San Diego Audit Committee Meeting - February 10, 2016
STREAMING COPY IN PREPARATION — RECORDING AVAILABLE FROM THE ORIGINAL SOURCE
San Diego Audit Committee Meeting - February 10, 2016
The Audit Committee of the City of San Diego met on February 10, 2016, at 9:00 AM. The meeting included approval of prior minutes, a monthly activity report from the City Auditor, a presentation of the San Diego Housing Commission's fiscal year 2015 audited financial statements, an audit of the city's overhead rate calculation process, and a quarterly fraud hotline report. All items were approved unanimously.
Consent Calendar
- Approval of minutes from the January 20, 2016 meeting was granted by unanimous consent.
Public Comments & Testimony
- No public speakers were present for any agenda items.
Discussion Items
- Monthly Activity Report (City Auditor Eduardo Luna): Mr. Luna reported on ongoing audits, including a memorandum to amend City Charter Section 111 (closeout audits of departing officials), which was considered by the City Council on January 25, 2016. Audits in progress include the San Diego Public Library, Housing Commission, IT Excel implementation, and pedestrian safety. The auditor also noted that the municipal code requires review of fiscal impact analyses for up to four potential ballot measures (redistricting, Rebuild San Diego, minimum wage/earned sick leave, and charter amendments).
- Housing Commission CAFR Presentation (Tracy McDermott, interim CFO; Amadou Bokar, audit partner): The Housing Commission received an unmodified (clean) audit opinion with no management comments. Key financial highlights for fiscal year 2015: total assets of $606 million (up $24 million), net position of $484 million (up $27 million), total revenue of $236 million (up 3%), total expenses of $209 million (down $7 million). Grant revenue (81% of total) and housing assistance payments (70% of expenses) were the largest components. Operational highlights included over 20,000 housing inspections, assistance to 950 new families, and $19 million spent on homelessness. The commission's pension plan is a 401(k) type, not subject to GASB 68. Questions addressed the composition of unrestricted net assets ($244.6 million, with only $9.9 million truly unrestricted), the structure of the Housing Commission as a component unit of the city, and the treatment of affordable housing loans (non-cash deeds of trust monitored for compliance).
- Audit of City's Overhead Rate Calculation Process (Danielle Knighton, Deputy City Auditor): The audit reviewed the standard cost allocation and non-discretionary cost allocation processes for overhead rates, focusing on the Public Utilities Department (PUD) and the libraries. The audit found that while rates were reasonable and equitable, formal documentation and guidance were lacking. Four recommendations were made: (1) The Comptroller's Office should provide training and document cost allocation decisions; (2) Financial Management (FM) should enhance monitoring, require sign-offs, and improve communication; (3) PUD should formalize its cost classification review; (4) PUD and the Comptroller should document the change from four overhead rates to one. All departments agreed with the recommendations. No material control weaknesses were identified. The audit did not cover external fees or charges.
- Quarterly Fraud Hotline Report (Andy Harida, fraud investigator): For the second quarter of fiscal year 2016, 21 complaints were received: 8 assigned to the City Auditor, 13 to departments, and 6 were outside purview. 16 cases were closed, leaving 22 open. Four corrective actions were taken: updating a reference in wastewater testing reports, requiring a contractor to use a city email account, issuing a civil penalty for a code violation, and issuing an administrative warning for water theft from a fire hydrant. Two cases were over a year old: one awaiting debarment procedures (expected by June 30, 2016), and one with a confidential draft being finalized. The office noted an increase in complaints (121 in FY15 vs. 75 in prior year) and may need additional resources for proactive fraud prevention.
Key Outcomes
- All reports were accepted by the committee and forwarded to the City Council with unanimous votes.
- The next regular meeting was scheduled for March 9, 2016.
Meeting Transcript
Perfect. Thank you all for being here. Welcome to this morning's meeting of the audit committee, February 10th, 2016. See we have Mr. Luna, our city auditor with us. Mr. Spencer, welcome back. Tom, good to see you, sir. Ricardo Valdivi from the I did it again. Rolando, sorry. I keep getting you and Ricardo mixed up all the time. Rolando Charvel from the Mayor's Office. Uh Lisa should be here shortly. Committee consultant. And Mara from the City Attorney's Office. Council Member Zap and Ricardo. Looks like we're all here. We have quorum. So good to go. Um begin approval of minutes from the January 20th, 2016 meeting. Unanimous consent, unless anybody has any issues or problems with the minutes of the last meeting. We're all good. No questions. Uh continuance items that anybody requests. Anybody any issues? Good. Ready to move on. First items, information item. Mr. Luna, are we doing the monthly activity report? Yes, I am. Good morning, members of the audit committee. Eduardo Lunis, City Auditor. I'm here to present our monthly activity report since our last meeting. That report will be heard at today's agenda. In addition, on January 25th, we issued a memorandum to the City Council proposed uh continuing to proposal to amend the city charter section one eleven, which is entitled Audits of Accounts of Officers. We were recommending that they strike the requirement from the city charter to perform um audits we call closeout audits of departing officials. And that was heard and considered the city council yesterday. In terms of audits that are in progress, we have several audits. We'll be sending that out to the administration for review and comment fairly shortly, fairly soon. In addition, the San Diego Public Library audit. Um we have completed field work and will begin drafting the report. Um in terms of the housing commission audit, we are in the middle of field work on that audit and expect to complete that later this spring. Um in terms of the IT audit of Excel implementation, that is also ongoing. The IT audits involving the treasurer's R tax and B tax system have been completed, and we'll be issuing reports to um the city council and management on those um systems. In addition, we're also um in the midst of beginning field work for the pedestrian safety audit. Um the next slide shows audits that are in the approved work plan but have not started. Um we expect to start these um audits this fiscal year. In addition, just let the audit committee be made aware of this. Uh, the municipal code requires that the city auditor review the fiscal impact analysis that's prepared by the Office of the Independent Budget Analyst for each new city ballot measure.
openpublica.com