Audit Committee

MINUTES Audit Committee of Roanoke City Council Location: Council Conference Room Noel C. Taylor Municipal Building, Room 451 South Date: September 5, 2018 Time: 4:04 p.m. to 5:10 p.m. Attendees: Audit Committee Member Present (Y/N) Anita Price (Chair) Y William Bestpitch (Vice-Chair) Y Michelle Dykstra (Member) N Sherman Lea (Ex-Officio) N Drew Harmon, Municipal Auditor Bob Cowell, City Manager Dan Callaghan, City Attorney Brian Townsend, Assistant City Manager for Community Development Sherman Stovall, Assistant City Manager for Operations Amelia Merchant, Director of Finance Dawn Hope Mullins, Assistant Municipal Auditor Tasha Burkett, Information Systems Auditor Cari Spichek, Senior Auditor Brian Pendleton, Senior Auditor Emma Coole, Senior Auditor Dorothy Hoskins, Senior Accountant Amanda Dooley, Accounts Payable Coordinator Eric Charles, Deputy Chief of Police 1. Call to Order: Ms. Price called the meeting to order at 4:04 p.m. 2. Approval of the Minutes from the June 6, 2018 Meeting: The minutes were set aside until a quorum was present. September 5, 2018 Page 2 of 6 3. Police Cash and Fees Audit: In addition to the typical cash funds and fees audited annually, off-duty billings and a staff fund were included in this year’s audit. There were no exceptions noted in relation to the cash funds. The $2,000 emergency fund, which had been inactive for several years, was closed in March 2018. Off-duty Billing: Businesses and other entities can request and pay for off duty officers to provide security. Officers working off duty assignments are in uniform and follow police standard operating procedures. Officers log into dispatch so the department is aware of where they are and their status. The off duty program increases policing capacity because private entities pay for the additional police coverage. Billings totaled almost $500,000 in 2017 with over 11,000 hours worked. Account delinquencies were minimal. Mr. Harmon explained that auditors looked at days when an officer worked more than 15 hours of shift and off-duty time combined. A sample was tested for overlapping time. Exceptions noted were discussed with the persons involved and their supervisors. Explanations were reasonable but indicated a need for better documentation of schedule changes. Verification Reports: Management had implemented their plans from the prior year’s audit. Auditors found that deposits were made timely. The availability of verification reports continued to be an issue. Auditors reviewed ten days (10) of mailed requests and found 61% were returned to the requestor unfulfilled. The cause appears to be with a Department of Motor Vehicles interface. A software upgrade is expected to correct the underlying issue. Deputy Chief Charles anticipates the upgrade will be scheduled for the fall or winter timeframe. Online Service: The City subscribes to an online service that allows customers to download verification reports themselves. The Police Department receives $5 for each download. The contract with the service requires that the City upload all accident reports within 48 hours. Various factors can prevent the City from meeting the 48 hour requirement and we noted several exceptions. The number of reports being uploaded to the site began dropping in late 2016 and have not recovered to previously noted levels. The cause of lower numbers has not been determined. This issue will be reviewed again in the next audit. Deputy Chief Charles commented that work is in progress on some of the items noted. Ms. Price asked if the technology glitches would be addressed. Deputy Chief Charles affirmed that they would. Ms. Price thanked him for being present. Hearing no further questions, the report was received and filed. 4. Council Expenditures Audit: The audit covered expenditures for the year ended June 30, 2018. No exceptions were noted. Overall, disbursements were three percent [3%] below budget. Ms. Price expressed her appreciation. September 5, 2018 Page 3 of 6 Hearing no further questions, the report was received and filed. 5. Clerk of the Circuit Court Audit: The audit covered transactions occurring January 1, 2017 through March 31, 2018, as specified by the Auditor of Public Accounts [APA]. No exceptions or concerns were identified. Ms. Price asked about the agreement with the APA for the audit. Mr. Harmon responded that the agreement dates back to the 1970’s and waives all costs for the audit in return for Municipal Auditing performing a share of the audit work. There were some challenges in scheduling the work and obtaining state reports in recent years. Ms. Price asked how other localities handle the audit. Mr. Harmon was unaware of any that have the same arrangement. He plans to review the agreement with the APA and consider changes going forward. Hearing no further questions, the report was received and filed. 6. Revenue Project Update: Ms. Burkett presented the update. The team completed the remaining Business Process Reviews [BPRs] this quarter, with the exception of miscellaneous accounts receivable. Mr. Bestpitch asked for a description of miscellaneous accounts receivable. Ms. Burkett responded that this would be anything billed by the City that is not a tax. These types of fees are currently billed through the Advantage financial system. Mr. Bestpitch asked how parks and recreation fees are billed. Ms. Mullins replied that a separate cloud-based system is used for people to register and pay for recreation classes and events. The Advantage financial system is used to bill sports leagues and delinquencies. Mr. Bestpitch inquired as to how miscellaneous billing will work if it is not included in the new system. Ms. Burkett replied that it would stay on the financial system, but options such as interfacing are available. Ms. Mullins added that the preference is to move miscellaneous receivables to the new system, but the decision has not yet been finalized. Mr. Bestpitch noted that one of the main objectives of the project was to have everything someone owes in one system. Ms. Burkett assured him that was still the goal and all options will be carefully and fully evaluated. The vendor provided a two day demonstration of the whole system for employees this quarter. This provided employees an opportunity to see the system work and to ask questions. The majority of time this last quarter was spent on converting legacy data to be transferred into the new system. Almost 200,000 records have been provided to the vendor and have passed an initial review. The work is very detail oriented and time consuming. Employees must look at every customer record to make sure the data is correct. The team started with business license data and is now reviewing the associated personal property records. Additionally, departments are developing a list of reports that will be needed, with approximately 400 currently identified. Once completed, the vendor will review the list September 5, 2018 Page 4 of 6 and either identify a comparable report or create a new one. Ms. Burkett reported that the team is doing an amazing job. A kick-off luncheon was held for all project stakeholders and team members to acknowledge the start of the project. It was very well attended, with almost all invitees present. Ms. Price asked that Ms. Burkett let the team know how much the Committee appreciates their work. Ms. Burkett thanked the Council Members and management for their support. Hearing no further questions, the update was received and filed. 7. Hotline Update: Mr. Harmon reviewed a synopsis of closed reports. All completed investigations were found to be either unsubstantiated or were referred to other agencies. Allegations of criminal activity unrelated to city government were referred to the Police after verifying the persons named were not City of Roanoke employees. Allegations of fraud involving recipients of public assistance were referred to investigators in the Department of Human and Social Services. The investigation of code enforcement activity was extensive and compared citation history for all inspectors. There was no evidence to support the allegations; a comprehensive report was provided to management. The allegation related to Valley Metro was the first such report received through the City’s hotline. The hotline was created to receive complaints involving City of Roanoke employees and has not been publicized at Valley Metro. Auditing reviewed video and audio from the bus involved, with management’s assistance, and found no evidence to support the allegation. Ms. Price expressed her appreciation for the way in which the hotline is handled. The reports deal with very sensitive issues and Municipal Auditing makes certain they are appropriately investigated. Mr. Bestpitch appreciated that the Valley Metro complaint was investigated and not passed over because of being outside the intended scope of the hotline. Hearing no further questions, the update was received and filed. 8. Annual Report – Audit Committee: Mr. Harmon presented the annual report for fiscal year 2018. Mr. Bestpitch asked if the report will be included on the consent agenda for the upcoming Council Meeting. Mr. Harmon confirmed that it would be on the agenda. It was an unusual year that included assisting the Department of Finance with financial statement preparation and serving as project manager for the revenue system implementation. These projects required considerable hours that affected the number of audits that could be completed. The number of September 5, 2018 Page 5 of 6 hours worked on school audits was consistent with the agreement and audit plan. Indirect time that includes activities such as paid leave, training, and employee development was in line with benchmarks at 33%. New staff hired in two positions during the year contributed to additional training hours. Client satisfaction was slightly below target with only two surveys completed. Convincing people to take the time to complete a survey has been challenging. The percentage of action plans completed was below target primarily due to one vendor having several reportable issues that it did not resolve. Hearing no further questions, the report was received and filed. 9. Audit Plan: The plan is risk-based, utilizing nine risk factors along with input from management and elected officials. Other planning considerations include staff availability and client availability. The auditable areas identified in the plan are primarily based on budget offers. In this year’s plan, the Information Systems Auditor will work exclusively on the revenue system implementation. Audits in the Commissioner’s and Treasurer’s offices, as well as DoT will be deferred until the new system is fully implemented. Areas listed as priorities in the plan will be audited as staff become available. Mr. Cowell asked if a specific focus area in Fire/Emergency Medical Services was planned, such as medical supplies. Mr. Harmon shared information about the processes for controlling medications and explained how objectives and scope are developed during an audit. The process engages department management in talking through risks inherent to their operational objectives. Mr. Harmon discussed financial audits with a focus on workforce development funds. The City is part of a regional system which contracts with vendors to provide client services. An assignment has been set-up and work is underway. Mr. Cowell added that a recent review by the state identified a series of issues and that a closer look is appropriate. The new director has been working to address the issues cited by the state as well as other issues. Ms. Price commented on remarks about the workforce development board made by citizens the previous day at the regular City Council meeting. Mr. Cowell noted that the issues shared at the Council meeting were part of the reason the workforce development board changed vendors. Mr. Bestpitch asked about the new vendor. Ms. Coole responded that it is Ross IE Services, a workforce development company. Ms. Price was glad an audit had been initiated and Mr. Bestpitch concurred. Mr. Cowell commented on the City’s fiduciary responsibility as the grantee for work force development funds. Changes to the workforce development board were required to comply with state requirements. Mayor Lea and Vice-Mayor Cobb were appointed to the board during the previous day’s council meeting. Other member localities will need to do the same. Mr. Harmon discussed the simplified comparative and fiscal condition report, noting that Auditing has been considering this idea for several years. An outline has been developed as a proof of concept. The report will include financial and non-financial data that can be compared with other localities in the region. Most of the data will come from existing public reports and government agencies. It will be September 5, 2018 Page 6 of 6 purely informational without recommendations, and would be published annually so that trends may be noted and better understood. Ms. Price commented that it is a very ambitious and innovative project that she supports. Audit priorities for RCPS and GRTC were noted. Mr. Cowell asked if the review of GRTC’s fixed route service is related to the recently completed operational assessment. Mr. Harmon responded that it would not directly relate to the operational assessment. The audit will potentially address processes such as driver training, standby time and security situations. Hearing no further questions, the plan was received and filed. 10. Other Business: Mr. Harmon confirmed upcoming meeting dates and times including December 12, 2018, March 6, 2019 and June 5, 2019. Ms. Price and Mr. Bestpitch confirmed that 4:00 p.m. meeting times worked well with their schedules. 11. Adjournment: Ms. Price thanked everyone for attending and adjourned the meeting at 5:10 p.m.