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HomeMy WebLinkAbout2012-09-19 MinutesMinutes of the September 19, 2012 Audit Committee Meeting The following audit committee members were present: Tony Uth, Jr. Judy Jacobs Adam Motherwell Alderwoman Adella Gray The following City staff members were piesent: Don Marr, Chief of Staff Lindsley Smith, Communications and Marketing Director Marsha Hertweck, Accounting Director Vicki Deaton, Internal Auditor Approval of Minutes The minutes of the June 19, 2012 Audit Committee Meeting were approved by all audit committee members present. Draft minutes from this meeting and the March 6, 2012 final minutes will be forwarded to the City Council to keep them informed of committee proceedings. Approved minutes are posted on the City's website on the audit committee page. Audit Committee and Internal Audit Charter Ordinance 5522 was passed by the City Council on 9/4/12 to enact Article XXIV Audit Committee and Internal Auditor into Chapter 33 of the Code of Fayetteville. This codifies the Audit Committee Charter, which was established by resolution of the City Council in 2000, and the Internal Audit Charter, which was recently drafted. Internal Audit Update 1) Request for Proposals for Independent Financial Auditor— released on Monday, 9/17/12. Proposals are due 10/9/12. The selection committee consists of Tony, Judy, Adam, Adella, Paul, Marsha, and Vicki. We are working with the component units as they also seek financial auditors. The Purchasing division will schedule a selection committee meeting after the proposal deadline. The committee may choose an auditor at that meeting or may decide to schedule interviews to obtain more information from various proposers. Serving on the selection committee for the auditor is one of the primary stated responsibilities of the Audit Committee Charter. There were questions about how public accounting firms are notified of the Request for Proposals. There are automatic notifications that go out to entities signed up to receive notifications. Also, the request is published in the newspaper and on the City's website, and the Purchasing division sends notification to firms they believe might be interested or who have submitted proposals in the past. There were comments about the desire to select a firm with a regional presence in Northwest Arkansas. 2) Consulting project — Water and Sewer Operations Hansen inventory implementation with barcoding capabilities is ongoing. Inventory transactions are now live and only being recorded in the Hansen inventory module. Transactions are being recorded manually at this time. We performed a full training physical count at the end of August. The intention was to use some physical count best practices and train our counters. All items were counted at least twice, some three or four times. We hope to enter the results of the training count later this week, but we discovered some parts record issues that our IT department is working on. We plan to count the Water and Sewer inventory again at the end of November, as well as completing all other inventory counts by year end. There were questions about the variances revealed during the Water and Sewer physical count. We believe that many variances are related to inaccuracies in previous physical counts. We have also identified issues with the receipt of parts and the organization of the warehouse. There was discussion about the difficulties of counting plumbing inventory items and about the emergency nature of the water and sewer maintenance business. Improvements are needed in procedures to determine the reorder point for a part and the quantity of a part to be kept on hand. According to best practices, there are various ways to measure inventory performance. Some entities use record accuracy and some use dollar amount of variance. We have always used net dollar variance to measure the reasonableness of our count variances at the City. The net variance at the Water and Sewer division has traditionally been 5% or less. 3). FEMA declared disaster — The City of Fayetteville is eligible for public assistance related to severe storms during the spring of 2011. The City has claims with a total project cost of $743,000. Expected reimbursement is $653,000. I requested a project worksheet status update at the end of the 2nd quarter 2012. I compiled the information received from all divisions and found that the work detailed on 42 project worksheets was complete, the work on 4 project worksheets was in progress, and the work on 7 project worksheets was not yet started. I will request a 3rd quarter update at the beginning of October. The deadline for completion is the beginning of November. We received approved extensions on 5 Water and Sewer projects this week. 4) SW hauler agreement revision — During August and September, the City Council approved revised Agreements to Haul and Dispose of Solid Waste and Recycling in the City of Fayetteville for a term of 1 year with four different haulers. The Financial Coordinator in the Transportation Division is monitoring fee payments. 5) City responses to auditor management letter comments were distributed in August and the 2011 CAFR was presented at the 8/14/12 agenda session by Tony Uth. There were no specific questions about the CAFR or the auditor comments at the session. We have scheduled a meeting with staff from the City's two component units to discuss their selection of an independent financial auditor. 6) Retirement Savings Plan Review and Reconciliation —The testing is finished on this audit and action plans are being developed for findings. 7) One of the committee members asked about the status of the current Internal Auditor's move from Fayetteville and whether an Internal Auditor position vacancy would be posted soon. Don Marr told the committee the administration would like to try to retain the current Internal Auditor with the job structured for some remote work and some on-site work. There are many aspects of audit work that can be done from another location using current technology. Many internal auditors in the federal government telecommute because much of the job requires only system access. We will trya 40 hour work week schedule with a plan to be established every two weeks with times set for on-site in Fayetteville and remote work. There are some routine tasks like the quarterly Audit Committee meetings, year end work, physical inventory counts, external auditor fieldwork, FEMA projects, or large operational projects that require on-site involvement. The need for on-site work will fluctuate weekly, with much on-site work being seasonal. We plan to experiment with this, talk about and adjust the schedule based on work demands, the needs of the City, and the work life balance of the Internal Auditor. Accountability for the work task will be established by the Annual Audit Plan. Presentation by Lindsley Smith, Communications and Marketing Director for the City of Fayetteville Lindsley talked about what comprises communication and what communication is in a governmental entity. Governmental entities in Arkansas are subject to the Freedom of Information Act. We are required to communicate certain business of the government and respond to citizen requests for information. Technology has changed the public's expectations concerning communications. Lindsley talked about the current administration's commitment to transparency and open communication. Government is by, of, and for the people, so communication and responding to requests are a priority. Lindsley manages the Television Center, which includes public access, education, and government channels. The government channel broadcasts between 25 and 30 regularly scheduled meetings each month, in addition to special meetings. She discussed the challenges of providing full coverage to various types of meetings. Public access television provides training to citizens who want to learn about making videos and documentaries. The Communications department also serves as a laison between City administration and our legislators. Lindsley tracks state bills that could have an effect on the City, and sometimes helps draft bills for passage. Lindsley showed the City's website, www.accessfayetteville.org, to the committee. She talked about how the website has been updated and improved in the past few years, using an audience centered approach. She also mentioned that the website translates into 60 different languages. The administration and City Council have mandated that we use social media for communication. Lindsley showed the committee links on the website for facebook, twitter, RSS feeds, and You Tube. Lindsley showed the committee how City Council meetings can be viewed online, along with the accompanying documentation. The Community Link was pointed out. It provides a listing of community events and information about volunteering in the community. The committee thanked Lindsley for her presentation and her service to the City of Fayetteville.