Months 8 Months 6 - 12 Months 1 The GALAS Compliance Rate is based on a checklist that is completed at the end of each audit. TY ELLIOTT CITY INTERNAL AUDITOR'S OFFICE AUDIT COMMITTEE City Internal Auditor 1101 Texas Ave. Mayor Karl Mooney telliottjacstx.gov_ College Station, Tx 77840 Counciimember James Benham TEL: (479) 764-6269 Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) City of College Station City Internal Auditor's office A summary of the major impacts of our Office's engagements over the last fiscal year follows: Peer Review. During the summer of FY18, our Office received a peer review of our internal quality control system. This included a review of policies and procedures, audit engagements and work papers, and documents related to independence, training, and development of audit staff. Based on this review and interviews with our Office's staff, the peer review team granted us the highest opinion possible. Going forward, receiving this review and opinion will lend our Office further credibility and should provide the Audit Committee with greater assurance about the quality of our work. Invitation to Bid 18-104 Attestation Engagement. At the beginning of August, our Office conducted an examination attestation engagement per the direction of the Audit Committee. During this engagement, we gathered sufficient and appropriate evidence to express an opinion on the effectiveness of purchasing controls on Invitation to Bid 18-144, which was issued to replace the roofs of City Hall and the City Hall annex building. Our opinion stated that purchasing controls were generally effective, providing assurance to the City Council about City staff's activities. COSO Assessment. Over the course of this year, our Office conducted a number of interviews with City staff to document compliance with the COSO Internal Control Framework, which municipalities are required to be in alignment with under the Uniform Guidance for Federal Awards. This work resulted in a completed COSO Matrix, five flowcharted major fiscal processes, and a number of work papers. We believe that the work completed and documented during this project will not only aid us in developing and performing future audits, but also aid the new external auditors in conducting their work. Moving forward, our Office hopes to develop and finalize a Fraud Response Plan to help ensure that fraud or malfeasance, if suspected, is properly handled. In addition, we plan to update the COSO Matrix documentation and design and implement a continuous auditing program, which will help focus our activities in the future. Finally, we hope to complete one performance audit and will continue to respond to hotline allegations and Council inquiries as needed. Sincerely, CIA, CFE, CGAP, COSO City Internal Auditor 21 Page (*0r4" CITY ter- COI:f r STATION Home of Texru AcW Uniuenity" TO: Honorable Mayor and City Council FROM: Ty Elliott, City Internal Auditor DATE: September 25, 2018 SUBJECT: Fiscal Year 2019 Potential Audit Plan During fiscal year 2018, our Office received permission from the Audit Committee to design and implement a continuous auditing program and to develop and finalize a Fraud Response Plan. In addition, towards the end of fiscal year 2019, we will need to update the COSO Matrix and process documentation. Despite these prior commitments, we believe we have enough resources to conduct one small scope audit during FY19 — most likely during October. A description of each potential audit topic follows: Performance Evaluations: Over the course of the FY 17 Risk Assessment and the COSO Assessment, we found that Employee Performance Evaluations differ greatly across City departments and divisions. An audit of this topic would focus on identifying where employees are treated differently across the City and evaluating if this is reasonable. City-wide User Access: Based on the COSO Assessment, an analysis of City-wide user access of key systems may be warranted. An audit of this topic will involve reviewing user access policies and procedures, and identifying and analyzing user access to key systems. Software Acquisition and Use: An audit of software acquisition and use would investigate software used throughout the City and the associated licenses, as well as, software acquisition policies and procedures. Parkland Dedication: Since our Office was formed in 2007, we have conducted two andits of the Parks and Recreation Department, however, both were focused on the recreation side. An audit of the Parkland Dedication program would focus on compliance with City ordinances as well as efficient and effective achievement of the program's mission, goals, and objectives. Financial Indicators: This would entail examining the Comprehensive Annual Financial Report and other financial documents and is intended to: 1) identify significant existing or emerging financial problems, 2) put the City's finances in context, and 3) encourage discussion of City finances. Commodity Purchases: A previous audit of purchasing processes was conducted in 2008 with a follow- up in 2010; however, these audits did not specifically address purchasing processes involving commodities — or raw materials that the City buys and stores in bulk. An audit of commodity purchases would include a review of policies, procedures, processes and practices. TY ELLIOTT City Internal Auditor telliott cstx_goy TEL: (979) 764-6264 CITY INTERNAL AUDITOR's OFFICE 1101 Texas Ave. College Station, Tx 77840 AUDIT COMMITTEE Mayor Karl Mooney CouncilmemberJames Benham Councilmember Linda Harvell Mike Ashfield (Advisory) Nathan Sharp (Advisory) City of College Station City Internal Auditor's Office Vendor Database: Based on the COSO Assessment, an in-depth analysis of the City's Vendor Database may be needed. This includes areas such as vendor performance, inappropriate vendor -employee relationships, and database controls and access. Payroll Aspect Audit: An audit of a specific payroll aspect would involve review and testing over internal controls as well as analysis. Specific payroll aspects that could be covered include: Fire and Police Move - Up Pays, Short -Term Disability Payments, a specific Fringe Benefit (i.e. cell phone allowance, car allowance, etc.), or a specific department's overtime usage (i.e. Fire, Police, Public Works overtime, etc.). The aspects of payroll identified as risks during the COSO Assessment include Move -Up Pays and Short -Term Disability Payments. Police Evidence Disposal: An audit of Police Evidence was begun during fiscal year 2015, but was never completed. Based on this previously completed work, an audit of Police Evidence disposal would evaluate the City's current evidence disposal policies and procedures and their effectiveness. Based on this, a potential audit schedule would be as follows: Figure 1: Potential FY19 Schedule 10/1/2018 12/31/2018 4,/1/2019 7/1/2019 9/30/2019 Potential Audit Fraud Response Plan Continuous Auditing Implementation 0050 Update Sincerely, CIA, CFE, CGRP, COSO City Internal Auditor 2 1 P a g e