San Diego Audit Committee Meeting – January 15, 2020
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San Diego Audit Committee Meeting – January 15, 2020
The Audit Committee of the City of San Diego met on January 15, 2020, at 9:00 AM. Chair Sherman presided, with committee members Mr. Spencer, Mr. Valdivia, and Mr. Halpern present. The meeting covered the City Auditor's monthly activity report, the Fiscal Year 2019 Comprehensive Annual Financial Report (CAFR), the quarterly fraud hotline activity report, and a hotline report on Public Records Act (PRA) responses. All motions passed unanimously.
Approval of Minutes
- The minutes from the previous meeting were approved unanimously.
Discussion Items
City Auditor's Monthly Activity Report
- Interim City Auditor Kyle Elser reported that since the last meeting, two audit products were issued: a hotline report on Public Records Act responses and a quarterly hotline report. Four audits are in the report-writing stage, including neighborhood services and homelessness, development services charges for deposit accounts, strategic human capital management, and risk management for city attorney liability payouts. Four new staff members were introduced.
- The office received a peer review with no recommendations for improvement, and two recommendations from the prior year have been implemented.
Fiscal Year 2019 Comprehensive Annual Financial Report (CAFR)
- Comptroller Tracy McCraner and Finance staff presented the CAFR, which received an unmodified (clean) audit opinion from MGO (external auditors). The report included a reclassification of $200 million between two equity accounts in the 2018 column, which did not impact total equity. Corrective actions were implemented, including additional controls and reorganization.
- MGO partner Peter George confirmed the clean opinion and noted two audit adjustments: a $15.9 million reclassification of commercial paper from short-term to long-term in governmental funds, and adjustments of $3-4 million for water and sewer revenue recognition. No material weaknesses or significant deficiencies were identified. The committee questioned MGO about compliance with government auditing standards, and MGO clarified that a separate report was issued.
Quarterly Fraud Hotline Activity Report
- Fraud Investigator Gina Ruza reported that during the second quarter of FY2020, 54 fraud hotline reports were received: 40 within purview (4 assigned to City Auditor, 36 to departments) and 14 outside purview. 35 reports were closed, leaving 56 open cases. One City Auditor case was substantiated (related to PRA noncompliance), and eight department investigations were substantiated. Corrective actions were taken for seven cases.
- The committee discussed the 1,520 hours spent (out of 2,082 budgeted) and the number of open cases, which remained stable.
Hotline Report of Public Records Act Responses
- Fraud Investigator Andy Harida presented a 48-page report finding that the city's PRA program did not consistently comply with all aspects of the PRA. Examples included a 111-day delay in responding to a water billing request and inaccurate compliance statistics. The city lacked complete policies and procedures. Six recommendations were made, and management agreed to implement all, including citywide training, revising administrative regulations, and reviewing performance metrics.
- The committee discussed the role of the City Attorney's Office in reviewing reports and ensuring legal compliance. The PRA program manager acknowledged that policies and procedures exist but were not fully documented; they aim to complete documentation by June 2020.
Key Outcomes
- Accepted the City Auditor's Monthly Activity Report unanimously.
- Accepted the CAFR and related reports unanimously.
- Accepted the Quarterly Fraud Hotline Activity Report unanimously.
- Accepted the Hotline Report on Public Records Act Responses and directed it to the City Council unanimously.
- The next meeting is scheduled for February 19, 2020.
Meeting Transcript
All right, good morning, everybody. Welcome to the January 15th, 2020 meeting of the audit committee. Looks like we have almost a full vote here. We have Mr. Spencer, Mr. Valdivia, and Mr. Halpern committee members. Our newest council member representative, Vivi Marino won't be able to join us today. We have Kyle Elser, our interim city auditor, Lisa from the IBA, Rolando Charveau from the City's Finance Department, Joan Dawson City Attorney's Office, and Dan. We are all here. We have a quorum. I do need a approval of the minutes from our last meeting if unless anybody has any questions, concerns, changes. First one there, second one there, Mr. Halpern and Mr. Valdivia. All in favor? All right. Passes unanimously. Do we have any non-agenda public comment today? We do not. We'll get right on to committee members. Anything you want to comment on before we get started here today? Any requests for continuances? Anything from the city city attorney's office IBA. Perfect. Then we're going to go right into our first item. Which is City Auditors Monthly Activity Report. Mr. Elser, that is you. Thank you, Chair Sherman. Good morning, everyone. I'm Kyle Elser, interim city auditor. And with me is Danielle Knighton, Deputy City Auditor. And we'd like to present the city auditors' monthly activity report. So since we last met, we've issued two audit products. We issued our hotline report of Public Records Act responses and our quarterly hotline report. And both of those reports will be presented to you this morning. And we have four audits in the report writing stage. We have our neighborhood services efforts to combat homelessness audit. We expect to receive the management response to that report on Friday, and we'll be issuing it on Monday. At least that is our plan. We also have the development services charges for deposit accounts audit, and that audit has been issued in draft in the exit conference is scheduled for January 21st. We also have the strategic human capital management audit. We plan to issue the draft report this week for management review. And we also have the risk management city attorney liability payout audit, and we intend to issue the draft within the next two to three weeks. We have the San Diego Police Department Crime Data Analysis Program Audit. And our IT audit of citywide sensitive data encryption standards. And we have one audit in the planning stage, which is our IT audit of legacy applications. We do have 10 audits on our annual audit plan that we have not yet started, and five of them are listed on this slide, and there's five listed on the next. The first recommendation was regarding how sampling is portrayed in our audit reports.
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