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Home My WebLink About10/22/2013 - Regular Minutes - City Council - Audit Committee 114 CITY OF COI .I FGE STATION Mayor Home ofTexasA&M University' Council members Nancy Berry Blanche Brick Mayor Pro Tem Jess Fields Karl Mooney Karl Mooney Interim City Manager Julie Schultz Kathy Merrill James Benham Minutes CITY COUNCIL AUDIT COMMITTEE Tuesday, October 22, 2013 at 4:30 pm City Hall Administrative Conference Room 1101 Texas Avenue College Station, Texas 77840 Audit Committee Members Present: Nancy Berry, Mayor Karl Mooney, Councilmember Jess Fields, Councilmember City Staff: Ty Elliott, Internal Auditor Gregory Jeffs, Assistant Internal Auditor Kathy Merrill, Interim City Manager Jeff Kersten, Chief Financial Director Carol Thompson, Budget & Financial Reporting Manager Regular Agenda Item No. 1— 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 Nancy Berry at 4:33 p.m. on Tuesday, October 22, 2013 in the Administrative Conference Room of the City of College Station City Hall, 1101 Texas Avenue, College Station, Texas 77842. Regular Agenda Item No. 2 - Presentation, possible action, and discussion of minutes for the audit committee meeting held on July 23, 2013. MOTION: Upon a motion made and a second, the Audit Committee voted three (3) for and zero (0) opposed, to approve the July 23, 2013 Audit Committee minutes as amended. The motion carried unanimously. Regular Agenda Item No 3 - Presentation, possible action and discussion regarding the City -wide Asset Management Audit. Pulled for future meeting. Regular Agenda Item No 4 - Presentation, possible action and discussion regarding the City Internal Auditor's Fiscal Year 2014 Audit Plan. Ty Elliott presented the Audit Committee with potential audit topics for the fiscal year 2014 audit plan (see Attachment). Due the amount of audit coverage provided over the past five years in Fiscal Services, these audit topics focused more on performance or operational audit work. The Audit Committee selected the following audits to be conducted in the 2014 fiscal year: Library Operations, Insurance Benefit Eligibility, Facilities, and Change Orders. Regular Agenda ItemNo. 5 - Presentation, possible action, and discussion regarding future agenda items. The Audit Committee requested an update of the progress audit work related to automated auditing and scripts. Ty Elliott, Internal Auditor explained that this work will be put on hold until the City's new ERP system is implemented. Regular Agenda ItemNo. 6 - Adjourn. Hearing no objections, Mayor Berry adjourned the meeting at 5:17 p.m. on Tuesday, October 22, 2013. c=: lAPC.AA. , c4-4- l Nancy Berry, Mayor ATTEST: S , ■ i i.:I/ Are Tany: McNir , Deputy City Secretary CITY OF COI 1.F.GE STATION Home of Texas AdM University City Internal Auditor's Office City of College Station College Station, Texas 77482 ph. 979.764.6269 City of College Station Audit Committee Nancy Berry, Mayor Karl Mooney, Mayor Pro Tem Jess Fields, Council Member October 22, 2013 Dear Audit Committee: In preparing this list of potential audit topics, we identified topics that were likely to provide the greatest overall benefit to the city. These potential topics were developed after taking the following actions: • Discussing audit possibilities with city staff. • Reviewing potential findings that were identified in previous audit reports that fell out of the scope of those reviews. • Reviewing audits performed in other Texas municipalities. (With a focus on audit topics that have not received audit coverage in our city.) Potential Audit Topics Library Operations: The Larry J. Ringer Library facility is overseen by the City's Parks and Recreation Department. This facility is operated in collaboration with the City of Bryan, which provides staffing for the College Station facility. The Library FY14 Proposed Budget is $1,085,099. The city's ILA with Bryan authorizes the city to audit library services. Potential audit areas include: fraud controls, performance effectiveness, and cost - efficiency. Additionally, there are two particular reasons why an audit of library operations may be timely. First, a fraud was recently discovered at the Bryan library. Second, the College Station library has about $8 million (from the 2008 General Obligation Bond) which is to be used for a library expansion. This expansion is still in the planning stages; therefore, an audit of the library in the upcoming fiscal year would occur before a significant amount of the expansion money has been spent. Operational audits of municipal library systems are not uncommon among local government auditors. For example, the City of Houston has conducted three library related audits in the last five years. Estimated Time to Complete: 4 -5 months P.O. BOX 9960 • 1101 TEXAS AVENUE • COLLEGE STATION • TEXAS • 77842 TEL. 979.764.3500 • FAX. 979.764.6377 cstx.gov City of College Station Page 2 of 3 Insurance Benefit Eligibility: Dependent populations are always in a state of change. According to ACS benefits Services, marriage, divorce, childbirth, adoption and regulatory changes cause 5% to 15% of employees to have dependents enrolled who no longer comply with the organization's eligibility definition. ACS benefits Services estimates that an organization with 500 employees could reduce future claim costs by as much as $125,000 a year. Estimated Time to Complete: 2 -3 months Citizen Resolution Processes: Currently, the city utilizes a number of different means for identifying citizens' concerns such as see - click -fix, social media (e.g. Facebook and Twitter), the city website, or phone calls made to staff in various departments. Identifying an issue is only the first step to mitigating a citizen concern. These issues must then be efficiently relayed to the appropriate city staff so that effective corrective action can be taken. Some cities implement customer relationship management systems that function as city-wide intake systems for all customer service requests. These systems are designed to enhance customer service by improving communications, data tracking, and reporting. For example, the City of San Antonio implemented a city -wide customer intake system in 2011 that cost approximately $893,000 with a total cost including implementation of $3.5 million. The San Antonio Auditor's Office conducted a 2013 audit of this system. Estimated Time to Complete: 4 -5 months Facilities: The 2012 CAFR states that the city owns $29,378,320 worth of buildings and building improvements. Most facilities audits investigate security risks, safety risks, facility adequacy (both current and future), contingency plans, or facility maintenance. Estimated Time to Complete: 2 -3 months Inventory: The 2012 CAFR states that the city owns $9,126,983 worth of inventories. An inventory audit in the city would likely begin with an audit of the inventorying processes throughout the city. These initial findings could then be used to help focus additional inventories audit work. Estimated Time to Complete: 3-4 months Work Order System: Closely related to inventory, is the City's processes and procedures related to work orders. City departments that perform some type of maintenance function typically use some form of work order system. An audit of work order practices could be useful to determine if: (1) work order requests are being reviewed and properly approved, (2) materials inventory agrees to a physical count, (3) work orders are being completed in a timely manner, or (4) users access of the work order /inventory system is limited to appropriate staff. Public Works, College Station Utilities, Utility Customer Service and Information Technology all utilize work order system. Estimated Time to Complete: 3-4 months P.O. BOX 9960 • 1101 TEXAS AVENUE • COLLEGE STATION • TEXAS • 77842 '1'1F:1 . 979.764.3500 • FAX. 979.764.6377 cstx.gov City of College Station Page 3 of 3 Change Orders: A change order may be required if, after a contract has been executed, changes in plans or specifications for the contract are necessary. Change orders present an area of risk to the city for two primary reasons: (1) the city risks overpaying for services because change orders occur after the competitive bidding for a project has already closed, and (2) when change orders are denied, the city risks purchasing inadequate goods or services. Estimated Time to Complete: 3-4 months Hotel Occupancy Tax (HOT): The City of Austin's Auditors Office has conducted 10 HOT audits since 2005. These reviews have resulted in identifying $2 million owed to the City of Austin by hotels in their jurisdiction. The City of Dallas published two HOT audits —one in 2011 and another in 2002. However, it should be noted that the City of College Station currently has a contract with an external auditor to provide hotel occupancy audits and analysis; therefore, HOT is an area that already has some audit coverage. Estimated Time to Complete: 3 -4 months Non -Audit Services Hotline Investigations: Hotline investigations are not specifically scheduled, but occur as the reports come in. Hotline reports are among the most important ways that the city can learn about frauds that may be occurring. Estimated Time: Last year approximately 200 work hours (5 weeks) were dedicated to hotline investigations. Enterprise Resource Planning System (ERP): The city is currently in the process of upgrading its ERP system. In order to help ensure that proper internal controls are in place when the new ERP system is implemented, the Internal Auditor's Office needs to be involved. Sincerely, c7jeoge ems' Ty L Elliott City Internal Auditor telliott@cstx.gov P.O. BOX 9960 • 1101 TEXAS AVENUE • COLLEGE STATION • TEXAS • 77842 TEL. 979.764.3500 • FAX. 979.764.6377 cstu.gov