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HomeMy WebLinkAbout2023-02-28 Policy & Services Committee Summary MinutesPOLICY AND SERVICES COMMITTEE SUMMARY MINUTES Page 1 of 6 Special Meeting February 28, 2023 The Policy and Services Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 7:00 P.M. Present In Person: Tanaka (Chair), Lauing, Veenker Present Remotely: Absent: Oral Communications: None Agenda Items 1. Office of the City Auditor Presentation of the Utility Work Order Process and Control Review Report City Auditor Adriane McCoy delivered a slideshow presentation. Baker Tilly Manager Ronald Cintron worked on the audit team and provided an overview of the report. The following recommendations were highlighted. Approvals should be in writing. It was observed that 3 of the 21 sampled work orders did not have appropriate signature approval. Of 25 sampled work orders, 2 did not have a signature demonstrating review of the completed work order. A supervisor should review and provide written approval of labor and materials including third-party invoices. It would be beneficial for utilities, wastewater, gas and water to implement their own checklist. Work orders should be closed and capitalized monthly instead of quarterly to ensure depreciation starts immediately when the asset is placed in service. Utilities Strategic Business Manager Dave Yuan indicated that staff and Accounting agreed to continue the quarterly process because changing it to monthly would triple the amount of work and they do not have the staffing resources. Discussion ensued regarding Pages 25 and 26. Council Member Veenker inquired why the other utilities had KPIs but electric did not. Utilities Strategic Business Manager Yuan explained that water, gas and wastewater had their own analyst and project coordinators. Electric was short- staffed, so they were unable to run some of the reports and do analysis whereas water and gas was more fully staffed. In response to Council Member Veenker’s query as to how long the other utilities had KPIs, Mr. Batchelor replied at least six to eight years. SUMMARY MINUTES Page 2 of 6 Sp. Policy & Services Meeting Summary Minutes: 02/28/2023 Chair Tanaka asked how our level on noncompliance or rate of issues compared to what Baker Tilly normally sees with other organizations or cities. Baker Tilly Manager Mr. Cintron responded he was not prepared to answer that question. City Auditor McCoy did not believe it was an alarming number of findings for this scope of work and the issues were typical. Baker Tilly Manager Mr. Cintron addressed Chair Tanaka’s question on fraud risks. Their standards require them to keep the possibility of fraud in mind at all times when they are developing procedures. Signature approvals are one way to prevent fraud. Chair Tanaka noted that one question not asked in the audit was if the work on the work order was necessary. Baker Tilly Manager Mr. Cintron explained they would have investigated further if they had come across indicators during interviews or during test work. Auditors use their judgment and take into consideration the amount of the work order. It was not a random audit sample. It was a judgmental sample to include an adequate representation of various scenarios. In reply to Council Member Veenker’s request for a definition of emergency work versus unplanned work in Appendix D on Packet Page 24, Utilities Strategic Business Manager Yuan responded that unplanned is unscheduled work not considered an emergency. Discussion ensued on how to word the motion. Baker Tilly Manager Mr. Cintron believed that random samples were not appropriate because they need to use judgment in some situations. City Auditor McCoy advised they could include random samples but cannot use random sampling exclusively. The scope of the audit may require them to look for certain criteria and conditions; therefore, sampling methods may be statistical, judgmental, stop and go or random. MOTION: Chair Tanaka moved, seconded by Council Member Veenker to recommend the City Council accept the Utility Work Order Process Review Report and recommend the following improvements: A. Staff work with Baker Tilly to reconcile the key performance indicators (KPIs) to be adopted pursuant to Recommendation 9 that the electric utility would benefit from developing similar KPIs that the water, wastewater, and gas utilities currently use and that the utilities may want to consider adding additional KPIs related to work orders and project management. B. Suggest that future audit work should include random samples and there should be tests if work orders needed to be done. C. Set updated target and completion dates for each item. MOTION PASSED: 3-0 City Manager Ed Shikada remarked that this item would be forwarded to the City Council on its consent calendar. SUMMARY MINUTES Page 3 of 6 Sp. Policy & Services Meeting Summary Minutes: 02/28/2023 2. Approval of Office of City Auditor FY2023 Task Orders City Auditor Adriane McCoy presented a list of Task Orders to request approval from the Committee. Task 01, a Citywide Risk Assessment would be conducted, which was typically an annual process. After identifying and rating the risks, a recommended Annual Audit Plan would be created for the new fiscal year, which was Task 02. Task Orders 04.12, 04.13, 04.14 and 04.15 were requests for due date extensions. Task 04.19 is for working with the CIO on a new audit for Disaster Recovery Preparedness pertaining to Information Technology and Systems. Task 04.20 is for working with the CFO’s office on a new audit for Procurement Process Review. City Auditor McCoy addressed Council Member Lauing’s inquiry as to what caused the need for due date extensions. Tasks 04.12 and 04.13 were waiting for management to provide update responses and supplemental documentation needed to be reviewed. Task 04.14, the Cybersecurity Assessment report was provided to management but still awaiting management’s response including remediation efforts before presenting the report to the Committee. Task 04.15, the fieldwork had been completed and they are in the process of completing the report, which was delayed because of a transition during the first quarter of the fiscal year. Chair Tanaka asked if there was a common cause for task delays. City Auditor McCoy explained that supplemental or subsequent information that needed to be received and reviewed added time to complete the audit process. Task 04.12 was pending additional information from the bank, when the information is received it has to be reviewed and the reports updated accordingly. Task 04.14, the first round of responses had not been received. Chair Tanaka invited staff to respond to the Auditor’s comments. City Manager Ed Shikada responded it was accurate. There were various circumstances causing delays. For cybersecurity as an example, the CIO would be responding this week. In response to Council Member Lauing’s query if this was causing additional cost, City Auditor McCoy responded it was within the contract. City Auditor McCoy addressed Council Member Veenker’s questions about Tasks 04.19 and 04.20, who adds new audits and why. The audits were added because this was the time they could be executed from the annual audit plan. When a risk assessment is conducted, audits are scheduled in order of prioritization to be accomplished during the fiscal year. Regarding 04.19, Disaster Recovery Preparedness, Council Member Veenker asked if the Disaster Recovery Plan is audited, if so, by whom and when. City Auditor McCoy replied that the plan is audited for completeness. Disaster recovery has two phases, systems and operations. The scope of the audit would include ensuring those plans exist, assessing whether the plans had been tested on a periodic basis to ensure they are current and that management knows how to respond during service disruption. Auditing the plan would be within the scope of Task 04.19 to the extent that timing and budget allows. After initial reviews with the IT Department and CIO, the specific objective would be discussed as well as what can be covered in the full scope and determine the timing. SUMMARY MINUTES Page 4 of 6 Sp. Policy & Services Meeting Summary Minutes: 02/28/2023 Council Member Veenker inquired if analysis of the Green Waste contract for potential fraud was included in the audit plan. City Auditor McCoy responded that audits were recommended when conducting the Citywide Risk Assessment and confirmed Council Member Veenker’s understanding that Task 01 would include uncovering whether there was a need for a more thorough audit of something such as our Green Waste contract. Regarding the Wastewater Treatment Facility Agreement, Chair Tanaka wanted to know if Task 04.15 included fairly splitting the capital cost among the cities. When the wastewater treatment plant was built and the cities split the cost, Palo Alto was bigger relative to our nearby cities. Over the past few decades, Mountain View, Menlo Park and East Palo Alto have grown more than Palo Alto, so now our wastewater share was much less compared to our neighbors. At peak, he believed Palo Alto was 40% of usage and now it was about 32%. Baker Tilly Manager Ronald Cintron recalled there were provisions in the contract to allow for adjustments. Chair Tanaka believed it was only for operations, not capital. Baker Tilly Manager Mr. Cintron felt those contracts were very detailed and he would be surprised if there was not a way to correct that but he has not looked at them in a long time. Baker Tilly assessed whether there was compliance with the terms of the contract, not whether the contract was fair. Chair Tanaka would like an answer to his question. The Auditor reports to the Committee and Council, so Chair Tanaka encouraged Council Member Veenker to set up a meeting with the Auditor to express her ideas where there was potential risk or areas she wanted investigated. City Auditor McCoy agreed. The Audit Plan is determined from the Risk Assessment, interviews and information reviewed. Time is set aside for requests and would be prioritized based on need. Chair Tanaka indicated he is particularly interested in Task 04.20, Procurement Process Review, because that is where a lot of money flows and was potentially a source of inefficiencies. He was interested in the length of the procurement process. There have been double-digit increases in cost but sometimes there was only one bid and the lack of competition was disappointing. It is important to know why we were getting single bids. The Ranger Pipeline was a $6M or $7M project to replace pipelines in our streets. One of Ranger’s competitors came to a City Council meeting to complain because the original bid had a provision that required working weekends and holidays, so nobody bid on it. Because there were no bids, the staff could do a direct award to a contractor. Chair Tanaka also wondered how vendor dinners or vendor-sponsored speaking engagements to exotic locations affected the procurement process. City Auditor McCoy responded that there were currently no limitations on their objectives. Interviews and inquiries would be conducted with staff and then it would be determined what the appropriate scope should be but she has made note of what has been mentioned during this meeting. Chair Tanaka requested that when Council Members are presented with the price of a contract that the previous contract price be included to provide a baseline in determining the amount of increase. He needs to go through years of reports or agendas to find that information. Sometimes there were multiple bids but Council was not told what the range of the bids was SUMMARY MINUTES Page 5 of 6 Sp. Policy & Services Meeting Summary Minutes: 02/28/2023 unless Council asked. City Auditor McCoy suggested that Council have criteria for what they would expect to have presented. Chair Tanaka asked if the City Auditor’s budget was sufficient to do a thorough job on the procurement process. City Auditor McCoy would like to look into that because it may not be sufficient. Council Member Lauing suggested that the motion state, “if there is sufficient budget for a thorough audit of the procurement process.” Chair Tanaka agreed and he would like the clerk to change the wording. MOTION: Chair Tanaka moved, seconded by Council Member Lauing to recommend the City Council approval for the following Task Orders, identified in the Audit Plan Report and reevaluate if there is sufficient budget for Task 04.20: 1) FY23-Task 01 – Citywide Risk Assessment 2) FY23-Task 02 – Annual Audit Plan 3) Task 04.12 – Wire Payment Process and Controls Review (Extension) 4) Task 04.13 – Remote and Flexible Work Study (Extension) 5) Task 04.14 – Cybersecurity Assessment (Extension) 6) Task 04.15 – Wastewater Treatment Facility Agreement (Extension) 7) Task 04.19 – Disaster Recovery Preparedness 8) Task 04.20 – Procurement Process Review MOTION PASSED: 3-0 Future Meetings and Agendas Council Member Veenker asked what the process was for getting items on the agenda. City Manager Ed Shikada believed that process was in the Procedures and Protocols Handbook. He believed full Council would talk about procedures on March 20. Items brought to this Committee were referred from the full Council or staff. Chair Tanaka thought it was important especially as elected officials being accountable to the people that they have some control of their own meeting. It should be easier and quicker to add items to the agenda. He believed the advantages of that format is it would be less structured, they did not have to take turns and instead have more of a conversation versus talking at each other in Council. It would be more efficient because the Committee could work out details much quicker with three members versus seven Council members. SUMMARY MINUTES Page 6 of 6 Sp. Policy & Services Meeting Summary Minutes: 02/28/2023 Council Member Lauing suggested that when the colleagues’ memo was approved it should come to the Committee at their next meeting. Chair Tanaka agreed. Council Member Lauing advised having two timeframes, A or B, A needs a colleagues’ memo because it is going to take staff time versus B placed directly on the agenda. Chair Tanaka invited feedback on making Committee meetings more efficient and useful. Chair Tanaka recommended having slides arranged by context to discuss one task at a time versus bouncing back and forth. Chair Tanaka echoed Council Member Veenker’s struggles with the slide presentations. Council Member Lauing was surprised there was only one item on today’s agenda. Deputy City Manager Chantal Cotton Gaines explained that there was a list of items on the work plan that staff did not have the opportunity to discuss with the full Council yesterday. There were referrals from Council that staff is working on amidst other projects they were assigned. Council Member Lauing stated he appreciated the quality of the performance and presentation from the auditors, which demonstrated they were highly qualified. City Auditor Adriane McCoy indicated she would reach out to set up individual meetings. Adjournment: The meeting was adjourned at 8:45 P.M.