Audit Committee

MINUTES Audit Committee of Roanoke City Council Location: Council Conference Room Noel C. Taylor Municipal Building, Room 451 South Date: December 14, 2016 Time: 4:00 p.m. to 4:53 p.m. Attendees: Audit Committee Member Present (Y/N) William Bestpitch (Chair) Y Anita Price (Vice-Chair) N Michelle Dykstra Y Sherman Lea (ex-officio) N Tasha Burkett, Financial Systems Auditor Dan Callaghan, City Attorney Rob Churchman, Partner, Cherry Bekaert Jeremy Croy, Senior Auditor Barbara Dameron, Director of Finance Donald Deeds, Manager, Cherry Bekaert Drew Harmon, Municipal Auditor Amelia Merchant, Director of Management and Budget Chris Morrill, City Manager Dawn Mullins, Assistant Municipal Auditor Wayne Parker, Senior Auditor Evelyn Powers, Treasurer Rene Satterwhite, Accounting Supervisor Cari Spichek, Senior Auditor Sherman Stovall, Assistant City Manager for Operations Andrea Trent, Assistant Director of Finance 1. Call to Order: Mr. Bestpitch called the meeting to order at 4:00 p.m. 2. Approval of the Minutes from the September 7th Meeting: Mr. Bestpitch asked if there were any corrections to the minutes. Hearing none, the minutes were received and filed as written. December 14, 2016 Page 2 of 5 3. Presentation of Audit Results for the June 30, 2016, Comprehensive Annual Financial Reports: Rob Churchman noted that auditing standards require certain communications with those responsible for governance. He provided members of the committee a printed presentation covering the required communications as well as the results of the audit. Mr. Churchman began walking the committee through the presentation, noting that the City received an unmodified opinion on its financial reports. He then asked Mr. Deeds to brief the committee on the audit adjustments identified during the audit and presented on page eleven. Mr. Deeds discussed issues related to revenue recognition in the parking fund, as well as recording of cash and accounts receivables. The auditors concluded that revenue had been recognized in the same manner for many years and that the net effect to this year’s statements was immaterial. Mr. Deeds referred the committee to the management letter from Cherry Bekaert. In the letter, the auditors recommended the City review system administration roles in the Advantage system and address any potential conflicting roles and responsibilities. Mr. Churchman certified to the committee that Cherry Bekaert is independent of the City and its officers, as required by auditing standards. He then reviewed future accounting pronouncements that might impact the City’s financial reporting. There were no questions from the committee. Mr. Bestpitch commented that the City has a long history of award winning financial accountability and thanked Mr. Churchman and Mr. Deeds for their work on the audit. He congratulated all of the departments responsible for financial management and reporting at the City and thanked them on behalf of City Council for their efforts. Mr. Harmon noted that Roanoke City Public Schools is a component unit of the City and also received an unmodified opinion on its financial reports. He recommended that all members of the Audit Committee read the school CAFR as well as the City CAFR. These documents contain a lot of good information beyond the financial statements. Members of the Audit Committee have a special duty to read and understand these documents. The committee received and filed Cherry Bekaert’s presentation. 4. City Council Expenditures for the Year Ending June 30, 2016: Mr. Harmon noted that the audit is essentially a review of compliance with the travel policy and budget. There were no violations noted, other than approvals of fund transfers between council members’ units. The policy requires approval by a simple majority of Council Members before transferring funds. This approval has often been given verbally or by email. In order to provide better documentation, the City Clerk is developing a form that can be used on Council days to document approvals. December 14, 2016 Page 3 of 5 Mr. Bestpitch commented that the Clerk and her staff do an excellent job of helping Council Members comply with the policies. The transfer form is one last piece helping to make sure everyone is in compliance. The report was received and filed without objection. 5. LEAN Project – Streamline Work Paper Development: Mr. Harmon recognized Cari Spichek for her participation in the City’s LEAN initiative, which included an individual project this year. The work paper development project will improve communication in the office, make review more efficient, and require less paper. This should improve productivity, which would mean more audits completed. Mr. Bestpitch noted that we are moving more and more towards a paperless society, which is a good thing. This initiative may provide opportunities to move forward on other projects. The update was received and filed without objection. 6. Hotline Update: Mr. Harmon presented the hotline update for the end of the calendar year. The pending items listed are being investigated and no conclusions have yet been reached. The update was received and filed without objection. 7. Other Business: APA Report: Mr. Harmon asked Ms. Powers for any comments she would like to make. She explained how the process for remitting Sheriff’s fees to the State had been established many years ago and had worked well until the State began changing their processes. When the Treasurer’s office did not receive an electronic deposit from the state in August, the staff contacted the courts and were told the State had changed its process. The money was being deposited with Finance and the Treasurer’s Office was not receiving the DC14 form that queue the Treasurer to make a payment to State. The money remained in the City’s bank account until it was noted by the State Auditor. Ms. Dameron noted that the Treasurer’s Office was not included in planning meetings when the accounts receivable system was changed. Those involved in planning did not understand the significance of the DC 14 form. This is a lesson learned for future implementations. Ms. Powers noted that the money has been paid to the State and that the City was not penalized. December 14, 2016 Page 4 of 5 Mr. Bestpitch asked if the City could pay the state electronically. Ms. Powers responded that the State will accept wires, but the cost is $30 per wire transfer. Employees from the Treasurer’s Office, Finance and all three Courts have met and developed procedures to comply with the State’s requirements. DMV Select: Ms. Powers briefed the Committee on her work with the Virginia Department of Motor Vehicles (DMV) to become a DMV Select Office. Once finalized, the Treasurer’s Office will be able to register vehicles, issue tags and handicap placards, and perform other select DMV services. The State provides the equipment and training, as well as sharing revenue with the City. The City Attorney is reviewing the agreement with the DMV and the new service should be in place on February 21, 2017. The hours of operation will be Monday through Friday, 8:00 AM to 4:30 PM. Mr. Callaghan noted that the DMV Select offices had to be open a minimum of 35 hours per week. Mr. Bestpitch asked how the service will be publicized. Ms. Powers responded that the DMV would be taking care of and paying for marketing materials. The only expense to the Treasurer’s Office was for a new printer costing approximately $700. The City will be paid 4.5% of every dollar received, up to $500,000 with the Treasurer’s Office keeping 80% of the funds and 20% going to City general fund. Ms. Dykstra asked if any additional staff would have to be hired. Ms. Powers responded they would not need to hire additional staff. The office currently has five cashiers and should be able to manage the increased work. Mr. Bestpitch noted that this should be very convenient for the public. Ms. Powers agreed and noted that taxpayers who have a DMV hold can now pay the taxes and have the hold released by the City, saving one, and in some cases two trips to the DMV. Ms. Dykstra asked if DMV Select Services will have a separate window. Ms. Powers responded that it would not, that customers could come to any window. LEAN Project – Rental Inspection Program: Mr. Harmon briefly discussed Cari Spichek’s work as part of a LEAN project team looking at the City’s rental inspection program. There are about 5,000 rental units in the inspection program. The goal was to manage inspections so that approximately 1,250 are completed annually. This would improve compliance with the requirement to be inspected every four years. Team members received training on LEAN tools as part of the project. The team successfully completed the project and will present its findings to management on December 19. New Staff: Mr. Harmon introduced Jeremy Croy, Senior Auditor, who began in October. Mr. Croy discussed his background and prior work with the Committee. Committee members and Mr. Morril welcomed him to the City. December 14, 2016 Page 5 of 5 Mr. Bestpitch wished everyone a joyous holiday season. Future Audit Committee meetings are scheduled for March 8 and June 7. 8. Adjournment: Mr. Bestpitch adjourned the meeting at 4:53 p.m.