Audit Advisory Committee Regular Meeting – July 14, 2025

Note: The agenda and meeting minutes indicate the meeting was originally scheduled for July 10, 2025, but this summary follows the instruction to use July 14, 2025 as the meeting date.

The Audit Advisory Committee of Fort Smith, Arkansas, met in regular session at 6:07 PM in Blue Lion Room 2. Director Neal Martin chaired the meeting in the absence of Chairperson Deana Infield. Members present: Russell Bragg, Christina Catsavis, Lavon Morton, Andre Good, and Neal Martin. Absent: Deana Infield and Ed Ralston. Internal audit staff present: Christi Fisher (Staff Auditor), Lucretia Perkins (Utility Auditor), and Tammey DiMatteo (Admin Coordinator). The meeting adjourned at 7:32 PM.

Consent Calendar

• Approval of Minutes (6/12/2025): Motion by Director Andre Good, seconded by Director Christina Catsavis, to approve the meeting minutes from June 12, 2025. Approved unanimously.

Discussion Items

• Audit Charter and Audit Advisory Committee Charter Revisions: The committee discussed aligning the charters with IIA (Institute of Internal Auditors) and GAO (Government Accountability Office) standards. Key points included:

  • Clarifying that the committee’s role is advisory, not oversight. The phrase "discharging its oversight role" should be changed to "discharging its advisory role." Members proposed adding language that all committee responsibilities under the charter are "advisory and non-binding."
  • Removing references to the City Administrator having authority over the internal audit function. The charter should state the internal audit reports functionally to the Board of Directors and only administratively to the City Administrator.
  • Deleting bullet points under the "Authority" section that granted the committee power to authorize special investigations or hire external firms; such authority should rest with the Board.
  • Revising the "Financial Statements" section to rename it "ACFR" (Annual Comprehensive Financial Report) and removing the first bullet point on reviewing complex accounting issues, which is handled by finance staff.
  • Replacing the line "City Administrator shall nominate committee members" with language stating the Board appoints members through the standard application process.
  • The committee requested that Christi Fisher redraft both charters incorporating these changes, cross-reference them with IIA and GAO model charters, and send a redline version for review at the next meeting. Policy manuals were deferred.

• Internal Audit Director Position & Outsourced Baker Tilly Services:

  • One candidate was previously interviewed; two more interviews were scheduled for July 15, 2025, after the Board study session. The committee expressed interest in having internal audit staff (or the full committee) also meet candidates to ask specific technical questions.
  • Members noted progress in recruiting; candidates from the current posting appeared stronger than previous ones. However, some Board members lacked clarity on the specific skills needed (e.g., CPA vs. audit experience). Governmental audit experience was valued but not required.
  • Regarding Baker Tilly: The committee voiced frustration with slow progress under the current 30-hours-per-month contract. The firm proposed a separate 225-hour, $50,000 engagement for a citywide risk assessment, but the committee decided to narrow the scope to utilities only. Discussion included focusing on high-risk areas such as utility billing (e.g., zero-bill accounts, unbilled revenue of approximately $6,000 per account) and IT controls.
  • The committee recommended that Baker Tilly begin the risk assessment for utilities only, using the existing contract hours, and that internal staff (Lucretia Perkins) assist with data gathering. Director Neal Martin agreed to communicate this direction to Baker Tilly and request a shortened timeline (estimated 100 hours) and deliverable dates.
  • Members emphasized that this targeted assessment would provide immediate value, especially with upcoming bond issuances for utility infrastructure, and would not duplicate efforts if a new director is hired later.

• Roundtable / Questions / Recommendations:

  • A question was raised about a delay in the single audit (federal program audit). The committee noted the delay was due to an identified federal award requiring additional procedures; the deadline is nine months, not six, so no immediate issue.
  • The next regular meeting was set for October 23, 2025, at 6:00 PM at Blue Lion (same location). Meeting invites to be sent by staff.

Key Outcomes

• Directives for Staff:
  • Christi Fisher to revise the Audit Charter and Audit Advisory Committee Charter per committee discussion, align with IIA and GAO standards, and circulate a redline draft for review at the next meeting.
  • Interim policy manuals were not reviewed; staff will resend corrected versions.
• Baker Tilly Engagement:
  • Committee recommended that Baker Tilly proceed with a risk assessment limited to Utilities only, using the current contract (30 hours/month). Staff to negotiate a reduced scope and cost (e.g., ~100 hours) and define specific deliverables and dates.
  • Internal audit staff to support Baker Tilly in data collection without duplicating efforts.
• Internal Audit Director Recruitment:
  • Two additional interviews will occur after July 15 Board study session.
  • The committee will participate in the evaluation of final candidates, potentially through a separate meeting with them.
• Next Meeting: October 23, 2025, 6:00 PM, Blue Lion Room.