Minutes - November 19, 2007 - Audit Committee
Description
Meeting Minutes Audit Committee Monday, November 19 2007 3:00 p.m. 1. Opening Remarks/Roll Call Meeting was called to order at 3:02 p.m. Present: Rick Williams, Chairman Jackie Feagin Barbara Chick Preston Edwards Staff: Bill Dollar Bryan Bradford George Kauffman Craig Hametner Liz Romero Jed Johnson Steve Anderson Paige Bobbitt Joe Beauchamp 2. Consider approval of the minutes from the meeting of November 5, 2007 With a correction on page 2 change an to and, page 4 it they, get rid of it, Motion was made to approve November 5, 2007 minutes by Jackie Feagin Motion seconded by Preston Edwards Motion was approved 3. Municipal Court Audit Craig stated to the Committee that he would like to go over the Executive Summary that was provided to them in their packets. The actual report was also included. He stated the executive summary on page 2 has the objectives for the audit; page 3 has the overall conclusion where it shows the areas for improvement which are the items that will be talked about more in detail. Page 4 goes into the first area which can be improved. Page 4 deals with the reconciliation of citations, it states, “Enforcement Departments are not performing adequate reconciliation of issued, voided, and unused citations.” What was done was to go to the enforcement departments and look at the range of citations that were issued. What was looked at was for gaps in those ranges to ensure that there ...
Informations
| Publié par | Urzoe |
| Nombre de lectures | 40 |
| Langue | English |
Extrait
Meeting Minutes
Audit Committee
Monday, November 19 2007
3:00 p.m.
1. Opening Remarks/Roll Call
Meeting was called to order at 3:02 p.m.
Present:
Rick Williams, Chairman
Jackie Feagin
Barbara Chick
Preston Edwards
Staff:
Bill Dollar
Bryan Bradford
George Kauffman
Craig Hametner
Liz Romero
Jed Johnson
Steve Anderson
Paige Bobbitt
Joe Beauchamp
2. Consider approval of the minutes from the meeting of November 5, 2007
With a correction on page 2 change an to and, page 4 it they, get rid of it,
Motion was made to approve November 5, 2007 minutes by Jackie
Feagin
Motion seconded by Preston Edwards
Motion was approved
3. Municipal Court Audit
Craig stated to the Committee that he would like to go over the Executive
Summary that was provided to them in their packets.
The actual report was also
included.
He stated the executive summary on page 2 has the objectives for the
audit; page 3 has the overall conclusion where it shows the areas for
improvement which are the items that will be talked about more in detail.
Page 4
goes into the first area which can be improved.
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Page 4 deals with the reconciliation of citations, it states, “Enforcement
Departments are not performing adequate reconciliation of issued, voided, and
unused citations.”
What was done was to go to the enforcement departments
and look at the range of citations that were issued. What was looked at was for
gaps in those ranges to ensure that there is complete accountability for those
citations.
In each of the enforcement departments, some gaps were found in
those citations.
The recommendation is that reconciliation be performed by the
departments to ensure accountability over all of the citations and the range of
citations that have been issued.
Also to consider the hand held citation
technology because that would greatly increase the accountability over the
citation process in the citations that are issued so that we know where all of them
are.
On this particular recommendation, management did concur in that they
would develop a process for reconciling on a monthly basis and also to look at
the capability of the hand held technology.
Chairman Williams had a question on the actual report, regarding the Municipal
Court Technology Fund, the report states that “As of August 8, 2007, the
Municipal Court Technology Fund has a balance of $987,392, and this may be
used as a funding source for this project.”
His question was that if this Municipal
Court Technology Fund was dedicated only to Municipal Court; and Bill stated
that it was.
He asked how the $987,392 matched up to what it would cost for
everyone to have a hand held to automate the process.
Paige stated the last
model she saw which was year before last and the estimate was about $125,000
for 25 officers then.
Chairman Williams then asked Bill if this item was one of
those technology things where it would go to the technology board.
Bill stated it
would once it got to that point but they have been at a standstill and they knew
that this was the last piece to the puzzle to be fully automated but the feed back
they got from Chief Bates and the police officers was that it slowed them down to
the point that it really made their traffic stops very cumbersome and part of that
was that they had to manually input the driver’s license number.
It was a very
awkward process especially for a motorcycle officer where he has a unit even
though it is portable, it is still bigger then his book that he is writing in.
Bill stated
he heard that they now make one where it allows you to swipe the driver’s
license and that information is input and takes the degree of the manual process
from it.
Chief Bates knows we have to get there and it’s his charge to get what
needs to be done.
The other issue is the interface.
Bill stated the easy part
would be to find one that does some of these things but to make sure it can
interface with our system is the other issue.
Bill stated he does not want to go
out to do something and add to our woes and he does not want to have to start at
ground zero and work back and hopes to get something that can interface.
Bill
stated he has been told that these machines are getting better.
Councilwoman
Chick asked if the books that are issued are numbered and asked Craig if that is
part of the accountability to see they are all there and all are accounted for.
Craig stated that they are number sequential and that they looked at the ranges
that each department issues of the sequence and looked to see that they were all
accounted for.
Craig stated the audit period was from January 2006 to
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December 2006.
Bill then stated that it’s not only Police and Craig stated that it
was not, that it was all enforcement departments.
Craig then went to page 5.
Part A states “Collection and serving of warrants
needs improvement.
As of December 2006 there were over 82,000 outstanding
warrants totaling $21 million.”
Craig did state that there has been improvement
since the last audit.
About 65% of 52,000 warrants that were issued since
January 2004 have been resolved which is an improvement but there are still
quite a few outstanding warrants out there.
Additionally as of last Friday, they
found 89,000 outstanding warrants totaling $23.5 million.
Craig stated what they
are saying here is that the Police Chief should continue to ensure that
outstanding warrants are served and collected in a timely manner.
Craig stated
the OnBase Imaging system has helped them out and also knows that the
movement of the warrant collection function from the Marshals to the Police
Department has helped out the resolution collection but thinks there is still room
for improvement.
Chairman Williams stated that some warrants are turned in to
the collection agency and asked if those are mostly traffic fines, and does the
Police Department pursue warrants, or do they do more serious stuff?
Paige
stated they try to get the most recent and they want to work the most recent as
the collection of those is greater then the older ones.
They all start at the Police
department and after 60 days, it goes to the collection agency.
Councilman
Edwards then asked Paige what is the percentage of the 82,000 that can be
collected.
Paige stated she would estimate that probably about 60% of those
could be collected but stated that you could not assume that the $21 million is
actually money because some of those will be time served, they can come in and
reciprocate but there are a lot of options there but if you were to assume that the
$21 million is actual money then that would be false.
Bill then stated they were
hoping they would be able to put some kind of a warning on a driving record
where it came time to renew your driver’s license at the state level that they knew
you had outstanding warrants in some places but that was not able to happen.
Paige did state that she is pursuing another option that she would be bringing
forward real soon which can limit the ability to register a vehicle if they have an
outstanding traffic offense. It would have to be a warrant for them in order to do
that and she wants to pursue that option but she would have to go to El Paso
which is the only other place in Texas that has this program in place.
David
Childs the County Tax Assessor has agreed to go with them.
Bill stated it would
be the best collection mechanism they could have.
Paige stated it would be
better than with the driver’s license since the renewal period is six years where
this other option would be an annual process.
Part B states the “Warrant Issuance process needs improvement.”
What this is
talking about is the citation is issued for a class C Misdemeanor and how many
days it takes to issue a warrant.
According to their policy it is 30 days.
Craig
stated there has been a significant improvement since the last audit in the
issuance of warrants which is Alias, Bench, and Capias warrants but there is still
improvement that could be made.
The average days that were calculated for
2006
were 64 days for Alias/Bench warrants and 147 days for Capias warrants.
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Councilwoman Chick asked what that was, Craig stated an Alias warrant is
where someone got a citation and does nothing about it, and then an Alias
warrant is issued.
A Bench warrant is where they had a court hearing date but
they did nothing about the court hearing date that is a Bench warrant.
A Capias
warrant is where judgment has been rendered but they have done nothing about
the judgment at all so that is called a Capias warrant.
Craig stated there was
significant improvement but it appears that improvement could be made.
Craig
mentioned 64 days is the average time to issue an Alias/Bench warrant and 147
days to issue a Capias warrant.
Chairman Williams asked if those times are from
the arrest date or the default date.
Craig stated it was from the arrest date
because according to the performance measurements, its 30 days from the
arrest date.
Craig stated the complication is that sometimes the ultimate person
that sets the time frame is the Judge so there could be resets, there could be
some payment plans in effect which could affect that time frame and therefore it’s
going to exceed the 30 days.
In 2006, out of 6,000 warrants, 1,275 were Capias
warrants and it is undetermined how many default dates were different from what
the Judge had set and what the arrest date was.
It could be longer than the 30
days because it’s up to the discretion of the Judge.
Bill stated it’s a shame that
those can not be segmented out because those are really not controllable.
George stated a lot of what happens at the Court is up to the discretion of the
Judge and that is why there are a lot of variations.
Bill did state the rate has
improved because if you look from two years ago it’s almost been reduced 60%
in both areas.
Craig did mention that the rate has significantly gotten better.
Page 6 the next item is “A minimum collection standard has not been set for the
warrant collection agency.”
The collection agency is MSB and they are in a
contract that has no minimum collection rate set.
What was calculated is that
they are collecting about 12% of what they get from us.
They keep about 30% of
that but there is nothing there that’s in the contract that’s within the performance
measurements.
In this particular case, it was stated that they need to “Establish
performance standards by which MSB’s collection efforts can be evaluated at the
time of contract renewal.”
They concurred with that but the way they went about
it was that they will re-bid the contract every two to three years to keep the
collection agency honest and committed to collecting for us.
In regards to the
information that is provided to the vendor, we have to send them a database of
what’s
owed.
Additionally we have to tell them what has cleared because we want to
give them the information they need to collect as soon as possible.
What we
found is that we need to be submitting the information that has become at least
60 days old.
Chairman Williams asked if the 60 days was past the date when
Police first got it but Craig stated it’s the “warrant date.”
Chairman Williams
wanted to be clear on this issue and asked if “As soon as the warrant is issued,
the Police first get it, then 60 days after is when the collection agency is
supposed to get it” and Craig stated that was correct.
So Craig stated 60 days is
what’s in the contract.
When the average was done as to when it is sent to the
agency they came up with about 75 days from the warrant issue date.
So again, it
goes back to the other issue about the 30 days.
It’s not always clear that it’s
going to be 30 days and there can be reasons why it could extend past that and
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so in this case here it appears that issue comes up again where it could drag on
past the 60 days depending on what the judge does at his discretion.
The
reason it was put in was because the objective is that you want to get those past
due accounts to the collection agency as soon as possible because you have a
better chance in collecting in the early stages then waiting forever and ever.
The
other issue here was the clearance reports and they should be issued every day
but we found that they were being issued three times a week.
The clearance
reports are important because it tells them what has been collected because we
do not want the agency collecting something that already has been collected.
The last issue concerning the clearance reports, action was taken and clearance
reports are submitted daily as of August 2007.
Paige wanted to add that the
actual contract states that the warrants must be at least 60 days old.
Page 7 deals with the Operating Policy Manual.
We found there was no
documented operating policy in effect so our recommendation here was to create
a policy manual and update it on a regular basis.
They had no issue with this,
they concurred, and the action plan is to develop the manual by early 2008.
Page 8 “The Performance Indicator report” the issue here is that we believe there
should be two other statistics that should be added to the report and those
should be the total number of outstanding citations and total outstanding
warrants and we think that should give you an overall picture of what’s
happening.
Right now they give the monthly numbers and it does not give the
total outstanding citations and warrants.
Chairman Williams asked if the monthly
numbers are for the end of the month and Craig stated it was for that particular
month as to how many outstanding citations they have and how many
outstanding warrants.
It’s a monthly figure.
If you take the whole amount, you
would be seeing 82,000 outstanding warrants.
On this one, they did not concur;
they believe that the performance measurements that are there are sufficient.
Chairman Williams asked Paige what her thoughts were on this.
George asked if
he could answer that question since the reports go to him.
What he would like to
say is that the 82,000 does not tell him a whole lot and the reason that it does not
is because he does not know by looking at the number 82,000 how many of
those involved some discretion by the Judge.
He does not know how many of
those warrants are from five years ago or six years ago that have never been
collected.
He stated that he thinks it is misleading to have a number of 82,000
when a bunch of those are just gone.
So what he stated was that the 82,000
does not really tell him a whole lot without additionally knowing how many of
those are never going to be collected.
Councilwoman Chick asked if we have the
capability to where on these warrant reports that if there is anything in the system
that kicks in that says “Barbara Chick” has six outstanding arrest warrants for her
so that would be somebody that they would come after with a little more
persistence.
Paige stated that the monthly reports do not do that however, the
Warrant unit, does have the ability to pull out the people that have 17 warrants,
21 warrants, so they do have the ability to pull that out.
Councilwoman Chick
stated that it seems to her that it would be invaluable information.
Paige stated
it’s fabulous for them to try to contact a person with the most, like 21 warrants for
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one person, and they want to get those rather then concentrating on the ones
with just an individual one.
Councilwoman Chick then asked Paige if she is
saying that they have something that gives them that information on a monthly
basis and Paige stated not on a monthly basis.
Her staff pulls a report for the
warrants that were issued for that particular week, she may have 400-500 a week
and she does a count on the particular citation number and the person that has
maybe 21 warrants that information is given to the Warrant unit so that person is
pursued first because they have a long, long list of current warrants in a week but
as far as pulling that information on a monthly report, Paige stated she is not sure
that it can be done.
Chairman Williams then asked about the IT money for
Municipal Court.
He asked if it was dedicated Municipal Court money.
Bryan
stated that at one time, they were accumulating the money to replace the
Municipal Court system itself which was about 1.5 million.
George then stated
that if there was better information available then it would be helpful but just
knowing a total number of total outstanding warrants do not say a whole lot.
Craig then stated the issue about the total number of outstanding citations or
warrants in the Court system is that you want to get an overall view of how much
is out there.
It’s just like accounts receivable, if you have the monthly accounts
receivable for that month, it is going to be meaningless to you because you want
to know the total outstanding accounts receivable that you have, that gives you
the total overall picture.
Chairman Williams stated that was a good point.
Craig
then asked why they don’t age warrants.
Councilman Edwards then stated that
in other words what George would want to see is if the Judge extends a warrant
that we want to know which ones are getting extended.
Craig then asked why
not have aging reports then.
George then stated that just getting the information
on accounts receivable does not help him at all if he does not know whether or
not the information is legitimate or not if they are legitimate then yes he agrees
but he does not know how many of the 82,000 are really legitimate and if we
could get better information of what that is then that would be helpful.
Jed then
stated that these warrants are issued by the Judge, and it needs to be served.
I
believe that the Court system is capable of aging these warrants.
Once we age them, it
will help Management to make a determination on whether or not to run a
warrant
round up on all the 82,000 outstanding warrants or the ones issued after 2003 or
2004 etc.
Paige then made a point that for warrants that are more then 3 years
old, the region will not take them anymore and the only hits would only be made
in Garland which is the other advantage to having a purge policy.
Bill then asked
Paige what is keeping them from doing a purge policy and Paige stated the
ability to actually go into the system because the system does not do it.
She
stated that currently there is a module out there that they are hoping can be
ready by April 2008 where they will actually go in and purge.
Currently, the
system will only purge things that have zero balances.
She stated that a person
would have to go to each warrant that is 3 years and older and zero them out
manually which would take a lot of people and a lot of hours to do one by one but
they are hoping the vendor will have the module up and going by April which they
would batch items by the year.
Bill then stated the first step would be to ask the
Council to change the policy to three years and that way when the module is
ready then that would also be a follow up step.
He stated that it seems to him
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that they should follow-up on getting the process started to get the Council to
approve the three year purge policy.
Chairman Williams then also stated that if
the vendor will have the ability in April to say which warrants are older then 3
years old that must mean that the vendor has the ability to look at the dates so
then the vendor would be able to say which warrants are one year old, two years
old, etc.
Bill then stated why don’t they leave this with Paige and George to
come back to Council with a purge policy.
Paige stated that she already has a
written purge policy.
Bill stated they just need to get it on the agenda.
Page 9 deals with Driver Safety Courses, an adult, or juvenile has 90 days to
complete the Driver Safety Courses and if they do not then they get a Show
Cause Hearing which means they have to see the Judge after that.
They get 30
days to pay it or to take the course or pay the penalty and fine.
Approximately 30
cases were found where warrants were not issued or there was no hold put on
issuance of the driver’s license for juveniles.
The recommendation is that
something needs to be done with those particular 30 cases.
Management
concurred.
Craig stated that out of the 30 cases that they looked at they went in
on Friday to look at them again to see what the status of them was and 18 of
them still had not received any final disposition.
Bill asked if they had not
received final disposition from the Judge and Craig stated that was correct.
Paige then stated that they have reset them all.
She stated there is a new
legislation out that if they do not show up for a Show Cause then they get
another Show Cause but they have reset them all and does not believe that there
are any more that have fallen into this same scenario.
Page 10 deals with the documentation of the fines in the Court Specialist
Incorporated (CSI) software that they use.
It was found that there were some
inaccuracies in them, 10 minimum charges showed they were wrong, 7 did not
show a minimum amount penalty, some had other then class C misdemeanors, and
there was no reference statutes for about 7 of the charges.
The
recommendation was
that staff get with the Judges and Prosecutors to review the accuracy of those
fines.
Management concurred with this and a review was done as of August
2007 and those fines were corrected.
Chairman Williams had a comment about the report.
He stated that he and Craig
had discussed about putting positive things in the reports and he stated that
some of the positive things that have happened in Court are the automation but
he felt that maybe in the background section there should be a little paragraph
about the automation.
Craig stated that normally what he would do there is to
ask Paige to give him a paragraph and he would put it in the report verbatim.
With a few minor changes to the report, Council did not have any more to add.
4. Policy FIN-02
Chairman Williams had asked Craig to add this to the agenda since he had come
across this when he was filing some financial things and saw that it dealt with
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Internal Audit.
He noted that the Policy states that every five years the City looks
for a new External Auditor and his question was if the City does this.
Craig then
stated the date of adoption of the Policy was 04-01-86 which was sixteen years
before Sarbanes Oxley came into being.
Sarbanes Oxley requires that lead and
reviewing partners be changed out every five years and seven years for any
partner that has a significant involvement in the audit.
Sarbanes Oxley
commissioned the GAO to do a study on mandatory audit rotation of firms which
was back in 2004.
They interviewed 330 Fortune 1,000 companies.
The study
was inconclusive.
They needed more time to see whether it would be beneficial
to do audit rotations every five years or not.
One of the statistics that came out of
this was that they found that of those 330 firms, the average tenure of their audit
firms or their company was 22 years.
The City has had Deloitte for 14 years.
In the
survey 90% did not support mandatory firm rotations, 99% did not have any
policy in
effect at all.
There are pro’s and con’s to it.
There is the deal that if they have
been around too long that they get too close to management and the
independence and objectivity could be compromised.
It could be that they
become stale after a while and that they may use the same work papers after a
while.
For everything that could be bad about it there is also good points.
It
really is an inconclusive issue whether it does benefit the organization or not to
have mandatory rotation of auditing firms.
Bill stated that we use to have a larger
number of audit firms you could go with and now we are down to four.
George
stated it is actually three which is KP&G, Price Waterhouse, and Deloitte.
Steve
then stated that KP&G and Deloitte are the only ones that conduct governmental
audits.
George then stated that the Government Finance Officers Association
has recommended practices and one of their recommended practices is audit
procurement.
Their point in audit procurement is that a government entity should
undertake a full-scale competitive process for the selection of independent
auditors at the end of the term of each audit contract, consistent with applicable
legal requirements.
Ideally, auditor independence would be enhanced by a
policy requiring that the independent auditor be replaced at the end of the audit
contract, as is often the case in the private sector.
Unfortunately, the frequent
lack of competition among the audit firms fully qualified to perform public-sector
audits could make a policy of mandatory auditor rotation counterproductive.
In
such cases, it is recommended that a government entity actively seek the
participation of all qualified firms, including the current auditors, assuming that
the past performance of the current auditors has proven satisfactory. So what
George stated that they have done in the past at the end of the first five years of
the term of the contract with Deloitte, is that they went out and submitted
requests for proposals (RFP’s), they got a couple of proposals from the large
firms but no regional firms at all.
At that point and time, Steve Shepherd, Steve
Anderson and himself sat down and reviewed each of those proposals
independently and all three came to the same conclusion of rehiring Deloitte.
They came to City Council at that time and pointed out the Policy to them and
also informed them of the GFOA recommendations since this is a council policy
and Council has the ability to overwrite policy or modify as needed.
For the first
five year term, the Council agreed unanimously to accept the recommendation to
hire back Deloitte and then went to back to Council asking them to approve a
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sixth year to add another year to the five year agreement because they were
going through a financial system conversion at that time and Council did that.
At
the end of the sixth year they went out again to Council showed them what the
GFOA recommendation was and the policy, the Council said it was fine and
approved another five year term.
George stated a couple of things to mention is
that wherever you go with new external auditors, the first two years of audit
startup costs are very high in terms of dollars and resources.
George stated that
Deloitte has tried to maintain a sense of independence by rotating the auditors
working on the audit engagement.
George stated that some smaller cities may
be able to go with a regional firm but the City of Garland is large enough with the
issues they are faced with and are complicated that they really need to go with a
larger firm.
A good example of that is the Electric issue and looking at that is an
issue that Deloitte has the resources that they can help with where a regional
firm would not.
Also the bond rating is more credible when a larger firm is used.
Councilman Edwards then stated that in other words the policy needs to be
changed and George stated that they have talked about changing the policy in
other times but Council just decided to leave it as it was and look at it every time
they come back every five years.
Chairman Williams thanked them for the
information.
5. Internal Audit Department Charter
Craig stated that he provided the Internal Audit Department Charter to the Audit
Committee because the last time he gave it to them it was from the internet but
the reason that he gave it to them was to show that this action was approved by
the committee chair back in 1996.
6. Management Letter
Craig stated that they wanted to have more discussion on this and that is the
reason why he is presenting this.
They had agreed at two meetings ago that
they would discuss page 4 of the document.
Craig wanted to update them in
particular on the Conflict of Interest statement and the Code of Conduct.
There
have been several employees in HR, Steve Anderson and himself looking at this
issue and they are in the process of creating a Code of Conduct and a Conflict of
Interest that would help comply with what Deloitte & Touche is requesting.
It is in
progress and should have something to the committee in January.
Chairman
Williams asked as far as the recommendations go, what is the effect of
complying or not complying?
Craig stated that these are not material
weaknesses or reportable conditions.
Deloitte might come back this year and
mention them again in the management letter.
As for the Whistleblower Plan
Craig stated that they have a Hotline at the City which goes to his office.
Chairman Williams then asked about the Code of Conduct and Craig stated that
is part of what they are working on and should have something to them by
January.
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Chairman Williams then had a comment about the Risk Assessment model and
Craig stated that they already did that with the UTD Interns work on the Financial
Accounting Risk Assessment.
7. Projects in Progress
Craig presented the committee with a Monthly Work in Progress Report and
stated to the committee that he can provide them with that if they desire on a
monthly basis.
It gives them the status of what the Internal Audit Department is
doing at the City and gives a little information about the audits, objectives and the
project status and the anticipated dates to the Audit Committee.
8. Future Agenda Items
Craig asked Chairman Williams that it was his understanding that they still want
the Chamber to give a presentation at the next meeting and Chairman Williams
said yes.
They were looking as to when to meet with them when Chairman
Williams asked Craig about the several audits planned for a completion date of
December 2007.
Craig stated that the Payroll audit is a potential one which they
are waiting on responses for but the External Audit assistance would not be
brought to them because that is just working with Deloitte and Touche.
The Risk
Assessment that the UTD interns did looks good for December and then the
Audit Manual which he can give them a copy of so they can look at that which is
the policies and procedures which will be completed for the December meeting.
Chairman Williams just wanted to make sure that these items could be held off
until the January meeting and Craig stated that they could wait until January.
Craig stated that he would call Paul from the Chamber and let them know of the
meeting.
9. Next Audit Committee Meeting
The next Audit Committee Meeting is scheduled for Monday, January 7, 2008 at
3:00 p.m.
10. Adjournment
The meeting was adjourned at 4:08 p.m.
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