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HomeMy WebLinkAbout08-10-2009 Audit Committee Minutesa~ ~ 8~.0.~ ~. ~ 7 Minutes AUDIT COMMITTEE MEETING City of Orange -Weimer Room Monday, August 10, 2009 3:00 p.m. ATTENDEES: AUDIT COMMITTEE (Voting Members) Present David E. Sundstrom CPA, Chair Nancy Loughrey, CPA Dwight Nakata, CPA David Piper, CPA John W. Sibley, City Manager Katrin Bandhauer, Internal Audit Manager EX-OFFICIO MEMBERS Carolyn Cavecche, Mayor Not Present Denis Bilodeau, Councilmember CITY STAFF Richard Jacobs, Finance Director David Christian, Assistant Finance Director Jeanne Arehart, Accounting Manager Christine Overturf, Utility Billing Supervisor Leonie Crouch, Business License Supervisor EXTERNAL AUDITORS Ken Al-Imam, CPA, Partner -Mayer Hoffman McCann P.C.1. Call to Order: Chairman David Sundstrom called the meeting to orderat 3:08 p.m.2. Introduction of New Internal Audit Manager: Deputy City Manager Rick Otto introduced the new Internal Audit Manager, Katrin Bandhauer.3. Approval of Minutes of December 15, 2008: Minutes approved as read.4. Status of 2008-09 Financial Audit: Ken AI-Imam. The interim phase of the audit is complete and a number of cash disbursement transactions were tested. Compliance testing began which included the Redevelopment Agency, the health and safety code, the single audit, Federal financial programs and the City' s investment portfolio conforming to the state government code. In the final phase of the audit, more is focused on substantiating support for the year-end balances, especially for significant assets and liabilities, and also a number of analytical review procedures.A new accounting standard takes effect this year: GASB Statement Number 49 which deals with pollution remediation. GASB 49 requires a local government to record as a liability on its balance sheet a legally obligated responsibility to clean up existing pollution and has nothing to do with pollution monitoring or prevention. The liability is recorded only after the responsibility has been identified ( there are five defined obligating events) and only if the liability is material to the financial number of cities, including Orange, have some responsibility to monitor emissions from former landfills. There's specific language in GASB 49 on how to account for pollution. remediation that's a part of the process of acquiring property either for resale or for continued operational use. David Sundstrom suggested that the Audit Committee should consider a periodic self- evaluation. AICPA asks for it every five years and it hasn't been done in the past 10 years. Mr. Sundstrom distributed a document to propose a draft charter. The Mayor requested. that this be looked into. 5. 2009-10 Audit Plan: Katrin Bandhauer. Katrin and Jeanne Arehart reviewed the preliminary work. Katrin did with. some of the Department Heads. In 2005, Jeanne went through every department within the City and performed a detailed risk assessment to help identify the areas of exposure- financial, procedural, and regulatory- within the City.Katrin has met with all the Department Heads to re-familiarize them with that risk assessment, to determine whether they still consider the risk rankings appropriate, and to evaluate whether any changes within their departments, such as additional procedures or reductions in staff, would impact future risk levels. An overlay was put together to identify significant areas of risk for follow-up and then on a go-forward basis. These 5 or 6 items will be the focus of the Internal Audit Plan for the next several months and will be reported on at the Audit Committee meeting at the end of December.6. Annual Write-off of Receivables: Rich Jacobs. The write-offs from Accounts Receivable and Utility Billings were presented. The larger items from AccountsReceivable (items 2,000 totaling $88,183) are minor accounts that were mainly damage to City property and, since collection efforts have been exhausted, it is advised that thosebe written off.There are $73,000 in write-offs on utility accounts, which are many bi-monthly billings for local accounts for water and sewer and trash. In past years, the write-offs were in the neighborhood of $30-40,000 a year. This year's write-offs are nearly double, primarily due to the economy. People are being foreclosed upon and one of their lowest priorities is paying their last bill. If there is a deposit on the account, it is applied. Mayor Cavecche questioned why that Equity Office Properties is one of the ones listed as they are still in business. Christine Overturf will. research that request.7. Draft Report to City Council: David Sundstrom. A checklist was presented with items to be included in the draft report. These are things already being done and it is recommended to document them in the report. Item #16, states the Audit Committee should present annually a report to the governing body on how we discharge our duties.The report should be made public and the duties should be outlined in this Committee's charter or other established documentation. It specifically states that the report should include the fact that the Audit Committee discussed. financial statements with management ,privately with the independent auditor, and then amongst themselves, and believes they are fairly presented to the extent such a determination can be made solely on the basis of such conversation. David Sundstrom and Katrin Bandhauer will follow up with the goal of incorporating as many of the items on the checklist as feasible in future Audit Committee reports to the City council.8. Public comment: David Sundstrom.There was no public comment. 9.