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HomeMy WebLinkAboutMinutes - Minutes - Audit Committee - Meeting Date: 10/3/2019Glendale MINUTES AUDIT COMMITTEE CITY HALL, CONFERENCE ROOM 3A 5850 W. GLENDALE AVE. GLENDALE, ARIZONA 85301 OCTOBER 3, 2019 2:00 P.M. CALL TO ORDER The Chair, Councilmember Hugh called the meeting to order at 3:06 p.m. ROLL CALL Councilmember Hugh announced all members were present. Present: Raymond Malnar, Councilmember Ian Hugh, Councilmember Lauren Tolmachoff, Councilmember Irene Avalos, Member Rusty Simmons, Member Kevin Phelps, City Manager, Ex -officio Non-voting Member Lisette Camacho, Interim Budget and Finance Director, Ex -officio Non-voting Member Also Present: Rob Sweeney, Interim Internal Audit Program Manager Jean Moreno, Director, Department of Organizational Performance James Gruber, Deputy City Attorney INTRODUCTION OF THE NEWLY APPOINTED MEMBERS Ms. Avalos and Mr. Simmons, the two newly appointment public members were introduced themselves. 4. CITIZEN COMMENTS No comments from the public. APPROVAL OF THE MINUTES Councilmember Tolmachoff motioned to approve the Audit Committee minutes of the July 16, 2019 meeting as written. Councilmember Malnar made the second. Motion carried unanimously. 6. AUDIT PROGRAM MANAGER HIRING UPDATE Mr. Sweeney announced the City has hired Mr. Emmanuel Ogutu as the Internal Audit Program Manager after a national recruitment search. Mr. Sweeney reported Mr. Ogutu's first day will be on Monday, October 7, 2019, and shared details on his resume and experience. Mr. Phelps stated there were a number of very qualified applicants and Mr. Ogutu was the best fit. AUDIT PROCESS Mr. Sweeney stated he will walk through what happens after this body and Council approve an Audit Plan, the Risk Assessment is done, and the contracted auditors and Audit Program Manager execute the Plan. He announced the four major areas of the audit process: planning, field work, reporting, and follow up. He provided a detailed explanation of each of the four major areas. Mr. Sweeney shared information on the planning phase, which included the following highlights: • Holding an opening meeting to go over the audit objectives and providing an estimated timeline of when the audit will be complete. • Introduction of the audit team. •Appointment of the audit liaison. Mr. Sweeney stated during the field work phase, the auditors conduct interviews to gather information on operations, systems, policies and procedures; which may be conducted on site or remotely. He announced an exit meeting with the liaison may be scheduled at the end of the field work phase, at which general findings and conclusions may be shared. Mr. Sweeney provided information on the report phase as including a pre -draft report, draft report, and final report and explained each. Mr. Sweeney's explanation included the following highlights: • The pre -draft is issued to department management. Management may identify any material errors or omissions at this time. •After the closing meeting with City management, a draft report is issued which includes findings, conclusions, and recommendations. • Based on the ordinance that was approved, the Audit Committee will forward the draft report to the City Manager, who distributes as appropriate to City management. • City management is to formally respond to recommendations within 15 calendar days. *The final report is issued to management and the Audit Committee and includes the management response to the recommendations. The Audit Committee sends the full report to City Council within 30 days of receipt. • Anything in draft form is to remain in confidence until the final report is issued. • When draft reports are discussed in this body, it will be done in Executive Session. • The final report will be issued formally out to the public on the City's website. Sensitive or confidential items may be redacted. Examples of sensitive information were provided. Mr. Sweeney said the follow up phase was a periodic review by the auditor to ensure the audit recommendations and management responses have been implemented. He stated the periodic report would then come to the Audit Committee and to City management indicating the status of the items to be resolved. Mr. Sweeney concluded his presentation. Councilmember Tolmachoff asked if the liaison was appointed by the director of each department. Mr. Sweeney replied in the positive and explained the liaison is really in place so as to not burden the director of each department with day to day questions. Councilmember Tolmachoff asked if the pre -draft was delivered in written form or notes of a conversation. Mr. Sweeney explained that the pre -draft was a formal report, which is issued to City management and looks the same in the draft level if nothing changed from pre -draft to draft. He noted pre -draft does not include management response. Mr. Simmons had a question about audit timelines and exceptions to the timelines. Mr. Sweeney explained at the opening meeting, the auditors would establish the timeline and state the audit would take a certain number of hours over a certain amount of time and any exceptions would be documented Mr. Simmons asked about the follow-up process in the instance if there were egregious or a high number of findings. Mr. Sweeney indicated if a large number of items or high-risk items were found, they could be included not only in the audit follow-up phase, but in a work plan or future audit plan. Mr. Phelps inquired as to what was envisioned in management's formal response. Mr. Sweeney replied that it must be in writing, not verbal, and would follow a template of the report that the audit program would establish, including indication of concur/non-concur. Mr. Sweeney summarized the response was written and appended and becomes part the audit report. Mr. Phelps stated management may concur with the findings based on the report, but then finds that it can no longer concur with that recommendation based on new information, such as budgetary constraints. Mr. Phelps wondered how management could append concur/not concur or management response. Mr. Sweeney replied the amendment to the management response would be included the follow-up report. He said the response would be that management still concurred but could not complete the recommendation in the timeline due to circumstances. Mr. Phelps commented that implementation of recommendations can sometimes be short or sometimes take a period of years. He recommended a method of updating Council and the public on the status of completion of recommendations, such as a web portal. Ms. Camacho stated the follow-up is usually accompanied by another report and if this would still be done. Mr. Sweeney replied that the follow-up report would be a stand-alone report on all items to follow up at the time. He added that if there was something material enough to where a recommendation changed from concur to not -concur, the process would have to be looked at to determine if the report will be re -issued because the public thought the problem would be fixed and the timeline or response may now have been changed. 8. COMMITTEE COMMENTS AND SUGGESTIONS Mr. Phelps asked if the Committee should adopt the audit process or if it was a guiding principle for the Committee to work under. Mr. Sweeney replied that it was a guiding principle and it was taken out of a draft City of Glendale policy, which is being updated. He added this was merely a section of a much larger policy. Mr. Phelps asked for the current status of developing the audit plan and risk assessment, including the timeline and steps for which the Committee should be prepared. Mr. Sweeney anticipated bringing an Audit Plan to Council in November for approval, which would be executed through the end of June. Mr. Sweeney has met with all of the department directors and has looked at past audit work and trending audit concerns to create a risk assessment. He stated that he could bring an update to the next meeting on the Audit Plan status. Mr. Phelps asked about the risk assessment and compliance accountability audits versus performance-based audits. Mr. Sweeney provided a detailed explanation of the how the two different types of audits would be looked at in the audit plan. He added that the audit program should be a balanced plan. Councilmember Malnar asked for a matrix to show the entire gamut of audits. Mr. Sweeney stated that he has no less that 55 central audit subjects with various levels of risk both from a compliance and performance aspect, but all cannot be done based on staffing and external service costs. He stated if there was a particular audit the Committee was interested in that the program was not recommending, the Committee could move to look at the particular audit in light costs or value to see if could be done during the current fiscal year. Councilmember Tolmachoff wondered who determined how much risk there was in each of the 55 audits. Mr. Sweeney replied there is art and science in this determination. He relayed he met with the department subject matter experts, executive teams, and management teams to identify the different areas of risk. Mr. Phelps stated that there could be items of high risk, that have low impact, such as $25.00 petty cash to which many people may have access. He added that there are also items of low risk, that could be high impact; which is why it is both art and science. Mr. Simmons inquired about the process for the Committee to re-evaluate the Audit Plan, noting that over the year, there could be a change in rules and regulations or something that could impact the plan. Mr. Sweeney responded if there was an approved Audit Plan and something surfaced that needed to be looked at, the Committee would be informed there would be deviation from the approved plan to focus on the particular area of need. 9. NEXT MEETING Mr. Sweeney announced the ordinance of the body states the Committee will meet at least quarterly if there is business and suggested on setting the next meeting date. Councilmember Malnar recommended November 7th or the first Thursday of the month. Councilmember Tolmachoff suggested 2:00 p.m., if that would work for the public members. No opposition was voiced. Mr. Sweeney announced that staff will use Share Point for sharing the meeting documents with the members. Ms. Avalos asked if there was an adopted charter for this Committee. Mr. Sweeney replied in the negative and added there are codified roles and responsibilities in the Committee ordinance and he will forward the document. Councilmember Malnar asked if an additional meeting date should be set. Mr. Phelps suggested continuing with the first Thursday of each month at 2:00 p.m. Mr. Sweeney recommended scheduling out for the next six months to hold the calendar. The next meeting will be held on November 7, 2019 at 2:00 p.m., in conference room 3A, located at 5850 West Glendale Anenue, Glendale, Arizona, 85301. 10. MOTION TO CALL FOR AND ENTER INTO EXECUTIVE SESSION Councilmember Tolmachoff motioned to enter into Executive Session. Councilmember Malnar made the second. The motion carried unanimously 11. EXECUTIVE SESSION Session was held. 12. ADJOURNMENT The Chair, Councilmember Hugh confirmed there were no further comments and adjourned the meeting at 4:26 p.m. The Audit Committee meeting minutes of October 3, 2019 were submitted and approved this 7th day of November 2019. Emmanuel Ogutu Internal Audit Program Manager