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HomeMy WebLinkAbout12/15/2025 - Regular Minutes - City Council - Audit CommitteeMayor John Nichols Mayor Pro Tem Mark Smith City Manager Bryan C. Woods 4-ff" CITY OF COLLhGE. STATION Home of Texas A&M University' Councilmembers William Wright David White Bob Yancy Melissa Mcllhaney Scott Schafer Minutes CITY COUNCIL AUDIT COMMITTEE IN -PERSON WITH TELECONFERENCE PARTICIPATION Monday, December 15th, 2025, at 1:30 pm Audit Committee Members Present: John Nichols, Mayor Melissa Mcllhaney, Councilmember (Left at 3:09 pm) Mark Smith, Mayor Pro Tem (Arrived at 1:44 pm) Michelle McMillin, Committee Member Nicolo Logalbo, Committee Member (Left at 2:30 pm) City Staff: Ty Elliott, City Internal Auditor Matthew Ragaglia, Program Auditor Bryan Woods, City Manager Jeff Capps, Deputy City Manager Jeff Kersten, Assistant City Manager Jennifer Prochazka, Assistant City Manager Adam Falco, City Attorney Michael DeHaven, Assistant Finance Director 1. Call meetine to order and Announce a Ouorum is Present. With a quorum present, the Audit Committee of College Station was called to order by Mayor Nichols at 1:32 pm on December 15, 2025, in the 1938 Executive Conference Room of the City of College Station City Hall. 2. Hear Visitors There were no hear visitors. 3. Agenda Items 3.1 Presentation, discussion, and possible action of minutes for the City Council Audit Committee meeting held on September 8. 2025. MOTION: Upon a motion made by Committee Member Michelle McMillin and a second by Committee Member Nicolo Logalbo the Audit Committee voted four (4) for and zero (0) opposed to approve the September 8, 2025, Audit Committee minutes. The motion carried unanimously. 3.2 Presentation, discussion, and possible action regarding the review and approval of the Internal Audit Charter. Ty Elliott presented the draft Internal Audit Charter, noting that the Red Book requires a formal charter that clearly defines the internal audit activity's purpose, authority, and responsibilities, with approval from both the Audit Committee Chair and senior management. Senior management approval is required to demonstrate organizational acknowledgment of internal audit's role, ensure alignment with management responsibilities, and formally recognize the authority and access needed for the internal audit function to operate independently and effectively. Committee Member Michelle McMillin, who works in a Red Book —compliant audit environment, compared the draft charter to the Institute of Internal Auditors' model charter and indicated that the document was adequate and appropriately aligned with professional standards. MOTION: Upon a motion made by Committee Member Michelle McMillin and a second by Committee Member Nicolo Logalbo the Audit Committee voted five (5) for and zero (0) opposed to approve the Internal Audit Charter. 3.3 Presentation, discussion, and possible action regarding revisions to the City's Fraud Response Plan. Ty Elliott requested direction from the Audit Committee regarding potential revisions to the City's fraud response plan. He explained that the current process involves the Internal Auditor, in coordination with the City Manager's Office and City Attorney's Office, investigating allegations of fraud involving employees up to the point of predication, after which matters are referred to the College Station Police Department; however, a procedural gap exists when allegations involve elected or appointed officials. Ty noted that best practices observed in other jurisdictions recommend engaging external forensic accountants or investigators. The Audit Office has begun researching ways to incorporate best practices through discussions with other city auditors, audit firms, Finance, and the City Manager's Office. The Audit Committee provided direction to continue developing options and to bring potential approaches forward for discussion at a future Audit Committee meeting. 3.4 Presentation, discussion, and possible action regarding opportunities to enhance the visibility and public engagement of the Internal Audit Office. Ty Elliott presented several options to enhance the visibility and understanding of the internal audit function, developed in response to feedback received during his evaluation by City Council. He noted that these options were informed through collaboration with other city auditors and the City's Public Communications Department, and he requested the Audit Committee's direction on which approaches should be pursued. The Audit Committee gave direction to perform the following outreach initiatives: appearing on What's Up CS?, a program hosted by the City's Public Communications Department; distributing Audit Committee materials to the full Council via a shared Dropbox; providing Council updates following Audit Committee meetings to inform Council of audit reports presented to the Committee; meeting with City Council in executive session twice annually to provide progress updates; and participating in select public -facing activities, including social media engagement, community events, I Heart CS, and other City communication efforts. 3.5 Presentation, discussion, and possible action regarding the Audit of the Drainage Utility Fee. MOTION: Upon a motion made by Mayor Pro Tem Mark Smith and a second Committee Member Michelle McMillin the Audit Committee voted four (4) for and zero (0) opposed to accept the Audit of the Drainage Utility Fee. 3.6 Presentation, discussion, and possible action regarding the Audit of Payroll Superuser Governance & Activity Oversight. This item was tabled and deferred for presentation, discussion, and possible action at a future Audit Committee meeting. The item is tentatively scheduled to be brought forward at the Audit Committee meeting planned for March 24, 2026. 3.7 Presentation, discussion. and possible action on updates and proposed amendments to the Fiscal Year 2026 Audit Plan. Ty Elliott provided an overview of the initial FY26 Audit Plan, highlighting the planned timing and focus of several key engagements. The discussion emphasized the Fleet Management audit scheduled early in the fiscal year, the Capital Improvement Projects audit planned for later in the year due to its scope and complexity, and ongoing efforts to work with ThirdLine to develop a scheduled audit and continuous monitoring program to enhance data -driven oversight and audit efficiency. Ty Elliott then outlined the Modified FY26 Audit Plan and the rationale for the proposed adjustments to audit timing and focus. During the survey phase of the Fleet Management audit, the audit team identified the ongoing installation of dash cameras, which are expected to provide data related to driver safety and vehicle utilization; as a result, fieldwork is proposed to be rescheduled to the summer to allow Fleet Services sufficient time to collect meaningful and reliable data. In addition, preliminary planning for the Capital Improvement Projects audit identified a potential need for external technical expertise for certain subject -matter areas, prompting a request to pursue a service -level agreement as part of the upcoming budget process. In the interim, audit resources are being directed toward the Red Book transition, collaboration with ThirdLine to develop an agile and scheduled audit process, and research into updates to the City's fraud response plan. Councilmember Melissa McIlhaney inquired about the potential for an audit related to how City ball fields are scheduled, citing interest in field usage, revenue generation, equity in the allocation of field time, maintenance costs, and opportunities for process improvement. Ty Elliott explained that if a full audit is contemplated, additional clarity would be needed regarding desired timing, and that adding a new engagement to the Audit Plan would require Audit Committee approval; he further noted that, if a significant risk were identified, expedited consideration through Chair approval could be assessed. As an alternative, Ty outlined options for obtaining more timely information, including data collection by the City Manager's Office or a limited -scope audit focused on validating the accuracy and completeness of information used for Council decision -making, with Councilmember McIlhaney expressing the interest in this hybrid approach before departing early due to another commitment. The remaining members —Mayor John Nichols, Mayor Pro Tem Mark Smith, and Committee Member Michelle McMillin —provided guidance to proceed with the modified audit plan and allow the City Manager's Office to move forward with data collection, with the understanding that potential assurance or advisory services of the audit function in regards to this topic could be discussed at a later date if warranted. 4. Discussion and possible action on future agenda items. There were no future agenda items discussed. 5. Adjourn. There being no further business, the Mayor adjourned the meeting at 3:20 pm on Monday, December 15, 2025. ATTEST: Kimberly A. Di ey, Records Management dministrator ohn Nichols, Mayor Internal Audit Charter for the City of College Station Purpose The purpose of the internal audit function is to strengthen the City of College Station's ability to create, protect, and sustain value by providing the City Council, management, and the public with independent, risk -based, and objective assurance, advice, insight, and foresight. The internal audit function enhances the City of College Station's: • Successful achievement of its objectives. • Governance, risk management, and control processes. • Decision -making and oversight. • Reputation and credibility with its stakeholders. • Ability to serve the public interest. The City of College Station's internal audit function is most effective when: • Internal auditing is performed by competent professionals in conformance with the IIA's Global Internal Audit StandardsTM, which are set in the public interest. • The internal audit function is independently positioned with direct accountability to the City Council. • Internal auditors are free from undue influence and committed to making objective assessments. Commitment to Adhering to the Global Internal Audit Standards The City of College Station's internal audit function will adhere to the mandatory elements of The Institute of Internal Auditors' International Professional Practices Framework, which are the Global Internal Audit Standards and Topical Requirements. The City Internal Auditor will report at least annually to senior management, the Audit Committee, and the City Council regarding the internal audit function's conformance with the Standards, which will be assessed through a quality assurance and improvement program. Mandate Authority The City of College Station's internal audit function mandate is found in Section 30 of the City of College Station's City Charter, which states "The City Council shall appoint an officer of the City to be the City Internal Auditor, who may be removed from office by the Council. The City Internal Auditor shall carry out the audit functions and shall perform such other duties assigned by the City Council. The City Internal Auditor shall have the power to appoint an assistant or assistants, if they deem necessary, subject to the approval of and at such compensation as may be fixed by the City Council; and such assistant or assistants may be removed from office by the City Internal Auditor." The term "City Internal Auditor" referenced in Section 30 of the City of College Station's City Charter is the chief audit executive for the City of College Station. The internal audit function's authority is created by its direct reporting relationship to the City Council. Such authority allows for unrestricted access to the City Council. The City Council authorizes the internal audit function to: • Have full and unrestricted access to all functions, data, records, information, physical property, and personnel pertinent to carrying out internal audit responsibilities. Internal auditors are accountable for confidentiality and safeguarding records and information. • Allocate resources, set frequencies, select subjects, determine scopes of work, apply techniques, and issue communications to accomplish the function's objectives. • Obtain assistance from the necessary personnel of the City of College Station and other specialized services from within or outside the City of College Station to complete internal audit services. Independence, Organizational Position, and Reporting Relationships The City Internal Auditor will be positioned at a level in the City of College Station that enables internal audit services and responsibilities to be performed without interference from management, thereby establishing the independence of the internal audit function. The City Internal Auditor reports functionally to the City Council and administratively to the Mayor. The Mayor also serves as the Chair of the Audit Committee, through which the City Council exercises its functional oversight of the Internal Audit Office. This positioning provides the organizational authority and status to bring matters directly to senior management and escalate matters to the City Council, when necessary, without interference and supports the internal auditors' ability to maintain objectivity. The City Internal Auditor will confirm to the City Council, at least annually, the organizational independence of the internal audit function. If the governance structure does not support organizational independence, the City Internal Auditor will document the characteristics of the governance structure limiting independence and any safeguards employed to achieve the principle of independence. The City Internal Auditor will disclose to the Mayor, Audit Committee and/or City Council any interference internal auditors encounter related to the scope, performance, or communication of internal audit work and results. The disclosure will include communicating the implications of such interference on the internal audit function's effectiveness and ability to fulfill its mandate. Changes to the Mandate and Charter Circumstances may justify a follow-up discussion between the City Internal Auditor, senior management, the Audit Committee, and the City Council on the internal audit mandate or other aspects of the internal audit charter. Such circumstances may include but are not limited to: • A significant change in the Global Internal Audit Standards. • A significant reorganization within the organization. • Significant changes in the City Internal Auditor, City Council, and/or senior management. • Significant changes to the City of College Station's strategies, objectives, risk profile, or the environment in which the City of College Station operates. • New laws or regulations that may affect the nature and/or scope of internal audit services. Audit Committee Oversight See College Station Code of Ordinances Section 2-95 — Creation of an Audit Committee. City Internal Auditor Roles and Responsibilities Ethics and Professionalism The City Internal Auditor will ensure that internal auditors: • Conform with the Global Internal Audit Standards, including the principles of Ethics and Professionalism: integrity, objectivity, competency, due professional care, and confidentiality. • Understand, respect, meet, and contribute to the legitimate and ethical expectations of the City of College Station and be able to recognize conduct that is contrary to those expectations. • Encourage and promote an ethics -based culture in the organization. • Report organizational behavior that is inconsistent with the City of College Station's ethical expectations, as described in applicable policies and procedures. Objectivity The City Internal Auditor will ensure that the internal audit function remains free from all conditions that threaten the ability of internal auditors to carry out their responsibilities in an unbiased manner, including matters of engagement selection, scope, procedures, frequency, timing, and communication. If the City Internal Auditor determines that objectivity may be impaired in fact or appearance, the details of the impairment will be disclosed to appropriate parties. Internal auditors will maintain an unbiased mental attitude that allows them to perform engagements objectively such that they believe in their work product, do not compromise quality, and do not subordinate their judgment on audit matters to others, either in fact or appearance. Internal auditors will have no direct operational responsibility or authority over any of the activities they review. Accordingly, internal auditors will not implement internal controls, develop procedures, install systems, or engage in other activities that may impair their judgment, including: • Assessing specific operations for which they had responsibility within the previous year. • Performing operational duties for the City of College Station or its affiliates. • Initiating or approving transactions external to the internal audit function. • Directing the activities of any City of College Station employee that is not employed by the internal audit function, except to the extent that such employees have been appropriately assigned to internal audit teams or to assist internal auditors. Internal auditors will: • Exhibit professional objectivity in gathering, evaluating, and communicating information. • Make balanced assessments of all available and relevant facts and circumstances. • Take necessary precautions to avoid conflicts of interest, bias, and undue influence. • Disclose any actual or perceived impairments to independence or objectivity, at least annually. Staff auditors must report such impairments to the City Internal Auditor. The City Internal Auditor must report any impairments of their own independence or objectivity to the Mayor, who serves as Chair of the Audit Committee. Managing the internal Audit Function The City Internal Auditor has the responsibility to: • At least annually, develop a risk -based internal audit plan that considers the input of the Audit Committee and senior management. Discuss the plan with the Audit Committee and senior management and submit the plan to the Audit Committee for review and approval. • Communicate the impact of resource limitations on the internal audit plan to the Audit Committee and senior management. • Review and adjust the internal audit plan, as necessary, in response to changes in City of College Station's functions, risks, operations, programs, systems, and controls. • Obtain approval from the Audit Committee Chair for any significant interim changes to the audit plan. Notify the full Audit Committee and senior management of such changes as they occur. • Ensure internal audit engagements are performed, documented, and communicated in accordance with the Global Internal Audit Standards and laws and regulations. • Present the results of each internal audit engagement to the Audit Committee and senior management during quarterly or as -needed meetings. Report the results of follow-up work —confirming the implementation status of recommendations or action plans —to the Audit Committee, the City Council, and senior management at least annually. • Ensure the internal audit function collectively possesses or obtains the knowledge, skills, and other competencies and qualifications needed to meet the requirements of the Global Internal Audit Standards and fulfill the internal audit mandate. • Identify and consider trends and emerging issues that could impact the City of College Station and communicate to the Audit Committee and senior management as appropriate. • Consider emerging trends and successful practices in internal auditing. • Establish and ensure adherence to methodologies designed to guide the internal audit function. • Ensure adherence to the City of College Station's relevant policies and procedures unless such policies and procedures conflict with the internal audit charter or the Global Internal Audit Standards. Any such conflicts will be, rebolved or documented and communicated to the Audit Committee and senior management. • Coordinate activities and consider relying upon the work of other internal and external providers of assurance and advisory services. If the City Internal Auditor cannot achieve an appropriate level of coordination, the issue must be communicated to senior management and if necessary escalated to the Audit Committee and the City Council. Communication with the Audit Committee and Senior Management The City Internal Auditor will report quarterly or as needed to the Audit Committee and senior management regarding: • The internal audit function's mandate. • The internal audit plan and performance relative to its plan. • Internal audit budget. • Significant revisions to the internal audit plan and budget. • Potential impairments to independence, including relevant disclosures as applicable. • Results from the quality assurance and improvement program, which include the internal audit function's conformance with The IIA's Global Internal Audit Standards and action plans to address the internal audit function's deficiencies and opportunities for improvement. • Significant risk exposures and control issues, including fraud risks, governance issues, and other areas of focus for the Audit Committee that could interfere with the achievement of the City of College Station's strategic objectives. • Results of assurance and advisory services. • Resource requirements. • Management's responses to risk that the internal audit function determines may be unacceptable or acceptance of a risk that is beyond the City of College Station's risk appetite. This risk acceptance could be a result of funding restrictions impacting management's ability to respond to risks toward strategic objectives. Quality Assurance and Improvement Program The City Internal Auditor will develop, implement, and maintain a quality assurance and improvement program that covers all aspects of the internal audit function. The program will include external and internal assessments of the internal audit function's conformance with the Global Internal Audit Standards, as well as performance measurement to assess the internal audit function's progress toward the achievement of its objectives and promotion of continuous improvement. The program also will assess, if applicable, compliance with laws and/or regulations relevant to internal auditing. Also, if applicable, the assessment will include plans to address the internal audit function's deficiencies and opportunities for improvement. Annually, the City Internal Auditor will communicate with the Audit Committee, City Council, and senior management about the internal audit function's quality assurance and improvement program, including the results of internal assessments (ongoing monitoring and periodic self - assessments) and external assessments. External assessments will be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the City of College Station; qualifications must include at least one assessor holding an active Certified Internal Auditorl) credential. Public sector competencies and knowledge as well as knowledge of the Global Internal Audit Standards should be considered when selecting external assessors. Scope and Types of Internal Audit Services The scope of internal audit services covers the entire breadth of the organization, including all of the City of College Station's activities, assets, and personnel. The scope of internal audit activities also encompasses but is not limited to objective examinations of evidence to provide independent assurance and advisory services to the Audit Committee, City Council and management on the adequacy and effectiveness of governance, risk management, and control processes for the City of College Station, The nature and scope of advisory services may be agreed with the party requesting the service, provided the internal audit function does not assume management responsibility. Opportunities for improving the efficiency of governance, risk management, and control processes may be identified during advisory engagements. These opportunities will be communicated to the appropriate level of management. Internal audit engagements may include evaluating whether: • Risks relating to the achievement of the City of College Station's strategic objectives are appropriately identified and managed. • The actions of the City of College Station's officers, directors, management, employees, and contractors or other relevant parties comply with the City of College Station's policies, procedures, and applicable laws, regulations, and governance standards. • The results of operations and programs are consistent with established goals and objectives. • Operations and programs are being carried out effectively, efficiently, ethically, and equitably. • Established processes and systems enable compliance with the policies, procedures, laws, and regulations that could significantly impact the City of College Station. • The integrity of information and the means used to identify, measure, analyze, classify, and report such information is reliable. • Resources and assets are acquired economically, used efficiently and sustainably, and protected adequately. Approved by the Audit Committee at its meeting on December 15, 2025. Acknowledgments/Signatures City J erna! Auditor ic) e/td,_ dit Committee Chair City 14haisager 2-kZS r Date /p-it Date 1 / ?P.C. Date