Audit Committee

MINUTES Audit Committee of Roanoke City Council Location: Council Conference Room Noel C. Taylor Municipal Building, Room 451 South Date: September 4, 2019 Time: 4:03 p.m. to 4:58 p.m. Attendees: Audit Committee Member Present (Y/N) Anita Price (Chair) Y William Bestpitch (Vice-Chair) Y Michelle Davis (Member) N Sherman Lea (Ex-Officio) N Drew Harmon, Municipal Auditor Dan Callaghan, City Attorney Bob Cowell, City Manager Sherman Stovall, Assistant City Manager for Operations Brian Townsend, Assistant City Manager for Community Development Amelia Merchant, Director of Finance Dawn Hope Mullins, Assistant Municipal Auditor Tasha Burkett, Information Systems Auditor Cari Spichek, Senior Auditor Emma Coole, Senior Auditor Brian Pendleton, Senior Auditor Tim Jones, Chief of Police Steve Martin, Director of Human Services/Social Services Michael Clark, Director of Parks and Recreation Jeffrey Powell, Director of General Services Susan Reese, Family Services Manager Meredith Burger, Human Services Business Administrator Wendy Webb, Family Services Supervisor Paul Workman, Budget Business Analyst Dorothy Hoskins, Senior Accountant Casey Fabris, Roanoke Times Reporter Matt Chittum, Roanoke Times Reporter 1. Call to Order: Ms. Price called the meeting to order at 4:03 p.m and welcomed everyone. September 4, 2019 Page 2 of 5 2. Approval of the Minutes from the Jun 17, 2019 Meeting: Ms. Price asked if there were any questions or corrections to the minutes. Hearing none, the minutes were received and filed as written. 3. Annual Simplified Comparative Report: Ms. Price commented that the report is a wealth of information not only for the City, but also for comparative jurisdictions. She suggested the Planning department might benefit from having a copy as they prepare the 2040 strategic plan. Mr. Bestpitch agreed and cited interesting data on poverty rates and median incomes. Mr. Harmon expressed hope that the report will spur additional analysis and conversation. This was the first edition of the report, requiring approximately 650 hours to design and publish. Mr. Harmon expects future editions to take no more than 300 hours to produce now that the design and data sources are documented. He recognized Mr. Pendleton and Ms. Coole for their work on the project. Mr. Harmon thanked the City’s Community Engagement Manager for her help in publicizing the report on social media, the City’s website and local news. Ms. Price thanked Auditing for their efforts. Mr. Bestpitch commented that it could be useful in financial planning and should be distributed to other Council Members. Mr. Cowell agreed and noted that it is on the City’s website and easy to access. Hearing no further questions or discussion, the report was received and filed. 4. Police Cash Follow-Up Audit: This was a follow-up review of the prior year’s findings. Mr. Harmon noted that quarterly billings were corrected, off-duty assignments were approved and billed correctly, and issues with overlapping time were addressed. An update to the Police records system was recently installed and is expected to address issues with verification reports. Auditing will review verification reports again next year. Mr. Bestpitch commented that the audit looked good. Ms. Price recognized Chief Jones and asked if there were any questions. Hearing no further questions or discussion, the report was received and filed. 5. Council Expenditures Audit: Committee members noted that the audit is performed annually and covers 100% of expenditures by members of City Council. Mr. Harmon stated that there were no audit findings. Overall expenditures by Council Members increased 1.3% over the prior year. Costs in the administrative unit were down by 44% primarily due to funding to search for a City Manager in the prior fiscal year. Mr. Harmon will be scheduling a meeting with the City Clerk, City Attorney and City Manager to work on clarifying Council’s September 4, 2019 Page 3 of 5 Travel policy and reducing paperwork. Ms. Price agreed that streamlining procedures would be beneficial to all. Hearing no further questions or discussion, the report was received and filed. 6. Clerk of the Circuit Court Audit: This is an annual audit done under the direction of the Auditor of Public Accounts [APA]. Municipal Auditing staff audited deeds, wills, trusts, civil cases and manual receipts. No audit findings were noted. Hearing no further questions or discussion, the report was received and filed. 7. Adult Services Investigation: The Director of Human Services/Social Services contacted Municipal Auditing for assistance when his staff noted irregularities in a former employee’s records. The investigation identified $27,000 in questionable, unsupported costs. Lapses in internal controls enabled the employee involved to approve her own work and process payments without adequate supporting records. Ms. Price asked when auditors plan to follow-up on the issues identified. Mr. Harmon expects follow-up will occur next year. Mr. Bestpitch asked if it was correct that the employee in question had not worked for the City since June 2017. Mr. Martin confirmed it was correct and noted that the employee had in fact taken extended illness leave prior to that date. Mr. Bestpitch commended Mr. Martin for contacting Municipal Auditing for assistance. Mr. Harmon reported that additional issues were referred to other agencies. Hearing no further questions or discussion, the report was received and filed. 8. Parks and Recreation Investigation: This investigation of conflicts of interest and the use of flextime was undertaken based on an anonymous compliant through the hotline. Auditors looked at sponsorships and donations for events like GO Fest. There was no evidence of conflicts of interest or missing assets. Recommendations for improving segregation of duties, asset record keeping, budgeting and depositing cash were proposed. A written understanding with Roanoke Outside agreeing on responsibilities and accounting related to GO Fest was also identified as a need and was being worked on by management. Auditors identified issues with the use of flextime to manage work schedules. Based on their varying schedules, hourly employees should have kept a record of time worked. Mr. Bestpitch commented on recreation employees working evenings and weekends. He hoped a good balance could be found in terms of tracking time while also maintaining flexibility for employees. Mr. Cowell noted there are challenges, especially with non-exempt (hourly) employees. Flextime has been preferred as a cost September 4, 2019 Page 4 of 5 control tool, but overtime or other tools may be necessary to provide current services. Parks and Recreation is working with Human Resources to help address these issues. Hearing no further questions or discussion, the report was received and filed. 9. Right-of-Way Mowing Investigation: A concern about the accuracy of right-of-way mowing records was received through the hotline. Auditors found that a narrow strip of the right of way in question was mowed as reflected in the records. The perception that it was not mowed was understandable given the narrowness of the cut. A discussion ensued about the responsibilities of property owners adjacent to the right of way, issues of safety, and how best to address complaints of this type in the future. City code specifies that adjacent property owners are responsible for maintaining their property to the edge of the pavement. The City has historically mowed right of way where topography may be challenging and there are concerns about safety. There was general acknowledgement that it would be difficult to pivot mowing back to owners irrespective of safety concerns. There was some discussion about referring hotline complaints of an operational nature to management. Referrals would be on a case-by-case basis, depending on the circumstances involved, similar to past referrals to HR and Social Services. Hearing no further questions or discussion, the report was received and filed. 10. Annual Report: The Audit Committee met quarterly as required. School audits accounted for 11% of overall audit hours, approximately five percent below budget. Investigations accounted for 23% of audit hours, an increase of seven (7) percentage points over the prior year. Time used for consultations decreased, but will continue to be considerable while the tax/treasury project is ongoing. Direct time on audits was at 68% and consistent with the Institute of Internal Auditors benchmark measure. Hearing no further questions or discussion, the report was received and filed. 11. Other Business: The next Audit Committee meeting was scheduled for Wednesday, December 11, 2019. Mr. Bestpitch noted that he will not be available on the 11th. Mr. Harmon will identify an alternative date. Mr. Harmon introduced an additional audit report on vendor provided lunches. The investigation resulted from three separate reports received through the Fraud, Waste and Abuse Hotline. He stated that the report tried to provide clarity on the method used and steps taken in reaching the conclusion that it was erroneous to ask for the lunch. Auditing staff spoke with the Purchasing Manager in place at the time, the subsequent Purchasing Manager and the City Attorney’s Office. All were in agreement with the audit position. Mr. Stovall responded that from a management perspective, they do not question the responsibility of the Municipal Auditor in determining the findings and they do not contest September 4, 2019 Page 5 of 5 the findings. However, they do take exception to representations and characterizations made and think they impugn the integrity and competency of the Director of General Services. He further stated that the representations and characterizations in this report are different than those made in the Parks and Recreation report. That document included a succinct statement in respect to the finding with no other characterizations or representations. There is a disagreement in this regard, and he felt compelled to note it. Ms. Price noted that there seemed to be quite a bit of language in terms of the report. Mr. Bestpitch commented that he understands the rules, but it seems crazy. Mr. Cowell concurred that the audit identified current policy and some gray area. It goes back to defining what is nominal and that has raised a concern. He has related this to Directors as it calls into question a number of items. For instance, it is not uncommon for the City to solicit donations from folks that do business with the City for large employee gatherings. It is also not uncommon for vendors to provide food for Fire Department personnel. They need to find a way to avail the community to do the things they want to do. It is an issue that they need to look into quickly. Management thought the audit was right, now they just need to figure out how to best address it. He agreed with Mr. Harmon that the approach needs to be proper and practical. Mr. Bestpitch noted that it seems like a case of taking an example to the extreme as the procurement process was already completed and there was not any favoritism involved in having lunch. Mr. Cowell replied that in that regard, management does not dispute the conclusion of the auditor. It was not consistent with purchasing policy. Mr. Harmon noted that staff appeared to be confused by the situation based on the hotline reports received. He elaborated that it was important that the audit report be descriptive given that the Purchasing Division reports directly to the General Services Director. Mr. Harmon commented that rejecting the advice of the Purchasing Manager without seeking the advice of the City Attorney is a significant “tone at the top” issue. Mr. Stovall responded that in a superior- subordinate relationship, these types of issues arise every day. Just because management turns out to be wrong, the meaning of the decision is not “amplified.” He then reiterated his concerns about representations made in the report. Mr. Harmon reminded him that the report was walked on to the meeting agenda at the request of management. As a result, there was not a chance to work through management’s concerns with the wording of the report. Mr. Cowell commented that he felt “tone at the top” was not a legitimate audit topic. Mr. Harmon responded that “tone at the top” is one of the most important internal controls. Ms. Price thanked everyone for their comments and asked that the parties involved work out their differences outside of the committee meeting. She thanked the Auditing staff for their work Hearing no further questions or discussion, the report was received and filed. 12. Adjournment Ms. Price adjourned the meeting at 4:58 p.m.