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HomeMy WebLinkAboutmemo1MEMORANDUM TO: Joe Arriola, Chief Administrator/City Manager City of Miami FROM: Richard A. Berkowitz, Chairperson, Appointed by Thomas Regalado Monica C. Fernandez, Appointed Sanchez Evelyn D'An, Appointed by Johnny Winton Ignacio J. Abelia, Appointed by Angel Gonzalez Vacant, Appointee for Jeffrey Allen Date: January 15, 2005. Subject: Audit Advisory Committee Report pursuant to City Code Section 2-890. The purpose of this memorandum is to provide information pursuant to Section 2- 890 of the City Code. Is the Board serving thepurpose for which it was created? The Audit Advisory Committee was created to assist the Mayor, the City Commission, and the City Manager to fulfill their fiduciary responsibilities relative to accounting, auditing, and financial reporting. During the 2004 calendar year, the Committee held its meetings and discussed a wide range of issues as noted below: In accordance with the provisions of Section 2-946(1) and (2) of the City Code, a representative from KPMG, LLP, the City's former external auditor, attended the Committee's meeting of June 22, 2004. At that meeting the representative presented the City's Comprehensive Annual Financial Report (CAFR) and the Management Letter for the fiscal year ended September 30, 2003. The representative discussed KPMG's responsibilities, which included (1) to plan and perform an audit of the City's basic financial statements which were prepared by and are the representation of the City's management, and (2) to obtain an understanding of and perform tests of the internal control. The representative also discussed the summary of fiscal year 2003 audit processes/results, including (1) audit was conducted in accordance with Generally Accepted Government Accounting Standards (GAGAS) and Rules of the State of Florida Auditor General, (2) there were no limitations to the scope of work and they had full access to records and full cooperation from management, (3) there were no errors or irregularities noted during the audit, and (4) no material weaknesses in internal Page 2, Joe Arriola, City Manager controls were noted. KPMG's representative responded to specific questions including but not limited to issues relative to written internal control policies and procedures, control environment, test of controls, assessed level of control risk, and budget/actual expenditures variances as indicated in the notes to the CAFR. The single audit report was not complete, therefore, was not be presented at this meeting. The Audit Committee and the Finance Committee held joint workshop on July 20, 2004. The purpose of the meeting was to familiarize members of the two committees' with the City's budget development process; to provide an overview of the link between the strategic plan and the annual budget development process; and provide an overview of the assumptions and estimates of the 2005 fiscal year budget. The Chief of Strategic Planning Budgeting and Performance, made a presentation, and the Deputy City Administrator/Chief Financial Officer, also participated in the presentation, Committee .members and staff asked numerous questions about the budget process and fiscal year 2004/2005 budget issues, and there was substantial "back and forth" dialogue with presenting staff and committee members. In accordance with the provisions of Section 2-946(3) of the City Code, the Committee has continued to discuss issues relative to the internal control policies and procedures currently in effect at the various City departments. The internal and external audit processes requires the auditors to gain an understanding of the internal control policies and procedures prior to substantive audit tests and also to report any significant deficiency of internal control noted during the audit. The Committee reviewed several internal control deficiencies disclosed in internal/external audit reports. The Committee is in the process of determining how best to design and implement citywide written internal control policies and procedures. The Committee periodically surveys other cities in connection with audit functions and also in search of best auditing/accounting practices. Based on the activities noted above, the Committee believes that it is serving the purpose for which it was created. Page 3, Joe Arriola, City Manager Is the Board serving current community needs? The Audit Advisory Committee members are accounting and legal professionals that either do business in the City or are City residents and in some case both. The members are not employed nor compensated in any way by the City. By providing independent advice and oversight over the City's overall financial and internal/external audit functions, the Committee, therefore, serves a useful purpose to the community. What the Board's major accomplishments? As stated above, the Committee has continued to discuss issues relative to internal control policies and procedures currently in effect at the various City departments. The internal and external audit processes requires the auditors to gain an understanding of the internal control policies and procedures prior to substantive audit tests and also to report any significant deficiency of internal control noted during the audit. The Committee reviewed several internal control deficiencies disclosed in internal/external audit reports. For example, issues such as monitoring of all contracts for compliance with important provisions of all contracts and City Code/Charter were discussed. The Committee is in the process of determining how best to design and implement citywide written internal control policies and procedures. The proper implementation of a citywide written financial related internal control policies and procedures would mitigate operational/system deficiencies and enhance efficiency, effectiveness, and reduce unnecessary wastes. The Committee periodically surveys other cities in connection with audit functions and also in search of best auditing/accounting practices. Page 4, Joe Arriola, City Manager Is there any board,public or private, which could better serve the function of the board? The committee is not aware of any board that could better serve the functions of th.e Audit Committee. Should the Ordinance creating the board be amended to better enable the board to serve the purpose for which it was created? Section 2-946(6) of the City Code provides that the Audit Committee shall: "Review the City manager's recommendation for selection of an independent auditor if requested by or directed by the city commission." The audit committee has never been requested/directed by the City Commission nor participated in the selection process. Pursuant to the provision of Section 2-946(6) of the City Code, Committee members (Certified Public Accountants in private practice) would like to participate and assist in the selection process. Should the Board's membership requirements be modified? The Committee is satisfied with the membership requirements as established by the City Code. However, the Committee requests that appointments to fill vacant positions on the Committee be made promptly. Timely appointments would enable the Committee muster the required quorum for its meetings. The Committee currently has one vacant position. The total cost, both direct and indirect costs of maintaining the board? There are no direct nor indirect costs associated with the activities of this committee. C: The Honorable Mayor and Members of the City Commission Priscilla A. Thompson, City Clerk Jorge L. Fernandez, City attorney Elvi Alonso, Agenda Coordinator