Audit Committee Meeting

MINUTES Audit Committee Meeting Thursday, December 15, 2022 at 3:00 PM Carnegie Town Hall, 235 West 10th St., Sioux Falls, South Dakota 57104 1. Call To Order Present: Committee Member David Barranco, Committee Member Dean Buckneberg, Committee Member Tony Goettsch, Committee Member Rose Grant, Committee Chair Alex Jensen, Committee Member Rich Merkouris, Committee Member Greg Neitzert Committee Chair Alex Jensen called the meeting to order at 3 p.m. 2. Approval of Minutes A. Thursday, October 13, 2022 A motion was made by Committee Member Neitzert and seconded by Committee Member Grant to approve the minutes. Voice vote to approve. 7 Yes: Barranco, Buckneberg, Goettsch, Grant, Jensen, Merkouris, Neitzert; 0 No: (None). Motion Passed. 3. Reports and Updates A. Update on External Audit of City’s 2022 Financial Statements by Eide Bailly, LLP Brian Stavenger of the Eide Bailly Fargo office provided the presentation remotely and Joy Fiege, of the Sioux Falls office, assisted in person. Stavenger spoke about the service team assigned to the audit and reviewed the objectives. He reviewed the risk assessment by differentiating between significant, inherent, and fraud risk and reviewed new professional audit standards to be implemented this year and next. The audit will: 1) be performed in accordance with generally accepted auditing standards, Government Auditing Standards, and Title 2 U.S. Code of Federal Regulations (CFR); 2) obtain reasonable, not absolute, assurance about whether the financial statements are free of material misstatement; 3) include examining, on a test basis, evidence supporting amounts and disclosures; 4) include discussions with management; and, 5) assess the quality of accounting principles and significant estimates. Planning for the audit will take place in November/December, 2022 with interim testing taking place throughout December and January. Year-end testing will occur in January, February, and March; the final  audit will be issued in late March. Stavenger explained the hybrid audit approach and emphasized the importance of ongoing communication throughout the year using online publications, webinars, and providing access to specialists. B. 22-01F Golf Management Agreement Follow-Up by Ryan Lauseng, Internal Auditor The Golf Management Agreement audit was originally presented to the Committee in October, 2022. The follow-up provided a review of three unresolved recommendations from the original audit. Lauseng reported that all three recommendations were implemented. C. 22-05 Employee Reimbursements (Non-Travel) by Emily Trujillo Rodriguez, Internal Auditor The objectives of the audit are to determine the effectiveness of controls over employee reimbursements and compliance with City policies, procedures and best practices.The City of Sioux Falls offers employees the ability to receive reimbursement for business expenses incurred on the job. The expense reimbursement program is currently governed by the City Accounts Payable Policy, Executive Orders and various collective bargaining agreements. This does not include employee reimbursements while in travel status which are processed separately and have their own City policy. The total amount reimbursed through the program in 2021 was approximately $45,510. In addition to business expenses, the reimbursement program is utilized to reimburse benefits for employees such as car allowance/mileage reimbursement, education assistance, the employee recognition program, tool allowances and boot allowances. The accounts payable process as a whole is monitored by Finance and all expense reimbursements should comply with applicable City policies and procedures. The individual types of reimbursements and various thresholds eligible for reimbursement are the responsibility of department management to monitor. The City maintains various policies and procedures applicable to the employee reimbursement process, such as the Accounts Payable Policy, Purchasing Card policies, collective bargaining agreements, and executive orders. These are made available to employees via the city intranet site InSite. The audit provides two recommendations. First, implementing a dedicated policy for non-travel related employee reimbursements which provides details specific to employee reimbursements that might differ from regular accounts payable items paid to outside vendors (such as sales tax typically is not paid but is included for employee reimbursements, what is the procedure if an original receipt cannot be obtained, how is the “timeliness” of submitting invoices defined, etc.). Second, developing and implementing a standardized cover sheet or form to ensure that all the necessary details are provided with the reimbursement request. This would also ensure expenses comply with the citywide accounts payable policy, executive orders, collective bargaining agreements and any newly implemented employee reimbursement specific policies in the future. The travel reimbursement process utilizes a form to ensure compliance in a similar manner. A brief discussion followed about duplicate reimbursements.  A motion was made by Committee Member Buckneberg and seconded by Committee Member Barranco to submit the report to the City Council. Voice vote to submit. 7 Yes: Barranco, Buckneberg, Goettsch, Grant, Jensen, Merkouris, Neitzert; 0 No: (None). Motion Passed. D. 22-03 Housing Cash Handling by Emily Trujillo Rodriguez, Internal Auditor The objectives of the audit are to determine if cash collections are safeguarded, deposited in a timely manner and accurately recorded. Housing is a division of Planning and Development Services in the City of Sioux Falls. The division is dedicated to connecting people in Sioux Falls with resources to help ensure safe and sustainable living conditions. Housing aims to help ensure decent, safe, and sanitary living conditions through programs that assist with repairs and improvements. Some of the major programs to assist the community include Single- Family Rehabilitation, Neighborhood Revitalization, Rental Rehabilitation, Emergency Mobile Home Repair, and Public Safety Down Payment Assistance. These community development housing programs determine eligibility based upon income guidelines; depending upon the specific program, a certain percentage of the median family income is required. Some of these Housing Division programs are structured as a deferred payment zero interest loan due upon sale or discontinuance of occupancy, such as the Single-Family Rehabilitation program. The 2022 submitted and approved action plan will result in approximately: 35 single family houses rehabilitated, 6 mobile home units rehabilitated, 60 low-income households receiving case management and stable housing, 15 low-income households benefiting from accessibility modifications, and 3 low-income households with accessibility modifications to their rental units. The audit provided three recommendations: 1) the Housing Division, in coordination with Finance, implement some type of secured storage available to employees during business hours to prevent unsecured cash assets. It’s further recommended that the Housing Policies and SOP’s be updated to formally document the proper usage of secured storage to enhance the physical security of cash assets both during business hours and overnight; 2) Finance establish a more detailed policy and procedure outlining the requirements for completing deposit slips to standardize best practices City-wide. The Housing Division internal policies and procedures should then comply with the over-arching Finance policy. It is also recommended that this updated policy include specific requirements to notate on the slip which employee completed the deposit, for example initials, signature, name or employee number to comply with best practices and strengthen internal controls. To avoid illegible handwriting issues, two indications such as initials and employee number could be utilized; and, 3) Housing Division staff other than the Accountant be designated and trained to complete deposit slips in order to maintain segregation of duties between the receipting and recording functions of cash handling. A back-up individual should be designated and training provided to perform the journal entry in Munis for Housing deposits in case of an extended absence or unavailability.  A motion was made by Committee Member Grant and seconded by Committee Member Goettsch to submit the report to the City Council. Voice vote to submit. 7 Yes: Barranco, Buckneberg, Goettsch, Grant, Jensen, Merkouris, Neitzert; 0 No: (None). Motion Passed. E. Annual Risk Assessment by Ryan Lauseng, Internal Auditor Lauseng explained the 2022 Annual Risk Assessment that included the Internal Audit Plan Development Cycle and program planning. He discussed how inherent risks were identified and how risk is measured after internal controls are applied. Following this, he discussed how a survey was used to ultimately develop the findings in the assessment. Discussion followed about feedback to the survey. F. 2023 Proposed Audit Plan by Emily Trujillo Rodriguez, Internal Auditor Trujillo Rodriguez reviewed the status of the 2022 Audit Plan. The 2023 Proposed Audit Plan includes the following carryover audits: Facility Security; Bidding Selection Process for Architectural/Engineering Services; Reconciliation of AR systems into Munis; and, Vendor Set-up and Maintenance. Assurance Audits include: Cash Handling; River Greenway Spending; Plat Fee Calculations/Collections; Washington Pavilion/Orpheum Management Agreement; and a TIF Completed Project. A performance audit of Operational Efficiency of the Plan Review Process will be conducted along with various follow-up audits and fraud awareness training. Discussion followed about the frequency of audits on specific topics, timing of the Washington Pavilion agreement audit, and staffing. A motion was made by Committee Member Grant and seconded by Committee Member Goettsch to recommend the plan to the City Council for approval. Voice vote to recommend. 7 Yes: Barranco, Buckneberg, Goettsch, Grant, Jensen, Merkouris, Neitzert; 0 No: (None). Motion Passed. 4. Committee Member Remarks Dean Buckneberg mentioned that it would be useful for the committee to receive financial updates at or before committee meetings. 5. Public Comment There were none. Committee Chair Alex Jensen adjourned the meeting at 4:04 p.m. 6. Adjournment Thomas M. Greco, City Clerk