San Diego City Audit Committee Meeting - July 18, 2018
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San Diego City Audit Committee Meeting - July 18, 2018
The Audit Committee of the San Diego City Council met on July 18, 2018, at 1:15 PM to discuss several audit-related items, including the citywide human capital fact book, the annual risk assessment and audit work plan, IT audit priorities, and a quarterly fraud hotline report. The meeting was chaired by Councilmember [Chair] and included members Scott Sherman, Thomas Hebrank, Ricardo Valdivia, and Alan Spencer. The committee approved the minutes of the May and June meetings by unanimous consent.
Consent Calendar
- Approval of Minutes: The record of action for the May and June 2018 meetings was approved by unanimous consent without discussion.
Public Comments & Testimony
- Martha Welch (non-agenda public speaker) expressed concern about funds not being spent properly, referencing a MAD for Ecunanum (unclear project) that had a budget of $2.5 million but spent only $2,000. She stated that the city is not using money for sidewalks and licenses as intended, and that the issue is mounting.
Discussion Items
Monthly Activity Report (City Auditor Eduardo Luna)
- The City Auditor presented the first monthly activity report of FY2019. Since the last meeting, the office issued four audit products: the citywide human capital fact book, the annual citywide risk assessment and audit work plan, the annual IT risk assessment and audit work plan, and the quarterly fraud hotline activity report.
- Upcoming audits include the public utilities customer support and water billing audit (to be released July 24), real estate asset surplus properties, and a water meter cover replacement process audit. Several other audits are in progress, including community planning groups, fleet services, and IT audits.
Citywide Human Capital Fact Book and Identified Risk Areas
- Presentation: Andy Hannah (Principal Performance Auditor), Nathan Otto, and Laura Reyes Cortez presented the fact book. Key findings: The city has over 11,000 employees, spending $1.4 billion on salaries and benefits (40% of the city budget). Only 30% of managers believe the city is effective at retaining talent, and quits are increasing faster than retirements. Average years of service at separation dropped from 10 years (2011) to 5 years (2018). Voluntary turnover is estimated to cost $40 million annually. Employee satisfaction is 74% overall but varies widely by department. Only 35% of employees feel poor performance is dealt with effectively. The report identified four risk areas: retention, organizational agility, employee satisfaction, and compensation.
- Committee Discussion: Councilmember Sherman emphasized that the discipline and incentive issues are tied to collective bargaining agreements, and that the city is losing high performers. Chair noted the low discipline scores (35%) and the disparity across departments. Members discussed the need for audits to drill down into these issues, particularly retention and performance management.
- Outcome: The committee voted unanimously to accept the report and forward it to the full City Council.
City Auditor’s Annual Citywide Risk Assessment and Audit Work Plan (FY2019)
- Presentation: Kyle Elser (Assistant City Auditor) presented the work plan, which includes 21 projects. Six audits are carried over from FY2018: transportation stormwater curb painting, real estate surplus properties, fleet services, water meter cover replacement, community planning groups, and water billing. Ten new performance audits are planned, including financial reporting, park joint use agreements, tree trimming, call center, capital project charges, DSD deposit accounts, advanced metering infrastructure, and homelessness reduction. The work plan totals approximately 25,000 hours.
- Committee Discussion: Councilmember Sherman highlighted the value of the DSD billing and water meter audits. Councilmember Spencer questioned the efficiency of the audit office’s administrative time and the scope of cross-departmental audits. The committee discussed the prioritization of audits and the role of council requests.
- Outcome: The committee approved the work plan unanimously.
IT Risk Assessment and Audit Work Plan (FY2019)
- Presentation: Steven Gomez (Principal IT Auditor) presented the IT audit plan. Three audits are carried over (SL implementation, City Hub security, disaster recovery preparedness) and two new IT audits are planned: network perimeter controls and citywide sensitive data encryption standards. The audits are ranked by risk to the city.
- Committee Discussion: Members questioned the backlog and the separate treatment of IT audits. The auditor explained that IT audits require specialized skills and that hours were reallocated to the water billing audit. The committee noted the importance of these audits for cybersecurity.
- Outcome: The committee approved the IT audit work plan unanimously.
Draft Administrative Regulation 1510 (Audit Report Replies)
- Presentation: Kyle Elser presented the updated AR, which establishes procedures for city departments to respond to audit reports, implement corrective actions, and provide documentation for closure. The regulation aligns with generally accepted government auditing standards.
- Committee Discussion: Councilmember Sherman clarified that the AR applies to mayoral departments but also expects independent departments to follow it. The committee noted the importance of ensuring audit recommendations are addressed.
- Outcome: The committee approved the draft AR, supporting the mayor’s authority to issue it.
Quarterly Fraud Hotline Activity Report (Q4 FY2018)
- Presentation: Andy Harita (Fraud Investigator) reported that the hotline received 226 cases in FY2018, a 10% increase from the prior year. In Q4, 53 complaints were received, 37 assigned to departments, 11 retained by the city auditor, and 16 deemed not in purview. Substantiated cases involved a parks custodian making illegal water connections and two public utilities employees using unauthorized disabled parking placards. Departments took corrective actions. The report also noted that the hotline has led to over $6,000 in recoveries.
- Committee Discussion: Councilmember Hebering commended the productivity. The committee discussed the need for strong consequences for theft and the importance of publicizing outcomes to deter fraud. The fraud investigator noted that staff augmentation from audit staff helps manage the caseload.
- Outcome: The committee accepted the report unanimously.
Key Outcomes
- Votes: All agenda items were approved by unanimous vote: acceptance of human capital report (moved to full council), approval of citywide and IT audit work plans, approval of administrative regulation 1510, and acceptance of the fraud hotline report.
- Next Steps: The next special meeting is scheduled for August 1, 2018, at 2:00 PM.
Meeting Transcript
All right. Good morning, everybody. I leaned into it. Thank you. Don't back up back away. Council members Scott Sherman, Mr. Thomas Hebrank, Ricardo Valdivia, and Mr. Alan Spencer also up here today. Well, of course, Eduardo Luna, our city auditor, Priscilla Dugard, Deputy City Attorney Scott Clark, Department of Finance, Assistant Director, and Lisa Byrne from our IBA's office and my committee consultant Bruce Williams. So we will record the record of action of both May and June meetings of the audit committee by unanimous consent, unless anyone has any changes or discussion and seeing none. We will approve that by unanimous consent. We have one non-agenda public speaker this morning for two minutes, Ms. Martha Welch. You have two minutes. Martha Wells, you should look into the MAD for um Ecunanum, but that they had point two thousand point two thousand. No, sorry about that. Two five million. But they only spent two, um, two thousand um a thousand. That's amount that's not right because where's the money that is that's um they don't um tell you what they do with the money, and it's not right because it's mouse and um they don't um spend the money, and that's not right because um you're supposed to spend the money because um and if you don't spend the money, that's not right because um it's mouse and because I've seen this before, and they don't spend all the money in the amounts because they don't do it, um they don't do that right because um they don't fix the sidewalks or the um license and all that stuff they're supposed to do, but they didn't do it, so it's mounting. Thank you, Ms. Welch. And so uh we will go next to the um activity report, monthly activity report, Mr. Luna. Certainly good morning, members of the audit committee at Wardaluna, City Auditor. I'm here to present our monthly activity report, the first one of the fiscal year. Since we've last met, we issued four audit products. This includes our citywide human capital fact book fact book, which will be heard today. In addition, we issued our annual citywide risk assessment and audit work plan for fiscal year 2019, our annual IT risk assessment and audit work plan for fiscal year 19, and our quarterly broad hotline activity report for the final quarter of fiscal year 2018. In addition, we have several audits are in the report writing stage. Um that's been getting a lot of attention is our public utilities customer support and water billing. We'll be releasing that audit on July 24th. In addition, we have real estate asset surplus properties, which also will be released uh shortly as well. In addition, we also have a second um public utilities audit underway. This includes a water meter cover replacement process. We're targeting to issue that report in July as well. We have other audits, um process, community planning groups, fleet services vehicle acquisition, IT audit, excellent implementation, those are scheduled for July as well, but some of them may slip a little bit towards August because we are putting most of our resources into finalizing the water department audits. In addition, we have our annual mission pay fund audit for fiscal year 17 that we expect to issue in August. We have one audit that's in the planning stage. This is the IT audit of the security of the city hub and supporting infrastructure, and then one audit that was on the work plan that was not commenced, which is the IT audit of disaster recovery preparedness. And finally, we also issued a draft administrative regulation 1510 on replying to audit reports. So that concludes my presentation today. Okay, I'm not seeing anybody on the lights, and I'm sorry, neglected to see uh ask if anyone had any other comments before we launched right into the monthly activity report. No, okay, good. Um we will move right into our um our discussion agenda and um item number one. We've got our citywide human capital fact book and identified risk areas. Uh we will hear a presentation on item uh this item. And Mr. Luna will lead off with a few remarks. Certainly uh members of the audit committee at Ward of Luna. This report that you see before you is a little bit different than most daughter reports, in that it doesn't contain any findings or recommendations, but really lays the groundwork for issues that I believe are important for the mayor, city council and this committee and the executive agent of the city to begin thinking about, which is the idea of human capital.
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