Audit Committee

MINUTES Audit Committee of Roanoke City Council Location: Council Conference Room Noel C. Taylor Municipal Building, Room 451 South Date: March 8, 2017 Time: 4:05 p.m. to 5:19 p.m. Attendees: Audit Committee Member Present (Y/N) William Bestpitch (Chair) Y Anita Price (Vice-Chair) Y Michelle Dykstra Y Sherman Lea (ex-officio) N Ray Ferris, Council Member Tim Jones, Police Chief Tasha Burkett, Financial Systems Auditor Dan Callaghan, City Attorney Jeremy Croy, Senior Auditor Barbara Dameron, Director of Finance Drew Harmon, Municipal Auditor Chris Morrill, City Manager Dawn Hope Mullins, Assistant Municipal Auditor Wayne Parker, Senior Auditor Evelyn Powers, Treasurer Sherman Holland, Commissioner of the Revenue Greg Emerson, Deputy Commissioner of the Revenue Terra Heavner, Tax Compliance Supervisor Jody Lawson, Payroll and Collections Administrator Cari Spichek, Senior Auditor Sherman Stovall, Assistant City Manager for Operations Brian Townsend, Assistant City Manager for Community Development 1. Call to Order: Mr. Bestpitch called the meeting to order at 4:05 p.m. 2. Police Cash: The scope of the audit included cash accounts, fees and the property room. The audit determined that cash, fees and property were managed appropriately and in accordance with standard operating March 8, 2017 Page 2 of 4 procedures, except for fees received for verification reports. An employee in the Department of Finance’s Accounts Receivable Office was responsible for collecting cash from the register, entering the money into the accounts receivable system, and depositing the money. This combination of responsibilities enabled her to steal $3,081 over eight months. The employee was terminated and charged with a felony. She has pled guilty to the charges and repaid the stolen funds to the City. A sentencing hearing has been scheduled for April 25, 2017. The Director of Finance confirmed that changes have been made to ensure all funds are deposited in a timely manner and are properly reported. The audit report was received and filed without objections. 3. Tax and Treasury Project Update: Ms. Mullins briefed the committee on the status of the various components of the tax and treasury project. The project has three (3) primary components: 1) Miscellaneous Accounts Receivable 2) Local Trust Taxes 3) New Tax System Mr. Bestpitch asked if the accounts receivable employees in the Department of Finance would be transferring to the Treasurer’s Office in FY18. Ms. Mullins referred the committee to page four (4) of the presentation noting the positions will all be moved to the Treasurer’s office by July 1, 2017. The Treasurer’s Office is working with the Department of Finance to schedule Accounts Receivable refresher training for employees throughout the City who are responsible for entering invoices into the system. Municipal Auditing will perform a turnover audit prior to July 1 to validate the completeness and condition of the accounts receivable records. Local Trust Taxes Two (2) full time positions are expected to be transferred from Finance to the Commissioner of the Revenue’s Office on July 1. One is vacant and the incumbent in the other position will vacate the position when it transfers. Mr. Bestpitch asked if this meant the Commissioner will be hiring these positions after July 1, to which Ms. Mullins responded he would. She noted that knowledge transfer in this area is a concern at this time. In response to this concern, one of the business tax auditors in the Commissioner’s Office will help process trust tax returns in March. Learning the trust tax system is critical given the age of the system and absence of vendor support. March 8, 2017 Page 3 of 4 Ms. Dykstra asked if there were plans to replace the system. Ms. Mullins confirmed that it would be replaced with the implementation of a comprehensive revenue system. However, the current system will need to function for 18 to 24 months while the new system is installed. Ms. Powers noted that her office and the Commissioner’s office will be working in the local trust tax system, which may increase the stress on the system and the risks. Municipal Auditing will perform a turnover audit on the local trust tax data prior to July 1. The primary objective of the audit will be to determine if the data is complete and reliable. The committee was briefed about the plans to renovate offices in order to accommodate the employees transferring to the Treasurer’s and Commissioner’s offices. Due to deadlines and budget constraints, a comprehensive redesign of the second floor lobby will not be possible at this time. Written agreements that clarify responsibilities of the elected officers and the city, cooperation between all parties, and compensation are being developed. Existing agreements were signed in 2003 and are in need of significant updating to reflect planned changes. Compensation is being analyzed using pay data from the Virginia Compensation Board and payroll data within the City. Ms. Dykstra asked if there may be a need for additional compensation after these changes occur. Mr. Harmon replied that it should be considered. Ms. Dykstra asked if compensation changes were included in the budget process; Mr. Harmon responded that changes to compensation were not addressed in the proposed budget. Ms. Dykstra asked the Treasurer and Commissioner of the Revenue how their employees are feeling about the changes. They thanked Ms. Dykstra for asking and noted that they expect it will be stressful and could impact morale. Ms. Price noted how encompassing this initiative will be and asked that Council’s appreciation be conveyed to everyone involved. The costs to license and install a new tax system are expected to total approximately $1.45 million. The transition to a comprehensive tax management system will involve the conversion of at least seven (7) legacy systems. Ms. Mullins briefed the committee on the steps taken to date to evaluate the preferred system. The committee discussed the various aspects of system implementation. The update was received and filed without objection. 4. Auditing Budget Briefing: The committee reviewed the proposed auditing budget for fiscal year 2017/18, including changes in hotline services that helped to reduce expenditures. March 8, 2017 Page 4 of 4 The briefing was received and filed without objection. 5. Other Business: Tasha Burkett was recognized for recently attaining her certification as an information systems auditor. The certification required several years of experience working with information systems and passing a comprehensive four part exam. 6. Adjournment: Mr. Bestpitch adjourned the meeting at 5:19 p.m.