The Audit Board of the City of Orlando met on Friday, January 20, 2006 in conference Room R on the

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• Publié par: Phawyug
• Nombre de lectures: 118
• Langue: English

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The Audit Board of the City of Orlando met on Wednesday, January 21, 2009 in Conference RoomRon the second floor of Orlando City Hall. B OARD M EMBERS :  JudithK. Welch, ChairPresent [2/1]  LyndaM. Dennis, Vice ChairPresent [2/0]  KennethScearce Present[2/0]  W.Neal CarrisAbsent [2/1]  AnneM. MercerPresent [2/0] O THERS P RESENT :  DeborahD. Girard, Deputy Chief Administrative Officer  RebeccaW. Sutton, Chief Financial Officer  RaymondM. Elwell, Deputy Chief Financial Officer  BerylH. Davis, Director, Office of Audit Services & Management Support  WilliamC. Mummert, Controller  MichaelPattillo, Audit Partner, Ernst & Young  MichelleMcCrimmon, Senior Manager, Ernst & Young  AnnetteMadden, Recording Secretary 1. O PENING R EMARKS Ms. Welch, Audit Board Chair, called the meeting to order at approximately 9:00 a.m. Ms. Welchquestioned the use of the word “profit” in the third paragraph of the Budget Update section of the November 24, 2008 meeting minutes. Mr. Elwell explained that he may have used that term related to revenues over expenditures. Ms. Girard stated that the words “slight surplus” should be used to substitute and Mr. Elwell agreed.Motion was made by Ms. Dennis and seconded by Mr. Scearce to approve the November 24, 2008 minutes as amended. The motion was approved. 2. B UDGET U PDATE –R AY E LWELL ,D EPUTY C HIEF F INANCIAL O FFICER Mr. Elwell distributed copies of the FY 2008/09 Fund Status Report as of December 31, 2008. He reported that overall the City is where it would expect to be at this time. Mr. Elwell stated that the General Fund results for the first quarter of the year are slightly above the target at about 26.7% of budgeted expenditures. He explained that in December the City makes debt payments and also makes transfers to the CRA trust fund, resulting in higher December expenditures than in a typical month. Mr. Elwell explained that the budget to actual comparison graph illustrates the City’s millage rate increased this year resulting in higher payments to the CRA. He stated that management will continue to closely monitor the Families, Parks & Recreation, Police and Fire Departments, noting these departments appear to be close to budget. Mr. Elwell reported that revenues received through December represented 40% of budgeted revenues as compared to 34% last year. Mr. Elwell highlighted certain revenue categories for the Board, noting: a) intergovernmental revenues were below the already lower budgeted amount, prompting management to submit a budget reduction amendment to City Council (State revenue sharing - $400K, State sales tax $1.2M); and b) fines and forfeitures are projected to generate $2.3M of revenue from the recently installed red light cameras (have already collected approximately 23% of the budgeted amount). Mr. Elwell also mentioned that, while not reflected in the current statements, City Council recently approved parking fee increases that are expected to generate between $3.0M-$4.0M new revenue to offset the parking system’s previous $300K monthly losses.

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During Mr. Elwell’s report, Ms. Welch inquired about the collectability of property taxes, which Mr. Elwell indicated is generally satisfied by the Property Appraiser’s sale of tax certificates. Ms. Dennis queried the impact of the current economic environment on investment income, with Mr. Elwell replying that management had anticipated possible negative economic impacts in the budget and established a larger than normal spending contingency, which has grown even larger as estimated gas price increases have not materialized. 3.R EVIEW S TATUS OF E XTERNAL A UDIT –M IKE P ATTILLO ,A UDIT P ARTNER ,E RNST & Y OUNG Mr. Pattillo stated that Ernst & Young (E&Y) is still performing year-end audit testing and field work. He stated that conclusions on internal control matters or compliance matters have not yet been documented and he could not report results at this meeting. Mr. Pattillo went on to say that the first draft of the Comprehensive Annual Financial Report (CAFR) was received on Friday (January 16), and that E&Y is planning to conclude field work by the end of next week (January 30). Mr. Pattillo expressed his belief that it is worth speaking with the Board about the current economic environment from a risk perspective. He stated that E&Y has been concluding a number of government audits during the last month and that he has never seen the number of issues that have arisen with almost every client. Mr. Pattillo reported there is a heightened sense of audit risk and E&Y has therefore adjusted its scopes in areas such as securities, going through an exhaustive process in assessing portfolios, particularly where a client, similar to the City, has pensions and investments other than treasuries and corporate notes. Mr. Pattillo went on to discuss several areas where E&Y is spending additional time as a result of the current economic conditions, including assessments of financial condition, discount rates and assumptions used in OPEB and pension reports and grants. Mr. Pattillo stated that E&Y has noted a trend in deteriorating financial conditions among its clients and indicated this is an area that he will likely discuss with the Board during the wrap up of the audit. Mr. Pattillo also mentioned that, given the current market declines, E&Y actuaries are reviewing the OPEB and pension reports and are challenging the discount rates and assumptions. He also stated that E&Y is carefully reviewing the grants process to determine compliance is maintained and that restricted resources are not being used for unrestricted purposes. Mr. Pattillo concluded by saying that E&Y is receiving terrific cooperation from the City management team and that he expects to complete the audit as set forth in the audit plan and will be reporting final results to the Board at its next meeting. In response to a question from Ms. Welch with respect to the effect of Audit Service’s staff reduction on the external audit, Mr. Pattillo responded that E&Y assigned additional staff to compensate for the fewer hours provided by Audit. Ms. Welch also asked about the risk assessment associated with the community venues with Mr. Pattillo replying that they are mainly related to disclosures and contingencies, particularly given the number of inter-local and private sector agreements. Mr. Pattillo went on to say that the City has established procedures and protocols to monitor each of the projects and that E&Y has discussed these areas with the City during the last couple of years. Ms. Dennis asked if the City has actuaries studying the investments in the pension plans and what the impact is going to be fornext year’s contribution. Mr. Elwell stated thatthis is a very timely question because the City is in the process of changing its funding assumptions

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starting with next year’s budget. Instead of contributing to the pension funds based upon a projection for the current year, the City is converting to a process that estimates the contribution based on both the contribution for the current year and the contributions for next year. 5.A UDIT S ERVICES &M ANAGEMENT S UPPORT U PDATE –B ERRI D AVIS ,D IRECTOR , O FFICE OF A UDIT S ERVICES &M ANAGEMENT S UPPORT Ms. Davis thanked Ernst & Young and acknowledged that it has been a challenge for the Office to meet its obligations to them as a result of the restructuring. She stated that it has been even more challenging for E&Y in managing the process with decreased Audit staff time, and she thanked Ms. McCrimmon for working with the Office. Ms. Davis referenced an emailfrom the City Attorney’s Office previouslyforwarded to the Board. The email addressed concerns expressed by the Board at its last meeting with regard to the Office hotline, specifically to ensure the confidentiality of the identity of the individual making the hotline call. Based on her research and the Attorney General opinions, the Assistant City Attorney concluded that an individual who reports something via theCity’s hotline is provided confidentiality in perpetuity. Even after the investigation or the audit work is completed and the workpapers related to the investigation or audit are public, the name of the individual does not become public and remains confidential. Ms. Davis explained the steps taken by the Office to ensure the individual’s nameis removed from the workpapers if they expressed the desire to remain anonymous. Ms. Davis stated that she also spoke with theCity’sChief Information Officer, to inquire whether the City retains call data that could be obtained to satisfy a public records request of all the calls received through our hotline number. Ms. Davis stated that Technology Management does retain this data in a data bank, however, the data is not currently used to create reports or for any other purpose. The information is, however, retained for a period of time. Ms. Davis then updated the Board on the activities of the Office of Audit Services and Management Support. She reported on the Summary of Past Due Recommendations, noting that the summary reflects 42 outstanding recommendations of which the Finance Department was responsible for 24 recommendations and the Public Works and Housing Departments were each responsible for nine recommendations. Ms. Davis went on to say that most of the recommendations were outstanding because the related Policies and Procedures have not been updated and/or approved, but that these situations should be resolved in the next few months. Ms. Davis stated that there is no significant risk to the City as a result of these recommendations not being implemented. Ms. Davis then addressed the report onNon-Implemented Recommendationsnoting the recommendations will be removed from the report in the future. A record of the results would be maintained in the Office files so that when these areas are audited in the future the Office will be aware of these issues, including the reasons these recommendations were not implemented. Ms. Davis provided details of each recommendation to the Board. During her discussion of the recommendation related to controls and responsibilities for the four City checking accounts not currently reviewed by Accounts Payable, Mr. Mummert provided details outlining the status of each of these accounts.He stated that it is a top priority to get all the accounts folded into the Accounts Payable process and he anticipates that this will be completed by 2010.

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Ms. Davis reported on the follow-up audits in progress, stating they should be completed within the next few weeks. She reported that the other open recommendations require no action at this time because the Office has up to 12 months to determine whether the recommendations have been implemented. Ms. Davis updated the Board on the Audit Hotline call discussed at its last meeting, noting Families, Parks and Recreation (FPR) staff conducted an investigation, which included interviews and written statements from staff and a review of payroll records. She stated the Office reviewed FPR’s investigative processes and reports by staff and we are in agreement with the process and their conclusions. As a result of the investigations, FPR revised some of its internal procedures to clarify and strengthen controls in certain areas. The Office also recommended further enhancements. Ms. Davis stated that the Office completed the audit of Progress Energy Public Service Tax and Franchise Fees. She stated that the City assessed Progress Energy $106,000, but the amount has not yet been collected. Ms. Davis stated that the total revenues (including the Progress Energy assessment) collected year to date for the fiscal year beginning October 1, 2008, is approximately $235,000. Ms. Davis then reported on the projects in process, mentioning that the work for the Risk Management audit is complete, the exit conference conducted, and a report draft issued in October. Finance is hoping to respond to the recommendations this week and the final report should be issued at that time. Ms. Davis stated that the Office spent a lot of time working with Ernst and Young for the past month or two. She stated that the Projects Not Started are planned to begin the second, third or fourth quarter. Ms. Davis continued saying that she spoke to Ms. Welch yesterday to inform her that she is leaving the City of Orlando for a new position as Controller for the Orlando Museum of Art. She stated that the move is effective February 2, 2009. Ms. Davis stated since the Audit Manager left the City, Mr. Sirak, assumed his duties and will, at least functionally, take over her responsibilities on a temporary basis. Ms. Davis stated that Mr. Sirak is an extremely competent individual who was in fact responsible for two corporate audit functions prior to joining the City. Ms. Sutton entered the meeting at approximately 9:45 a.m. In response to inquiries from Ms. Welch, Ms. Davis briefly summarized the Office’s recent reorganization and Mr. Elwell noted that the Office’s transferred employees to the Business and Financial Services Department has greatly enhanced its capabilities with only one of the three employees requiring the creation of a new position. Ms. Sutton added that it is important to point out that the City has decided to outsource much of the management review function, and in fact, has had one extensive review of the Purchasing function performed over the last three months. She stated that this reflects a shift in the manner in which the City is performing that type of auditing. Ms. Sutton noted that the current state of the economy has caused a reduction in staffing and additional efficiencies in many areas and the City believes that it will gain substantial efficiencies with this approach. During the ensuing discussion, Ms. Sutton responded to several inquiries and comments from Ms. Welch, Ms. Dennis and Ms. Mercer regarding possible City board realignments, internal audit independence, audit outsourcing/co-sourcing advantages and management responsibilities, and methodologies for reporting results of such activities to the Audit Board.

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The regular Audit Board meeting adjourned at 10:05 a.m. for the individual meeting with the Chief Financial Officer. Ms. Davis, Mr. Pattillo, Ms. McCrimmon, Mr. Elwell and Mr. Mummert left the meeting at 10:05 a.m. The regular meeting reconvened at 10:30 a.m.Ms. Sutton left the meeting at 10:30 a.m. The next meetings of the Audit Board are scheduled as follows:  Friday,March 27, 20091:00 p.m.Conference Room R  Friday,June 19, 20091:00 p.m.Conference Room R  Friday,August 21, 20091:00 p.m.Conference Room R Ms. Dennis requested that theCity’sCAFR be distributed to the Board in advance of the March Audit Board meeting to allow the Board time to review the document prior to its discussions. Ms. Girard stated that since the March meeting is so late in the month this should be possible. Ms. Girard asked that the Board Secretary notify Mr. Elwell of the Board’s request. Board members discussed their terms: Ms. Welch stated her tenure on the Board ends effective August 31, 2009. Ms. Dennis stated she is in her first full term. Mr. Scearce explained that when he first joined the Board he was on the Cornell Museum Board and that he is incoming Chair of that board for next year. He stated that because of this commitment, he is considering resigning from the Audit Board in August at the end of his current term. He explained that this was the reason he declined the nomination at the last Board meeting. Ms. Dennis stated she believes Ernst & Young has a publication which they could route to staff and to the Board about establishing an audit committee. She stated her belief that this publication would help clarify earlier discussion that this is not arealaudit committee. Discussion ensued. Ms. Girard stated that she would ask Mr. Pattillo to provide the publication to the Board. There being no other business, the meeting adjourned at 10:45 a.m. Respectfully submitted, Judith WelchAnnette Madden Chair RecordingSecretary