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HomeMy WebLinkAboutAudit Committee Minutes 09-14-2017�JTES CO 0 � For Recording Stamp Only Minutes of the Meeting of the Deschutes County Audit Committee Thursday, September 14, 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 Daryl 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 Wa e Lowry, Finance Director x Lindsay Nokell, Quality Improvement Specialist, Behavioral Health x Mark Ulanowicz, Principal Auditor, Multnomah Count x Shalyn Pugh -Davis, Auditor I, City of Berkeley, CA x Chris Ogren — Deschutes County Intern x Laura Skundrick, Administrative Assistant — BOCC CALL TO ORDER: Chair Lombard called the meeting to order at 12:04pm. AGENDA: • Lunch/Introductions/Announcements. Introductions were made. • Outstanding Audit Committee Topics. None identified. Approval of Minutes: Motion made by Member Parrish and supported by Member Linhares to approve the minutes of the Audit Committee Meeting of June 15, 2017. Motion carried. EXTERNAL PEER REVIEW of Internal Audit Program for FY 14-17: AUDIT COMMITTEE MEETING Thursday, September 14, 2017 Page 2 of 6 Mr. Givans introduced external auditors Mark Ulanowicz and Shalyn Pugh -Davis. Both auditors provided their backgrounds and the objective of peer reviews, which ensure auditors are operating effectively and following standards. Mark and Shalyn summarized their review findings, in which Mr. Givans' auditing for Deschutes County meets standards and follows processes. They summarized his work they reviewed to come to this determination, such as analyzing working papers from 6 audits using their checklist tool and reviewing Mr. Givans' risk assessment process. There are no recommendations for changes, and it was found that he is able to cover a lot of ground, and receives great support. Mr. Linhares asked who funds the peer reviews, and Mr. Ulanowicz stated that their respective jurisdictions pay for their time. The County reimburses peer reviewers through ALGA for their travel costs. Mr. Givans added that he will perform a peer review in the future so it will even out, and is very economical. These peer reviews offer a lot of value. Chair Lombard asked if more detail or any recommendations was provided to Mr. Givans, and what value he gets out of the process. Mr. Ulanowicz replied that over the course of the week, they've had many discussions about the organization, coordination, audit approaches, use of analytics, value of independence and how that works. Mr. Givans added that the peer reviewers shared information about a different way of organizing electronic work papers and what has worked best. Chair Lombard asked if the audit reviewed Mr. Givans' efficiency, since he acts independently. Mr. Ulanowicz stated that is the nature of an auditor's work, so it isn't reviewed like other aspects. Mr. Linhares asked the external auditors' opinion about the internal auditor being appointed versus elected, and whether it offers enough independence? Mr. Ulanowicz explained that independence as an appointed, and the extent to which that independence has been strengthened is a mutual benefit, although he stated he's unsure of all the benefits associated with elected and appointed positions. Mr. Anderson indicated that Mr. Givans has been involved in projects that some would label as "non -audit," adding that Mr. Givans provided great advice throughout the process of establishing the county's new financial system, and that is valuable to the county. He asked Mr. Ulanowicz how they determine work that might not be in line with his mission. Mr. Ulanowicz replied that their peer review looks at standards, the ALGA Quality Review process, looking at what goes into benchmarks, criteria, and best practices. He added that he sees no trouble with Mr. Givans' role in that process, as that would provide valuable input and standards allow for non -audit services. He provided examples of his own experience with tasks that some may consider "non - audit" services. Chair Lombard asked that since the standards allow for non -audit activities, if they also speak to the value of performing these services. Mr. Ulanowicz responded that the standards are written for a broad universe of auditors, so it does not speak to specific non -audit work or benefits. However, an auditor has a set of skills that are beneficial and the key is to make sure they don't make management decisions and make recommendations to management instead. Ms. Blankenship asked if there is an Oregon network outside of the three-year peer reviews that allow auditors to network. Mr. Ulanowicz stated yes, there are audit forums, trainings and conferences. Chair Lombard asked what specifically about risk assessment is reviewed? Mr. Ulanowicz replied that auditors look to see if the process is just checking boxes, or is it a well thought out AUDIT COMMITTEE MEETING Thursday, September 14, 2017 Page 3 of 6 process. Here it was clear that it is a very well thought out process. Chair Lombard asked if this audit committee is fairly unique to others you've seen? Mr. Ulanowicz stated yes, it is, and it's great to have people interested in what's going and it also creates another level of supervision, allowing you to have an honest program. Mr. Anderson explained when looking at the two general categories of performance auditing versus financial auditing — if a crook is discovered and prosecuted, is that a failing of the organization or of the audit function? Mr. Ulanowicz replied that an audit function cannot be everywhere all the time. Organizationally, the auditor could talk about internal controls, but well - thought out fraud can beat those controls. Having a hotline as well as having an approachable auditor can help prevent those problems as well. Mr. Anderson stated that looking through context of measures in a report, it's difficult to quantify success and communicate prevention of inappropriate action. How do you speak to that, quantify that success, and tell that story for a public perspective? Mr. Ulanowicz agreed that is difficult to do so, unlike a financial audit. There has to be context to tell the story. 2017 County Fair Overview and Observations Mr. Givans invited Dan Despotopulos to discuss Fair outcomes. Mr. Despotopulos stated the weather and smoke this year definitely affected attendance of the 2017 County Fair. Saturday held the best attendance of the five days, setting a record. However, going up against last year's record year, overall it will be down about 12-15%. Mr. Despotopulos explained part of Mr. Givans' audit around food and beverage, and described the process of how they order food through the State purchasing program and receive a continued savings around 9%. Mr. Givans had given the recommendation to execute a survey, which provided very valuable information after receiving 280 replies. The food vendor choices were very positive. Both the Deschutes County employee breakfast and the Les Schwab corporate event had records numbers. Ms. Blankenship stated whoever came up with the county breakfast idea is brilliant, because people like being involved in something like this event that their county puts on. Mr. Despotopulos agreed and stated it was Mr. Anderson's idea. Ms. Blankenship asked if this was the first year with the new carnival ride group? Mr. Despotopulos stated it was the second, and they've been great to work with. One complaint heard from the survey was about golf carts riding around the fairgrounds. Commissioner DeBone noted that he had a golf cart there, and only after the fair was over did he realize there were certain places they were supposed to be driven. Mr. Despotopulos confirmed there was a specific pattern for pick- ups and drop-offs, and they could have advertised that better with better cart training, because when the patterns are followed it works well. Chair Lombard asked if reducing the number of county food operations improved overall profitability. Mr. Despotopulos replied that absolutely it did, and it has been difficult to find help, so not having those food stands allowed staff to focus on other things. Chair Lombard asked if Fair & Expo receives a lot of interest from external food vendors to serve at the fair. Mr. Despotopulos replied yes there is a long wait -list, because it is the largest county fair in the state. ALGA Performance Measures: (David) AUDIT COMMITTEE MEETING Thursday, September 14, 2017 Page 4 of 6 Mr. Givans stated these ALGA performance measures are a new publication from his national association (ALGA). The performance measures they recommend that people look at and think about, we also have to look at them and fit them in the context of everything else. He asked if there are specific measures the committee is interested in, or that they would like or not like to see. He created a summary sheet with suggestions for data, adding that using measures which receive 100% year after year just aren't helpful. He explained which various measures may be beneficial to track, and how others can be manipulated to show positive results. One way to track success is looking at the auditor's ability to implement change, and how well management is implementing these changes — although, policy can take some time to change or be implemented. A lot of people rely on the output measures, but they aren't quite as strong as the quality or outcome measures. Efficiency measures are difficult to quantify, and it's hard to find statistics about hours, since they depend on what projects were completed, what type of project, etc. Chair Lombard noted that those measures could make you look inefficient, but that's not true. Mr. Givans added that his indirect is a bit high, because he does his own scheduling and meetings. He offered to add any measures, such as how many implementations have been implemented, or more the committee would like to see if there was support for one over another? Member Parrish asked if there is value in showing actions implemented, does it show how well the auditor is working with others? Mr. Givans replied that yes, we would want to somehow communicate that recommendations have been followed up on. Member Parrish suggested he doesn't see the real value in those measures. Chair Lombard suggested that seems like the only measurement discussed that tries to get at the impact the auditor has. She agreed with Tom that it's important to have viable text around the measures to explain them and give them meaning. Mr. Givans agreed he would think about how he can add implementation percentages to the measures, and what he can carve out to tell you a story. Mr. Anderson suggested that the measures and the story depend on who your audience is, whether it's for self-improvement, that could be one set or format, with another for the public or to tell a story. Finance & Human Resource Software Update: (Erik) Mr. Kropp explained that on July 1, Deschutes County transferred to financial system Tyler Technologies/Mums. The finance team did a great job preparing and getting everyone ready, and implementation has gone smoothly, but there is still training and learning involved. The other piece of the package is the Human Resources side, which will roll out January 2018. Ms. Blankenship stated the new system took some time to get footing and seemed overwhelming with trainings, but it has gone really well. Mr. Linhares asked how readily reports are available in the new system? Mr. Kropp answered that the ability to run reports is there, and they will be more accurate, however a lot of us haven't gotten that far yet. One of the other benefits in this new system is the amount of time required to process a voucher — what had previously taken a week and a half, now gets paid within that very same week if approved by the deadline. Mr. Anderson added that prior to the new system, the process for approving county bills each week was a rather laborious one that included a piece of luggage in his office containing every paper invoice from the week. If he had a question, he would have to look through stacks of paper to find the answer, then commissioners would have to approve the overall bills each week. With the new system, Mr. Anderson receives the summary bill report, which he can use to quickly reference anything he might have a question about. Mr. Linhares asked where the paper invoices go once they are submitted into the new system, and Mr. Kropp stated the auditor is working on retention and what is needed for that. AUDIT COMMITTEE MEETING Thursday, September 14, 2017 Page 5 of 6 Mr. Parrish asked if timekeeping is included in the system, and Mr. Kropp replied that will be phase two, with the electronic timekeeping program NOVATime. This will begin to roll out starting October, working simultaneously with the current system for a short time as a training period. UPDATES/Other Items: (David): Mr. Givans provided updates regarding the following items: • Global follow up report 2017 Requests for status updates have been sent to departments that show recommendations still pending. These updates are due back in October. • Current audit work status: The field work portion of the Solid Waste audit has been completed, and is now working on the analysis. • Committee open position recruitment There is one opening on the committee. Mr. Anderson added there is also an opening on the budget committee, so advertising can be done jointly. Mr. Givans stated three members terms were renewed by the commissioners on September 13th: Lindsay Lombard, Wayne Lowry, and Nancy Blankenship. • Hotline feedback The board tentatively approved moving forward with policy development of the hotline. The thought is that the hotline effort would be housed as an internal audit function, then potentially spun out externally. It would be primarily for employees and internal purposes. The call would be received then determined who would receive the complaint, if it needed to be sent to HR, Legal, Auditing, etc. Ms. Blankenship asked if it wouldn't be managed by a third party vendor. Mr. Givans replied that it might be, and most do use third parties. There are benefits to doing so, such as having a staff who's trained for taking the calls, and have 24/7 availability. One benefit would be that the person who complained could check the status and follow up on their complaint. Mr. Linhares asked that it wouldn't be for general public to call? Mr. Givans stated not generally, but that might be what it turns into. Chair Lombard asked if there was knowledge of fraud or embezzlement, how does that investigation happen — is that an auditor's role? Mr. Givans stated that there are methods laid out in the current policy for employees to complain or bring information forward, and then Tom and the group determine the best person or team to investigate — which could mean anyone from the auditor to the police. Mr. Anderson added that if illegal activity occurs, law enforcement is involved right away. Commissioner DeBone asked what the benefit is of the hotline, if there is already a process for complaints. Mr. Givans stated that research shows people prefer the anonymity of hotlines. • See Internal Audit status report June 2017- through Aug 2017 This status report shows another couple months of time spent. Solid Waste has been a large part of that, and the payroll and HR systems have kept us pretty busy as well. There isn't too much to tie up after peer review besides the press release we will put out. OTHER BUSINESS/CLOSING: None presented. Mr. Givans stated the next meeting is November 91h, with the CAFR about a week before that. Chair Lombard asked if committee members could receive the printed CAFR a week prior to the meeting. Mr. Givans responded yes, he will distribute that information as soon as he receives it. AUDIT COMMITTEE MEETING Thursday, September 14, 2017 Page 6 of 6 Adiournment: Being no further issues brought before the Committee the meeting was adjourned at 1:56 p.m. Respectfully submitted, wynk, tall uradrick Administrative Assistant - BOCC