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HomeMy WebLinkAboutAudit Committee Minutes 11-28-2006Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 1 of 20 Deschutes County - Audit Committee MINUTES – 11/28/06 Re: Deschutes County Audit Committee Meeting Minutes – Tuesday, November 28, 2006 Committee Members Present: Commissioner Dennis Luke; Scot Langton, Assessor; Tom Anderson, Community Development; Jade Mayer, Barry Jordan, Jim Keller and James Kerfoot, Public Sector. Others present were: Commissioners Bev Clarno and Mike Daly; Marty Wynne, Finance Department; Dave Kanner, County Administrator; and David Givans, County Internal Auditor. Present for a portion of the meeting were Jeanine Faria; Finance De partment; Alana Audette and Dan Despotopulos, COVA (Central Oregon Visitors Association); Candace Fronk, Al Colombo and Wes Price from Price, Harrigan, Fronk LLC; and Keith Chu, The Bulletin. Jade Mayer called the meeting to order at 12:15 p.m. Introductions Introductions were made around the table with special mention that Candace, Al, and Wes are with Price, Harrigan, Fronk, and are the external auditors for the County he re to present their financial report. Approval of Minutes from the meeting on September 14, 2006 Tom Anderson: Moved Approval of the Minutes from September 14, 2006. James Kerfoot: Second. VOTE: Unanimous Approval. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 2 of 20 Presentation of County’s Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2006 (and management letter) Candace Fronk: I just passed out a few things that will be our talking point today (See attached marked as Exhibit A.) You all received the Comprehensive Annual Financial Report or CAFR as we like to call it. We finished our field work in September so we have a September report date. About a month later we have the reports put together and ready for J eanine to review as a draft and then to you the first part of November. So, we are a littl e bit later having this meeting just because of some scheduling issues. The audit went very well this year. We tried to schedule the field work not quite as e arly as the year before and I think that actually worked out well for everyone. We we re still able to have a product in your hand at a fairly early time. As far as the scope of the audit, everything went really well. We were able to go visit all the departments that we wanted and we felt like we really had full access to everyone. They were very helpful, very knowledgeable; the staff here is very high quali ty, both in the Finance Department and in the other offices. As far as specific departments we went to and did some additional internal control work this year, in July we did Solid Waste and that went well as far as their controls which was primarily the receipting and billing; a process that they do themselves. The disbursement side goes pretty much through the Finance side. The other departments that have their own little system in place, we have been trying to cycle through those. We were also out at Community Justice and did Parole and Probation as well. They have their own little internal systems that seem to be working pretty well. We do have some summary m emos on those and I will make sure that David gets those as well so when he makes his next visit out there he can just kind of start where we left off. We test internal controls; we do not test all internal controls in the County. We tes t the ones that help us give our opinion on the financial statements, something that we can rel y on when we are just trying to test the numbers. We always go through the assess ment taxation system; we always go through accounts payable, payroll, and human resources. On the receipt side some of the revenues are better tested other ways although, w e like to go out to the decentralized departments. They all tie into the County but say, Solid Waste for instance, has its own system for billing the garbage companies and the people who have accounts. They have their own system that is not on your H.T.E. main accounting software where they track, bill, and receipt that in. Solid Waste is collecting money; they have the whole scale system. So, we just try to see how that is working for them and also how that ties into the Countywide system, making sure that they are looking for completeness of revenue and tha t everything they are taking in is getting deposited and appropriately credit ed to their funds. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 3 of 20 Marty Wynne: Candy, if I could ask you to elaborate a little bit on internal controls because Keith Chu is here and in recent months we have seen articles with regard to the City of West Lynn and Culver. I know that you were the auditors on the Culver audit. If you look at your main report on page 259 and also on 261 and also on page 263, these documents deal with internal controls and your review. Fronk: We are always looking for what we consider material weaknesses in internal c ontrol. Internal control is really a system of policies and procedures and the whole tone of checks and balances over finances and financial reporting that you have. Good internal control has duty separated between various parties, so that no one person has custody of an asset, the recording keeping duty of an asset, and the authorization to spend or utiliz e that asset. The County has good separation of those duties and that is something that we can go in and check. When you go in a pay a bill, what controls are over that. We will see what the authorization process is, the disbursement, so that when you use positive pa y the banks will only pay checks that are on an approved list that has gone through the system. Then we say, who can get things on that list and make sure that there is not any crossover so that it would be very hard to pay something that did not go through a lot of people at the County. We talk to everyone and ask what their role is but then we go back and take a random sample of transactions. We walk it through to make sure that, not only is what they tell us happening, but that is what we find and can document for ourselves that that is what is happening. We do try to tie into what David (Internal Auditor) does because he does go into more detail sometimes with the departments. What we do is based on materiality i n relation to these basic financial statements which are the first section of your re port. What is material to those financial statements is what somebody reading this financial statement would come to a different conclusion or decision based on whatever decision they are making regarding the County, if that number was different. If it is something that someone would care about, it is something that we care about. Fraud is certainly one of the things we look at. We look at anything whether it is intentional, unintentional, or errors, or fraud that would cause these financial state ments to be materially misstated. That is our goal, to find those. There are always some adjustments that we have; there are always some adjustments that I like to tell you about. There are the ones that we did not make too. For instance the retiree health insura nce is one that probably should not have been on the books for last year and it wasn’t so it is on as a liability this year. It is one that probably could have been shown as a prior peri od adjustment. Based on the type of adjustment that it was, it is all just in the current period expense. Other adjustments that we actually did have, that kind of came up as part of the audit, for the most part Finance has already made all of the adjustments. When we were doin g Community Development and we were doing our Federal Funds, there was a $300,000 grant that looks like you spent. Then no, you did not spend it. It is for the new loan Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 4 of 20 program out in La Pine. Then it probably should not be in revenue if it is still something that is sitting in the bank and is going to be part of a future program. That was an adjustment, we call that deferred revenue, put that back in liability on the balance sheet. Another one, which actually Jeanine had accrued for our full accrual balance shee t, was the La Pine Industrial Group. They had a lot of sales out there of land and a majority o f those proceeds get turned over to a non profit that develops the Industrial Park. For las t year’s sales, the amount that was going to be paid to them wasn’t accrued on the budgetary statements. That is the only place where you ended up over budget. I reall y hated to book that one too because Jeanine and Marty were very excited to have one year that did not have anybody with a line over budget. That is the only one so; it is still good to only have one line. Usually, there are a few little ones that sneak past or somet imes the Service Districts which are incorporated in this report. We have library dis tricts that just collect taxes and pay bonds on library buildings. Sunriver, Black Butte, 9-1-1 and Extension4H have separate reports but they all roll into this as well. Some years we have had budgetary issues with one of those and then that also gets reported in the CAFR. This year all those were clean, all the regular departments were cle an, it was just this one rather unusual item. Depreciation is one of those kinds of things that we talked about in what kind of estimates there are in the financial statement. Depreciation is conside red an estimate because we say this building is going to have a 30 to 40 year life. That is an estimate so depreciation expense in general is considered an estimate. The Land Fill liability is the other one that is an estimate, which came out really close. I think Jeanine had put $10,000,000 as an estimate of what it would be when we were waiting on the final engineered numbers from Solid Waste. It came in at like, $10,006,000 something. Once the Land Fill is closed it will have 30 years of post closure monitoring as well as those closure costs. That actually gets accrued as t he Land Fill fills up, not for your budgetary purposes but on the full accrual statement. So, that is one of your larger estimates. Commissioner Luke: There is a considerable amount of money being put away to monitor that, hopefully when the landfill closes down we will have the amount of money necessary in there to monitor it. Fronk: The only place that liability shows up is on those full accrual statements. We do show the different funds and reserves and did actually try to match up the presentation of t hat money with that liability a little bit differently than we have in the past. We only have two engagements that we do for the County that are not this audit. One is Solid Waste and we do what is considered an agreed upon procedures engagement to show those amounts that are reserved and refer them back to the CAFR, very straight forwar d. The other non audit service that we do is related to the motel tax collections where we go out and do some revenue based audits of individual motels. That is something for this Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 5 of 20 Committee; it is more and more important that your auditor does not do a lot of consulting or other type work just to remain independent. So, both of those other engagements that we do are ones that we need to be independent to provide as well. Dave Kanner: In my prior job the auditors looked very closely at our self insurance program and ever y year the audit would make recommendation about what we should be reserving. In fact I often felt our self insurance program was being driven by the auditors and not by the risk manager, who happened to be me. Your report is totally silent on the adequacy of our self insurance reserves. Fronk: What we look at is, were there any actual claims, actual claims that existed at June 30th, whether they have been reported to you or not, is that accrual appropriate. Is the bala nce in the fund the amount that is really in the fund? But, to say that the reserves are adequate, it does not really matter whether you are self insured or buying a commercial policy. If you were buying a commercial policy and you were going to have to $10,000,000 coverage on something. When do you know if that is enough? Kanner: You know because you hire an actuarial who can tell you what your competence level is. Fronk: You would not ask your auditor to tell you whether or not $10,000,000 is an appropriate coverage. I think an actuary is appropriate. You will never know that you have enough money there because you never know what can happen. There is always some small chance that it is going to be a billion dollars. Luke: But it is backed by the General Fund. Fronk: Yes, you do have other resources. Kanner: I guess my question is what is the audit standard because Kenneth Kuhns and Company clearly felt that reviewing those liability and workers compensation res erves and then commenting on the confidence level, was part of the scope of government audit. Now we have Harrigan, Price, and Fronk saying no, it is not. Fronk: I think the rule of the audit is to present historical facts, this is how much money is in there, this is how much claims have been, this is what the liability is for claims on t he balance sheet date, and I think that it is wise to have actual determination as to if your balances are adequate for the risk of future claims. The only comment relat ed to insurance that we are required to make for the Secretary of State is do you have fidelity Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 6 of 20 bonding. There are no other accounting standards that relate to that other than the presentation of those historical balances. The audit standards require the information that is in the footnote that talks about the balances and the claims, the history, and to what extent the amounts in the account hav e been insufficient in the past 3 years. They look to see if your claims exceeded the balance in your insurance fund, and they haven’t. Wynne: You would feel that if you were to make a comment on what you need beside the two million you have that you would in effect become an actuary? Fronk: Right. Wynne: And that is not your role. Fronk: That’s not my role. Kanner: Is there an audit standing with frequency with which the County should be doing actuarial evaluations. Fronk: No Wes Price: There is with pension plans but not with insurance plans. Luke: Dave, I think it is important that the audit committee know that we have not spent more money than we have in the reserve in those liability funds. Your concern is that the reserve may not be big enough and you may do that some day but we have never spent more than our reserve. We have not had an actuary study done since 97; we should probably be having one. Price: Basically what you are getting into and what this discussion surrounds is the adequ acy of estimates. There are estimates included in any set of financial statements, that’s just a given. What you try to do when you are putting together an estimate from the accoun ting side, internally first then us externally as the auditor reporting on that, is try to get what third party information you can obtain and work on the best information that is available . Estimates that are larger liabilities, the objective of any financial reporting process is that you are trying to say ok, here is what the known assets are and these are the known Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 7 of 20 liabilities, and then here are some other things that we are not sure of the real number but we are going to get them on there. That is what those estimates are. There is going to be issues or a debate over the adequacy of many things in a set of financial statements but it is reasonably to review things like a self insurance fund on a regular frequency but t he auditors are not qualified to do that. In reality that is not what our job is, we are not actuaries. Luke: When we had an actuary look at the health reserves, we are about four times over what she said we needed in the reserves. Wynne: Probably eight times over. Price: We would be hard pressed to issue an opinion to say no, that you needed to have doubled the amount of cash reserve for assets available when you had someone else who said no, it is well covered. We do not have the tools in our bag to challenge those kinds of things. Luke: She said a standard policy with a standard risk, you should have this. We said we would rather have one years claims in reserves in case something happened. Fronk: That is a policy decision. Price: Our job is to disclose in the footnotes the essential elements of what risk you are assuming in your self insurance and what you are doing toward a funding objective. Mayer: Any disagreements with management in the audit this year? Fronk: No, we went round and round a little bit before we booked the La Pine Industrial accrual. Jeanine Faria: Not from a disagreement standpoint but just what is this animal. It is an unusual relationship that the County has with La Pine Industrial Group and just trying to sif t through that to get the substance over form of what is going on here, whose money is this, who owns it, what is going on. That was a discussion. Fronk: The other single audit areas that we tested were the schools and roads money in Ti tle III, which is one we hit almost every year just because of its size. We always do detail testing on at least 25% of your Federal dollars and when we throw that progra m in there Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 8 of 20 we usually end up with well over half. The other one this year is what is called H.I.D.A. (High Drug Traffic Area) grant that the drug enforcement team handles . One of my staff people had a very interesting conversation with Tim Edwards and some of the folks out there on that money because it does get passed through to C.O.D.E. (Central Oregon Drug Enforcement) and some of the other agencies. The District Attorney ge ts a part of it, so there are quite a few strings attached to that as well on how that is spent. So, that is something that we went through the Federal requirements on and made sure everybody was in compliance and they were very knowledgeable about those requirements on that money. They had very good controls. Michelle Rich went out there and went through it all with all of them and traced it through the system, she was happ y that it was being accounted for correctly. As far as recommendations, last year we had some issues with Assessment and Taxation software. Nothing big but things were not rolling forward and rounding quite to the penny as we would have liked. There seemed to have been quite a bit of improvement in that. Dave Lilley is doing a good job of tracking that and keeping up on it. The software is making some improvements in his life as well so he does not spend a lot of time tryin g to reconcile it all. There is a lot of money for the other taxing districts bes ides what goes through the County books that is in the trust fund. When we thought about what else you can do better and different, the only thing that we really came up with was, perhaps, making sure that departments understand revenue recognition issues a little bit. Like the loan program money that came in to CD D (Community Development Department), money comes in they put it in current year revenue and sometimes it is not always current year revenue. I am hoping wi th Jeanine and David Givans talking to some departments that there is an awareness of some of these unusual items and usually programs might require a little different tre atment or some communication with Finance to make sure that it gets appropriately reported because sometimes it is for a future period. That was the one in this case. Mayer: Candy, were there other items discussed as potential management letter co mments. Fronk: I don’t think so, that was really about the only thing. We have a hard time coming up with good suggestions for these guys because they do such a good job. David has been out in all the departments all year long being the consultant for them. Mayer: Any other questions for Candy? Luke: Were there recommendations from last year that were not carried out? Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 9 of 20 Fronk: No, the only recommendation we had last year was related to that ORCATS software and substantial improvements have been made there. Management Response - Mayer: Within your package of materials is a letter back from Marty addressing the comments that were made this year as well, so I thought that was right on point. (See attached marked as Exhibit B.) Wynne: Pretty much, it is an answer here between Candy’s comments and Jeanine’s comments. The recommendation, just to make it very specific, it says that “We recommend that the Finance Department and Internal Auditor work to educate the County departments on proper recognition of grant revenue and the necessity to communicate on any unusual circumstances”. Jeanine convenes these meetings two or three times a year with the various business managers and the County people throughout the County. We talk about a number of things and at year end we talk about year end accruals and remind them of certain procedures that take place. What we will do is put this on the agenda and every year, for a couple of years at least, just to talk about some of the nuances that can take place in grant recognition. Some of them are straight forward and some of them a re not. If we can make them more aware that if there is a grant with any unusual ci rcumstances that they be sure to bring it to our attention and we would like to get them tuned in to the fact that not everything is recorded as revenue. We will do that, that is our response. Tom Anderson: Just to add to that Marty, as an end user so to speak, I certainly recognize the nec essity of that external audit. The treatment of their different revenue sources is not some thing that we think about. As Jeanine mentioned we think in terms of the budget and the proper accounting in terms of where it goes but something like that, it never in a million years would have occurred to us that it would have been treated differently than any other check that comes to us. That educational component that you are talking about Marty, I think will be very beneficial for us. We could even take it a step further and any gr ant that we do there is a work scope, a characterization of what the money is for, what we are going to do with it, and a timing element. We can share those with Finance up front so you get an advance sense of the cash flow and timing of different pieces of that grant. This was a loan program for the replacement of septic systems in South County. We knew about that from the start but it would never have occurred to us to treat it differentl y in terms of how it is characterized on the books. Mayer: Anyone have anything else for Candy? Candy, do you have anything else for us? One more question for Candy. Was this your third year and didn’t we have a three year contract? Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 10 of 20 Fronk: Yes, we have a three year with two one year renewals for you to contemplate. Mayer: Candy, Al, thank you very much (Wes had already left the meeting.) Jim Keller: Before you leave, I am really pleased with all the cooperation that is going on with date, time and completion of the information. I hope that at some point we will get a chance to talk with someone about the major pieces and how they interact, how the audit committee action dovetails with what you just brought us. It is a source of pride, at least for m e, to see the improvements, the activity, and the completeness of all of the information that we get in combination of David’s work and what goes on between Finance and the auditors. It is quite revealing. Fronk: I would like to compliment the County on having this Committee and having a functioning Audit Committee that has members that are not part of management. That says a lot for the independence and the oversight that it can have. Faria: I would like to thank the Harrigan, Price, and Fronk firm from the whole Finance Department. We have had a couple of different auditors since I have been with Deschutes County and they are far and away head and shoulders above anyone we have come across with their quality of staff they manage to attract and reta in and it is a very workable relationship. Wynne: I agree with everything Jeanine has said but another thing that Candy has said is high quality staff we have here and Jeanine is 95 % of that. She does a great job. Maybe all of you do not know she is a Professor of Accounting at Lynnfield University here, has been at Lynnfield in Portland, a University of Portland C.P.A., and is extremely thorou gh and competent. COVA Internal audit Report – Alana Audette, CEO of COVA and Dan Despotopulos, Chairman of COVA Board, joined the meeting to discuss the COVA audit that was done by David Givans. (Handouts given – see attached marked as Exhibit C and Exhibit D.) David Givans: COVA, along with two other agencies were selected for a brief review of s pending. They are considered to be fairly quick looks in terms of what they are doing for the County . So, I started this audit in August and the audit was scheduled for 40 hours. It was quite a bit more than that just because of some of the follow-up work. There was some Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 11 of 20 information I could not get to and working back with Alana we tried to get some of that stuff. COVA came out with some very good recommendations on how they could improve their processes. I think we have a better understanding of what the spending is. I thi nk in terms of goals of the audit in determining those kinds of things; I think we accomplished that. In turn they got a lot of information on how they could better structure some of t he operations they do. Alana Audette: Thank you for the opportunity for us to be with you today. I think from our perspective it was an excellent process for us as a relatively small corporation given t he overall scope of the County. We do feel that we play a very vital role in generating economic development for the entire County. Certainly, tourism is a vital part of the overall economic vitality of Central Oregon. Having David come in and go through our processes with us very beneficial from our point. He made some outstanding recommendations in ways that we can update and streamline and give us a better product, I think, as far as our recording and account ability. So, we are grateful for the opportunity. We were instructed, as part of this report, t o provide responses to his findings and that has been included as an addendum in the later part of your report. We have gone through and addressed his recommendations item by item. I think overall there are no recommendations that David brought forward that w e had an issue with. We felt each of them were very thoughtful and contrived in a way that is going to be very beneficial to the overall COVA operations. So, that being said, it was a great process and we are happy to be a part of it. We ar e hopeful that this is going to be an ongoing opportunity for us because as a non profit we do not have a lot of resources and having the County partner with us on this audit process was a great benefit. Keller: I am not familiar with this type of relationship. To what extent does the County hav e a responsibility for reporting all of the things? Givans: That is defined by the agreement you have between the two organizations. That is one of the recommendations, to establishment a contract or grant agreement that identif ies what we expect out of that relationship and what they expect from us. I sat in on the budget process this year and I think that came clearly out of the Budget Committee’s questions is that, they wanted to understand, what the spending was on in COVA and how that money was being used. Along with that great description of all the things they do in terms of leveraging and making our presence be known around the country that was not real clear. What will we be spending money on, what bucket is it going into? Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 12 of 20 Commissioner Clarno: The County’s recommendation of including a contract requirement is excellent and I think that should be done. Givans: It is awarding the room tax money; it is not so much a true contractual relationshi p. Wynne: It might help to explain how it works. There are two funds in the County. Of the 7% of room tax, 6% goes into one fund. That fund is split 80/20. We get $100,000 dollars in; $20,000 goes to COVA, simple. The 80 thousand is then transferred at some point in time to the Sheriff’s office. The other fund is the 1% of the 7%. This precedes me in the way it works and I think it was a ballot measure at one time. Of the 1%, the net amount, all of it goes to COVA. There has been a debt service payment on the welcome center for years and years. That will go away with this agreement with ODOT. Ba sically, the City of Bend agreed to pay half of the debt service and the other half comes out of thi s fund, then the net goes to COVA. When you take that 20% and the net 100% of the other fund, the average has been about 29% of the $3,000,000 that we collect, roughly, of all room tax. That is functionally how it works. Mayer: Alana, are your financial statements audited or reviewed on an annual basis by any body? Audette: By the accounting firm that compiles our tax returns. Mayer: Had there been any discussion by your Board to increase that compilation by either a review or an audit? Audette: There has not been. Givans: It is up to the policy holders on what they want to do. My goal was to help identify areas that can be strengthened. They were very forthcoming with me. In terms of m y approach, it was to try and give them a starting point. Jade realizes the diffe rence between a compilation and an audit. Commissioner Daly: On the Gala, from my understanding, the money from the Gala, usually the amount of money that is in the $70,000 range, goes to the recipients. So, how does that work? Audette: All of the money in goes back to the recipients other than if we have an entertainer that is donating part and being paid for part or if there are printing costs; part donated and part Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 13 of 20 our cost. There would be expenses paid out of that but everything over and above the expenses is passed through directly to the beneficiary. Nothing from the Gala i s retained by COVA. Luke: What do you figure the impact to the community was for you to make the $32,000 for Pac Am Golf Tournament? Audette: We just take straight economic impact; it is about 1.7 million for that week long event. I am pleased that you ask that because that is what is difficult to reflect in that report. Yes, indeed the Pac Am is money in and money out. It is not a tremendous revenue generator for COVA’s budget, but it is a significant revenue generator for the first we ek of October when there is literally not a lot of other tourism business in the community. There wa s a reason that we developed the event, to generate the local economy and to generate publ ic relations exposure for this region as having a very attractive shoulder seaso n and that the first week of October is a time to explore Central Oregon. We have been phenomenall y successful in both of those venues. Event planning in and of itself is usually not a revenue generator. That is why you see wonderful non profits like the Cascade Festival and some other music festivals really struggling financially. While they are a very important community asset, i t is very difficult to make money with event planning. So the fact that the Pac Am has been in the black since the first year of its inception, I think, is a very strong testam ent to how successfully we have run and executed that event and that it has continued to grow and be successful. It is now the largest amateur golf tournament west of the Mississippi. It has branded this region as a golf destination like no other single event. Despotopulos: I think your point shows how important tourism is to the region from a whole variety of levels. If a department is struggling and needs extra cash, do you take it away from COVA? There are some tough decisions but if you sit down and look at an overall picture there are some decisions. Mayer: What you did not see on David’s report was a recommendation for a review or for an audit. I would strongly encourage this group to think about that kind of requirement as we move forward with some kind of formal agreement between the two entities. That would solve a lot of the issues you see in this report. Despotopulos: The recommendations that David has made, we have already put in place because the y were very good. We are prepared to do just that. Barry Jordan: It would be interesting to know what kind of response or how your Board feels about it. I see it as a neat opportunity. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 14 of 20 Mayer: Dave, you noted that you were in agreement with the idea of a contract but not necessarily all the points that were included in here. What is the foundation for that comment? Kanner: Before David started this audit I had asked staff to research potential contract terms and conditions. With anyone that we are giving money to there should be some kind of written agreement, even if it is just a one page grant agreement or a more for mal contract that delineates what we are giving and what we expect to get in return. The audit j ust reinforced the notion that we should have some kind of agreement in place. I have not seen any of the staff work on what they have found in terms of what other jurisdictions are doing with contracts with their visitor associations or their chambers of c ommerce. I think we just need to do a little bit more research on what is best practice in this ar ea and see what works for Deschutes County. Audette: I think our Board would welcome that as well, having a formal agreement. We are extraordinarily proud of the programs that we produce and execute and we have an excellent story to tell. A formalized agreement would help advance that inform ation for even those who are outside of the industry who may not have what they perceive a very direct interest in it. It is an integral part of this community. Langston: Do you receive any monies for room taxes from the other counties? Audette: Not through room taxes but we have a membership base that extends primarily over the Tri-County region and then a portion of Wasco county. As a membership association we have dues paying private businesses that support overall regional marketing. Anderson: You have a means to assess that the County gets the money it should from rentals? Wynne: We do audits of the larger ones and of the smaller ones periodically. Of the big porti on of it we do audit them and if you are collecting room tax in Deschutes County, you a re pretty much aware you are going to get audited; it is just a matter of how of ten. On the smaller portion we go through the internet, the Oregonian, Eugene papers and a number of publications and when we see an advertisement of a rental in Deschutes County that does not have our certificate of authority that we assign to them, then we write them letters and we say did you forget to put that number with your advertisement or do y ou have one and if you don’t here are the rules. Private home rentals are different, they a re voluntary. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 15 of 20 Jade Mayer: Motion to approve that David add a comment in his report that recommends COVA to have an audit done on an annual basis. Keller: Second. Mayer: Any further discussion? Givans: I recommend that you make it your own recommendation that way I don’t have to change my report. Scot Langton: Second. Despotopulos: Is this audit something that David could perform? Luke: No, that would be a conflict. Despotopulos: When the Welcome Center sunsets could some of that money be dedicated to pay for the audit? Luke: COVA needs to take this back to their Board. Despotopulos: Not opposed to it, it is just an additional cost. Audette: We have already taken David’s recommendation to the Board and have put those recommendations to work. The only problem is the expense of an audit. Luke: Do you want to do a motion to accept this first? Jade Mayer: Moved Approval of COVA Audit. James Kerfoot: Second. VOTE: Unanimous Approval. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 16 of 20 Jade Mayer: Moved Approval that the Audit Committee Encourages COVA to have an Audit Done on an Annual Basis. Scot Langton: Second. VOTE: Unanimous Approval. Goals and Objectives for Internal Audit Program – Givans: The organization has been going through a lot of goal setting and Administrative Services, of which I am part, did an internal set of goals and objectives. Kind of in alignment with that I developed my own internal goals and objectives (See attached marked as Exhibit E.) Goal 1 dovetails with the administrative goal of evaluate the effectiveness and efficiency of operations. It pretty much covers audit function in general; doing the reports. T he objectives are set up under that. Objectives are things that you need to complet e or you should have a way to measure that you followed that in order to obtain your goal. In my estimation you can’t have a viable audit function without following standards and bein g independent. After every audit I send out a survey. I do not always get those back but I do send out a survey. Connie gets them directly; I do not get them first. You can sit down and look at those any time. I would say in general they are very positive. I had a limited number of incidents where I had to go take a look at reports of fraud. If we do get a request for an identified issue on fraud we go after it right away. Most often it has been because people do not understand something that has come up. Under Goal 2 dovetails with the administrative goal of improving internal functions and processes. Basically making sure we give the information to Department H eads and the objectives follow that. Luke: Where can the general public pick up one of these audit reports. Givans: All they have to do is ask. What I am doing now is working on Intranet version of it which is complete and now I will start completing the Internet version which will have a list of all the audits reports. Luke: It won’t be the audit itself. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 17 of 20 Givans: It will be a list and if they want further information they can contact me. I did that because I really would like to get feedback of who is using the reports. James Kerfoot: Do you put one of these in the library; the audit report? Givans: I believe that the CAFR does go to the library. Givans: Goal 3 dovetails with the administrative goal to improve transparency. It is to i mprove access to management, employees and the public of internal audit work being perf ormed. That is what you get to in terms of the Intranet and Internet. Later in the age nda or after this I will show you what the Intranet looks like right now. That will be the model to move towards the Internet. I also attached the page of our administration goals so you can see what those are. Does anyone have any feedback on this? Mayer: David, I am assuming that you are looking for approval from this group? Givans: I mentioned it to Dave Kanner and asked him if I should bring it in front of the Audit Committee and get approved. If you feel comfortable you can approve it as a t entative work in process kind of a thing and then we will just check it out as the year goes by. Kerfoot: It will always be subject to changes. Jade Mayer: Moved Approval of Draft of Internal Auditors Goals and Objectives. James Kerfoot: Second. Mayer: Any further discussion? Anderson: One more comment before we approve this. You have an objective there that has to do with proactive auditing as opposed to reviews. Another thing you sent out was the check list for cash handling which we have self applied in our department. I think things li ke that could be very beneficial to operating departments rather than waiting f or you to show up and go through and tell us what we are doing wrong or how we can improve. By seeing audits you have already done we can learn from those but also something l ike a check list where we can have an ongoing improvement program based on that kind of a Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 18 of 20 guideline, I think is a real good thing. It kind of gets us ahead of the curve a little bit in terms of being responsive to what we need to do in terms of our own internal diligence. Givans: Maybe that is something I should schedule for reoccurring department head m eetings, just to talk about those things. I would be good to talk about the kinds of things we are finding. The cash handling guide was something I toyed with when I first got here and as I started seeing reoccurring themes that was established for them to get info rmation before I came out. It is a good tool to help inform everyone of what we are going to be looking for. You can’t do that on everything. It is open to departments that are quicker to use my services or ask me questions about how they should configure things. Luke: You send your audits to the department heads? Givans: I don’t just send them to the department head being audited; I put them on the Intranet. Luke: It would be nice that an email go to the department heads stating that this is an audit we just completed for a department. They need to know that they are there and that the audit responses are on the Intranet. Givans: I don’t think it is widely known but Anna has sent out a couple of emails letting everyone know audits are on the Intranet. I will start notifying department heads of the pre sence of the reports and where they can find them. I do an executive summary at the beginnin g of each report and could email those out. Mayer: Further discussions? We have a motion and a second on the table, all in favor? VOTE: Unanimous Approval. Internal Audit INTRANET website (as time permits) – David showed the group the County Intranet layout and discussed that the Intranet is for employee’s to find various information. The departments that have full blown Internet sites are referred to on the County website. He showed them audit and other informat ion that is available on the Intranet. This site is just for County employees. His goal is to eventually put the follow-up work plan to an audit on the Intranet. Another new item is a contact request form if someone wants to give a tip on something, they do not think something is done right, a question, or something needing service in the future such as a n audit. Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 19 of 20 Mayer: Can someone get a hold of you anonymously if they want to? Givans: They can drop me notes, they can drop me mail, phone call and in one of our policy work it asks people to notify me or the County Administrator. I can see doing something like this on the Internet site as well. Mayer: Do you control that? Do you set it up the way you want or does IT set that up. Givans: I.T. helped me out initially with the basic things and now they have trained me to fill in. It is fairly time consuming but it is manageable for me to add a report. Status of Current Work – (See attached marked as Exhibit F.) · September/October 2006 Internal Audit status report – Givans: Two month report sent out. · ABHA (Accountable Behaviorable Health Alliance) – Five counties involved with ABHA who handles how the Mental Health funds are distributed. Givans: Audit almost near completion. · Helion (ORCATS) – Taxation software system. – Givans: We have all of our information on that and have requested financial information which we are to get from them. · Cash handling guide – Givans: Tom talked about it and I sent you all that. Will see if need any changes after I receive any comments. I am compiling a comprehensive list of c ounty depts. that handle cash and will be using that to make spot checks of peoples procedures. (See attached marked as Exhibit G.) Other Items – Givans: I do have a video that County did for Internal Audit program. It will take about 5 minutes to show. (Video was shown.) Minutes of Audit Committee Meeting Tuesday, November 28, 2006 Page 20 of 20 Jade Mayer: Moved Approval to Conclude the Audit Committee Meeting. James Kerfoot: Second. VOTE: Unanimous Approval. Being no further issues brought before the Committee, Jade Mayer adjourned the meeting at 2:45 p.m. Respectfully submitted, __________________ Connie Thomas Administrative Assistant