HomeMy WebLinkAboutStaff Report 3463
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
January 22, 2013
The Honorable City Council
Palo Alto, California
Policy and Services Committee Recommendation to Accept the
Auditor's Office Quarterly Report as of September 30, 2012
The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report
as of September 30, 2012. At its meeting on November 20, 2012, the Policy and Services
Committee approved and unanimously recommended the City Council accept the report. The
Policy and Services Committee minutes are included in this packet.
Recommended Action: Accept the Auditor’s Office Quarterly Report as of September 30, 2012.
Respectfully submitted,
Jim Pelletier
City Auditor
ATTACHMENTS:
: Attachment A: Auditor's Office Quarterly Report as of September 30, 2012 (PDF)
: Attachment B: Policy and Services Committee Meeting Minutes Excerpt (November 20,
2012) (PDF)
Department Head: Jim Pelletier, City Auditor
Page 2
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
November 20, 2012
The Honorable City Council
Attention: Policy & Services Committee
Palo Alto, California
Auditor's Office Quarterly Report as of September 30, 2012
RECOMMENDATION
The City Auditor’s Office recommends the Policy and Services Committee review and
recommend to the City Council acceptance of the Auditor’s Office Quarterly Report as of
September 30, 2012.
SUMMARY OF RESULTS
In accordance with the Municipal Code, the City Auditor prepares an annual work plan
and issues quarterly reports to the City Council describing the status and progress
towards completion of the work plan. This report provides the City Council with an
update on the first quarter for FY 2013.
Respectfully submitted,
Jim Pelletier
City Auditor
ATTACHMENTS:
Attachment A: Quarterly Report as of September 30, 2012 (PDF)
Department Head: Jim Pelletier, City Auditor
Attachment A
Page 2
Attachment A
“Promoting honest, efficient, effective, and fully accountable city government."
Attachment A
1
September 2012
CONTENTS
INTRODUCTION ................................................................................................................................................................... 2
OVERVIEW OF THE OFFICE OF THE CITY AUDITOR (OCA)...................................................................................................................... 2
OCA’S CORE PRODUCTS & SERVICES ............................................................................................................................................... 2
PROFESSIONAL STANDARDS ............................................................................................................................................................ 3
FIRST QUARTER FY 2012 UPDATE ........................................................................................................................................ 4
OVERVIEW .................................................................................................................................................................................. 4
AUDITS ....................................................................................................................................................................................... 4
OTHER MONITORING AND ADMINISTRATIVE ASSIGNMENTS .................................................................................................................. 5
FRAUD, WASTE, AND ABUSE HOTLINE ADMINISTRATION ..................................................................................................................... 6
Attachment A
2
September 2012
INTRODUCTION
Overview of the Office of the City Auditor (OCA)
The OCA conducts performance audits of City departments, programs, and services. Performance audits provide
the City Council, City management, and the public with independent and objective information regarding the
economy, efficiency, and effectiveness of City programs and activities. Our goal is to help the City achieve its
strategic, operational, reporting, and compliance objectives using a systematic, disciplined approach to
evaluating and recommending improvements to the effectiveness of the City’s risk management, control, and
governance processes. Through our audit activities, the OCA supports the key governance roles of Oversight,
Insight, and Foresight as described below:
Oversight Insight Foresight
OCA provides oversight of City
management on behalf of the
City Council and the residents of
Palo Alto by evaluating whether
departments have established
efficient and effective means of
doing what they are required to
do, spending funds for intended
purposes, and complying with
applicable laws and regulations.
OCA provides insight to assist City
management by assessing the
adequacy of internal controls;
sharing best practices and
benchmark information; and
looking across departments to
help management identify
opportunities to borrow, adapt,
or re-engineer good practices.
OCA helps City management look
forward by identifying trends and
bringing attention to emerging
challenges before they become
crises. These issues often
represent long-term risks that can
sometimes receive low priority
for attention where scarce
resources drive more short-term
focus on urgent concerns.
OCA’s Core Products & Services
Audits – OCA’s core product addressing performance (efficiency and effectiveness), compliance, and
information technology matters that provide management with value-added recommendations focused on
mitigating risks and improving internal control. Audits are designed to support the achievement of the City’s
strategic, operational, reporting, and compliance objectives and the City Council’s priorities.
Service Efforts and Accomplishments (SEA) and Citizen Centric Report (CCR) – The SEA is an annual report that
provides data about the costs, quality, quantity, and timeliness of City services. The report includes a variety of
comparisons to other cities and the results of a citizen survey. The goal is to provide the residents of Palo Alto,
the City Council, City Staff, and other stakeholders with information on past performance to strengthen public
accountability, improve government efficiency and effectiveness, and support future decision making.
Prepared in coordination with the annual SEA report, the CCR is intended to be a brief, easy to read document
that provides a quick snapshot of the City’s progress over the year. Based on guidance from the Association of
Government Accountants, the report is a method to foster innovative means of communication between the
City and the public.
Administration of the Fraud, Waste, and Abuse Hotline (Hotline) – The Hotline provides an anonymous
mechanism for employees to report fraud, waste, and/or abuse of City resources. The OCA is responsible for
partnering with an outside vendor to administer the Hotline and ensure that all calls are reviewed and acted
upon by the Hotline Review Committee. The OCA may, as necessary, investigate certain cases. Additionally, the
OCA will provide quarterly reporting of Hotline activity to the City Council.
Attachment A
3
September 2012
Special Advisory Memorandums (SAMs) – Utilized for time critical engagements including limited assessments,
reviews, or evaluations as requested by management or the Council. These services do not typically conform to
the rigorous audit standards required for Audits, but allow for important information to be provided to
management in a quick, flexible manner and can be focused on singular issues.
Comprehensive Annual Financial Report (CAFR) and Single Audit Report – Each year, the OCA contracts with an
independent, certified public accountant to perform both the City’s annual financial audit as well as the annual
Single Audit.
Sales and Use Tax Monitoring – The OCA conducts sales and use tax monitoring internally and contracts with an
external vendor for quarterly sales and use tax recovery and information services. The purpose of this
monitoring is to identify misallocations of local sales and use tax generated by companies doing business in Palo
Alto. In addition, the external vendor prepares quarterly sales and use tax summary reports that are provided to
the City Council as informational items.
Professional Standards
The OCA must adhere to a set of professional standards in conducting its work. The Palo Alto Municipal Code
requires the OCA to adhere to Government Auditing Standards issued by the US Government Accountability
Office. These standards require that we plan and perform our audits to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on the objectives of each audit. The OCA’s
compliance with these standards is reviewed every three years by an external firm.
Attachment A
4
September 2012
First Quarter FY 2012 Update
Overview
The audit function is essential to the City of Palo Alto’s public accountability. The Office of the City Auditor’s
independence and accountability, mandated by the City Charter and municipal code, means the public, the
Council, and City staff can rely on us for objective information and practical advice. We thoroughly review and
analyze City performance to give you the information you need about complex and difficult issues. Taking action
on our audit recommendations will help the City to reduce risks and protect its good reputation.
Audits
Below is a summary of our Audit work for the first quarter of FY 2013 (as of September 30, 2012):
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Service Efforts &
Accomplishments /
Citizen Centric
Report
To provide consistent,
reliable information
on the performance of
City services to:
Assist users in
assessing whether
the City is
achieving its goals
and objectives in
an efficient and
effective manner
Assist the City in
meeting its
responsibilities to
be publicly
accountable in the
stewardship over
public resources
7/12 1/2013 In Process These reports provide
comprehensive and historical
data and analysis that is not
available in any other single
report in the City. The SEA
and CCR are available online
or hardcopy from the OCA.
This year’s report has been
redesigned from the ground
up with additional focus on
performance management.
Contract
Administration Audit
(Audit of Contract
Oversight)
To assess whether
internal controls are
effective and
adequate to ensure
that City contracts are
administered in
accordance with
Municipal Code and
relevant policies and
procedures. The audit
focused on the City’s
contract with
OfficeMax.
1/2012 11/2012 In Process
(Reporting)
TBD
Attachment A
5
September 2012
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Utilities Reserves
Audit
To determine the
appropriateness and
adequacy of utilities
reserves, reserve
policies, reserve
guidelines, and their
usage.
1/2012 12/2012 In Process
(Reporting)
TBD
Human Resources
Employee Benefits
To determine whether
the Human Resources
Department has
adequate controls
over employee
benefits to ensure that
health premiums and
administrative fees
are calculated and
paid accurately for
eligible active and
retired employees in
accordance with
applicable labor
agreements, laws, and
regulations.
6/2012 12/2012 In Process
(Reporting)
TBD
Other Monitoring and Administrative Assignments
Below is a summary of Other Assignments for the first quarter of FY 2013 (as of September 30, 2012):
Title Objective(s) Status Results/Comments
Sales and Use Tax
Allocation Reviews
The OCA conducts sales and use
tax monitoring in-house and
also contracts with an outside
vendor.
Ongoing The OCA continues to submit
inquiries to the State Board of
Equalization. As of the end of the
first quarter, the City received
$44,287 in total Sales and Use Tax
Recoveries ($7,341 from OCA
inquiries and $39,946 from vendor
inquiries). Also, due to processing
lags at the State Board of
Equalization, there are 54 potential
misallocations waiting to be
researched and processed (29 from
OCA and 25 from the vendor).
Quarterly Reporting Each quarter, the OCA prepares
Quarterly Status Updates and
Sales Tax Digest Summaries for
Council review.
Ongoing N/A
Attachment A
6
September 2012
Fraud, Waste, and Abuse Hotline Administration
On August 16, 2012, we launched the City’s Fraud, Waste, and Abuse Hotline. Below is a summary of Hotline
Activity for the first quarter of FY 2013 (as of September 30, 2012):
Category Number Action Taken
Inquiry 1 No Action Required
Attachment A
POLICY AND SERVICES COMMITTEE
DRAFT EXCERPT
Page 1 of 2
Special Meeting
November 20, 2012
Auditor’s Office Quarterly Report as of September 30, 2012
Jim Pelletier, City Auditor would provide a detailed update at the end of the
second quarter, when the Policy and Services Committee (Committee) would
review the audit plan in more detail. At that time, he would recommend
changes to the audit plan and provide more information. The City Auditor’s
Office Staff was working on the annual Service Efforts and Accomplishments
(SEA) Report. They were redesigning the report to make it user friendly and
visually appealing, and to focus on performance management. The Contract
Oversight Audit was complete; the Utilities Reserves Audit and the Human
Resources Employee Benefits Audit were in the final reporting stages and
scheduled to be reported in early December 2012. Ongoing assignments
were the sales and use tax allocation review and quarterly audits. As of the
end of the first quarter, the City received slightly more than $44,000 in total
sales and use tax recoveries, approximately $7,000 from direct analysis by
the Audit Staff and approximately $40,000 from the vendor. Potentially 54
misallocations remained outstanding with the State Board of Equalization, 29
from Audit Staff and 25 from the vendor. Staff anticipated additional
recovery as the year progressed. New for the quarterly report was an
update on the fraud, waste and abuse hotline, implemented on August 16,
2012. As of the end of September 2012, the hotline received one call, which
was an inquiry regarding City policy. No follow-up action was required. The
hotline received two additional calls, which would be reported in the next
quarter.
Council Member Schmid inquired whether the Human Resources Employee
Benefits report would be available prior to the December 10, 2012 City
Council meeting.
Mr. Pelletier indicated it would be provided in the December 10, 2012
Packet.
Attachment B
DRAFT EXCERPT
Page 2 of 2
Policy and Services Committee Special Meeting
Draft Excerpt 11/20/2012
MOTION: Council Member Schmid moved, seconded by Council Member
Espinosa to recommend the City Council approve the Auditor’s Office
Quarterly Report as of September 30, 2012.
MOTION PASSED: 4-0
Attachment B