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HomeMy WebLinkAboutAudit Committee Minutes 06-15-2017�U�JTes co Z m a For Recording Stamp Only Minutes of the Meeting of the Deschutes County Audit Committee Thursday, June 15, 2017 Members consist of S Public (P), and 3 County Management (CM) Quorum =five Committee Members resent: X Facilitator: David Givans, County Internal Auditor X Lindsey Lombard, Chair, P Administrative Services Director, Bend Park & Recreation District Michael Shadrach, (P) Retired corporate executive X Wayne Yeatman, (P) Professor, COCC John Barnett,(P) CPA, Barnett & Company CPA X Tom Linhares, (P) X Darryl Parrish, (P) X AnthonyDeBone, (CM) County Commissioner X Nancy Blankenship, CM County Clerk X Dan Des oto ulos, CM Deschutes County Fair & Expo Center Director Others Present: X Tom Anderson, County Administrator X Erik Kropp, Deputy County Administrator Wayne Lowry, Finance Director X Jeanine Faria, Accounting Manager X Tracy Scott, Assistant Director X Pauline Word—legal d t X Elyse West, Administrative Assistant — Fair & Expo X Butch Graham, Food & Beverage Manager X Lealan Miller, Kristin Diggs, Austin Flo e from Eide Bailly LLP CALL TO ORDER: Chair Lindsey Lombard called the meeting to order at 12:10 p.m. AGENDA: Lunch / Introductions / Additions to agenda / Minutes for 3/09/2017 approval Nancy Blankenship made a motion to approve the 03/09/2017 Audit Committee minutes, Dan Despotopulos seconded the motion. Minutes passed. AUDIT COMMITTEE MEETING Thursday, Page 2 of 6 EXTERNAL AUDIT PLAN for FY 16/17 - Eide Bailly LLP – Lealan Miller, Partner; Kristin Diggs, Manager and Austin Moge, Senior Accountant ❑Timing of audit work and report; ❑Communications []Update on the key risk areas they will focus on; and []New accounting and reporting pronouncements Kristin Diggs, manager for Eide Bailly LLP, gave an update of the external audit schedule. (Exhibit 1) This week they meet with County management to ensure a good plan is in place. Year-end fieldwork will be completed in September. A final issuance of the audit will be delivered by October 31, 2017, and be presented to the Audit Committee at the November 9, 2017 meeting. This is year four of their five-year contract. Deliverables will remain consistent with prior years. Work will begin with the County to understand and evaluate the new financial software. Jeanine Faria, Deschutes County Accounting Manager, stated that this timeline will likely not be repeated next year, as the new financial software will limit commitment to a timeline. A mid-December audit issuance would be more applicable for 2018. She noted that Oregon compliance is adopted differently than in prior years and will continue into the future. Budgets are simplified and sorted by program. Lealan Miller, Partner at Eide Bailly LLP, directed attention to page three—new county standards. GASB77 is simply a footnote disclosure with no accounting effect. Property taxes are reduced if there is a signed contract with a third party. Certain requirements must be met, and Ms. Faria is working with County Assessor Scot Langton to identify who it applies to. GASB82 offers no noticeable change. Mr. Miller asked if the County does pickups. Ms. Faria confirmed and stated it is part of personnel cost and can be found in PERS footnote. Mr. Miller referred to GASB75. The only liability with OPEB is the actuary versus actual amount paid. It shows the unfunded amount and will be reflected on the financial statement. 2017 is when the actuary calculation is calculated. Wayne Lowry, Deschutes County Finance Director, decided to implement the new method this year. More discussion to follow in the November Audit Committee meeting. Mr. Miller stated that the key risk areas cover the same basic audit concept. No issues are anticipated in revenue recognition. No fraud is seen to be occurring. Regarding net pension liability, this year will be triple liability over last year, due to the market in 2015/2016. 2018 liability will drop. The Audit Committee can recommend areas of concern for Eide Bailly LLP to investigate. David Givans, County Auditor stated that the County departments Justice Court and Community Development are areas they may consider. Tom Anderson, Deschutes County Administrator, recommended analysis on how federal grants in the Health Department are being spent. Ms. Faria pointed out that the new financial system requires new processes for scanning documents. Plans on how long to retain hard copies of documents and a filing system should be researched. Mr. Miller stated they have encountered no retention requirement and will look into past systems and report. Nancy Blankenship, County Clerk stated that staff must have quality scanners for the financial system and ensure scans are correct. Ms. Faria noted that the new financial system features levels of approval. Mr. Givans will need to work with IT on internal control. Ms. Lombard asked how the fifth audit next year will assess risk, with the shift from one financial system to another. Mr. Miller responded that some factors will remain the same. The IT aspect of the new financial system is outside of the audit scope and would be an additional fee. AUDIT COMMITTEE MEETING Thursday, Page 3 of 6 INTERNAL AUDIT REPORT: Fair & Expo — Food & Beverage — Dan Despotopulos and Butch Graham #16/17-3: Budgeted 180 hrs. / Actual 187 hrs. Dan Despotopulos, Director of Fair & Expo, gave background on the Food & Beverage program. In 2001, F&E was contracted with C&D Event Management for food and beverage. In 2005, the company switched to Premier Services, and the contract continued until 2014—when the program was brought in- house. Mr. Givans' audit looked at 1-2 years of the contracted company's segment of ownership and also the entire in-house segment. (Exhibit 2) It was a good move to bring the program in-house. Currently, five third party caterers pay 12% for their food delivery and 15% when using the F&E kitchen. In-house catered events net 40%. Mr. Givans' audit supplied eleven recommendations and most are already in place. (Exhibit 3) One implemented recommendation is utilizing the State food purchasing program, which now saves 9% of food expenditures. Butch Graham, Food & Beverage Manager, has high expertise in the field, and satisfaction surveys average 98-100%. Ms. Lombard asked for explanation on net profit—if cost allocations of personnel, IT, etc. are included in net profit. Mr. Despotopulos responded that the cost of maintaining the kitchen is in the overall Fair & Expo budget. Costs are known but are not broken down by those mentioned expense categories. Mr. Graham's salary is drawn from the Fair & Expo budget. Mr. Givans said his audit provides a comprehensive comparison of business from year to year. Commissioner Tony Debone asked for a summary of the temporary staffing process for events. Mr. Graham responded that for larger events, he performs the cooking and temporary help is brought in to provide food preparation support. They also provide wait staff for serving duties. All Food & Beverage staff are temporary except Mr. Graham. Ms. Lombard asked if event coordinators could select their caterer. Mr. Despotopulos responded that they could. Erik Kropp, Deputy County Administrator, asked if there are set menus to choose from. Mr. Graham confirmed that there are set menus, but custom tailoring of the menu and pricing is typical. Ms. Lombard asked how the third party caterers are selected. Mr. Despotopulos answered that third party caterers approach F&E. Ms. Lombard asked if that option should continue. Commissioner DeBone stated that the community asked to keep third party caterers as an option. Mr. Despotopulos added that they do bring in additional outside business, as hoped. Ms. Lombard asked about food handling methods. Mr. Graham responded that the Food & Beverage program goes through the same process and inspections as other food business. Mr. Givans added that he looked at the DC food inspection scores for audit, and did not see any areas of concern. Ms. Lombard asked if there was a customer survey in place. Mr. Despotopulos stated that a survey is in place, but is typically completed by the coordinator. Options are being considered for a larger survey sampling of consumers. One such survey will be kicked off for the annual Fair & Rodeo. INTERNAL AUDIT REPORT: LEGAL - David #16/17-5: Budgeted 60 hrs. / Actual hrs. 65 AUDIT COMMITTEE MEETING Thursday, Page 4 of 6 Mr. Givans audit stated that the audit of the Legal Department went quickly, and Finance was involved in many of the aspects. (Exhibit 4) Pauline Word, paralegal for the Legal Department, said she worked with Ms. Faria to ensure processes were efficient. Staff are now implementing recommendations, including eliminating the petty cash amount and circulating a draft of reimbursement for the checking account. Additionally, department head David Doyle will review deposits and accounting every four months. Staff will also use the new financial system to centralize their finances. Commissioner DeBone asked what expenses the department incurs. Mr. Kropp answered that expenses includes court filing fees, FedEx usage, and training costs. Ms. Word pointed out that most expenses that are drawn from checking account are urgent matters. Commissioner DeBone asked if the department still issues checks. Mr. Givans responded that the Legal department can issue checks but are encouraged to use the financial system for large amounts. Ms. Word added that they are authorized to write checks for up to $2,500, but their use of checks has been decreasing. Ms. Lombard asked if the department has a credit card. Ms. Word confirmed that the main expense for their credit card is to file for appeal. Ms. Lombard asked if the new financial system will show accounts receivable for billing. Mr. Givans confirmed and said it will offer more transparency. Ms. Blankenship asked how many departments have petty cash. Mr. Givans answered that there are about ten departments. Many have closed due to credit card usage. Internal Audit Workplan – David ❑Risk assessment ❑Management feedback ❑Proposal ❑Review and discussion Mr. Givans outlined the different aspects of the audit process in his Internal Audit Workplan. (Exhibit 5) He benchmarks 1,150 hours, which covers a two year period, but is flexible. In the risk process portion of department audits, business climate change is considered based on what he has heard in management meetings. The highest risk departments are currently Behavioral Health and the Sheriff's office—which are also the County's largest departments. Community Development's risk has risen due to complex land use changes, and marijuana issues—making it more visible to the public. Solid Waste is looking for a consultant to assist in their longevity plan regarding the landfill, as well as steering committee members. Adult Parole and Probation, Community Justice, and Juvenile departments all stand at lower risk. Mr. Givans meets with administration to hear ideas and look for patterns of issues that should be addressed. He also reviews work being performed by his peers to look at general audit topics that may apply. Hours are given broad levels based on expected risks. His goal is for the audits to give the Board of County Commissioners and department management information to make sound decisions with. Full-time nurses were implemented at the Jail one and one half years ago, and he is proposing to review their utilization. This audit is estimated to be completed by January/February 2018. AUDIT COMMITTEE MEETING Thursday, Page 5 of 6 The focus of the Sheriff's Office last audit was not focused on fiscal matters but rather to provide an overview for the incoming new sheriff. Mr. Givans conducts an audit for newly elected officials before they come in. This provides a valuable baseline. Mr. Givans focuses on three risk scores: likelihood score, impact score, and velocity of change. Mr. Givans stated that he will be following the new financial system over the next two years. Unused audit ideas will be consider as time permits. He averages four to five projects per year. Tom Linhares, Audit Committee member, asked if the Board would approve temporary staff help for Mr. Givans. Mr. Givans responded that temporary staff help has been authorized, but implementation and proper training must be decided. The incoming Administration intern may be a resource, and Mr. Givans also has the ability to hire an on-call audit expert. Commissioner DeBone noted that Solid Waste added a full time employee for their front office—perhaps they could perform pre -work for their audit and free up time for Mr. Givans to focus on the Sheriff's Office audit for next January. Mr. Givans agreed that the new hire would help advance the audit. Ms. Lombard asked if the committee would move to approve the Internal Audit Workplan. Mr. Linhares made a motion to approve the Internal Audit Workplan. Darryl Parrish seconded the motion. Ms. Lombard put forth the motion to the Audit Committee. All approved the motion. Motion passed, Internal Audit Workplan approved. Periodic audit committee tasks: David/Lindsey ❑Review of County code 2.14 & 2.15 ❑Audit Committee survey Mr. Givans reviewed the County Code and did not have any staff response for changes. Ms. Blankenship asked if any conflicting issues were found. Mr. Givans responded that no issues arose in peer review and he has not discovered any. Ms. Lombard spoke about the Audit Committee 2017 Performance Evaluation that was dispersed. She provided a summary and her remarks upon the results (Exhibit 6). Mayne Yeatman and Darryl Parrish, Audit Committee members, mentioned that it was very helpful to hear from departments—helping members to learn the County's processes. Ms. Blankenship asked how many applications were received for recent committee member openings. Mr. Givans responded that five to six applications were received and discussion would occur with the Board of County Commissioners to find the best fit for the committee. Ms. Lombard mentioned the newest committee member opening would be posted soon. Finance & Human Resource Software update - Erik Mr. Kropp said the new financial system is on target to begin on July 1, 2017 for financial and January 2018 for payroll. Training is being provided to all relevant employees and change management is being included. UPDATES/Other Items: - David AUDIT COMMITTEE MEETING Thursday, Page 6 of 6 ❑Current audit work status: next? ❑COLES Audit FY 2016. ❑ALGA Peer review 9/2017 ❑See Internal Audit status report March 2017 through May 2017 Mr. Givans said he is assessing the possibility of adding a County hotline. Certain statute requirements apply and he is determining how best to implement the plan. Mr. Anderson said he has spoken with other counties and this offers opportunities to disclose fraud, but there can be irrelevant calls. Mr. Givans said the COLES Audit FY 2016 is completed with no distinct disclaimers. The ALGA peer review will begin at the September Audit Committee meeting to review a three-year period of his work. Updates/Other items: None Other Business/Closing: None Adjournment: Being no further issues brought before the Committee, Ms. Lombard adjourned the meeting at 3:00 ""will k 21 .,►leiILL I, Perusal