City Council Subcommittee: Audit Subcommittee Goodyear City Hall 190 N. Litchfield Rd., Room 117 Goodyear, AZ 85338 |
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CALL TO ORDER
ROLL CALL
- Present:
- Councilmember Joe Pizzillo; Councilmember Sheri Lauritano; Councilmember Brannon Hampton
- Staff Present:
- Deputy City Manager Dan Cotterman; Deputy Finance Director Jared Askelson; Accountant James Williamson
- Attendees:
- Crimson Singleton, Hinton Burdick Auditor
| PUBLIC COMMENTS |
None.
| BUSINESS |
1.
Discussion of Upcoming Comprehensive Annual Financial Report (CAFR) Audit.
Deputy Director of Finance gave overview of annual audit schedule and stated that the audit should be complete with a draft review of findings available to the Audit Subcommittee by late November, 2021.
Deputy Director of Finance gave overview of annual audit schedule and stated that the audit should be complete with a draft review of findings available to the Audit Subcommittee by late November, 2021.
2.
Request that staff investigate and report on the matter.
The following questions and concerns were presented by committee members:
Councilmember Pizzillo asked about the purchase card audit that is done annually and if it is possible to lock-down items to restrict purchases. Deputy Director Askelson replied that vendor lockdowns are possible but are not in place today, we do have City restrictions that have always been in place. We have not had issues come up that employees are improperly using their purchase cards, however on very rare occasions a card is accidentally used for personal use. It is an accidental purchase with large vendors such as Amazon or Home Depot and the City does not want to lock down vendors that we use frequently.
Councilmember Lauritano asked how such accidents are found, Deputy Director Askelson explained that a business justification is required for each transaction, including use of a travel form for travel expenses. The justification and approval processes are in place for the purpose of identifying these ineligible expenditures. All required justification and related documents are electronically attached to each reconciliation in the system which allows for an easier auditing process.
Councilmember Pizzillo asked if we had problems with employees purchasing items prior to obtaining purchase orders. Deputy Director Askelson stated anything under $2,500 limit does not require a purchase order. Vendors requiring purchase orders we try setting up blanket purchase orders for. Expenditures that are $2,500 or more require a purchase order and are flagged by the system when a purchase order is not used to identify potential violations.
Councilmember Pizzillo asked about separation of duties in the payroll process. Deputy Director Askelson stated that we try to split and segregate duties within the payroll division where necessary. Most importantly, any changes or additions to employees and their information happen outside of the Finance department, away from those that process payroll. Deputy Director Askelson also confirmed that we are still using checks and are trying to push less paper checks and utilize electronic deposits but the first payroll check always has to be paper.
Councilmember Pizzillo asked if we are seeing any fraud by ink extraction and re-writing of checks. Deputy Director Askelson noted that we saw an increase during Covid but we have a process of verifying check amounts with the bank prior to the bank cashing them and duplicate checks cannot be cashed.
Councilmember Lauritano asked about using corporate accounts. Deputy Director Askelson explained that we used to have corporate accounts with monthly bills that would require an extra process to occur to reconcile the charges. The City has pushed the payment method for corporate accounts to purchase cards. Deputy Director Askelson also explained there is less control and security with a corporate account unless a purchase card is used for payment.
Councilmember Lauritano asked about Cash and possible issues with Parks and Recreation. Deputy Director Askelson explained that Parks and recreation has a new system in place; the city has guidelines in place and is continually working on guidelines due to changes in the Parks and Recreation software, as well as cash handling best practices. This is a relatively new software for Parks and Recreation so we will have more data next year.
Councilmember Hampton asked if we had corporate accounts other than Lowe’s. Deputy Director Askelson confirmed that the city does have other corporate accounts such as our account with Wist for office supplies, however we have pushed the payment method to individual purchase cards while having the benefit of corporate accounts. Askelson also confirmed that maintenance workers can still use a corporate account with their purchase cards.
Councilmember Hampton asked about workflow approval for purchases, Deputy Director Askelson explained the approval workflow requiring a minimum of one department approval and also procurement approval for purchases over $2500; the City has a robust workflow in place for purchase card approvals when they are reconciled, the card holder is also in the approval process. Deputy City Manager Cotterman confirmed for Councilmembers that anything over $50000 requires City Manager level approval.
Councilmember Hampton asked if technology licenses are audited to make sure the city is not over-paying for licenses that are not in use any longer, as well as unnecessary repetitive purchasing. Deputy Director Askelson explained that the multi-level approval workflow helps to catch these types of issues as well as the internal auditing done by accounts payable staff.
Councilmember Hampton asked the City to make sure to review contract re-negotiations and renewals to ensure we are getting what is included in the contract and also to review grant spending in the same manner. Deputy Director Askelson confirmed that this year there is an audit scheduled for this purpose. Deputy City Manager Cotterman confirmed the scope of the CAFR audit and pointed out to Councilmembers that it does not include Cyber issues outside of expenditure auditing.
The following questions and concerns were presented by committee members:
Councilmember Pizzillo asked about the purchase card audit that is done annually and if it is possible to lock-down items to restrict purchases. Deputy Director Askelson replied that vendor lockdowns are possible but are not in place today, we do have City restrictions that have always been in place. We have not had issues come up that employees are improperly using their purchase cards, however on very rare occasions a card is accidentally used for personal use. It is an accidental purchase with large vendors such as Amazon or Home Depot and the City does not want to lock down vendors that we use frequently.
Councilmember Lauritano asked how such accidents are found, Deputy Director Askelson explained that a business justification is required for each transaction, including use of a travel form for travel expenses. The justification and approval processes are in place for the purpose of identifying these ineligible expenditures. All required justification and related documents are electronically attached to each reconciliation in the system which allows for an easier auditing process.
Councilmember Pizzillo asked if we had problems with employees purchasing items prior to obtaining purchase orders. Deputy Director Askelson stated anything under $2,500 limit does not require a purchase order. Vendors requiring purchase orders we try setting up blanket purchase orders for. Expenditures that are $2,500 or more require a purchase order and are flagged by the system when a purchase order is not used to identify potential violations.
Councilmember Pizzillo asked about separation of duties in the payroll process. Deputy Director Askelson stated that we try to split and segregate duties within the payroll division where necessary. Most importantly, any changes or additions to employees and their information happen outside of the Finance department, away from those that process payroll. Deputy Director Askelson also confirmed that we are still using checks and are trying to push less paper checks and utilize electronic deposits but the first payroll check always has to be paper.
Councilmember Pizzillo asked if we are seeing any fraud by ink extraction and re-writing of checks. Deputy Director Askelson noted that we saw an increase during Covid but we have a process of verifying check amounts with the bank prior to the bank cashing them and duplicate checks cannot be cashed.
Councilmember Lauritano asked about using corporate accounts. Deputy Director Askelson explained that we used to have corporate accounts with monthly bills that would require an extra process to occur to reconcile the charges. The City has pushed the payment method for corporate accounts to purchase cards. Deputy Director Askelson also explained there is less control and security with a corporate account unless a purchase card is used for payment.
Councilmember Lauritano asked about Cash and possible issues with Parks and Recreation. Deputy Director Askelson explained that Parks and recreation has a new system in place; the city has guidelines in place and is continually working on guidelines due to changes in the Parks and Recreation software, as well as cash handling best practices. This is a relatively new software for Parks and Recreation so we will have more data next year.
Councilmember Hampton asked if we had corporate accounts other than Lowe’s. Deputy Director Askelson confirmed that the city does have other corporate accounts such as our account with Wist for office supplies, however we have pushed the payment method to individual purchase cards while having the benefit of corporate accounts. Askelson also confirmed that maintenance workers can still use a corporate account with their purchase cards.
Councilmember Hampton asked about workflow approval for purchases, Deputy Director Askelson explained the approval workflow requiring a minimum of one department approval and also procurement approval for purchases over $2500; the City has a robust workflow in place for purchase card approvals when they are reconciled, the card holder is also in the approval process. Deputy City Manager Cotterman confirmed for Councilmembers that anything over $50000 requires City Manager level approval.
Councilmember Hampton asked if technology licenses are audited to make sure the city is not over-paying for licenses that are not in use any longer, as well as unnecessary repetitive purchasing. Deputy Director Askelson explained that the multi-level approval workflow helps to catch these types of issues as well as the internal auditing done by accounts payable staff.
Councilmember Hampton asked the City to make sure to review contract re-negotiations and renewals to ensure we are getting what is included in the contract and also to review grant spending in the same manner. Deputy Director Askelson confirmed that this year there is an audit scheduled for this purpose. Deputy City Manager Cotterman confirmed the scope of the CAFR audit and pointed out to Councilmembers that it does not include Cyber issues outside of expenditure auditing.
3.
Auditors' Comments and/or Questions
HintonBurdick auditor Crimson Singleton discussed the scope of this year’s audit with Councilmembers and staff. Singleton confirmed procedures and controls in the following areas were being evaluated:
1) Court- in depth look at minimum accounting standards
2) Purchase cards
3) Payroll
4) Cash handling
5) Inventory counts
6) Contracts
7) Discuss IT controls
Councilmember Hampton inquired about other external audits that are conducted for the City, outside of the Scope of the Annual CAFR audit. Deputy Director Askelson noted that the City is conducting more internal studies and Deputy City Manager Cotterman noted the IT department conducts penetration testing with outside firms to protect the City from hackers and the Fire Department also conducts an ISO audit with an external auditing firm. Staff shares best practices with neighboring cities. Deputy Director Askelson noted that several other cities are also using Tyler Munis for their financial system and information is shared amongst cities to help improve processes and internal controls.
HintonBurdick auditor Crimson Singleton discussed the scope of this year’s audit with Councilmembers and staff. Singleton confirmed procedures and controls in the following areas were being evaluated:
1) Court- in depth look at minimum accounting standards
2) Purchase cards
3) Payroll
4) Cash handling
5) Inventory counts
6) Contracts
7) Discuss IT controls
Councilmember Hampton inquired about other external audits that are conducted for the City, outside of the Scope of the Annual CAFR audit. Deputy Director Askelson noted that the City is conducting more internal studies and Deputy City Manager Cotterman noted the IT department conducts penetration testing with outside firms to protect the City from hackers and the Fire Department also conducts an ISO audit with an external auditing firm. Staff shares best practices with neighboring cities. Deputy Director Askelson noted that several other cities are also using Tyler Munis for their financial system and information is shared amongst cities to help improve processes and internal controls.
| INFORMATION ITEMS |
None.
| NEXT MEETING |
Review the date, time and location of the next meeting, if applicable.
| ADJOURNMENT |
There being no further business to discuss, Deputy Director of Finance, Jared Askelson adjourned the meeting at 4:51 p.m.
Respectfully Submitted by:
Respectfully Submitted by:
__________________________ Amie Gressett, Management Assistant |
__________________________ Jared Askelson, Deputy Director of Finance |
Date:___________________ |