San Diego Audit Committee Meeting Summary - January 20, 2016

The San Diego Audit Committee met on January 20, 2016, at 5:00 PM to review the City Auditor's monthly activity report and to receive a comprehensive training presentation on the Government Auditing Standards (the "Yellow Book") from Harriet Richardson, the Palo Alto City Auditor. The meeting included routine approvals, a detailed overview of auditing standards, and discussions on the city auditor's compliance with those standards. The next regular meeting was scheduled for February 10, 2016, at 9:00 AM.

Consent Calendar

• The committee approved the minutes from the previous meeting on January 11, 2016, by unanimous consent, with no changes or objections.
• There were no non-agenda public comments, no committee or Mayor's Office comments, and no continuance requests.

Discussion Items

Item 1: City Auditor's Monthly Activity Report

City Auditor Eduardo Luna presented the monthly activity report. Key updates included:

• Issued Products: On December 2, 2015, the office issued a library internal controls issues memorandum and a hotline investigation regarding misuse of scrap metal and contract deficiencies.
• In Progress: An exit conference was held with management on the hotline investigation, with the final report expected next month. Two audits are in report writing phase: a contracting follow-up audit requested by this committee, and a street trenching and paving audit.
• Fieldwork: Audits in progress include the San Diego Public Library, Housing Commission, IT audit on Excel I implementation, two IT audits on the treasurer's R tax and V tax systems, and a pedestrian safety audit (moving beyond planning).
• Not Commenced: Several audits on the approved work plan have not yet started.

Item 2: Yellow Book Training (Government Auditing Standards)

Harriet Richardson, Palo Alto City Auditor, delivered a 60-minute training. Key points included:

• History: The Yellow Book was first published in 1972 (54 pages) and has undergone six major revisions; the 2011 version is 177 pages plus appendices.
• Structure: The standards are principles-based, moving from rule-based in 2011. They use "must" (unconditional), "should" (presumptively mandatory), and explanatory language (e.g., "may").
• Ethical Principles: Five principles guide auditors: public interest, integrity, objectivity, proper use of government information, and professional behavior.
• Independence: Extensive coverage of threats (self-interest, self-review, bias, familiarity, undue influence, management participation, structural) and the requirement to document independence assessments, especially for non-audit services.
• Competence: Staff must collectively possess adequate competence, including 80 hours of CPE every two years (24 hours in government-related topics, 20 per year).
• Quality Control: Internal quality systems and external peer reviews every three years, with ratings of pass, pass with deficiencies, or fail.
• Performance Audit Standards: Planning (including risk assessment, evidence, and detailed audit plans), supervision, evidence (sufficient and appropriate), and reporting requirements (objectives, findings, conclusions, distribution, and follow-up).

Key Outcomes

• The committee received the Yellow Book training and discussed its relevance to the City Auditor's work.
• Councilmember Zepp commented that the training affirmed the City Auditor's adherence to the Yellow Book, noting that the City Auditor's office had passed two peer reviews.
• No formal votes were taken; the meeting was adjourned, with the next regular meeting scheduled for February 10, 2016, at 9:00 AM.

Discrepancy Note

• No agenda or minutes were available for this meeting. The transcript references a slide titled "audit reports issued," but Councilmember Spencer noted he did not see the list in the handout; the City Auditor clarified that the listed items were those issued during the period.