San Diego Audit Committee Meeting - September 16, 2015
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San Diego Audit Committee Meeting - September 16, 2015
The Audit Committee of the City of San Diego met on September 16, 2015, at 1:15 PM to discuss audit reports, including the monthly activity report, the central stores physical inventory, the Business Improvement District (BID) program audit, and the city's financial condition audit. The committee approved minutes and forwarded all reports to the full City Council. The meeting also included a closed session to evaluate the City Auditor.
Consent Calendar
- Approval of Minutes: Unanimous consent was granted for the minutes of the previous meeting. Councilmember Ricardo Valdebia was absent at the last meeting and could not vote. Ms. Schreiner and Mr. Valdebia abstained, and the minutes passed with majority approval.
Public Comments & Testimony
- Sarah Burns, San Diego BID Council: Expressed support for the BID audit findings and agreed with the recommendations. She emphasized the uniqueness of each BID and the need for performance standards that reflect individual community needs.
Discussion Items
- Monthly Activity Report (Information Item): Eduardo Luna, City Auditor, reported that since the last meeting, the office had issued four audit-related products: the city's financial condition report, the BID audit, the annual central stores inventory audit (FY2015), and the annual closeout audits. Two reports are in the writing phase (code enforcement division and IT risk assessment), and several audits are in progress (public utilities overhead rates, contracting follow-up, streets trenching and paving). A new IT auditor, Vishall Pahel, was introduced.
- Central Stores Physical Inventory Report: Kevin Starkey of MGO presented the results of the third annual inventory audit. The audit covered two stores and found an estimated difference of $49 out of a total inventory value of $2.3 million. The number of discrepancies (68 out of 232 stock items) appeared high but was explained by item-level sampling. The committee accepted the report and forwarded it to council.
- Business Improvement District (BID) Program Audit: Matthew Helm, Audit Manager, presented findings on the BID program, which oversees 18 BIDs managed by 17 nonprofit associations. Key findings: (1) The Treasurer's Office could enhance compliance by using additional data sources (private sector and county assessor data) to identify businesses not paying assessments. (2) Economic Development could improve performance metrics, shifting from narrative reports to standardized measures. The audit tested approximately 5,000 businesses and found that 26% of a sample were listed in a private database but not on the paid assessment list; county data showed 30-61% non-compliance across 11 BIDs. Management agreed to implement all three recommendations. Public speaker Sarah Burns (BID Council) voiced support. Committee discussions included penalties for non-compliance (three years back plus 10% penalty per year) and the administrative burden of monthly reporting. The report was accepted and forwarded to council.
- City's Fiscal Sustainability and Financial Condition Audit: Chris Kime, Audit Manager, presented the 10-point financial test comparing San Diego to six similar-sized cities over 10 years (FY2005-2014). The city scored 17 out of 20 in 2014, the highest among benchmark cities. Key metrics: short-run financial position (reserves of $177 million, 14% of general fund revenues), liquidity ratio of 3.9, revenues exceeded expenses by $162 million in 2014. The report showed significant improvement since 2005, attributed to financial reforms. Committee members praised the positive trend but expressed concern about unrecorded contingent liabilities (e.g., infrastructure, pension, stormwater) totaling $11 billion. The CFO and IBA noted ongoing reforms. The committee accepted the report and requested that future audits include an analysis of contingent liabilities.
Key Outcomes
- Motion to accept and forward the central stores inventory report to council: Passed unanimously (motion by Mr. Hebrank, second by Ms. Schreiner).
- Motion to accept and forward the BID program audit to council: Passed unanimously (motion by Mr. Hebrank, second by Ms. Schreiner).
- Motion to accept and forward the financial condition audit to council: Passed unanimously (motion by Mr. Valdebia, second by Ms. Schreiner), with a directive to include contingent liability analysis in future audits.
- Closed Session: The committee convened in closed session to evaluate the City Auditor's performance under Government Code Section 54957B. No report on actions taken was provided in the transcript.
Meeting Transcript
Good to see everybody again. It's been a little while. And I think we have everyone here with us today. Councilmember Zap, Carly Schreiner, Tom Hebrank, Ricardo's here. Eduardo's in his place. Lisa, Mar Elliott, everybody, I think Riley. I think we're all good. Um approval of minutes. Any unanimous consent unless there's any discussion or if anybody wants to noted. Nothing else. And we will pass them with Ricardo being absent at the last meeting and not being able to vote on this. That's two of us. Yeah, that's exactly why I went quick last time. Well, then it will be passed with majority with Ms. Schreiner and Mr. Valdebia abstaining. All good. Thank you. And do we have any non-agenda public comment today? No non-agenda, just agenda items. Okay. No non-agenda, so we'll move on. Any requests for continuance? Any comment from any of the committee members, IBA's office, city attorney. Nope. Perfect. We'll move right into the first item on today's agenda, which is an information item, which is a monthly activity report from Mr. Luna. Floor is yours, sir. Certainly. Good morning, members of the audit committee, Mr. Chairman. Eduardo Luna, City Auditor. I'm here to present our activity for the office since our last meeting. Since we've last met, we've issued four audit-related products. This includes the city's financial condition report, which will be heard at this meeting. In addition, we also issued our audit of the business improvement districts, which again will be heard this morning. We've also issued annual central stores inventory audit for fiscal year 2015. And that audit was conducted by Messias Jenny O'Connell. And also finally, we have issued our annual closeout audits, the public officials terminating office in fiscal year 2015. In terms of audit reports that are um in the report writing phase, we have two reports right now. The first one is the code enforcement division, and we expect to be able to provide that report to management to begin to begin the exit process within the next two weeks. In addition, we're in the process of writing our IT risk assessment, which will set the work plan for the coming year in that IT area. In terms of audits that are in progress, these are audits that are either in the field work stages or planning stages. This includes our audit of the public utilities overhead rates, contracting follow-up audit, and the streets trenching and paving audit. Um and also we are looking at starting the library audit and also housing commission. And then this last slide shows the remaining remaining audits that are been approved but haven't been started for the fiscal year. In terms of other audit issues and other um items I'd like to bring to the committee's attention. Um we are in the process of completing our recommendation follow-up for the fiscal year that ended June 30th. We expect to be able to provide that this report to the audit committee fairly soon.
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