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HomeMy WebLinkAbout12-18-2003 Audit Committee Minutesh~'/Jt1d- (J.,(7. /J Minutes I)DIT COMMITTEE fv1EETING City of Orangc- Wcrmcr Room Thursday, December 18,2003,3:00 p.m. ATTENDEES: AUDIT COMMITTEE Voting Members) Present David E. Sundstrom CPA, Chair Dwight Nakata CPA David Piper, CPA John Sibley, Assistant City Manager Jeanne Arehart. CPA, Internal Audit Mgr. Absent Eric Woolery CITY STAFF Richard Jacobs, Interim Finance Director David Christian, Accounting Manager EXTERNAL AUDITORS Steve Larson, CPA, Partner, Caporicci & Larson Mark McGeady, CPA, Manager, Caporicci & Larson 1. Call to OrdeI - ChainnanDavid Sundstrom called the meeting to order at 3:07 p.m.2. Approval of Minutes ofOctobcr 3,2003 - Reviewed andapproved as submitted.3. External Auditors - Steve Larson of Caporicci & Larson - Mr. Larson handed out a presentation outlining their responsibilities and approach as external auditors. Mr.Larson stated Caporicci & Larson audited the City's and RDA's financial statement1 reviewed the City's internal control policies and tested various Federal, State and appropriate County grant programs. Mr. Larson stated their responsibilities include obtaining a reasonable assurance that the statements are free of material misstatement and examining on a test basis, the support for the various transactions. In Phase 1,they met with City staff and identificd any unique accounting issues and proceeded to develop the audit work plan. In Phase 2, they began their interim work which focused on the internal control processes. They tested various transactions and began an audit of the Federal and State grant programs. Phase 3 was year-end work.Various account balances were validated based upon the assessment of risk which was detennined by their studies of internal control procedures. Mr. Larson statcd that the City prepared the City's and RDA's CAFRs which were reviewed by Caporicci's staff prior to finalization. The audit process took approximately 6 weeks spread over about 4..5 months. The conclusion is that financial statements are fairly presented in all material respects and, in summary, the set of numbers in the financials can be rclied upon as to the accuracy and consistency of application of estimates and processes. Chairman Sundstrom stated that thc records of the City didn't agree with the information from the LAn' statement and is that going to be corrected next year or is that a timing issue that we're going to be seeing every year? Rich Jacobs respondcd that it's a timing issue. By the time the auditors do their audit, it's October and they have better information. Richard Jacobs stated thc amount was under 5%. Caporicci Larson commented on the excellent year and the great job done by the City. Chairman Sundstrom also congratulated City staff on an excellent job. 4. Status of 2003-04 Audit Plan - Jeanne Arehart - Asthe last mceting was in October,only a few things have been completed since that time. The remaining'; TOTAuditswcre completed. The net findings in thosc 5 audits was approximately $1400.00.The amount of underreporting of TOT discovered through the audit process has diminished significantly due to the fact that we havc been auditing consistently for the past 6 calendar year returns. Therefore, we will be reducing the amount of auditing in this area (i.e. auditing every 3-4 years). At the Finance Department's request, Jeanne prepared an audit program 110 assist them with auditing business license tax returns. Business Liccnse staff will use the audit program to audit the gross reccipts reported on business license tax returns on all businesses who pay based on gross rcceipts. They will begin by auditing the service businesses, such as doctors and lawyers, as this is the area where there seems to be thc greatest discrepancy in reported gross reccipts. The audit of the Fair Labor Standards Act compliance has been completed and the final report is almost completc. Staff is working with the consultants to finc tune and cnsure we understand what their comments are and that our responses are completed before the report is finalized. That will be completed by the next Audit Committee mceting. We contracted with Diehl Evans to review Waste Management of Orange contract compliance. They have finished their field work and we will be getting a draft report after the holidays. Other audits in process are I) the Fire Department's process for issuing of permits for hazardous materials occupancy; 2) the Building Division's permit software cash receipts module's data accuracy and 3) the efficiency and accuracy of the Building Division's process for calculating and collecting fees on behalf of other departments and agcncies. Outside of the audit area, the Internal Audit Manager is helping Finance (as they do not have an Assistant Finance Director at this time) with their implementation of the utility billing software conversion. 5. Other audits - Jealme Arehart - The Statc Department of Finance audited our used oil grant and they had a couple of findings in ternlS of certain procedures we used. The City rcsponded that we have changed thcse processes and the state was satisfied with that. Only one finding becamc an issue and that is where they claimed we didn't provide enough documentation for some of the expenditures that were reimbursed to us through the grant. The City has bccn asked to repay the grant money related to this expenditure. The City is working with the contractor from whom we purchased promotional items to sccure thc satisfactory documentation. The City Attorney's office is involved and has informed the vendor that, if they are unable to provide the documentation, and the City is required to repay the grant money, the City will require reimbursemcnt from the contractor. The amount involved is a little over 0,000. There was no public discussion. Jeanne Arehart will e-mail committee with suggested meeting date in June or July.Mecting adjourned at 3:33 p.