CITY OF BELMONT
AUDIT COMMITTEE MINUTES
January 15, 2008
Committee Members Present: Mayor Lieberman, Treasurer Violet, Councilmember Dickenson
Committee Members Absent: None.
Staff Present: City Manager Crist, Finance Director Fil, Principal Biggs, , and Management Analyst Voelker
Others: Financial Expert Advisor de Russy
The meeting was called to order at 2:11 PM.
There was no oral communication/public comment, as no members of the public were present.
There were no agenda amendments.
Moved by Committee Member Lieberman, seconded by Committee Member Violet, by unanimous voice vote, the November 27, 2007 minutes were approved.
Director Fil then introduced Principal Biggs of Maze & Associates, stating that, as the City’s auditor, Principal Biggs is here to confer with the Audit Committee, providing an opportunity for the Committee to discuss their thoughts on how the 2008 audit should move forward, their role in this function, and strategies they’d like to see executed over the next 12 months. This is also an opportunity for the Committee to hear from their Financial Expert Advisor, John de Russy, on any questions or matters of interest related to the Audit.
Principal Biggs first addressed the issue of audit team rotation, stating that Maze plans on rotating staff this year, with 5 team members proposed for FY08. It is anticipated that Principal Biggs himself will be returning as partner, in addition to 2 new members, and 2 returning members to ensure continuity. Committee Member Lieberman turned to Advisor de Russy for his recommendation on best practices related to the issue of audit team rotation, to which he responded that, although there is no magic number, best practices in this case often translate to what is the best fit for the organization. He recommended that the City, like most, do a 5-7 year rotation in order to avoid rotating too often, in which case continuity is lost.
Committee Member Lieberman suggested that the Committee may want to recommend a rotation at the partner level due to previous discussions and concerns at the last City Council meeting. Chair Dickenson stated that he was uncomfortable rotating partners at this time, since there will likely be a new lead supervisor on the team. Discussion ensued around this topic, with Committee Member Lieberman recommending that the City retain Principal Biggs as a partner on the team for one more year, whilst integrating another partner to familiarize him/her with the City’s workpapers in preparation to serve as the partner on the FY09 audit team.
Moved by Committee Member Lieberman, seconded by Chair Dickenson, by unanimous voice vote the Audit Committee recommended rotation of the audit team supervisor for FY08, rotation of the audit team partner for FY09 with integration of a new potential partner during the FY08 audit for training purposes, and that the City adopt a policy next year to establish a staggered rotation policy with the lead supervisor and partner of the audit team.
In response to Committee Member Violet’s request, Principal Biggs explained a new provision in the Statement on Audit Standards (SAS) #114, which provides for City Council members’ role in the audit process. He clarified that this new condition ensures that the Auditor communicates with the City Council on certain matters related to the Audit. Principal Biggs assured the Committee that Belmont has had a long history of communication between the Auditor and the Finance Commission and City Council. Further discussion developed around SAS 114, which led into discussion on Governmental Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB), and the differences between the two.
Principal Biggs went on to discuss the Audit scope, referring first to the potential for fraud. He explained the audit team’s method for focusing attention on new potential areas for fraud each year, including theft of assets and accuracy in financial reporting (use of GASB and FASB). Committee Member Lieberman inquired whether certain departments were more prone to be audited for fraud than others. Principal Biggs responded that new audit standards require the audit team to provide several judgments and a documented chain of events that prompted the fraud audit in the first place.
Committee Member Lieberman then asked if Advisor de Russy had any suggestions on other areas that should be covered, to which he responded that Principal Biggs gave a very comprehensive review. He spoke briefly on Government Financial Officers Association (GFOA) best practices and provided a list of new pronouncements that the Audit Committee should be aware of, which included internal controls related to financial statements, sustainability of Other Post-Employment Benefits (OPEB), fraud, and cash controls/cash management. Discussion developed around these pronouncements, with Principal Biggs confirming that Belmont already follows these best practices as recommended by GFOA.
Director Fil reminded the Committee that the City of Belmont is a “best practice City”, and that staff reviews all new GFOA best practices on an annual basis to ensure that the City is in compliance. If the City is not in compliance with new best practices, then steps are taken to revise the financial policies in order to ensure compliance.
The Committee confirmed that their next meeting would take place on April 9, 2008, and that they would discuss policy updates at that time.
Moved by Committee Member Lieberman, seconded by Committee Member Violet, by unanimous voice vote the meeting was adjourned at 3:11 PM.
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