Audit Committee Meeting - October 8, 2025

This meeting of the Audit Committee covered several important oversight topics, including the Office of the City Auditor's recommendation follow-up report, the annual Central Stores inventory review, and the city auditor's monthly activity report. Committee members discussed numerous open audit recommendations across city departments, with a focus on those past due or requiring additional resources. A key action was taken on a recommendation regarding workforce reports, and the committee received updates on audits related to police body cameras, overtime, stormwater fees, lease management, brush management, and more.

Consent Calendar

• The committee approved the minutes of the July 25, 2025 meeting via a unanimous motion (with committee member Tap Shuri absent). The consent calendar included item 1 – approval of minutes. There was one public commenter, Blair Beekman, who spoke briefly on emergency preparedness.

Public Comments & Testimony

• Non-agenda public comment (before item 2): Four speakers addressed the committee. Blair Beekman spoke about city contract oversight and accountability practices, praising councilmember Von Wilpert's efforts. Becky Rapp called for a detailed audit of taxes collected from the cannabis business division, citing a prior auditor finding that fewer than 50% of permitted businesses were paying taxes. Terry Ann Skelly, a parent and planning group member, requested an audit of fees and taxes related to marijuana businesses, highlighting potential public health costs. Two additional speakers (Madison and Peggy Walker) raised concerns about the financial stability of the cannabis industry, referencing a national law review article about a $6 billion debt wall, and urged caution in city investments. All expressed a desire for transparency and cost analysis.
• Public comment on item 2 Section A: Blair Beekman spoke about the importance of efficiency and accountability, referencing CIP and transportation reporting.
• Public comment on item 2 Section B: Blair Beekman commented on police body camera auditing and police overtime practices, mentioning a recent controversy in San Jose.
• Public comment on item 3: None.
• Public comment on item 4: Blair Beekman praised the monthly activity report and urged continued open discussion on the unsafe camping ordinance.

Discussion Items

1. Item 2: Office of the City Auditor's Recommendation Follow-Up Report (Sections A and B)

   • Section A: The auditor presented the recommendation follow-up report. One item sought committee action: to close recommendation 7 from the 2020 strategic human capital management audit as partially implemented with no further action. This recommendation called for establishing a formal policy to ensure annual workforce reports are produced. City HR director Ms. Rasco noted the department had produced the reports for three years but had faced staff reductions (24% cut) and was in the process of drafting a formal policy. Chair Moreno disagreed with closing the recommendation, arguing that a policy is needed to ensure continuity beyond the current department head. She made a motion to leave the recommendation open and request HR to provide an alternative proposal with a timeframe and recommended codification method. The motion was seconded and passed unanimously (Tap Shuri absent).
   • Section B: Committee members Halpern and Mafia led a detailed discussion of several selected audits from the follow-up report. Key points:
     • Police: Body-worn cameras (23-001): Six recommendations still in meet-and-confer; target December 2025. A police captain confirmed the deadline remains viable, but negotiations are ongoing. The draft policy is with the police officers association for review.
     • Police: Overtime (24-08): Four open recommendations. Progress reported on centralizing overtime sign-up and prioritization. Some items still subject to meet-and-confer; December 2025 target remains.
     • Development Services: Code enforcement (22-009): 10 recommendations passed due; 8 require additional resources (program officers). Staff reported using current staff to draft new procedures; completion expected by end of fiscal year after a reduction-in-force is completed this month.
     • Stormwater: Reinspection fee (18-023): Only recommendation 9 remains open, with target July 2026. Requires two FTEs and $50-75k one-time cost to implement a reinspection fee program. Estimated eventual revenue of $1.5 million per year. Staff indicated the department did not request funding in FY25 or FY26, and likely not in FY27 due to budget constraints. Chair Moreno urged the department to include the request in FY27.
     • Economic Development: Real estate portfolio (19-002 & 22-007): Several recommendations depend on a real property management plan. Consultants are being scoped; target June 2026 but may slip without funding. Discussions on lease holdovers (currently 24%) and maximizing revenue. Chair Moreno stressed the need for faster action given budget deficits.
     • Ethics Commission (20-010): One remaining recommendation requires meet-and-confer to add 800-1000 classified employees to the commission's jurisdiction. Legal language is being drafted; commission noted this will require additional funding.
     • Public Utilities: Industrial wastewater (21-001): Two open recommendations. Negotiations with participating agencies have concluded; Metro JPA took an advisory vote. Approvals from 13 agencies are pending; city council action expected spring 2026.
     • Parks and Recreation: Equity in recreation programming (22-005): 12 of 16 recommendations still open, many requiring additional staff and funding. A community recreation needs assessment launched in August, with completion expected May 2026. Chair Moreno advocated for FY27 budget requests to address equity gaps.
     • Transportation: Pothole repairs (24-01): Only one recommendation remains open – codifying proactive pothole repairs in underserved areas. Staff described a proactive team; codification expected when the pavement management plan is presented to ATI in spring 2026.
     • Facilities: Condition assessments (25-01): Many recommendations require funding for facility condition assessments. Progress is limited; no agreement yet on target spending levels.
     • Fire/Parks: Brush management (24-01): Four recommendations past due. Parks requested $2.9 million annually for FY27 to consolidate brush management across multiple departments. Chair Moreno stressed the public safety importance.
     • Compliance: Workplace safety/workers compensation (22-08): Five open recommendations; compliance department notes resource constraints. Staff indicated progress on telematics pilot and survey.
     • Compliance: Unsafe driving telematics (23-08): Two recommendations disagreed with; compliance is piloting a telematics program. Committee requested updates on alternative approach; chief compliance officer provided verbal updates.

2. Item 3: Agreed Upon Procedures – Central Stores Physical Inventory FY2025

   • Kathy Lai from Crowe presented results. A sample of 253 items (value $229,317) from 1,683 stock items (total $1.7 million). Net overstatement of $12,646. Review is required by municipal code. Staff from Purchasing and Contracting provided an update on the long-pending recommendation to implement handheld inventory scanners: a previous vendor failed to integrate with SAP; a new SAP-certified vendor has been identified and a contract may be presented to council within months. The committee accepted the report and approved the motion.

3. Item 4: City Auditor's Monthly Activity Report

   • City Auditor Andy Hanao reported on recent reports issued (including the recommendation follow-up and fraud hotline report) and audits in progress (cybersecurity, leased golf courses, brush management, fire rescue dispatch, police internal affairs, unsafe camping ordinance). Proposals for independent legal counsel have been received; evaluation committee (including committee member Mafia) will begin work. He noted potential delays on police internal affairs due to redaction requirements.

Key Outcomes

• Motion on recommendation 7 (workforce report): The committee voted unanimously (Tap Shuri absent) to keep the recommendation open and direct HR to provide an alternative proposal for formal policy codification in the next recommendation follow-up report. Chairman Marino's motion carried.
• Item 2 Section B discussion: Informational only; no action taken. Committee members urged departments to request needed resources in FY27 budget and to prioritize revenue-generating recommendations.
• Item 3 – Central Stores: The committee accepted the agreed-upon procedures report and approved the motion (passed with vice chair Whitburn and committee member Tapsuri absent). Staff from Purchasing and Contracting committed to presenting a contract for handheld scanner implementation within months.
• Item 4 – Monthly activity report: Received as information. Committee member Halpern inquired about potential delays; auditor noted no specific concerns but acknowledged internal affairs audit may face delays.
• Next meeting: Scheduled for November 12, 2025, at 9 a.m.