HomeMy WebLinkAbout2019-06-11 Policy & Services Committee Agenda PacketPolicy and Services Committee
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Tuesday, June 11, 2019
Special Meeting
Community Meeting Room
5:00 PM
Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in
the Council Chambers on the Thursday 12 days preceding the meeting.
PUBLIC COMMENT
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comment may be addressed to the full Policy and Services Committee via email at City.Council@cityofpaloalto.org.
Call to Order
Oral Communications
Members of the public may speak to any item NOT on the agenda.
Action Items
1. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits of: 1) Citywide
Cash Handling and Travel Expense; 2) Cable Franchise and PEG Fees;
3) Continuous Monitoring: Overtime; 4) Continuous Monitoring:
Payments; and 4) Inventory Management
2. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates on Recommendations From the
Community Services Department Fee Schedule Audit
3. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Green Purchasing Audit Status Update
4. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits on
Recommendations From the 2016 Disability Rates and Workers'
Compensation Audit
5. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits on
2 June 11, 2019
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Recommendations From the ERP Planning: Information Technology
Data Governance Audit
6. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates on Recommendations From
Audits of: 1) Water Meter Billing Accuracy; 2) Electric Substructure
Contract Oversight; and 3) the Cross Bore Inspection Contract
7. Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Auditor's Office Quarterly Reports as of
December 31, 2018 and March 31, 2019
Future Meetings and Agendas
Adjournment
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City of Palo Alto (ID # 10166)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Summary Title: Status Updates of Audit Recommendations for Cable, Cash
Handling and Continuous Monitoring Audits
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits of; 1) Citywide Cash
Handling and Travel Expense; 2) Cable Franchise and PEG Fees; 3) Continuous
Monitoring: Overtime; 4) Continuous Monitoring: Payments; and 4)
Inventory Management
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Policy and Services Committee recommend that the City Council
accept the status updates of the audits of Citywide Cash Handling and Travel Expense; Cable
Franchise and Public, Education and Government (PEG) Fees; Continuous Monitoring: Payments
Audit; Continuous Monitoring: Overtime; and Inventory Management.
Background
The City Auditor’s Office previously issued audits of Citywide Cash Handling and Travel Expense;
Cable Franchise and Public, Education and Government (PEG) Fees; Continuous Monitoring:
Payments Audit; Continuous Monitoring: Overtime; and Inventory Management.
Staff has provided status updates on the audits in Attachments A-E. Of the remaining
recommendations six are complete and ten are in progress or not started. The open
recommendations include four that are linked to the future upgrade of the SAP enterprise
resource planning (ERP) system. In the Cable PEG fees audit, two recommendations are linked
to the upcoming agreements between the City and the Media Center to use PEG fees to
purchase the Media Center building. Details of all recommendations can be found in the
attachments.
Attachments:
• Attachment A: Overtime Audit
• Attachment B: Cable Audit
• Attachment C: Cash Handling Audit
City of Palo Alto Page 2
• Attachment D: Inventory Audit
• Attachment E: Payments Audit
ATTACHMENT A
STATUS OF AUDIT RECOMMENDATIONS
CONTINUOUS MONITORING: OVERTIME – ISSUED 9/6/17
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status Status
Finding: Implementing a continuous monitoring process for overtime in the new Enterprise Resource Planning (ERP) environment can help the City improve its
resource allocation and utilization.
1. Explore the potential of developing a
continuous monitoring process to
provide more detailed information on
overtime usage so that management
can better manage and control
overtime costs. A continuous
monitoring system could include data
analytics to extract data on service
demands, absences and vacancies,
and elements of city policies and
contractual requirement that could be
useful in identifying opportunities to
reduce overtime costs.
ASD Concurrence: Agree
Target Date: 4th Quarter 2018
Action Plan: ASD will work with departments to
explore the potential of developing a
continuous monitoring process for overtime.
In Progress April 2019 Management Update:
Staff is working with departments to
explore the potential of developing a
continuous monitoring process for
overtime.
Expected Completion Date: 4th Quarter
2019
2. Form a work group consisting of main
end users and stakeholders to design
shared system capabilities and
standardized overtime management
processes in the new ERP
environment by:
• Identifying useful overtime data
including their source, and user
interface (e.g., dashboard with
drilldown and reporting
capabilities) that allow users to
analyze pertinent overtime factors
shown in Appendix 1 in a
ASD Concurrence: Agree
Target Date: 4th Quarter 2018
Action Plan: ASD will work with departments to
determine shared needs for overtime in the
new ERP system. Staff is currently evaluating
ERP solutions for payroll and core financials and
staff has communicated the important of
overtime reporting to the vendors. Once an ERP
solution is selected staff will finalize overtime
reporting requirements and build those
requirements into the new ERP system with the
implementation consultants.
Not Started April 2019 Management Update:
The City will be upgrading the current SAP
environment per CMR 9826 rather than
implement a new ERP. As part of that
project ASD will work with departments to
determine shared needs for overtime in
the upgrade, as new system capabilities
allow.
Expected Completion Date: TBD
ATTACHMENT A
STATUS OF AUDIT RECOMMENDATIONS
CONTINUOUS MONITORING: OVERTIME – ISSUED 9/6/17
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status Status
comprehensive manner.
• Identifying manual data collection
and auxiliary processes (e.g.,
billing, reimbursement) that can be
automated.
• Reviewing applicable ERP system
requirements to ensure needed
capabilities are included in the
City’s ERP contract.
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
Finding 1: The Media Center did not restrict its use of $340,000 of annual PEG fees to capital expenditures as required by the federal Cable Act.
We recommend that the City Manager’s Office:
1.1 Consult with ASD, IT, the City
Attorney’s Office, and Cable Joint
Powers members to assess the need
to continue collecting PEG fees and
adjust the fee based on a
demonstrated need for future capital
expenses related to PEG access
facilities or discontinue collecting the
fee.
a. If it is determined that the PEG fee
should be adjusted or
discontinued, submit a staff report
to the City Council with a
recommendation to amend the
Municipal Code to reflect the
revised fee or to eliminate the
requirement and recommend to
the other Cable Joint Powers
members that they do the same.
b. If it is determined that the PEG fee
should continue to be collected:
• Amend the agreement with
the Media Center to remove
the requirement for the City to
remit all PEG fees collected to
the Media Center.
City Manager’s
Office, ASD, IT,
City Attorney’s
Office
Concurrence: Agree
Target Date: 2017
Action Plan:
Staff agrees that it should confirm the
ongoing need for the PEG fee and
ensure it is set at a level that is
consistent with future capital needs.
Staff will work with the City Attorney’s
Office to develop a “capital cost”
definition that eliminates any cost
categories that could be construed as
operating costs and will restrict the use
of PEG fees to expenditures that meet
this definition. Staff will also develop
and adopt procedures that define the
PEG fee distribution and reporting
process.
Staff will propose the appropriate
revisions to the Municipal Code if it is
determined that the PEG fee should be
modified in any way.
In Progress April 2019 Management Update:
On 1/28/2019 Council directed staff to negotiate
agreements to purchase the Media Center building
with PEG fee revenue (CMR 9804). The City is
working through development of the transaction
terms with the Media Center and the Cable Joint
Powers partners, and will return to Council for
approvals.
Expected Completion Date: 4QTR 2019
September 2018 Management Update:
The Cable Joint Powers is evaluating the possible
purchase the Media Center building over time
using PEG fees, in order to dedicate the building to
future PEG use and to maximize the benefit of PEG
fee revenue for PEG capital costs. The City is
discussing the terms of the building purchase
agreement with the Media Center . In the
meantime, PEG fees are being placed in a
restricted account only to be used for capital
expenditures that meet Federal Cable Act
requirements. Staff expects to provide an update
on the status of the possible purchase of the
Media Center building to the City Council before
the end of 2018.
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 2
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
• Coordinate with ASD, the City
Attorney’s Office, and the
Cable Joint Powers to develop
and implement criteria for the
use of PEG fees to ensure
compliance with the federal
Cable Act, and that the fees
are set at a level appropriate
for anticipated and necessary
capital expenses.
• Place the PEG fees in a
restricted account and
distribute them based on City-
approved capital expenditures
that meet federal Cable Act
requirements.
• Require that semi-annual
documentation of
expenditures be provided and
adopt procedures to review
the documentation to ensure
that PEG fees are spent only as
allowed by the federal Cable
Act and take immediate
corrective action as necessary.
Expected Completion Date: 1QTR 2019
March 2018 Management Update:
Staff is working with the Cable Joint Powers and
the Media Center to confirm the ongoing need for
PEG fees. It is anticipated that PEG fee revenue
will continue to be needed for appropriate capital
equipment and building expenses. Effective 2016,
PEG fees have been placed in a restricted account
only to be used for capital expenditures that meet
Federal Cable Act requirements. Procedures that
define capital assets, and the PEG fee distribution
and reporting process are under development.
Expected Completion Date: 3QTR 2018
1.2 Consult with ASD, IT, the City
Attorney’s Office, and the Cable Joint
Powers on whether to allocate a
portion of the unrestricted franchise
fees or other funds, instead of
restricted-use PEG fees, to subsidize
the Media Center’s operations or to
discontinue subsidizing the Media
City Manager’s
Office, ASD, IT,
City Attorney’s
Office
Concurrence: Agree
Target Date: 2017
Action Plan:
Staff will consult with the Cable Joint
Powers to determine if there is any
interest in subsidizing the Media
Center’s operations. Staff will propose
In Progress April 2019 Management Update:
On 1/28/2019 Council directed staff to negotiate
agreements to purchase the Media Center building
with PEG fee revenue (CMR 9804). The City is
working through development of the transaction
terms with the Media Center and the Cable Joint
Powers partners, and will return to Council for
approvals.
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 3
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
Center’s operations. Based on the
resulting recommendation, the City
Manager’s Office should make
recommendations to the Council
regarding appropriate future funding,
if any, for the Media Center.
recommendations to the City Council if
needed.
Expected Completion Date: 4QTR 2019
September 2018 Management Update:
The Cable Joint Powers prefers not to subsidize the
Media Center operations with franchise fees or
other funds. Instead, the City is pursuing the
option of using PEG fees to purchase the Media
Center building, thus providing the Media Center
with funds to cover its operating costs.
Expected Completion Date: 1QTR 2019
March 2018 Management Update:
The City is exploring with the Media Center a
proposal for the use of PEG fees to purchase the
Media Center’s facility. Under this option, the JPA
would use PEG fees for capital, enabling the Media
Center to cover operational expenses. (Staff will
report back to Council on the merits of this option
in the spring/summer 2018 timeframe.) The Cable
Joint Powers favors this option over using
franchise fees or other funds to subsidize the
Media Center’s operations.
Expected Completion Date: 4QTR 2018
Finding 2: Comcast and AT&T did not remit the full amount of franchise and PEG fees due.
We recommend that the City Manager’s Office, in coordination with ASD, IT, and the City Attorney’s Office:
2.1 Send a letter to AT&T and Comcast
describing the results of the audit and
demanding payment of the
underpaid franchise and PEG fees
City Manager,
ASD, IT, City
Attorney’s
Concurrence: Agree
Target Date: 4Q 2016
Action Plan:
Complete April 2019 Management Update:
On 11/13/18 staff reached a global settlement
with Comcast in the amount of $25,000.
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 4
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
shown in Exhibit 4, plus interest
calculated in accordance with DIVCA
requirements.
Office Staff will draft a letter to Comcast/AT&T
demanding payment of the underpaid
franchise and PEG fees, plus interest
(and audit costs in the case of AT&T).
Staff will work with Comcast/AT&T to
correct their address databases so that
future payments are properly remitted
and will develop criteria to assess the
accuracy of future payments. Staff will
work with San Mateo and Santa Clara
Counties to adjust their PEG fee rates as
needed.
September 2018 Management Update:
Staff has reached a tentative agreement with
Comcast on the terms of a global settlement. Staff
obtained Council approval for the financial portion
of the settlement. Staff is working with the City
Attorney’s Office to finalize the Comcast
settlement agreement.
Expected Completion Date: 4QTR 2018
March 2018 Management Update: In Progress
Staff issued letters to Comcast/AT&T demanding
payment of the underpaid franchise and PEG fees,
plus interest. Staff has reached a global settlement
with AT&T in the amount of $75,647. Staff
continues to negotiate the terms of a global
settlement with Comcast.
Expected Completion Date: 2QTR 2018
2.4 Develop criteria for assessing the
accuracy of future Comcast and AT&T
franchise and PEG fee payments on an
ongoing basis and:
• Communicate the criteria to
Comcast and AT&T and that it will
be used to review the accuracy of
future payments.
• Require Comcast and AT&T to
report the breakdown of their
fees in more detail, including
identifying what is and is not
included in the gross revenues
used to calculate the fees and the
Complete April 2019 Management Update:
Comcast and AT&T have adopted standard
company-wide reporting formats, providing a
breakdown of franchise and PEG fee calculations.
Staff will monitor and follow-up on any material
variances identified in these reports. Neither
company is able, or willing, to prepare a special set
of reports for the Cable Joint Powers.
September 2018 Management Update:
Staff has attempted to get Comcast and AT&T to
provide more detailed reporting formats to
improve the monitoring of future franchise and
PEG fee payments. The cable companies use
standard report formats for all their customers and
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 5
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
reason for any exclusions.
• Review the franchise and PEG fee
payments to ensure that they
were calculated on all revenues
that are subject to franchise and
PEG fees and promptly follow up
with Comcast and AT&T regarding
any discrepancies.
are not willing to provide a unique set of reports
for the Cable Joint Powers. Staff is working to
develop other ways to assess the accuracy of
future franchise and PEG fee payments
Expected Completion Date: 4QTR 2018
March 2018 Management Update:
After staff reaches a settlement with Comcast,
(determining what is and what is not included in
gross revenues used to calculate franchise fees), it
will finalize criteria and establish a more detailed
reporting format to assess the accuracy of future
franchise and PEG fee payments.
Expected Completion Date: 3QTR 2018
Finding 3: Roles and responsibilities for managing the City’s cable communications program are not clearly defined or assigned.
We recommend that the City Clerk and City Manager’s Office:
3.1. Confer and develop a
recommendation for the City Council
to assign responsibility for the City’s
cable communications program and
require the assigned department to
provide appropriate program
oversight to ensure that:
a. The City’s cable communications
program objectives are aligned
with the City’s goals and
objectives.
b. The assigned department
develops performance measures
to demonstrate that the program
City Manager’s
Office, City
Clerk
Concurrence: Agree
Target Date: 4Q 2016
Action Plan:
Staff will determine where to assign
responsibility for the City’s cable
communications program/activities and
propose the appropriate revisions to the
Municipal Code. The responsible
department will establish performance
measures to ensure proper program
administration and oversight.
In Progress April 2019 Management Update:
The Administrative Services Department assumed
responsibility for the City’s cable communications
program on an interim basis. A permanent
placement will be identified after the audit findings
are fully implemented.
Expected Completion Date: TBD
September 2018 Management Update:
Responsibility for the City’s cable communications
program was transferred to the Administrative
Service Department on an interim basis. After staff
completes the implementation of the audit
Attachment B
STATUS OF AUDIT RECOMMENDATIONS
CABLE FRANCHISE AND PEG FEE AUDIT – ISSUED 6/14/16
PAGE 6
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
is effective and is meeting the
City’s goals and objectives.
c. There is effective oversight and
management of the cable
coordinator’s contract and
activities.
findings, it will determine where to assign final
responsibility for the program.
Expected Completion Date: 1QTR 2019
March 2018 Management Update:
Staff is evaluating where to assign responsibility
for the City’s cable communications
program/activities and will propose the
appropriate revisions to the Municipal Code.
Expected Completion Date: 4QTR 2018
3.2. Submit a draft ordinance to the Palo
Alto City Council recommending
revisions to the Palo Alto Municipal
Code based on the revised
assignment of roles and
responsibilities.
Not Started April 2019 Management Update:
Staff plans to propose revisions to the Municipal
Code after it determines where final responsibility
for the City’s cable communications program will
reside.
Expected Completion Date: TBD
September 2018 Management Update:
Staff will propose appropriate revisions to the
Municipal Code after it determines where final
responsibility for the City’s cable communications
program will reside.
Expected Completion Date: TBD
April 2017 Management Update:
Not started.
Expected Completion Date: 4QTR 2018
Attachment C
STATUS OF AUDIT RECOMMENDATIONS
CITYWIDE CASH HANDLING AND TRAVEL EXPENSE – ISSUED 9/15/10
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
Finding 1: Stronger controls are needed for cash handling
Finding 2: Increased oversight and coordination can improve the employee travel expense process.
6. ASD should review the nighttime
meeting reimbursement policy. If the City
decides to maintain this practice, ASD
should report the amounts as income on
employee Form W-2s to conform to
Internal Revenue Service requirements.
In addition, ASD should review other
types of meal expense to ensure any
reportable amounts are included on
employee Form W-2s.
Auditor’s Note: The City Auditor and
Administrative Services Department staff
met to discuss using federal per diem
rates, which is a best practice, instead of
requiring employees to provide meal
receipts when traveling.
Administrative
Services
Department
Target Date Not Provided
ASD has determined that handling
such reimbursements through payroll
would involve significant staff time.
Staff is developing a process that will
comply with the IRS regulation in the
most economical and efficient
fashion. Any change in
reimbursements would be subject to
meet-and-confer depending on the
labor group.
In Process April 2019 Management Update:
Staff has developed a form and draft policy for
tracking meal expenses on employee W2s. Staff is
reviewing the form and policy with departments.
Expected Completion Date: 4QTR 2019
September 2018 Management Update:
Staff has developed a form and draft policy for
tracking meal expenses on employee W2s. Staff is
reviewing the form and policy with departments.
Expected Completion Date: 1QTR 2019
March 2018 Management Update:
Staff has developed a form and draft policy for
tracking meal expenses on employee W2s. Staff is
reviewing the form and policy with departments.
The new expected due date for capturing meals
expenses on W2s is 12/31/2018.
April 2017 Management Update:
Staff is planning to include taxable meals on
employee W2s by the end of 2017.
Expected Completion Date: 12/31/2017
October 2015 Management Update: ASD, working
with the City Auditor and the City Manager’s Office,
and has completed the first phase changes to the
Attachment C
STATUS OF AUDIT RECOMMENDATIONS
CITYWIDE CASH HANDLING AND TRAVEL EXPENSE – ISSUED 9/15/10
PAGE 2
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
meal reimbursement policy. Staff changed the
reimbursement for travel meals to the IRS per diem
limits, which do not require reporting on an
employee’s W2.
June 2014 Management Update: ASD staff is
reviewing process changes coupled with search and
reporting capabilities in the purchase card system
that could make it feasible for the Accounts Payable
and Payroll processes to sync up so that all taxable
meal reimbursements would be included on
employee paychecks to ensure proper handling of
taxable meal pay to employees. Expected
Completion Date: 4/1/15
Prior Years’ Management Updates (summarized):
ASD updated the travel policy, petty cash policy, and
reimbursement form to ensure proper coding of
meals. ASD also established a new general ledger
account to capture taxable meals for inclusion on
employee W-2 forms as compensation. It takes
considerable staff time to track and record these
taxable meals such as meals provided during one-
day training and meals provided to employees
during overtime. Given the small number of
incidents and the low dollar amounts, probably in
the few thousand dollars citywide in a given year,
staff is looking at phasing out these types of meals.
A further complication is that meals are sometimes
purchased with a P-card and may be for several
staff. There is currently no easy way to assign these
charges to the appropriate person receiving the
meal.
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
Finding 1: ASD and City departments should implement inventory management policies and procedures citywide to achieve the City’s inventory goals and
objectives.
1. ASD and City departments
should implement the City’s
inventory management policies
and procedures citywide to
achieve inventory goals and
objectives.
Administrative
Services (lead)
Remaining
Department
Responsible:
Utilities
6/30/14
Citywide policies and procedures
will be reviewed, updated, and
shared with all departments cited in
this audit. Inventory goals and
objectives will be stressed and
implemented where it is cost-
effective to do so.
Completed June 2019 Management Update:
Utilities’ staff has taken corrective measures and are adhering to
ASD’s inventory management policies and procedures. Since the
audit, Utilities and ASD staff has worked together to significantly
reduced inventory (valued over $100) held in the storage sheds
by returning materials to the warehouse. Utilities has
established a Meter and Specification Approval procedure for
Engineering, Operations, and ASD-Purchasing regarding
additions and deletions of meter master records and
specifications. Staff members are currently practicing
procedures to properly ensure meter specification changes are
communicated among staff. In addition, Utilities plans to deploy
a mobile application to track emergency and spare parts (greater
than $100 per unit) that are stored in storage sheds and
substations.
September 2018 Management Update:
Utilities awarded the inventory tracking system to Smart Energy
Water (SEW) in September 2017. SEW will deploy their Smart
Mobile Workforce application which includes inventory
management tracking and reporting, dynamic inspection forms
with backend integration, and mobile SAP work orders. SEW is
in the final configuration phase and the tentative go-live date is
Q4 2018. With Smart Mobile Workforce, Utilities will have real-
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 2
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
time inventory counts in various locations, real-time work
orders, and elimination of duplicate entry for inspection forms.
Expected Completion Date: November 2018
October 2017 Management Update:
ASD conducted the follow-up outlined in the October 7, 2014
Staff Report and the attached Policy, Process & Procedures
Document.
Recommendation completed for ASD, Public Works, and IT.
Utilities has requested that an exception be added in the policies
and procedures governing items valued at less than $100 stored
outside the warehouse (i.e. sheds, North Dock, substations).
These consumables are excluded from physical inventory counts
such as nuts, bolts, washers, pipe fittings, gloves, hard hats, and
small tools. Most of these items have high turnover and are
purchased in bulk rather than individual units. The time and cost
involved in recording these materials will greatly exceed the
value of the materials.
Utilities is working with Stores on the return process for unused
materials after completion of a project.
Utilities will be piloting an inventory tracking system with
barcode scanning capability to track and monitor materials
valued at greater than $100 stored outside the warehouse.
Expected Completion Date: June 2018
June 2014 Management Update: When the audit was presented
to the Finance Committee in February 2014, the Finance
Committee requested that staff return in 6 months (August
2014) to provide a status update. Due to various scheduling
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 3
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
conflicts, the meeting has been moved from August 19 to
October 7, at which time the Finance Committee will hear staff’s
responses to and the implementation plan for the Auditor’s
findings and recommendations. Since the Auditor’s
Recommendation Status update report ends June 30, 2014, staff
will provide status responses to the audit in the FY 2015
Recommendation Status update report. Expected Completion
Date: 10/31/14
Finding 2: ASD should improve controls to ensure the accuracy of recorded inventory.
3. ASD should update and
enforce inventory count policies
and procedures to help ensure
consistent and accurate
inventory records. The update
should at minimum require
blind inventory counts,
sufficient documentation of
counts and adjustments, and
appropriate segregation of
duties. ASD should consider
implementing controls included
in the GAO publication titled
“Executive Guide Best Practices
in Achieving Consistent,
Accurate Physical Counts of
Inventory and Related
Property.”
Administrative
Services
Remaining
Department
Responsible:
Utilities
6/30/14
• ASD has implemented blind
inventory counts and appropriate
segregation of duties at the MSC
warehouse and will continue to
improve. Limited staffing at the
MSC does make segregation of
duties challenging.
• To achieve greater accuracy in
counts at the RWQCP warehouse
as well as segregation of duties,
additional staffing is necessary.
Staff from Public Works and ASD
propose to evaluate the costs and
benefits of the recommendation
and report back to Council.
• Staff will strive to implement
controls cited in GAO publication
and inform Council of its progress.
Complete April 2019 Management Update:
RWQCP has implemented the City’s stores/inventory policy and
procedures to the extent feasible. Segregation of duties at the
RWQCP has been achieved through various restrictions of access
to the warehouse. Requests from the warehouse are logged in a
computer using personal logon access at the front counter and
orders are filled and placed in a designated location. RWQCP
warehouse cycle counts are generated randomly and reviewed
by the Warehouse Supervisor.
October 2017 Management Update:
ASD has implemented the GAO’s best practices in the
warehouse. ASD is conducting blind inventory counts at the
warehouse. ASD conducts a full inventory count at fiscal year-
end to ensure accuracy and accountability of inventory on hand.
Constant SAP auto-generated inventory cycle counts are
performed to maintain an accurate inventory.
Utilities is conducting semi-annual inventory counts of materials
valued over $100 and emergency parts stored in MSC sheds,
North Dock and substations.
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 4
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
Utilities will be piloting an inventory tracking system with
barcode scanning capability to track and monitor materials
outside the warehouse.
Expected Completion Date: June 2018
June 2014 Management Update: When the audit was presented
to the Finance Committee in February 2014, the Finance
Committee requested that staff return in 6 months (August
2014) to provide a status update. Due to various scheduling
conflicts, the meeting has been moved from August 19 to
October 7, at which time the Finance Committee will hear staff’s
responses to and the implementation plan for the Auditor’s
findings and recommendations. Since the Auditor’s
Recommendation Status update report ends June 30, 2014, staff
will provide status responses to the audit in the FY 2015
Recommendation Status update report. Expected Completion
Date: 10/31/14; All policies and procedures and responsibilities
for this recommendation are in place; will go live on 10/31/14
after Finance Committee review
September 2018 Management Update:
Utilities awarded the inventory tracking system to Smart Energy
Water (SEW) in September 2017. SEW will deploy their Smart
Mobile Workforce application which includes inventory
management tracking and reporting, dynamic inspection forms
with backend integration, and mobile SAP work orders. SEW is
in the final configuration phase and the tentative go-live date is
Q4 2018. With Smart Mobile Workforce, Utilities will have real-
time inventory counts in various locations, real-time work
orders, and elimination of duplicate entry for inspection forms
Expected Completion Date: November 2018
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 5
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
October 2017 Management Update:
ASD has implemented the GAO’s best practices in the
warehouse. ASD is conducting blind inventory counts at the
warehouse. ASD conducts a full inventory count at fiscal year-
end to ensure accuracy and accountability of inventory on hand.
Constant SAP auto-generated inventory cycle counts are
performed to maintain an accurate inventory.
Utilities is conducting semi-annual inventory counts of materials
valued over $100 and emergency parts stored in MSC sheds,
North Dock and substations.
Utilities will be piloting an inventory tracking system with
barcode scanning capability to track and monitor materials
outside the warehouse.
Expected Completion Date: June 2018
June 2014 Management Update: When the audit was presented
to the Finance Committee in February 2014, the Finance
Committee requested that staff return in 6 months (August
2014) to provide a status update. Due to various scheduling
conflicts, the meeting has been moved from August 19 to
October 7, at which time the Finance Committee will hear staff’s
responses to and the implementation plan for the Auditor’s
findings and recommendations. Since the Auditor’s
Recommendation Status update report ends June 30, 2014, staff
will provide status responses to the audit in the FY 2015
Recommendation Status update report. Expected Completion
Date: 10/31/14; All policies and procedures and responsibilities
for this recommendation are in place; will go live on 10/31/14
after Finance Committee review
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 6
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
Finding 4: The City’s warehouses have significant quantities of unused or infrequently used inventory.
6. ASD should identify,
formalize, and communicate
inventory management goals
and objectives to City
departments.
Administrative
Services
Remaining
Department
Responsible:
Utilities
6/30/14
Once current policies and
procedures are reviewed and
updated and inventory
management goals and objectives
are reaffirmed, they will be
discussed and left with
departments.
Completed Utilities’ staff has taken corrective measures and are adhering to
ASD’s inventory management policies and procedures. Since the
audit, Utilities and ASD staff has worked together to significantly
reduced inventory (valued over $100) held in the storage sheds
by returning materials to the warehouse. In addition, Utilities
plans to deploy a mobile application to track emergency and
spare parts (greater than $100 per unit) that are stored in
storage sheds and substations.
September 2018 Management Update:
Utilities awarded the inventory tracking system to Smart Energy
Water (SEW) in September 2017. SEW will deploy their Smart
Mobile Workforce application which includes inventory
management tracking and reporting, dynamic inspection forms
with backend integration, and mobile SAP work orders. SEW is
in the final configuration phase and the tentative go-live date is
Q4 2018. With Smart Mobile Workforce, Utilities will have real-
time inventory counts in various locations, real-time work
orders, and elimination of duplicate entry for inspection forms.
Expected Completion Date: November 2018
October 2017 Management Update:
Recommendation completed for ASD, Public Works, and IT.
Policies and procedures were developed with and approved by
departments. They include a definition of the goals and
objectives of those policies and procedures. The procedures
incorporate internal controls that ensure the responsible use of
public funds and efficiency of operations, including the
safeguarding of assets, the reliability and completeness of
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 7
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
information reporting, and compliance with laws and
regulations.
Utilities staff routinely monitors inventory to manage
appropriate classification of maintenance, emergency and
obsolete parts/materials. Inventory minimum and maximum
levels are reviewed at least semi annually.
Utilities will be piloting an inventory tracking system with
barcode scanning capability to track and monitor materials
outside the warehouse.
Expected Completion Date: June 2018
June 2014 Management Update: When the audit was presented
to the Finance Committee in February 2014, the Finance
Committee requested that staff return in 6 months (August
2014) to provide a status update. Due to various scheduling
conflicts, the meeting has been moved from August 19 to
October 7, at which time the Finance Committee will hear staff’s
responses to and the implementation plan for the Auditor’s
findings and recommendations. Since the Auditor’s
Recommendation Status update report ends June 30, 2014, staff
will provide status responses to the audit in the FY 2015
Recommendation Status update report. Expected Completion
Date: 10/31/14; All policies and procedures and responsibilities
for this recommendation are in place; will go live on 10/31/14
after Finance Committee review
8. ASD should consult with the
IT Department and other City
departments to ensure staff:
• Identifies and uses key SAP
inventory management
reports.
Administrative
Services
3/31/14
• ASD has worked and will continue
to work with SAP staff to use and
develop SAP inventory
management reports. A list of
Complete April 2019 Management Update:
Staff has completed the process of identifying, reviewing and
updating these categories for all materials.
September 2018 Management Update:
Staff is in the process of identifying, reviewing and
updating these categories for all materials.
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 8
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
• Appropriately configures and
updates SAP parameters
affecting inventory levels.
these reports will be included by
Target Date.
• Parameters affecting inventory
levels will be explored and
updated as needed.
Expected Completion Date: 4QTR 2018
October 2017 Management Update:
The warehouse provides a customized SAP “ZMMR05”
report semi-annually of slow-moving goods to the
respective departments. The report contains material lead
time, stock quantity, minimum and maximum stock
threshold, year to date usage and average monthly life
usage.
This report assists the Supervisors with determining
whether the minimum and maximum needs to be
adjusted, whether a part should be classified as
“emergency” because it is slow moving or whether a part
should be removed from stock entirely.
Materials should be identified as one of the following
categories: “Emergency”, “Maintenance”, “Delete” or
“Obsolete”. “Delete” is defined as a material that no
longer exists in the system, whereas “Obsolete” is a
material being phased out. Staff is in the process of
identifying, reviewing and updating these categories for all
materials.
Expected Completion Date: January 2018
June 2014 Management Update: When the audit was presented
to the Finance Committee in February 2014, the Finance
Committee requested that staff return in 6 months (August
2014) to provide a status update. Due to various scheduling
Attachment D
STATUS OF AUDIT RECOMMENDATIONS
INVENTORY MANAGEMENT – ISSUED 12/31/13
PAGE 9
Recommendation
Responsible
Department
Original Target Date and
Response
Current
Status
Implementation Update and
Expected Completion Date
conflicts, the meeting has been moved from August 19 to
October 7, at which time the Finance Committee will hear staff’s
responses to and the implementation plan for the Auditor’s
findings and recommendations. Since the Auditor’s
Recommendation Status update report ends June 30, 2014, staff
will provide status responses to the audit in the FY 2015
Recommendation Status update report. Expected Completion
Date: 10/31/14; All policies and procedures and responsibilities
for this recommendation are in place; will go live on 10/31/14
after Finance Committee review
Attachment E
STATUS OF AUDIT RECOMMENDATIONS
CONTINUOUS MONITORING: PAYMENTS – ISSUED 4/3/17
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status Status
Finding: 1. Implementing a continuous monitoring process can help the City identify duplicate invoice payments. The City recovered 17 (71 percent) of 24 confirmed
duplicate invoice payments.
1.1. Build a continuous monitoring
reporting process into the new ERP
system to identify potential
duplicate invoices based on
information such as vendor, date,
invoice number, and amount, and
run the report at least monthly. ASD
should review the results, seek
recovery of duplicate payments, and
identify and correct process
deficiencies that allowed the
duplicate payments to be processed.
ASD Concurrence: Agree
Target Date: TBD (date of ERP implementation)
Action Plan: ASD agrees that a continuous
monitoring reporting process should be part of
the accounts payable process. ASD and City staff
currently detects and recovers duplicate
payments through periodic account analysis,
contract monitoring and notifications from
vendors. Per the auditor’s recommendation,
ASD will develop and document an internal
control process to identify duplicates for the
new ERP system.
ASD is in the process of implementing a hard
stop in the City’s SAP system if the invoice date,
invoice number, and invoice amount are the
same. Previously, only a warning was issued and
it was possible to still enter a duplicate invoice.
This more restrictive configuration should
decrease the number of duplicate payments.
It is important to note that no system can
prevent 100% of duplicate payments. However
strong internal controls and entity -wide
coordination, can prevent most duplicates. With
technological advances and changing
requirements we have seen an increase in
Not Started
April 2019 Management Update:
The City will be upgrading the current SAP
environment per CMR 9826 rather than
implement a new ERP. Duplicate payment
detection will be implemented in the
upcoming upgrade to the current SAP
environment.
Target Completion Date: TBD (date of ERP
upgrade)
September 2018 Management Update:
See below, no new update.
Expected Completion Date:
March 2018 Management Update:
As of 12/28/17, SAP is configured to result
in a hard stop if a duplicate invoice is
entered. Previously only a warning was
given. The fields that are configured for a
hard stop are a combination of vendor
number, invoice date, reference text
(invoice number), amount and company
code.
Attachment E
STATUS OF AUDIT RECOMMENDATIONS
CONTINUOUS MONITORING: PAYMENTS – ISSUED 4/3/17
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status Status
duplicate invoices arriving in Accounts Payable.
Invoices come in to Accounts Payable from
multiple sources, and while previously a best
practice, requiring original invoices is no longer
practical. Invoices are now emailed by the
vendor, sent via DocuSign, by internal
departments and sometimes also sent via U.S.
mail.
In the upcoming demonstrations, ASD will
seek confirmation that the new ERPs can
provide similar duplicate invoice
detection.
Expected Completion Date: TBD (date of
ERP implementation)
Finding: 2. Numerous unneeded vendor records increase the risk of inappropriate and erroneous payments and payment records, as well as incorrect tax reporting.
2.1. Build a continuous monitoring
process into the new ERP system to:
• Review the vendor master file at
least annually to identify
duplicate, incomplete, or unused
vendor records (i.e., vendor
records not used during a time
frame determined by ASD).
• Inactivate duplicate vendor
records, enter missing identifying
information based on reliable
source documents such as a
vendor-provided IRS Form W9,
and inactivate or archive unused
vendor records.
ASD Concurrence: Agree
Target Date: TBD (date of ERP implementation)
Action Plan: ASD agrees that a continuous
monitoring process should be built into the new
ERP system.
When the new ERP is implemented ASD will
prepare a plan to review the vendor master file
at least annually and inactivate unused,
incomplete or inactive vendors.
Part of the annual review of the master vendor
file will also entail identifying and deleting
duplicate vendors. In addition, staff will also
update the missing vendor record using
information from sources mentioned in the
recommendation. ASD staff will also work with
ERP Team to explore other options to
accommodate different “Remit To” addresses
without creating a new vendor number.
Not Started April 2019 Management Update:
The City will be upgrading the current SAP
environment per CMR 9826 rather than
implement a new ERP. Duplicate payment
detection will be implemented in the
upcoming upgrade to the current SAP
environment.
Target Completion Date: TBD (date of ERP
upgrade)
September 2018 Management Update:
See below, no new update.
Expected Completion Date:
March 2018 Management Update:
To be implemented with new ERP. Prior to
implementation, ASD will prepare a plan
to review the vendor master file at least
annually and inactivate unused,
incomplete or inactive vendors.
Attachment E
STATUS OF AUDIT RECOMMENDATIONS
CONTINUOUS MONITORING: PAYMENTS – ISSUED 4/3/17
Recommendation
Responsible
Department(s) Original Target Date and Response
Current
Status Status
Expected Completion Date: TBD (date of
ERP implementation)
2.2. Clean the City’s vendor master file in
accordance with recommendations
2.1 and 2.2 before merging the data
into the City’s proposed new ERP
system.
ASD Concurrence: Agree
Target Date: TBD with adoption of new ERP
system
Action Plan: In order to provide consistency,
ASD intends to begin from scratch with the
Master Vendor File when the City adopts a new
ERP.
In Progress April 2019 Management Update:
The City will be upgrading the current SAP
environment per CMR 9826 rather than
implement a new ERP. The vendor master
file will be cleaned as part of the
upcoming upgrade to the current SAP
environment.
Target Completion Date: TBD (date of ERP
upgrade)
September 2018 Management Update:
See below, no new update.
Expected Completion Date:
March 2018 Management Update:
Prior to the conversion to a new ERP, ASD
will identify the vendors to input into the
new system. ASD will also create a coding
standard for data entry to be used by
Purchasing and Accounts Payable.
Expected Completion Date: Prior to ERP
implementation
City of Palo Alto (ID # 10183)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Summary Title: Status Update Fee Schedule Audit
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates on Recommendations From the
Community Services Department Fee Schedule Audit
From: City Manager
Lead Department: Community Services
Recommendation
Staff recommends the Policy and Services Committee recommend that the City Council accept
the attached Status of Audit Recommendations resulting from the City Auditor’s Community
Services Department Fee Schedule Audit.
Background
The City Auditor’s Office issued an audit, the Community Services Department (CSD) Fee
Schedule Audit on February 14, 2017. The full audit report can be found here.
The audit objective was to determine if department fees cover the cost of services to ensure:
Financial sustainability of CSD programs;
Customers pay the appropriate share of service costs, including direct costs and the
indirect cost rate related to the service;
City programs are subsidized in accordance with the City’s cost recovery policy and that
the financial impact of subsidies on total cost recovery is clear.
The City Auditor made three recommendations to strengthen the department’s cost recovery
procedures and processes for monitoring program costs. The key recommendations were:
1. The City Manager’s Office should coordinate with the City Attorney’s Office and the
Administrative Services Department to revise the City’s cost recovery policy and
Questica budget system procedures to clarify which fees are not subject to laws limiting
fees to cost recovery.
2. CSD should create a procedure to implement the City’s User Fee Cost Recovery Level
Policy and incorporate relevant and useful elements from its existing “Class Cost
Recovery Policy,” which can then be rescinded.
City of Palo Alto Page 2
3. CSD should work with the Administrative Services Department (ASD) and the
Information Technology Department to configure SAP or include a requirement for the
proposed new enterprise resource planning system to align cost centers with CSD
programs.
Discussion
The status of the two open audit recommendations is included in Attachment A.
Recommendation #1 was implemented in this review cycle and Recommendation #3 has
already been implemented. The Community Services Department anticipates that the
remaining recommendation should be completed by July 2019.
Attachments:
Attachment A: Status Update
Attachments:
Attachment A: Status Update
STATUS OF AUDIT RECOMMENDATIONS
FEE SCHEDULE AUDIT – ISSUED 2/4/17
Page 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
Finding: Most Community Services Department (CSD) programs recover costs consistent with City policy; however, CSD does not consistently apply its cost
recovery policies and procedures
1. The City Manager’s Office should
coordinate with the City Attorney’s Office
and the Administrative Services
Department to revise the City’s cost
recovery policy and Questica budget
system procedures to clarify which fees
are not subject to laws that limit fees to
cost recovery; modify the cost recovery
categories to allow for fees that recover
more than costs, based on market rates;
and configure the Questica budget
system to support setting fees to recover
more than 100 percent of costs when
appropriate.
ASD Concurrence: Agree
Target Date: 6/30/2017
Action Plan: ASD staff will
coordinate with the CMO, City
Attorney and departments to revise
and implement the
recommendations.
Completed March 2019 Management Update:
On October 16, 2018 the Council Finance
Committee approved updates to the User Fee
Cost Recovery Policy to explain the fees that
may recover more than costs. The muni fee
software, Questica, can support fees above
cost recovery. ASD will provide guidance on
workflow and procedure updates, where
applicable, to reflect this updated policy.
Questica procedures in the City’s U-Drive have
been annotated as well to help explain fees
that recover more than costs.
Expected Completion Date:
November 2018.
June 2018 Management Update:
No change, ASD anticipates it will update this
policy by Fall 2018.
Expected Completion Date: November 2018.
November 2017 Management Update:
ASD and the CMO expect to begin the policy
update shortly and will likely complete this
recommendation by Fall 2018.
3. CSD should work with ASD and the
Information Technology Department to
configure SAP or include a requirement
for the proposed new enterprise
resource planning system to align cost
CSD Concurrence: Agree
Target Date: 7/1/2018
Action Plan: While we will begin
working on this in earnest,
In Progress March 2019 Management Update:
CSD and the Budget Office have completed
cost center alignments to account for
programs clearly under cost centers. CSD has
proposed several additional budget clean up
2 Community Services Department: Fee Schedule Audit
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
centers with CSD programs. realistically, we anticipate that we
will not fully implement this
recommendation for at least two
budget cycles. We are currently
working with ASD to better align
CSD’s Cost Centers in SAP with our
individual lines of business. We
expect we will complete much of this
recommendation by 7/1/2017 but
that there will be additional clean up
in the next budget year.
items that will take effect in SAP July 1, 2019.
Expected Completion Date:
July 1, 2019
June 2018 Management Update:
No change. Staff have identified several clean-
up items to further improve cost center
alignment to programs. Staff will complete
these clean-up actions over the next several
months.
Expected Completion Date: November 2018.
November 2017 Management Update:
CSD has worked with Budget Office staff to
better align cost centers with CSD programs.
Staff have already updated cost centers for the
Children’s Theatre and Human Services and are
in the process of updating Recreation, Teen
Programs, and Cubberley. Staff have also
reviewed CSD staff assignments to ensure that
positions are assigned to the appropriate cost
centers. Staff anticipates that this review of
staff and budget by program should be
substantially complete this fall but will likely
require clean-up at the beginning of FY 2019.
Expected Completion date: 11/1/18
City of Palo Alto (ID # 10357)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Council Priority: Climate/Sustainability and Climate Action Plan
Summary Title: Green Purchasing Audit Update
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Green Purchasing Audit Status Update
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that City Council accept the attached Status Report on the City Auditor’s
Green Purchasing Practices Audit Recommendations.
Background
In April 2017, the City Auditor’s Office issued an audit on the City’s Green Purchasing Program.
The purpose of the audit was to determine whether the City of Palo Alto complies with
applicable green purchasing requirements in its purchases. The audit report presented one
finding with a total of eight recommendations.
Discussion
Staff from Public Works, Administrative Services, Utilities, Information Technology,and City
Manager's Office have worked together to complete or make progress on most of the Auditor’s
recommendations. Details are covered in Attachment A–Green Purchasing Audit Matrix June
11, 2019 to summarize the progress made to date.
Attachments:
·Attachment A: June 11 19 Green Purchasing Audit Update_final_5 29 19
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
Finding: The City does not always comply with applicable green purchasing
requirements in purchases
1.The City
Manager’s
Office should
clearly define
the
department(s)
responsible for
implementing
green
purchasing
policies,
determine if
additional
staffing and
funding is
needed to
implement the
policies, and
provide the
responsible
department(s)
with the
authority to
implement
green
purchasing
ASD/CMO Concurrence: Agree
Target Date: August 1, 2017
Action Plan:
Staff will prepare a document
identifying the responsibilities,
funding, and staffing needs as
suggested.
In progress. June 2019 Management Update:
Roles, responsibilities and staffing needs were drafted by PWD, CMO
and ASD in Fall 2017. To date, it has not been possible to locate
additional staff time or consultant funds to address all the Green
Purchasing needs. Additionally, the Chief Procurement Officer
position was also vacant for several months. Now that the position
has recently been filled, Administrative Services, Public Works and
the City Manager’s Office are discussing staffing options and an
appropriate work plan given staff resource constraints. PWD and
CMO can allot six hours combined monthly towards Green
Purchasing. The new Chief Procurement Officer is exploring whether
a few hours of staff time per month can be contributed to the effort
after all Purchasing staff vacancies are filled.
June 2018 Management Update:
Roles, responsibilities and staffing needs were drafted by PWD, CMO
and ASD.
Funds for a 0.5 contract position have been requested as part of the
FY 2019 budget and were not approved.
Attachment A
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 2
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
across the City.
The responsible
department(s)
should then:
3. Write and
distribute
consolidated
procedures to
implement
green
purchasing
policies,
including the 10
different areas
in the EPP
Policy and
update existing
policies and
procedures to
reflect current
requirements,
including
recycled paper
and p-card
guidance.
CMO/ASD/PWD Concurrence: Agree
Target Date (see related Action Plan
targets below):
a) July 1, 2017
b) September 1, 2017
c) April 22, 2018
d) Ongoing.
Action Plan:
a) Short term (12-18 months):
Identify funding and/or staff
to implement. This could be
via consultant services or
Office of Sustainability staff.
b) P-Card: Confirm proposed
revisions to P-Card
guidelines, and integrate
into PCard Guidelines,
training, and approval
process.
c) Revise Recycled Paper
Policy and procedures and
develop an integrated City-
wide paper reduction and
In progress/
Some Action
Plan items
completed as
noted in
prior update
June 2019 Management Update:
a) In progress. See answer to question #1 under Implementation
Update and Expected Completion Date.
b) Ongoing. The paper policy and two fleet procurement policies
were revised. Additional policies will be revised as needed,
including the Green Purchasing Policy.
June 2018 Management Update:
a) Staff requested a 0.5 contracted position for FY19 to help
implement Green Purchasing Program which was not approved.
b) Completed. Staff revised P-Card Guidelines to reflect
procurement requirements relating to zero waste, pollution
prevention and other environmental policies.
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 3
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
recycled-content paper
procurement plan.
d) Draft/implement/revise
policies and procedures as
needed.
c) Completed. Staff have updated the Procurement of Recycled
Paper and Recycled Paper Products Policy as suggested and
renamed it the Paper Reduction and Procurement of
Environmentally Preferable Paper Products Policy. This policy is
currently under review by the CMO before it is added to the
online policy manual.
d) The paper policy and two fleet procurement policies were
revised.
4. Educate staff
on green
purchasing
policies and
procedures
through various
means, which
could include
citywide emails,
p-card and
other training,
department
staff meetings,
and new
employee
orientations.
ASD, CMO,
PWD
Concurrence: Agree
Target Date: Ongoing as milestones
in this document are achieved.
Action Plan: Ongoing as milestones
in this document are achieved.
In progress. June 2019 Management Update:
Staff education is an ongoing need. Since the last June 2018 Green
Purchasing Audit update, Zero Waste worked with IT and computer
suppliers Toshiba and HP to reduce non-recyclable packaging. Zero
Waste convinced Toshiba to reduce the amount of non-recyclable
packaging by redesigning their computer packaging to be more
paper based and worked with HP to change their packaging to be
more recyclable. Zero Waste was able to get HP to commit to taking
back any non-recyclable packaging material as required in the City’s
purchasing Terms and Conditions.
In FY2020, pending Purchasing staffing levels and the prioritization of
other Green Purchasing priorities, Zero Waste will provide outreach
support to ASD to reduce printing throughout the City. ASD will lead
the effort with the assistance of Zero Waste.
June 2018 Management Update:
Some outreach has already been done, and outreach will be an
ongoing task. Efforts to date include:
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 4
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
Don’t Sprint to Print email campaign from Zero Waste group;
PCard guidelines and training have been revised to reflect
prohibited purchases;
Purchasing is developing educational material in the City’s
“Comearound” self-training tool which will be completed by July 1,
2018;
Provided training to IT staff on April 24, 2018) about City policy to
purchase EPEAT Certified products (Electronic Product
Environmental Assessment Tool)
Discussion about additional education and outreach beyond what
has already been done will begin after FY20219 budget approval
when potential contracted staff availability has been determined.
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 5
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
5. Evaluate the
quality,
performance,
and cost of
40 percent
postconsumer
fiber paper
towels, monitor
the janitorial
contractor’s
use of cleaning
supplies and
paper products
to ensure
compliance
with the green
purchasing
contract
requirements,
and evaluate
the feasibility
of including
other green
products such
as Green Seal
certified soap
and green can
liners in the
next janitorial
contract, as
appropriate.
PWD/Facilities Concurrence: Agree
Target Date (see related Action Plan
targets below):
a) April 22, 2018 (see 3c)
b) Ongoing
c) September 1, 2017
Action Plan:
a) Include evaluation of
custodial paper products
under 3c.
b) Continue to monitor
custodial contractor’s use of
Green Seal products.
c) Analyze more
environmentally preferable
options for trashcan liners.
Completed,
but not all
actions can
currently be
implemented
in FY 2020.
June 2019 Management Update:
a) Partially completed–not all tasks can be completed at this time.
The City’s custodial contractor is now using Green Seal certified
toilet paper and 100% recycled content toilet seat covers
throughout City facilities, and hand towels are now 20% post-
consumer content. Higher content paper towels will need to be
considered for the FY 2021 budget as costs for these are $23,000
greater than what is currently purchased. Upper management
decided not to pursue higher post-consumer recycle content for
paper towels because the cost to benefit ratio could not be
justified at this time. Opportunities to pursue more competitive
pricing could be considered in FY2020 factoring in other Green
Purchasing priorities.
b) Ongoing. Two types of hand soaps are currently used – one is
Green Seal Certified and the other is Eco Logo Certified.
c) Completed. This task cannot be implemented at this time. Trash
can liners with 70% post-consumer recycle content were
evaluated and deemed acceptable. These liners meet EPA
standard for recycle content. The cost to changeover to these
liners is $8,000 annually with the City’s custodial contractor. The
request for additional funding for these liners was approved at the
first phase of the FY 2019 budget process but retracted by upper
management during the budget process because the additional
funding and cost to benefit ratio was not acceptable. The change
also would have required a contract change and Council approval.
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 6
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
June 2018 Management Update:
5a) In progress. City’s custodial contractor is now using Green Seal
certified toilet paper and 100% recycled content toilet seat
covers throughout City facilities, and hand towels are now 20%
post-consumer content. Higher content paper towels will need
to be considered for the FY 2020 budget as costs of higher
recycled content paper towels are $23,000 higher than what is
currently purchased.
5b) Ongoing. Two types of hand soaps are currently used – one is
Green Seal Certified and the other is Eco Logo Certified.
5c) In progress. Trash can liners with 70% post-consumer recycle
content were evaluated and deemed acceptable. These liners
meet EPA standard for recycle content. The cost to changeover
to these liners is $8,000 annually with the City’s custodial
contractor. The request for additional funding for these liners
was approved at the first phase of the FY 2019 budget process,
and if approved by Council will be used as standard practice as
soon as the contractor can transition them in beginning July
2018.
6. Evaluate if the
new
e-procurement
system and
proposed
enterprise
resource
planning (ERP)
system or other
specialized
ASD/PWD Concurrence: Agree
Target Date (see related Action Plan
targets below):
a) December 1, 2017
b) September 1, 2018
Action Plan:
a) Form City-wide stakeholder
committee to recommend
a) In
progress.
June 2019 Management Update:
a) Green Purchasing ERP specifications were submitted to IT and ASD
in fall 2017. Interviews with ERP candidates occurred in late January
2018. Due to the high cost of all proposals, all bids were rejected.
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 7
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
software can
help with
tracking and
reporting green
purchases. As
part of the
planned
transition of
the Annual
Performance
Report to the
City Manager’s
Office,
determine
what green
purchasing
performance
measures to
track and
report on, such
as the number
and percentage
of green
products
purchased and
their
environmental
benefits. The
Sustainable
Procurement
Playbook for
Cities provides
green purchasing
performance measures for
ERP system to track number
and percentage of green
products purchased. If ERP
system cannot achieve this,
consider other options.
b) Identify best indicators to
track environmental
performance for select
contracts and services (e.g.,
less GHG, waste reduction).
b) Not
started.
The City is considering alternatives to upgrade the existing SAP ERP
system
(https://www.cityofpaloalto.org/civicax/filebank/documents/69985).
b) This task has not been started due to insufficient staffing,
competing priorities, and the ERP project being on hold. It is time-
intensive to create, educate, monitor and report environmental
impact indicators, and so this task would need to be prioritized
while factoring in other Green Purchasing and department
responsibilities.
STATUS OF AUDIT RECOMMENDATIONS
GREEN PURCHASING PRACTICES – ISSUED 4/13/17
June 11, 2019 Update
Page 8
Recommendation
Responsible
Department(s) Original Target Date and Response Status Implementation Update and Expected Completion Date
potential
criteria for
what to track.
7. To the extent
possible,
require vendors
to provide data
on the amounts
of green
products and
services that
the City
purchases from
them annually.
ASD/PWD Concurrence: Agree.
Target Date (see related Action Plan
targets below):
a) September 1, 2017
b) Ongoing
Action Plan:
a) Identify selected services
and goods requiring vendor
data and specify data
needed.
b) Monitor and enforce data
collection.
Not started
for 7a and
7b.
June 2019 Management Update:
a and b) Given the current staffing levels, ERP resource constraints
discussed above and competing priorities, this action has not been
pursued.
City of Palo Alto (ID # 10386)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Summary Title: Status Update of Audit for Disability and Workers
Compensation
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits on Recommendations
From the 2016 Disability Rates and Workers' Compensation Audit
From: City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that the Policy and Services Committee recommend that the City
Council accept the Status Update of Audit Recommendations for the 2016 Disability
Rates and Workers’ Compensation Audit.
Background
The City Auditor’s Office issued an audit with an objective to assess the effectiveness of
activities to manage and minimize disability retirements and workers’ compensation
claims. This audit included the review of processes to ensure employee safety, tracking
and reporting activities, contract administration and efficiency of claim processing.
As recommended in the audit, procedures and processes to improve claim monitoring
have been implemented and there continues to be focus on timeliness of claim
reporting and ensuring reliable reporting of performance data.
Staff has continued to work on completing audit recommendations. Staff last reported
on audit status to the Policy and Services Committee in October 2018. At that point, 10
out of 15 recommendations had been completed.
Discussion
The Status Update document is attached and provides an update of the status of the
recommendations still in progress. Two of the recommendations involve employee and
supervisor training being coordinated for later this year and the remaining two involve
correcting CalPERS payroll reports in progress to be completed by end of August 2019.
One recommendation has been determined to not be feasible or cost effective as it was
City of Palo Alto Page 2
an improvement dependent on the ERP replacement that is no longer moving forward
at this time.
Attachments:
• Attachment A: Disability Work Comp Audit update May 2019 v4
STATUS OF AUDIT RECOMMENDATIONS
DISABILITY RATES AND WORKERS’ COMPENSATION – ISSUED 10/17/16
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
Finding 1: The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its effectiveness due to the loss of its City Safety Officer.
1.3. HR review departmental
procedures and safety
requirements to ensure they align
with the revised IIPP and City
policy and procedures.
Human
Resources
Concurrence: Agree
Target Date: December 15, 2016
Action Plan: HR is in process of
securing a safety specialist to conduct
periodic inspections of City facilities
for hazard assessment. This
comprehensive evaluation will include
determining if any corrections need to
be completed, including updating or
implementing work procedures.
In Progress May 2019 Management Update:
In progress: Trainer identified to present
Supervisor safety training is no longer offering this
course. HR will work with new City training vendor
to find an alternate training resource.
Expected Completion Date: October 25, 2019
September 2018 Management Update: Supervisor
safety training presentation has been identified to
train supervisors on effective injury and illness
prevention strategies and conducting accident
investigations.
Expected Completion Date: January 31, 2019
January 2018 Management Update:
Currently, the following components of an
effective IIPP are ongoing:
Accident Investigation: supervisors investigate all
accidents, injuries and near-misses and make
appropriate changes to minimize recurrence.
Hazard Correction:
Supervisors correct conditions that are discovered
during their monthly inspections or after an injury
or accident to prevent reoccurrence.
Training:
STATUS OF AUDIT RECOMMENDATIONS
DISABILITY RATES AND WORKERS’ COMPENSATION – ISSUED 10/17/16
PAGE 2
Recommendation
Responsible
Department Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
Supervisors are responsible for ensuring their
employees are trained to perform work safely.
Documentation:
Safety training sign-in sheets and investigation
reports are maintained.
Communication:
Employees know how to inform management
about health and safety matters.
Expected Completion Date: June 2018
1.5. HR identify industry-specific
ergonomics and general wellness
training opportunities to minimize
common injuries, and coordinate
with departments to ensure
regular training is provided to
employees.
Human
Resources
Concurrence: Agree
Target Date: September 16, 2016
Action Plan: HR will coordinate
industry-specific ergonomic training,
similar to training provided to Parks
maintenance employees in 2010 and
Library employees in 2014. We agree
industry-specific ergonomic training
serves as a reminder for example, that
the best way to prevent back injuries
is to develop habits that reduce the
strain placed on the back.
In Progress May 2019 Management Update:
In progress: Human Resources is coordinating
training sessions with Utilities Operations
personnel to provide programming focused on
BackSafe Fundamentals and injury prevention.
Expected Completion Date: October 25, 2019
September 2018 Management Update:
Due to training staffing changes, industry-specific
ergonomic training has not been coordinated and
will be scheduled in Spring 2019.
Expected Completion Date: May 2019
January 2018 Management Update:
Have identified trainer and in process of
establishing contract and training dates. Using
claim data for previous 5 years, have identified top
5 body parts injured with objective to train
employees with highest exposure and focus on
injury prevention.
Expected Completion Date: May 2018
STATUS OF AUDIT RECOMMENDATIONS
DISABILITY RATES AND WORKERS’ COMPENSATION – ISSUED 10/17/16
PAGE 3
Recommendation
Responsible
Department Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
Finding 2: Injured employees’ benefit eligibility is not accurately and completely tracked and monitored, resulting in both overpayments and underpayments of
workers’ compensation benefits.
2.1. HR continue working with ASD and
CalPERS to address the disability
leave benefits that were
incorrectly reported as
compensation to CalPERS.
Human
Resources
Concurrence: Agree
Target Date: February 2017
Action Plan: HR worked with Payroll
to identify wage codes and required
corrections needed to fix CalPERS
payroll report.
In Progress May 2019 Management Update:
In progress: Consultant has been hired to work on
CalPERS payroll reporting correction which
requires SAP programming. Consultant’s expected
start date is May 20, 2019 and expected to be
completed by June 30, 2019. Testing is targeted
for July 2019.
Expected Completion Date: August 30, 2019
September 2018 Management Update:
Implentation of new disability coding delayed due
to priority FLSA project and Union contract
implementation. Testing dates under review with
ASD.
Expected Completion Date: June 2019
January 2018 Management Update:
SAP Functional has configured new disability
coding to make correction to CalPERS report. Next
steps include testing by Payroll and HR to move
forward with correction which have been delayed
due to other priority projects.
Expected Completion Date: June 2018
2.4. HR work with ASD to ensure that
the data necessary for disability
leave management is captured
through time reporting in SAP to
support the process, including:
Human
Resources /
Administrative
Services
Concurrence: Agree
Target Date: February 2017
Action Plan:
a. HR following up with ASD Payroll
on feasibility to revise City payroll
procedures; otherwise, will
In Progress May 2019 Management Update:
b.1)
In progress: Consultant has been hired to work on
CalPERS payroll reporting correction which
requires SAP programming. Consultant’s expected
start date is May 20, 2019 and expected to be
STATUS OF AUDIT RECOMMENDATIONS
DISABILITY RATES AND WORKERS’ COMPENSATION – ISSUED 10/17/16
PAGE 4
Recommendation
Responsible
Department Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
a. Revising the City’s payroll
procedures, Policies and
Procedures 2-06/ASD, to
provide clear instruction for
reporting disability leave on
SAP timecards.
b. Configuring the SAP system to:
• Track compensation
reportable to CalPERS
separately.
• Track medical
appointments that qualify
as disability leave by
creating a separate payroll
code.
• If feasible and cost-
effective, limit the number
of days each employee can
code disability leave or
modified duty on their
timecard based on their
position.
include steps in City’s Workers
Compensation policy.
b. ASD and HR have determined
how to code public safety
temporary disability as
“PERSable” and non-public safety
temporary disability as “non-
PERSable” by using different SAP
codes.
- A separate timecard code
(7600) is being developed to
track medical appointments.
- Limiting the number of hours
each employee can code
disability leave can be
accomplished when disability
leave bucket is established;
may not be feasible for
modified duty and requires
further review.
completed by June 30, 2019. Testing is targeted
for July 2019.
Expected Completion Date: August 30, 2019
b.3)
Closed: Not feasible or cost-effective at this time.
There will be no new ERP system and over the next
two years the proposed contract will be limited to
only maintenance and limited update of the
current system. However, if there is an
opportunity in the future to develop new SAP
coding for workers’ compensation tracking, HR will
resume discussion with the SAP functional team.
September 2018 Management Update:
50% complete
b.
1. In Progress- SAP Functional has configured
new disability coding to make correction to
CalPERS report.Next steps include testing by
Payroll and HR to move forward with
correction which has been delayed due to
other priority FLSA and Union contract
implementation project.
3. Not started- HR discussed new process with
SAP Functional to develop new SAP coding
system for workers compensation tracking. At
this time, determined not feasible in SAP.
Instead, HR will review new HR ERP solution
to look for improved coding process.
Expected Completion Date: June 2019
STATUS OF AUDIT RECOMMENDATIONS
DISABILITY RATES AND WORKERS’ COMPENSATION – ISSUED 10/17/16
PAGE 5
Recommendation
Responsible
Department Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
January 2018 Management Update:
50% complete
a. Completed- HR has drafted Timecard
Disability and Modified Duty Coding
guideline which will be attached to City’s
Workers Compensation policy
b.
1. In Progress- SAP Functional has configured
new disability coding to make correction to
CalPERS report.Next steps include testing by
Payroll and HR to move forward with
correction which has been delayed due to
other priority projects.
2. Completed- New SAP payroll code has been
created by ASD and tested by HR to track
medical appointments separately from
disability leave. An email communication
was distributed to city staff on use of new
code.
3. Not started- HR discussed new process with
SAP Functional to develop new SAP coding
system for workers compensation tracking.
At this time, determined not feasible in SAP.
Instead, HR will review new HR ERP solution
to look for improved coding process
Expected Completion Date: June 2018
City of Palo Alto (ID # 10394)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Summary Title: ERP Planning Audit Status
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates of the Audits on Recommendations
From the ERP Planning: Information Technology Data Governance Audit
From: City Manager
Lead Department: IT Department
Recommendation
Staff recommends that the Policy and Services Committee recommend that the City
Council accept attached Status of Audit Recommendations resulting from the City
Auditor’s ERP Planning: Information Technology and Data Governance Audit.
Background
The City Auditor’s Office issued an audit, ERP Planning: Separation of Duties on June
13, 2018. The full audit report can be found here.
The City Auditor’s Office issued an audit, ERP Planning: Information Technology and
Data Governance on June 13, 2018. The full audit report can be found here.
Discussion
Staff has provided status updates on the audits in Attachment A.
Out of the four recommendations from the Information Technology and Data
Governance Audit, two of the recommendations have been completed. The open
recommendations include adoption of IT Governance Framework and adoption of Data
Governance Framework. The Information Technology Department anticipates that the
remaining recommendations should be completed by December 31, 2020 and 2nd
Quarter of 2020 respectively.
The open recommendations for the Separation of Duties Audit include design and
definition of profiles and roles according to the concept of least privileges as identified
in the ERP design phase. The SAP ERP technical upgrade scope has been finalized and
the tentative timeline to begin the design phase is around the 4th Quarter of 2019. Staff
City of Palo Alto Page 2
anticipates that the remaining recommendation should be completed by the 4th Quarter
of 2021.
Attachments:
Attachment A - Status Update on ERP Planning Information Technology and Data
Governance
STATUS OF AUDIT RECOMMENDATIONS
ERP Planning: Information Technology and Data Governance – ISSUED 6/13/18
Page 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
Finding 1: Better information technology governance can help ensure that IT systems, including the new ERP system, support City goals, and objectives
1.1. Assign roles and responsibilities for
IT governance (e.g., “chief
governance officer”) to an existing
City position that reports or could
potentially report directly to the City
Manager or the Chief Information
Officer. The roles and responsibilities
should include:
Ensuring that City departments
and stakeholders who are the
users of the City’s information
systems are included in
governance processes and
decision making, including
decisions to address security
risks.
Ensuring that there is a process
to validate the accuracy and
completeness of key IT reports
that are used in decision making
or reporting (e.g., the City’s
document that shows decisions
on addressing risks identified in
the Coalfire report; decisions
regarding departmental roles and
Information
Technology
Concurrence: Agree
Target Date: 12/31/2019
Action Plan: The IT Department implemented
IT Governance citywide in 2012 and since
then it has been rightsized to reflect the
evolving needs of the City.
The roles and responsibilities for a leader in IT
governance have already been assigned to an
individual who reports to the Chief
Information Officer (CIO).
The IT Department agrees that work is
required to address gaps in our city IT
governance processes today including
leadership roles, communications, reporting,
and decision-making.
Complete June 2019 Management Update:
Currently a resource reporting to Chief
Information Officer (CIO) is assigned to
this role in a full-time capacity. The roles
and responsibilities of this individual are
clearly defined to enhance the existing
processes, address gaps in the governance
process while taking into account the
three recommendations mentioned in 1.1.
STATUS OF AUDIT RECOMMENDATIONS
ERP Planning: Information Technology and Data Governance – ISSUED 6/13/18
Page 2
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
responsibilities for the new ERP
system).
Ensuring that governance covers
all key aspects of the City’s
information systems (e.g.,
ensuring that the IT Department
has policies and procedures to
address the use, organization,
security, and access rights for the
City’s network drive).
1.2. Adopt an industry standard IT
Governance framework, such as
COBIT, and a process assessment
and rating or maturity model, such
as the COBIT 5 process assessment
model. Create a plan to achieve a
process capability model of 3 (i.e.,
“established”) or higher for:
IT staffing and funding
IT governance roles and
responsibilities
Aligning IT with departments'
priorities
Measuring and monitoring IT
governance outcomes
Identifying and mitigating IT risks
Information
Technology
Concurrence: Agree
Target Date: 12/31/2019
Action Plan: IT Department agrees to identify
and adopt an appropriate, rightsized,
industry-recognized, IT governance
framework.
The IT Department working with the City
Manager’s Office will determine the
appropriate level of IT Governance maturity
required for enabling organizational success.
In progress June 2019 Management Update:
IT Department is currently in process of
identifying and evaluating industry
standard IT Governance Frameworks with
emphasis on COBIT 5. The learnings from
this process will form the basis for the
plan to address recommendations
mentioned in 1.2.
Expected Completion Date: 4QTR 2020
STATUS OF AUDIT RECOMMENDATIONS
ERP Planning: Information Technology and Data Governance – ISSUED 6/13/18
Page 3
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
Finding: 2: Better citywide data governance will lead to better data in the new ERP system
2.1. Assign roles and responsibilities for
data governance (e.g., a “chief data
governance officer”) to an existing
position that reports or could
potentially report directly to the City
Manager or the Chief Information
Officer.
Information
Technology
Concurrence: Agree
Target Date: 7/1/2019
Action Plan: In January 2017, the IT
Department hired a qualified data analyst
with responsibility for citywide data
governance.
The role currently reports up through the
Chief Information Officer (CIO).
The IT Department agrees to request
elevation of this role from City Council to a
more senior classification to reflect the
increased responsibilities expected as a result
of implementing an industry-standard data
governance framework.
Complete June 2019 Management Update:
IT has promoted an existing resource as
Data Governance Program Manager in a
full time capacity reporting to Chief
Information Officer (CIO).
2.2. Adopt an industry standard data
governance framework, such as the
DAMA-DMBOK, and a process
maturity model, such as the COBIT 5
process assessment model. Create a
plan to achieve a process capability
model of 3 (i.e., “established”) or
higher for:
Inventory
Integrity
Migration
Information
Technology
Concurrence: Agree
Target Date: 12/31/2019
Action Plan: The IT data lead will work to
implement the citywide data strategy that is
currently being developed and is part of the
FY19-21 IT strategy. Adoption of a standard
data governance framework was already
identified as a goal in this plan.
IT Department agrees to identify and adopt
In progress June 2019 Management Update:
Data Governance Program Manager is
currently working on City wide Data
Strategy Framework and roadmap to align
with the FY19-21 IT strategy. IT has also
hired a consultant who will be working
closely with Data Governance Program
Manager and IT Enterprise team to assist
with ERP data standardization. The next
step would be to liaison with CMO and
other departments to identify appropriate
Data Governance levels.
STATUS OF AUDIT RECOMMENDATIONS
ERP Planning: Information Technology and Data Governance – ISSUED 6/13/18
Page 4
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or
Not Started)
Implementation Update and Expected
Completion Date
Security & Access
Legal Compliance
Availability
Usability
an appropriate, rightsized, industry-
recognized, data governance framework.
The IT Department working with the City
Manager’s Office will determine the
appropriate level of data governance maturity
required for enabling organizational success.
Expected Completion Date: 2QTR 2020
City of Palo Alto (ID # 10363)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 6/11/2019
City of Palo Alto Page 1
Summary Title: Status Updates of Audit Recommendations for Utilities
Department
Title: Staff Recommends the Policy and Services Committee Recommend the
City Council Accept the Status Updates on Recommendations from Audits of;
1) Water Meter Billing Accuracy, 2) Electric Substructure Contract Oversight,
and 3) the Cross Bore Inspection Contract
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that the Policy and Services Committee recommend that the City Council
accept the status updates of the audits of Water Meter Billing Accuracy, Electric Substructure
Contract Oversight, and the Cross Bore Inspection Contract.
Background
The City Auditor’s Office previously issued audits of Water Meter Billing Accuracy, Electric
Substructure Contract Oversight, and the Cross Bore Inspection Contract.
Status updates are provided in Attachments A, B and C. All of the recommendations in the
Contract Oversight and Cross Bore Inspection audits are complete. Three items remain open in
the Water Meter Billing Accuracy audit; with one item pending for completion by Utilities
Department staff, and two items pending completion by Purchasing Department staff.
The open recommendations include a comprehensive utility field meter survey and updates to
the Purchasing Manual and Policies and Procedures. The field verification includes conducting
an inspection survey of approximately 75,000 electric, gas and water meters to validate meter
condition, size, and location. The survey is expected to begin in May 2019 and will be
completed within one year. The Administrative Services Department is in the process of
revising the Purchasing Manual and Policies and Procedures. Recommended revisions should
be completed by end of calendar year 2019.
Attachments:
• Attachment A - Accuracy of Water Meter Billing
City of Palo Alto Page 2
• Attachment B - Contract Oversight-Trenching
• Attachment C - Cross Bore Inspection Contract
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
Finding 1: CPAU has not adequately prevented, detected, nor corrected water meter billing errors.
We recommend that CPAU:
1.1. Review and correct the meter
record errors identified for
meter sizes larger than 2
inches.
Utilities Concurrence: Agree
Target Date: December 2018
Action Plan: In preparation for the new
CIS Utility billing system and potential
advanced meter deployment, staff will
consider an in-house or contract service
audit of the three metered services
(electric, gas, water). Staff will also review
and update as needed roles and
responsibilities for key staff involved in
ensuring meter accuracy, including
procurement, inventory, testing,
installation, and billing records
management.
In progress June 2019 Management Update:
In preparation of new metering and billing systems and in
response to the audit, staff is retaining a consult to perform
a comprehensive utility field meter survey. The field
verification includes conducting an inspection survey of
approximately 75,000 electric, gas and water meters to
validate and ensure accurate meter data.
The contract was approved by Council in April 2019. The
project is scheduled to start in May 2019 and will be
completed within one year.
Expected Completion Date: May 2020
June 2018 Management Update:
Staff will be issuing an RFP for contract services to conduct a
field audit of 74,000 meters. One of the requirements is
verification of service connection size for 2” or greater
water meters.
Expected Completion Date: June 2019
1.2. Explore options for addressing
equity when making changes
to customer meter size rates
and establish a policy and
process for determining,
documenting, and notifying
customers of changes to their
Utilities Concurrence: Agree
Target Date: July 2018
Action Plan: The audit’s questioning of
utility practices regarding changes to
meter sizes is based on a unique situation
that occurred 22 years ago and does not
Completed
(pending
Council’s
approval of the
FY 2020 water
rates)
June 2019 Management Update:
Staff retained a consultant to update the water cost of
service study in late 2018. Based on the study results, and to
ensure uniform administration and equitable cost
allocation, staff proposes to charge all residential customers
with 5/8”, 3/4”, and 1” meters, which include fire flow, a
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 2
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
meter size and, if appropriate,
the rate change associated
with the new meter size.
reflect current policy or process. The
situation arising out of Southgate was a
unique case and staff does not agree that
this or other meter replacement practices
raise equity issues.
With regard to differential rates for
different meter sizes, staff is currently
reviewing policy options for addressing
this issue going forward, and will develop
options such as consolidating the fixed
rate for 5/8” and 1” meters for
consideration by the City Council.
uniform monthly service fee. The cost to the City of
providing service to these different residential meter sizes is
similar. Offering graduated meter sizes (up to 1”) is still
recommended in some cases, where there is inadequate fire
flow or low system pressure. Pending Council’s approval,
the change of monthly water meter service charges for
residential 5/8”, 3/4” and 1” meters will be effective July 1,
2019.
June 2018 Management Update:
Due to staffing changes, the Utilities Department was not
able to engage with a consultant to begin the water cost of
service study in FY 2018. Staff expects to issue an RFP in the
first half of FY 2019. Options to consolidate the fixed rates
for 5/8” and 1” meters will be considered. The study results
and staff recommendation will be brought forth for Council
review when completed.
Expected Completion Date: April 2019
Finding 2: CPAU has installed 1,178 water eMeters throughout the City’ however, there are no testing standards, and the accuracy, performance, and reliability of these
meters are uncertain.
We recommend that CPAU:
2.1. Develop a policy and
procedure to transparently
report significant, systemic,
infrastructure changes to
Council and update any CPAU
Rules and Regulations that
may be outdated to current
practice or affected by policy
changes.
Utilities Concurrence: Agree
Target Date: Immediately
Action Plan: Major infrastructure
changes are presented to Council for
approval. However, standards are
technical documents that provide the
general conditions and specifications for
the construction of the Water Gas and
Wastewater System. Updates to
Completed June 2019 Management Update:
These are the current control processes in place to
transparently report changes:
1.) Purchasing Policies and Procedures. Originating
department: Purchasing. Process status: Existing.
The purpose of this manual is to provide City
departments with a practical step‐by‐step guide
through the various stages of the purchasing
process. It also provides a means of assuring
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 3
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
standards are subject to multiple levels of
professional review including
engineering, procurement and legal.
Updated standards will be communicated
to Council as informational when
substantive.
uniformity in the City’s purchasing practices. The
City of Palo Alto Municipal Code (Section 2.30 ‐
Contracting and Purchasing Procedures) serves as
the basis for the information in this manual.
a. Sole Source Standardization Process. When a
City department requires a specific products or
services over $10,000 that can only be
furnished by a certain provider or that should
be otherwise exempted from the competitive
solicitation process (ref. PAMC 2.30.360), the
requestor must complete an Exemption From
Competitive Solicitation Request Form
(Purchasing Manual Appendix E).
b. Contracts for professional services over
$85,000 per year and/or with terms greater
than three years require the approval of the
City Council. Chapter 14 of the Purchasing
Guide provides information regarding the
preparation of a City Manager’s Report (CMR)
to request Council contract approval.
2) Rules and Regulations. Originating
department: Utilities. Process Status: Existing.
Rules and regulations are updated as needed
to reflect new business practices and
provisions. These changes are reviewed by the
City Attorney’s Office and are brought forth to
Council for approval. Staff is currently working
with the City Attorney’s Office on updating 16
of the Rules and Regulations, for Council’s
approval later in 2019.
3) Meter and Specification Update Approval
Process. Originating department: Utilities.
Process Status: New. This process ensures that
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 4
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
additions and deletions of meters in the
Warehouse and distribution system are
reviewed and approved by key staff and
management.
4) Utilities Engineering Electric and WGW
Construction Standards. Originating
department: Utilities. Process Status: New.
This process periodically reviews and compares
current construction standards with the
industry. The standards also specifies meter
types (i.e. Badger disc meter). Recommended
changes by staff will be brought forward to
Council for consent.
June 2018 Management Update:
The Utilities Department will inform Council when technical
standards are substantive. Since August 2017, the
department has not updated the technical standards for
electric, gas or water.
American Water Works Association (AWWA) has drafted
new standards for electromagnetic and ultrasonic type
water meters. The public comment period on the proposed
new standards closed on April 29, 2018. Final publication of
the standard may take several months. Staff will notify
Council if Utilities adopts the new electromagnetic and
ultrasonic water meter standards.
Staff will review and update existing policies and procedures
if applicable.
Expected Completion Date: June 2019
2.2. Seek direction and approval
from Council before
proceeding further with the
Utilities Concurrence: Agree
Target Date: Ongoing
Completed June 2019 Management Update:
The American Water Works Association (AWWA) standards
for electromagnetic and ultrasonic water meters were
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 5
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
future installation of eMeters
or any electronic meters.
Action Plan: Procurement and installation
of e-meters will remain suspended until
adoption of an AWWA standard for
testing and the availability of
independent test resources (either in-
house or contracted). It is expected that
a final standard for testing of E-meters
will be available at the end of 2017. The
new standards are not expected to
change the accuracy requirements from
those expected of the positive
displacement meter with the exception
that there will likely be an extended
range of accuracy for low flows. It should
be noted the E-Meters is a specific
product line, and mechanical meters may
also have electronic components.
published in October 2018. After staff’s review and meeting
with other water agencies and consultants, staff has
decided not to install new ultrasonic water meters until the
technology matures. At this time, Utilities will not be
adopting the new electromagnetic and ultrasonic water
meter standards. Utilities will notify Council in the future
when Utilities adopt the new AWWA electromagnetic and
ultrasonic water meter standards.
June 2018 Management Update:
American Water Works Association (AWWA) has drafted
new standards for electromagnetic and ultrasonic type
water meters. The public comment period on the proposed
new standards closed on April 29, 2018. Final publication of
the standard may take several months. Staff will notify
Council if Utilities adopts the new electromagnetic and
ultrasonic water meter standards or seeks to install
additional eMeters. Expected Completion Date:
Expected Completion Date: June 2019
2.3. Determine if the 1,178
installed eMeters should be
uninstalled and replaced with
the original displacement
meter and if billing
adjustments are required.
Utilities Concurrence: Agree
Target Date: July 2018
Action Plan: All customers with e-meters
installed will be immediately notified of
this audit, and that additional information
will be provided as available. For eMeter
testing, staff will send a sampling of
eMeters to independent testing
companies to determine if they are
performing per manufacturer
specification, and based on these results
will determine next steps. In addition,
Completed June 2019 Management Update:
The American Water Works Association (AWWA) standards
for electromagnetic and ultrasonic water meters were
published in October 2018. After staff’s review and meeting
with other water agencies and consultants, staff has
decided not to install new ultrasonic water meters until the
technology matures. Palo Alto will continue to meet with
other water agencies to monitor their electromagnetic and
ultrasonic water meter pilot projects.
Staff hired a contractor to test a sampling of eMeters. The
contractor tested the eMeters under four different
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 6
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
the Water Meter Shop has staffing
challenges and does not currently have
the resources required to undertake this
replacement project. At this time, staff
will continue to monitor the meter reads
for irregularities of both the installed
positive displacement and eMeters as
part of the billing exception process.
Staff is also developing a customer plan
for addressing any accuracy concerns
with the e-meters already installed.
scenarios. Overall, the testing results measured correctly
within the manufacturer’s specifications. Based on
manufacturer’s test results, third party sampled testing and
monthly meter reading of eMeters, staff believes these
meters are functioning properly and does not recommend
replacing them until their end of life.
Expected Completion Date:
June 2018 Management Update:
The Utilities department sent letters to the 1,178 residents
with installed eMeters. In response, 55 customers
requested their meters to be exchanged. A couple credit
adjustments were required for the eMeter exchanges. As of
June 2018, the City has 1,122 eMeters installed.
Status: Completed
Staff hired a contractor to test a sampling of eMeters. The
contractor tested the eMeters under four different
scenarios. Overall, the testing results measured correctly
within the manufacturer’s specifications and guidelines of
+/- 1.5%.
After AWWA publishes the final standards for
electromagnetic and ultrasonic type meters, staff will meet
with other water agencies to determine the pros and cons
of these meters. Staff will make a determination in 2019 on
whether to standardize displacement and/or ultrasonic type
meters.
Expected Completion Date: June 2019
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 7
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
Finding 3: Purchase of water eMeters did not meet purchasing policy and eMeter expenditures were not monitored.
We recommend that ASD Purchasing Division:
3.1. ASD Purchasing to clarify its
purchasing policy and
procedures for new and
renewals of product
standardization.
ASD Concurrence: Agree
Target Date: December 2017
Action Plan: Staff will update the policy
and coordinate with stakeholders to
ensure the policy is clear and easy to
follow. Staff will then finalize the policy
and disseminate to departments.
In Progress June 2019 Management Update:
Revisions to the Purchasing Manual will be drafted and
reviewed by the CFO in July. Proposed changes will be
disseminated to the organization early fall 2019.
Expected Completion Date: Fall 2019
June 2018 Management Update:
This is in the queue for development to update Purchasing’s
Policy and Procedures. Purchasing has the “Solicitation Plan
Checklist” already and the nuances of the process are
currently being written. The current Exemption Form
addresses the “Standardization” process in the P&P. The
“How To” and step-by-step self-learning tool regarding
standardization are in development.
Expected Completion Date: Q4 of FY18
3.2. ASD Purchasing to retrain
appropriate ASD and CPAU
staff on Purchasing policies
and procedures, and
completion of required forms.
ASD Concurrence: Agree
Target Date: January 2018
Action Plan: In conjunction with 3.1 staff
will provide training.
In Progress June 2019 Management Update:
The targeted completion of item 3.1 is early fall 2019. We
expect to conduct ongoing training to ensure that the
Department is aware of Purchasing’s revised P&P’s
regarding standardization.
Expected Completion Date: Winter 2019
June 2018 Management Update:
Training is being done on an as needed basis. Purchasing will
STATUS OF AUDIT RECOMMENDATIONS
ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17
PAGE 8
Recommendation
Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started) Implementation Update and Expected Completion Date
conduct formal training once item 3.1 is complete.
Expected Completion Date: Q2 of FY19
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report
progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been
implemented.
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
Finding 3: The Utilities Department did not enforce contract billing terms that were the basis for awarding the contract to Casey Construction, Inc.
5. The Utilities Department should
work with ASD to review existing
contract performance management
policies and develop procedures to
ensure staff appropriately
administers the City’s contracts.
Procedures should address the
following areas:
● Monitoring of contractor billings to
ensure accuracy and compliance with
contract terms.
● Ensuring contracts are
appropriately and timely modified, if
required.
Administrative
Services and
Utilities
Departments
3/31/14
Utilities staff is formalizing the
process by which contractor work is
requested, approved, inspected,
reviewed, and invoiced.
Utilities will hire a Project Coordinator
to assist Engineering in administrating
contracts, verifying invoices, and
processing payments. Utilities will be
requesting for similar positions in
Operations and Customer Support
Services in the 2014 mid‐year budget.
Utilities will also develop a tracking
mechanism to monitor contractor
work, reconcile invoices, and verify
payments.
ASD will conduct a review of the
entire purchasing process citywide.
The departments will collaborate to
bring contract management training
to appropriate staff. This training will
be rolled out to all departments.
Completed June 2019 Management Update:
Utilities has participated in construction contract and
project management training, and will continue offering
training to staff regularly or as needed. Training topics
include pre-bid conferences, prevailing wage
requirements, change orders, stop notices, payments,
project closeout and recordkeeping. The procedures
and/or guidelines for these topics have been
documented and made available for staff to use.
The Senior Engineers and Project Coordinators are
responsible for project management and contract
administration of capital projects and construction
contracts. With the additional training, staff has been
performing the administrative contract duties to ensure
contractor billing accuracy, compliance with contract
terms, and timely processing of change orders.
May 2018 Management Update:
Utilities has completed contract administration training
and will seek additional training for purchasing, project
management and risk management on an as-needed
basis.
Utilities has established general project management
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 2
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
guidelines including roles and responsibilities,
scheduling, change orders, negotiations, payments and
contract closing. Utilities will continue to work toward
uniform implementation of the guidelines and usage of
the forms.
The Project Coordinator position remains vacant as
Utilities redefines the contract administration and
project management responsibilities of the position to
better address department needs.
ASD has and continues to collaborate with the City
Attorney’s Office on further developing the IFB
Template on a regular basis. The latest revision is made
available and in use. This collaborative effort now
includes the new “Design-Build” templates. Contracts
are regularly being uploaded into Planet Bids Contracts
Management Module. On boarding department project
managers is forthcoming. Meanwhile ASD is also
considering contracts management in an Electronic
Document Management System (EDMS), as with ARC’s
“Infolink” platform, for public record management
functionalities, like contract management.
Expected Completion Date: December 2017:
December 2015 Management Update:
In February 2015, construction contract management
training was conducted in conjunction with PWD and
ASD. The training covered procurement, project
manager responsibilities, project scheduling, change
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 3
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
order requests, claims, payments and project closure.
In October 2015, ASD provided citywide training on
compliance to the new prevailing wage requirements
for construction and improvement contracts. The
training identified the roles and responsibilities of
Purchasing and project managers and reporting
requirements to the Department of Industrial Relations.
The Utilities Project Coordinator position is currently
vacant in Engineering. Utilities is currently reassessing
the job classification for this role and evaluating the
need for a higher Project Manager classification. Staff
will recruit for the position in 2016. Until the position is
filled, the project managers will continue administering
the contracts with support from administrative staff on
invoice verification and payments. All contract, invoice
and supporting documentations are managed in a
central shared drive.
The Invitation for Bid (IFB) template is currently in the
process of being revised to simplify and coordinate
language between other sections of the contract; the
boilerplate language should be completed by the
second half of 2016.
The firm that ASD selected to implement an invoice
management system was unable to deliver on the
scope as planned in 2015. ASD will evaluate the
possibility of acquiring another invoice management
solution or consider waiting until the new ERP system is
implemented with built in invoice management.
Expected Completion Date: Q4 2016
June 2014 Management Update: Utilities has
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 4
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
developed contract management guidelines and a
project charter for large construction projects and
professional services. These contracts and documents
are stored on a centralized SharePoint website.
Utilities Engineering hired a Project Coordinator in
March 2014 to assist with contract administration and
project management. The coordinator has developed a
contract database, coordinated project management
training, and formalized policies and procedures.
Utilities Operations reclassified a position in the FY
2015 to assist with contract and inventory
management.
Utilities is working with the City Attorney's Office to
strengthen the boilerplate language in the IFB and
professional service contract templates.
ASD hired a consultant to perform an independent
review of the entire purchasing process. The review
recommended a new purchasing system, increased
training, and additions to the Purchasing Manual
among other recommendations. Staff is in the process
of implementing the recommendations.
ASD has selected an online invoice management system
to improve the review, approval and tracking invoices
received by the City. This system will be implemented
in 2015 and will provide increased accountability and
visibility into the invoice review and payment process.
Expected Completion Date: 6/30/15
Finding 4: The Utilities Department did not appropriately manage its contract with Casey Construction, Inc. to ensure the City’s projects were completed in
accordance with plans and cost estimates.
6. The Utilities Department should
work with ASD to review existing
Administrative
Services and
Recommendation 5 & 6 are similar.
See response to recommendation 5.
Completed June 2019 Management Update:
Utilities has established and updated general project
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 5
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
contract performance management
policies and develop procedures to
ensure staff appropriately
administers the City’s contracts.
Procedures should address the
following areas:
• Roles and responsibilities for the
contract administrator and any
additional training requirements
for staff.
• Monitoring of contractor
performance.
• Ensuring payments are made only
for services and materials included
in the contract scope.
• Ensuring there is an adequate
process and documentation to
show planned work has been
completed.
Utilities
Departments
management guidelines and construction
administration manual including roles and
responsibilities, scheduling, change orders,
negotiations, payments, project closeout and contract
closing. The procedures, guidelines, and/or forms for
these topics have been documented and made
available for staff to use.
May 2018 Management Update:
Utilities has established general project management
guidelines including roles and responsibilities,
scheduling, change orders, negotiations, payments and
contract closing. Utilities will continue to work toward
uniform implementation of the guidelines and usage of
the forms
A vendor evaluation form has been drafted but has not
been implemented. The purpose of the evaluation
form is to monitor the performance of the vendor and
identify any incidents that occurred during the project.
Utilities will work with ASD on implementing the form.
Expected Completion Date: December 2017
December 2015 Management Update:
Utilities is monitoring contractor performance through
routine inspections, weekly meetings and
communication. During inspections, staff reviews and
verifies the contractor’s performance by documenting
and signing off the work completed (i.e. number of
boxes installed, footage of pipe installed). In the weekly
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 6
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
meetings, staff reviews the work schedule, scope of
work, claims and change orders with the contractor.
ASD has updated the City’s procurement training guide
including contract administration roles and
responsibilities, process workflow, best practices and
common pitfalls. ASD will continue to provide
procurement training annually and update the guide on
an as-needed basis (eg., to reflect changes to prevailing
wage laws).
http://cityconnect.staff.copa/civica/filebank/blobdload.
asp?BlobID=4255
ASD implemented PlanetBids as the City’s new
eProcurement solution. PlanetBids includes a contract
management module that provides a structure for
managing contracts. This module of PlanetBids will be
rolled out to departments beginning in 2
2016.
Expected Completion Date: Q2 2016
June 2014 Management Update: Roles, responsibilities,
and workflow for contract administration are
documented and saved on SharePoint.
Utilities Engineering completed a mandatory 3-day
project management course in July 2014.
ASD provided purchasing and contract administration
training to the Executive Team and City staff in 2013
and 2014. This training will continue in 2014 and 2015
as part of an ongoing purchasing training curriculum for
City staff.
Additional Contract administration training is planned
for November 2014 with Purchasing and City Attorney's
STATUS OF AUDIT RECOMMENDATIONS
CONTRACT OVERSIGHT: TRENCHING AND INSTALLATION OF ELECTRIC SUBSTRUCTURE – ISSUED 10/30/13
PAGE 7
Recommendation
Responsible
Department Original Target Date and Response
Current
Status
Implementation Update and
Expected Completion Date
Office.
See responses above related to vendor performance
review and new invoice management system.
Expected Completion Date: 6/30/15
STATUS OF AUDIT RECOMMENDATIONS
UTILITIES DEPARTMENT: CROSS BORE INSPECTION CONTRACT AUDIT ISSUED 6/1/17
PAGE 1
The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on
implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.
Recommendation Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
Finding: 1. Hydromax inspected 10,791 (60 percent) of 18,028 laterals and could not complete nearly half of its attempted inspections because of adverse
conditions in sewer lines.
1.1. Identify sewer pipelines that
Hydromax did not fully inspect or
attempt to inspect. Prioritize these
sewer pipelines for inspection under a
future contract(s). To the extent
possible, based on past experience,
predict potential inspection
challenges, such as poor pipeline
conditions, that may hinder future
inspections. Disclose these challenges
in future contract solicitations.
Utilities Concurrence: Agree
Target Date: Late 2018
Action Plan:
Staff will review a previously
generated prioritization list based on
assessment of risk for property
classifications, review inventory of
parcels that do not have an
associated lateral, and develop a
final prioritization list and cost
estimates based on experience and
data from the original crossbore
contract. Implementation of next
phase will proceed based on
available funding.
Completed June 2019 Management Update:
Staff has completed identification of
approximately 1,200 high risk laterals for Phase 2
of the crossbore verification project. The
prioritization was based on criteria such as
occupancy rates, installation of safety devices,
service material, age of service, and proximity of
natural gas service pipelines to sewer laterals.
The Crossbore Verification Invitation for Bid (IFB)
was issued on March 26, 2019. Staff has
evaluated the four bid responses. In the IFB, staff
provides cross bore inspection guidelines which
covers video quality and inspection procedures,
specialized industry equipment, and minimum
qualifications to improve the overall success rate
of verified clear sewer laterals. The contract for
Phase 2 of the crossbore verification project is
scheduled for Council approval on June 24, 2019.
June 2018 Management Update:
Utilities Engineering performed a risk analysis of
the laterals staff identified as not completed
during the initial cross-bore project, to prioritize
future inspection and predict potential inspection
challenges. The prioritization was based on
STATUS OF AUDIT RECOMMENDATIONS
UTILITIES DEPARTMENT: CROSS BORE INSPECTION CONTRACT AUDIT ISSUED 6/1/17
PAGE 2
Recommendation Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
criteria such as occupancy rates, installation of
safety devices, service material, age of service,
and distance from gas service. Phase 2 priority
categories include high occupancy properties, gas
services without excess flow valves, separation
distance between sanitary sewer lateral and gas
service, and polyethylene (PE) material.
Staff expects to issue the RFP for Phase 2 of the
crossbore safety inspection program, which will
include the risk analysis findings, in summer 2018.
Staff has requested for additional budget of
$1,000,000 in FY 2019 to fund the contract.
Expected Completion Date: Q2 of FY 2019
Finding: 2. City oversight and NASSCO contracting guidelines can help ensure accurate, complete, and cost effective future inspections.
2.1. Identify missing data in its laterals
database by comparing it with
independent databases such as
Hydromax inspection data. Update its
laterals database to ensure it can
effectively serve to track inspection
progress.
Utilities Concurrence: Agree
Target Date: Mid 2018
Action Plan:
Staff will utilize existing data to
review and update the City’s GIS to
reflect missing active City-owned
laterals. This will be done in
conjunction with the inventory of
parcels referenced in Finding 1.1.
Completed June 2019 Management Update:
Staff continues to improve the information and
accuracy of the Utility database using information
gathered during all construction projects, capital
improvement projects, sewer crossbore
inspections and daily operations. This
information is identified as a Map Update
Request and Engineering researches and updates
the GIS database regularly.
June 2018 Management Update:
Staff is in the process of reconciling and updating
the lateral information in the GIS database, to
identify missing laterals. The lateral database will
be updated prior to issuance of the RFP for Phase
2 of the project.
STATUS OF AUDIT RECOMMENDATIONS
UTILITIES DEPARTMENT: CROSS BORE INSPECTION CONTRACT AUDIT ISSUED 6/1/17
PAGE 3
Recommendation Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
Common sewer laterals are shared by more than
one parcel, thus there is not a one to one ratio of
laterals to premises. Staff has started a
preliminary review of the various scenarios
related to parcels without sanitary sewer laterals
and has updated GIS with the two latest capital
improvement projects.
Staff is working on identifying a dedicated
resource to complete the reconciliation process
between City mapping data on GIS and Hydromax
findings.
Expected Completion Date: Q2 of FY 2019
2.2. Incorporate relevant and useful
provisions from NASSCO’s contract
template, such as linear foot pricing
and prior verification of inspector
certifications, in future sewer
inspection contracts. Consult with the
Administrative Services Department’s
purchasing staff and the City
Attorney’s Office to determine if City
can enforce NASSCO template
provisions that it plans to incorporate.
Utilities Concurrence: Agree
Target Date: Mid to Late 2018
Action Plan:
Staff will review the NASSCO
contract template and look for
provisions to incorporate in a future
City contract, as applicable.
Completed June 2019 Management Update:
In the Crossbore Verification IFB, staff requested
the City-owned sewer laterals be assessed per
NASSCO standards by a certified NASSCO Lateral
Assessment and Certification Program (LACP)
trained operator or technician. The Contractor
will identify and code pipe defects in
conformance with LACP within the portion of the
sewer lateral owned by the City. Reports from
this program will be used to prioritize laterals
with the highest deficiencies for replacement.
June 2018 Management Update:
Utilities Engineering is in the process of reviewing
and adopting applicable National Association of
Sewer Service Companies (NASSCO) standards
which are appropriate for the City. These include
industry standards for the rehabilitation of
STATUS OF AUDIT RECOMMENDATIONS
UTILITIES DEPARTMENT: CROSS BORE INSPECTION CONTRACT AUDIT ISSUED 6/1/17
PAGE 4
Recommendation Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
underground pipelines and continued acceptance
and growth of trenchless technologies.
Staff has started reviewing the NASSCO contract
templates and will incorporate applicable
NASSCO standards that can be applied to a future
contract.
Expected Completion Date: Q2 of FY 2019
STATUS OF AUDIT RECOMMENDATIONS
UTILITIES DEPARTMENT: CROSS BORE INSPECTION CONTRACT AUDIT ISSUED 6/1/17
PAGE 5
Recommendation Responsible
Department(s) Original Response and Target Date
Current Status
(Complete, In
Progress, or Not
Started)
Implementation Update and
Expected Completion Date
2.3. Identify gaps in staff expertise needed
to monitor and facilitate field
inspections and to review and track
inspection data. Develop a training
and certification plan for field staff
who should have the expertise to help
meet the City’s inspection goals and
objectives.
Utilities Concurrence: Agree
Target Date: Late 2018 to Start of
future contract
Action Plan:
Staff will continue to review staffing
gaps for office and field personnel. If
gaps are identified and are not
resolved by training, additional
expertise will be identified within
the City or via contract.
Completed June 2019 Management Update:
Several staff members from Engineering and
Operations have been NASSCO certified for CCTV
inspection. With the industry standard pipe
rating codes, staff will be able to prioritize sewer
mains more effectively for future replacement
projects.
Staff is also seeking knowledgeable natural gas
industry personnel to facilitate Project
Management and Inspection of gas projects.
The City will continue to provide ongoing training
and certification to employees across all utilities
with industry recognized standards organizations.
Staff will assign a dedicated City Inspector to the
crossbore verification project to field Inspect and
ensure all attempt have been made to
successfully clear sewer laterals of potential
crossbores.
June 2018 Management Update:
Currently two Operations Staff members are
NASSCO certified for CCTV inspection. Staff is
working on identifying a dedicated resource for
the GIS and database analysis experience.
Expected Completion Date: On-going
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
June 11, 2019
The Honorable City Council
Palo Alto, California
Policy and Services Committee Recommends the City Council Accept
the Auditor's Office Quarterly Reports as of December 31, 2018 and
March 31, 2019
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 Reports as of
December 31, 2018 and March 31, 2019.
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. These reports provide the City Council with an update on the
second and third quarters for FY 2019.
Respectfully submitted,
Don Rhoads, CPA
Special Advisor to the Office of the City Auditor
Management Partners
ATTACHMENTS:
• Attachment A: Auditor's Office Quarterly Report as of December 31, 2018 (PDF)
• Attachment B: Auditor's Office Quarterly Report as of March 31, 2019 (PDF)
Department Head: Don Rhoads, Special Advisor to the Office of the City Auditor
Page 2
Quarterly Report as of December 31, 2018
Office of the City Auditor
“Promoting honest, efficient, effective, economical, and fully
accountable and transparent city government.”
Attachment A
PAGE 2
Fiscal Year (FY) 2019 Second Quarter Update (October – December 2018)
Overview
The audit function is essential to the City of Palo Alto’s public accountability. The mission of the Office of the City Auditor,
as mandated by the City Charter and Municipal Code, is to promote honest, efficient, effective, economical, and fully
accountable and transparent city government. We conduct performance audits and reviews to provide the City Council
and City management with information and evaluations regarding how effectively and efficiently resources are used; the
adequacy of internal control systems; and compliance with policies, procedures, and regulatory requirements. Taking
appropriate action on our audit recommendations helps the City reduce risks and protect its good reputation.
Activity Highlights
•Issued three audits: 1) ERP Planning – Separation of Duties, 2) ERP Planning – Data Standardization, and 3) Code
Enforcement.
•The external financial auditor completed the annual financial audit and federal single audit, which we presented to
the Finance Committee in December 2018.
•City Auditor Harriet Richardson announced that she plans to retire in February 2019.
Audit and Project Work
Below is a summary of our audit and project work for the second quarter of FY 2019:
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Business Registry Evaluate the rules and processes used
to establish the business registry and
make recommendations to help clean
up the data and ensure accuracy in the
future.
02/18 Early
2019
In Progress This audit was presented to
the Policy & Services
Committee in September
2018. The Committee
requested additional analysis,
which we will bring back to
the Committee in 2019.
ERP Planning
Audit: Data
Reliability and
Integrity – Data
Standardization
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
identifying where standardizing data
would be beneficial when
implementing the new ERP system
05/17 10/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
October 2018.
ERP Planning
Audit: Separation
of Duties
Evaluate the adequacy of separation of
duties for various activities in the
current SAP system and make
recommendations to ensure that
identified deficiencies are corrected for
the new ERP system.
05/17 10/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
October 2018.
Attachment A
PAGE 3
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Code
Enforcement
Audit
Evaluate the timeliness and
effectiveness of code enforcement
actions, the effectiveness of
communication with the public, and the
accuracy and completeness of code
enforcement case tracking for decision
making purposes. We conducted a
resident survey to help inform our audit
recommendations, as described below.
05/17 11/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
November 2018.
ERP Planning
Audit: Data
Reliability and
Integrity –
Personnel Data
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
assessing the accuracy of employee
master data, such as name, address,
birthdate, and social security number.
09/17 Early
2019
In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in 2019.
NOTE: We previously referred
to this audit as “Human
Resources/Payroll Data” but
changed it to “Personnel
Data” for clarification.
ERP Planning
Audit: Data
Reliability and
Integrity –
Utilities
Customer Data
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
assessing the accuracy of Utilities’
customer master data that is used for
billing purposes, such as customer
name, service and billing addresses,
and move-in and move-out dates.
06/18 Early
2019
In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in 2019.
Mobile Device
Inventory and
Security
Determine if the City accurately
inventories and securely manages city-
owned mobile devices, including
laptops, tablets, cell/smart phones, and
radios.
03/18 Early
2019
In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in 2019.
Nonprofit Service
Agreements
Audit
Evaluate whether nonprofit
organizations that receive City funding
are achieving the outcomes we expect
from the funding we provide and if City
departments monitor the nonprofit
service agreements to ensure that the
required services are performed. The
audit focuses primarily on nonprofit
organizations that provide senior
services.
06/18 Early
2019
In Progress This audit is in the report
writing phase and will be
presented to the Policy *
Services Committee in 2019.
NOTE: We previously referred
to this audit as “Nonprofit
Organizations Audit” but
changed it to “Nonprofit
Service Agreements” for
clarification.
Attachment A
PAGE 4
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Contract
Oversight
Select a sample of contracts to evaluate
the contract oversight process by
determining if the City has adequate
processes to ensure that the City
receives the goods and services it paid
for, that contracts did not result in
unnecessary overlaps in services, and
that contract extensions and change
orders were appropriate.
06/18 Early
2019
In Progress This audit is in the field work
phase and will be presented to
the Policy & Services
Committee in early 2019.
Transferable
Development
Rights
Determine if the City maintains an
accurate and complete record of the
transferable development rights (both
City-owned and non-City-owned) that
have been certified, transferred, and
used to date.
06/18 Mid-
2019
In Progress This audit is in the planning
phase. We expect to complete
the audit in mid-2019.
ERP Nonaudit
Service
Provide advisory services to the
Department of Information Technology
regarding its planning of a new ERP
system.
09/16 N/A On hold We have not provided this
service in FY 2019. We will
resume our service after the
City decides how to move
forward with its ERP project.
We will then focus on assisting
the City with addressing the
issues we identified during the
ERP planning phase and prior
audits.
National Citizen
Survey™
Obtain resident opinions about the
community and services provided by
the City of Palo Alto and benchmark
our results against other jurisdictions.
06/18 01/19 In Progress The National Research Center
sent a draft report in
December and the Auditor’s
Office is analyzing the raw
data. The results will be
presented at the annual
Council retreat in February
2019.
Performance
Report
Provides citywide information for key
areas, including spending, staffing,
workload, and performance.
10/18 Early
2019
In Progress Departments provided data,
which we are compiling into
the annual report. The report
will be published early in
2019.
Citizen Centric
Report
Provides City and community
information, performance results, and
summary revenue and expenditure
data in an easy-to-ready four-page
format.
10/18 Early
2019
In Progress Data have been collected and
are being compiled into the
report, which will be
published early in 2019.
Attachment A
PAGE 5
Other Monitoring and Administrative Assignments
Below is a summary of other assignments as of December 31, 2018:
Title Objective(s) Status Results/Comments
City Auditor
Advisory Roles
Provide guidance and advice to
key governance committees
within the City.
Ongoing The City Auditor serves as an advisor to the Utilities Risk
Oversight Committee and Information Security Steering
Committee. We are also serving as an advisor for the
strategic and technical planning groups for planning the
new ERP system (see comment in the Audit and Project
Work section above).
Sales and Use
Tax Allocation
Reviews
1)Identify businesses that do
business in Palo Alto that may
have underreported or misallo-
cated their sales and use tax and
submit inquiries to the state for
review and tax reallocation.
2)Monitor sales taxes received
from the Stanford University
Medical Center Project and
notify Stanford of any differences
between their reported taxes
and state sales tax information,
in accordance with the
development agreement.
3)Provide Quarterly Status
Updates and Sales Tax Digest
Summaries for Council review.
Ongoing 1)Sales and use tax recoveries for the second quarter of
FY 2019 were $7,635 from our inquiries and $35,535 from
the consultant’s inquiries, for a total of $43,170 for the
quarter and fiscal year to date. Due to processing delays
at the State Board of Equalization, 56 potential
misallocations are waiting to be researched and
processed: 24 from our office and 32 from the consultant.
2)We receive prior calendar-year sales tax information for
the Stanford Medicine development project several
months after the end of the calendar year and report
these on our June quarterly report. The City has received
$3,681,743 for calendar years 2011 through 2017 as a
result of the development agreement for this project.
3)Quarterly sales tax reports are published on the Office
of the City Auditor website at
www.cityofpaloalto.org/gov/depts/aud/reports/default.asp.
Status of Audit Recommendations
Forty-seven recommendations were open at the beginning of the second quarter of FY 2019, and none were closed. We
added 13 recommendations during the quarter, which resulted in 60 recommendations open at the end of the quarter.
Five status reports were presented during the quarter, and seven are due to be presented during the third quarter of
FY 2019. Below is a summary of the open audit recommendations as of December 31, 2018:
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Citywide Cash
Handling and
Travel Expense
Issued: 09/15/10
Due – 04/09/19
10/23/18
03/21/18
08/22/17
11/10/15
09/23/14
09/10/13
10/22/12
04/19/11
Recommendations: 11
Open: 1
Implemented during
quarter: 0
•Review practice of reimbursing employee meals
when not in a travel status and report the amounts as
income to employees to conform to Internal Revenue
Service requirements (ASD)
Attachment A
PAGE 6
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Inventory
Management
Issued: 02/18/14
Due – 04/09/19
10/23/18
11/02/17
09/23/14
Recommendations: 14
Open: 4
Implemented during
quarter: 0
•Implement City’s inventory management policies and
procedures (ASD/UTL/PWD/IT)
•Update and enforce inventory count policies and
procedures to ensure consistent and accurate
inventory records (ASD)
•Identify, formalize, and communicate inventory
management goals and objectives to City
departments (ASD)
•Ensure staff identify and use key SAP inventory
management reports and appropriately configure and
update SAP parameters that affect inventory levels
(ASD/IT)
Parking Funds
Issued: 12/15/15
Due – 03/12/19
06/21/18
11/14/17
Recommendations: 8
Open: 1
Implemented during
quarter: 0
•Develop policies and procedures to clarify roles and
responsibilities and ensure accurate calculation and
reporting of parking-in-lieu fees (PCE, ASD, PWD, CLK)
Disability Rates
and Workers’
Compensation
Issued: 05/10/16
Due – 04/09/19
10/23/18
02/13/18
Recommendations: 15
Open: 4
Implemented during
quarter: 4
•Review departmental procedures and safety
requirements to ensure they align with citywide
policies and procedures (HR)
•Identify and provide industry-specific ergonomics and
general wellness training opportunities (HR)
•Address the disability leave benefits incorrectly
reported as compensation to CalPERS (HR)
•Ensure that data for managing disability leave is
accurately captured through SAP time reporting (HR)
Cable Franchise
and Public,
Education, and
Government
(PEG) Fees
Issued: 06/14/16
Due – 04/09/19
10/23/18
03/21/18
08/22/17
Recommendations: 9
Open: 6
Implemented during
quarter: 0
•Assess ongoing need for PEG fees; place fees in
restricted account until decisions are made about use
of fees (CMO/ATTY/ASD/IT)
•Determine whether to allocate unrestricted funds,
instead of PEG fees, to subsidize the Media Center’s
operations. (CMO/ATTY/ASD/IT)
•Send letters to cable companies to demand payment
of underpaid franchise and PEG fees
(CMO/ATTY/ASD/IT)
•Develop criteria for assessing the accuracy of future
cable franchise and PEG fee payments and require
more detail with payment remittances (ASD)
•Assign responsibility for the cable communications
program and provide effective oversight of the
program (CMO/CLK)
•Draft an ordinance to update the Palo Alto Municipal
Code based on clarified assignment of responsibility
(CMO/ASD/ATTY/CLK)
Attachment A
PAGE 7
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Community
Services
Department
(CSD): Fee
Schedule Audit
Issued: 02/14/17
Due – 03/12/19
06/21/18
11/14/17
Recommendations: 3
Open: 2
Implemented during
quarter: 0
• Revise City’s cost recovery policy to align with
relevant laws and reconfigure the Questica budget
system to support fees that recover more than
100 percent of costs (ASD)
• Configure SAP or the new ERP system to align cost
centers with CSD programs (CSD)
Continuous
Monitoring:
Payments
Issued: 04/13/17
Due – 04/9/19
10/23/18
03/21/18
Recommendations: 7
Open: 3
Implemented during
quarter: 2
• Build a continuous monitoring process into the new
ERP system to identify potential duplicate invoices
and seek recovery of duplicate payments (ASD)
• Build a continuous monitoring process into the new
ERP system to identify duplicate, incomplete, or
unused vendor records (ASD)
• Clean vendor master file before merging data into
new ERP system (ASD)
Green Purchasing
Practices
Issued: 04/13/17
Due – 03/12/19
06/21/18
Recommendations: 8
Open: 6
Implemented during
quarter: 0
• Clearly define department(s) responsible for
implementing green purchasing policies and
determine if additional staffing and funding are
needed to implement the policies (ASD/CMO)
• Develop consolidated procedures to implement green
purchasing policies (CMO/ASD/PWD)
• Educate City staff on green purchasing policies (ASD)
• Evaluate potential for use of 40 percent post-
consumer fiber paper towels/other green janitorial
products and monitor janitorial contractor’s
compliance with green purchasing requirements
(PWD)
• Evaluate if new e-procurement system or other
technology solution can help with tracking and
reporting green purchases and establish appropriate
green purchasing performance measures (ASD/PWD)
• Require vendors to provide data on amounts of green
products and services that City purchases from them
(ASD/PWD)
Utilities
Department:
Cross Bore
Inspection
Contract
Issued: 06/01/17
Due – 03/12/19
06/21/18
Recommendations: 4
Open: 4
Implemented during
quarter: 0
• Prioritize uninspected sewer pipelines for inspection
and disclose potential inspection challenges in future
contract solicitations (UTL)
• Identify and update missing data in laterals database
(UTL)
• Incorporate relevant provisions from National
Association of Sewer Service Companies’ contract
template in future sewer inspection contracts (UTL)
• Identify gaps in staff expertise and develop a training
and certification plan for field staff who will monitor
field inspections (UTL)
Attachment A
PAGE 8
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Accuracy of
Water Meter
Billing
Issued: 08/16/17
Due – 03/12/19
06/21/18
Recommendations: 11
Open: 7
Implemented during
quarter: 0
•Review and correct meter records for meters larger
than 2 inches (UTL)
•Explore options for addressing equity in meter size
rates (UTL)
•Develop a policy and procedures to report significant,
systemic infrastructure changes to Council and
update City of Palo Alto Utilities’ (CPAU) Rules and
Regulations as needed (UTL)
•Seek direction from Council before proceeding with
installing additional electronic meters (UTL)
•Determine if installed eMeters should be replaced
and if billing adjustments are required (UTL)
•Clarify purchasing policy and procedures for product
standardization and sole source (ASD)
•Retrain staff on purchasing policies and procedures
and completion of required forms (ASD)
Continuous
Monitoring:
Overtime
Issued: 09/06/17
Due – 03/12/19
None
Recommendations: 2
Open: 2
Implemented during
quarter: 0
•Explore potential of developing a continuous
monitoring process for overtime (ASD)
•Form a work group to design standardized overtime
management processes in the new ERP environment
(ASD)
Information
Technology and
Data Governance
Issued: 06/13/18
Due – 03/12/19
None
Recommendations: 4
Open: 4
Implemented during
quarter: 0
•Assign roles and responsibilities for IT governance to
ensure that governance coveralls all key aspects of
the City’s information systems (IT)
•Adopt an industry standard IT governance framework
and create a plan to achieve a process capability
model of “established” or higher (IT)
•Assign roles and responsibilities for data governance
to ensure that governance coveralls all key aspects of
the City’s information systems (IT)
•Adopt an industry standard data governance
framework and create a plan to achieve a process
capability model of “established” or higher (IT)
Business Registry
Issued: 08/28/18
Will be
determined
after Council
acceptance
Recommendations: 3
Open: 3
Implemented during
quarter: 0
•Clarify existing and potential uses and priorities for
business registry data and update questions in
business registry survey as appropriate (CMO, DSD,
PCE, Trans)
•Identify external data that can improve accuracy of
data collected and provide the data to the business
registry consultant (DSD)
•Update business registry administrative manual to
reflect current process, including roles and
responsibilities (DSD and Attorney)
Attachment A
PAGE 9
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Code
Enforcement
Issued: 11/06/18
Will be
determined
after Council
acceptance
Recommendations: 7
Open: 7
Implemented during
quarter: 0
•Clarify the City’s code enforcement strategy and
priorities with the City Council; develop an updated
enforcement procedure that is aligned with the
strategy (CMO)
•Update Municipal Code sections governing code
enforcement, including combining, clarifying, and
streamlining the administrative procedures and
clarifying roles and responsibilities (CMO)
•Hold regular meetings with staff who have code
enforcement responsibilities to share information and
develop collective and consistent enforcement action
plans (CMO)
•Identify what complaint and case data to capture,
track, and share internally and externally; determine
which system(s) to use to track data for each code
enforcement function, including standardizing code
enforcement terminology; design reporting processes
capable of aggregating data into a citywide view;
develop citywide performance measures for code
enforcement (CMO)
•Reconfigure Accela Code Enforcement to enhance
data collection and reporting, to pave the way for
other functions that may adopt Accela (CMO)
•Provide general, citywide information on code
enforcement in a central location on the City’s
website and assign responsibility for ensuring that the
information is kept up to date (CMO)
•Assign staff to be responsible for citywide
administration of PaloAlto311 to provide ongoing
maintenance and support, including redefining
PaloAlto311 issue types and reconfiguring workflows,
managing user access and making training materials
available for new users, and updating and maintaining
the PaloAlto311 data and dashboard on the City’s
Open Data Portal (CMO)
ERP Planning –
Separation of
Duties
Issued: 10/17/18
Will be
determined
after Council
acceptance
Recommendations: 2
Open: 2
Implemented during
quarter: 0
•Transfer task of entering Accounts Payable’s invoices
to ASD Administration; have Payroll redesign manual
controls to mitigate high-risk areas of separation of
duty conflicts; and share with Utilities relevant,
adopted separation of duties practices to ensure
consistency with ASD practices (ASD)
•Revisit the design and definitions of profiles and roles
according to the concept of least privilege, where
possible (IT)
Attachment A
PAGE 10
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
ERP Planning –
Data
Standardization
Issued: 10/17/18
Will be
determined
after Council
acceptance
Recommendations: 4
Open: 4
Implemented during
quarter: 0
•Provide governance over data standardization, such
as who is responsible and what is subject to data
standardization (IT)
•Review other systems and determine what is subject
to data standardization, especially for data that feeds
into the SAP system (IT)
•Work with Departments to review the data within
SAP and determine what will benefit most by
standardizing data (IT)
•Require Departments to implement data
standardization requirements during data cleansing in
the ERP transition (IT)
Open Recommendations by Audit Issuance Date
Fiscal Year Audit Title Number of Open
Recommendations
2011 Citywide Cash Handling and Travel Expense 1 of 11
2014 Inventory Management 4 of 14
2016 Parking Funds 1 of 8
Cable Franchise and Public, Education, and Government (PEG) Fees 6 of 9
Disability Rates and Workers’ Compensation 4 of 15
2017 Community Services Department: Fee Schedule 2 of 3
Continuous Monitoring: Payments 3 of 7
Green Purchasing Practices 6 of 8
Utilities Department: Cross Bore Inspection Contract 4 of 4
2018 Accuracy of Water Meter Billing 7 of 11
Continuous Monitoring: Overtime 2 of 2
Information Technology and Data Governance 4 of 4
2019 Business Registry 3 of 3
Code Enforcement 7 of 7
ERP Planning – Separation of Duties 2 of 2
ERP Planning – Data Standardization 4 of 4
7
0 0 00
1
2
3
4
5
6
7
8
Q1 Q2 Q3 Q4
Number of Implemented
Recommendations by Quarter
16
15
13
16
0
20
40
60 Number of Open Recommendations
FY 19
FY 18
FY 17
Prior Fiscal Years
Attachment A
PAGE 11
Fraud, Waste, and Abuse Hotline Administration
The hotline review committee, composed of the City Auditor, the City Attorney, and the City Manager, or their
designees, meets as needed to review hotline-related activities. One complaint was received during the first quarter of
FY 2019, which was closed during the second quarter due to lack of receipt of additional information from complainant.
No complaints were received in the second quarter of FY 2019, and all prior-year complaints have been closed. The chart
below summarizes the status of complaints received in each fiscal year since the hotline was implemented.
7 3 2 13 9 0 10
2
4
6
8
10
12
14
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Status of Complaints Received by Fiscal Year
Closed Complaints
Open Complaints
Attachment A
Quarterly Report as of March 31, 2019
Office of the City Auditor
“Promoting honest, efficient, effective, economical, and fully
accountable and transparent city government.”
Attachment B
PAGE 2
Fiscal Year (FY) 2019 Third Quarter Update (January – March 2019)
Overview
The audit function is essential to the City of Palo Alto’s public accountability. The mission of the Office of the City Auditor,
as mandated by the City Charter and Municipal Code, is to promote honest, efficient, effective, economical, and fully
accountable and transparent city government. We conduct performance audits and reviews to provide the City Council
and City management with information and evaluations regarding how effectively and efficiently resources are used; the
adequacy of internal control systems; and compliance with policies, procedures, and regulatory requirements. Taking
appropriate action on our audit recommendations helps the City reduce risks and protect its good reputation.
Activity Highlights
Published and presented the FY 2018 National Citizen Survey™ at the annual Council retreat.
City Auditor Harriet Richardson retired in February 2019. Because of the turnover of this key position during the third
quarter of FY 2019 and because the firm providing interim services, Management Partners, did not begin until the
end of March, this Quarterly Report will be largely unchanged from the previous Quarterly Report as of December 31,
2018.
The City Council appointed Management Partners, Inc. in March 2019 to serve as the City’s Interim Auditor for up to a
six-month term. Management Partners assigned Don Rhoads, CPA as Special Advisor to the Office of the City Auditor.
Audit and Project Work
Below is a summary of our audit and project work for the third quarter of FY 2019:
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Business Registry Evaluate the rules and processes used
to establish the business registry and
make recommendations to help clean
up the data and ensure accuracy in the
future.
02/18 08/19 In Progress This audit was presented to
the Policy & Services
Committee in September
2018. The Committee
requested additional analysis,
which we will bring back to
the Committee in August
2019.
ERP Planning
Audit: Data
Reliability and
Integrity – Data
Standardization
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
identifying where standardizing data
would be beneficial when
implementing the new ERP system.
05/17 10/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
October 2018.
ERP Planning
Audit: Separation
of Duties
Evaluate the adequacy of separation of
duties for various activities in the
current SAP system and make
recommendations to ensure that
identified deficiencies are corrected for
the new ERP system.
05/17 10/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
October 2018.
Attachment B
PAGE 3
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Code
Enforcement
Audit
Evaluate the timeliness and
effectiveness of code enforcement
actions, the effectiveness of
communication with the public, and the
accuracy and completeness of code
enforcement case tracking for decision
making purposes. We conducted a
resident survey to help inform our audit
recommendations.
05/17 11/18 Completed This audit was completed and
presented to the Policy &
Services Committee in
November 2018.
ERP Planning
Audit: Data
Reliability and
Integrity –
Personnel Data
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
assessing the accuracy of employee
master data, such as name, address,
birthdate, and social security number.
09/17 08/19 In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in August
2019.
NOTE: We previously referred
to this audit as “Human
Resources/Payroll Data” but
changed it to “Personnel
Data” for clarification.
ERP Planning
Audit: Data
Reliability and
Integrity –
Utilities
Customer Data
This is one of a series of audits that
focus on evaluating the integrity and
reliability of data in SAP and making
recommendations to ensure that
identified deficiencies are corrected
prior to transferring data to the new
ERP system. This audit focuses on
assessing the accuracy of Utilities’
customer master data that is used for
billing purposes, such as customer
name, service and billing addresses,
and move-in and move-out dates.
06/18 2019 In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in 2019.
Mobile Device
Inventory and
Security
Determine if the City accurately
inventories and securely manages city-
owned mobile devices, including
laptops, tablets, and cell/smart phones.
03/18 2019 In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in 2019.
Nonprofit Service
Agreements
Audit
Evaluate whether nonprofit
organizations that receive City funding
are achieving the outcomes we expect
from the funding we provide and if City
departments monitor the nonprofit
service agreements to ensure that the
required services are performed. The
audit focuses primarily on nonprofit
organizations that provide senior or
nutrition services.
06/18 08/19 In Progress This audit is in the report
writing phase and will be
presented to the Policy &
Services Committee in August
2019.
NOTE: We previously referred
to this audit as “Nonprofit
Organizations Audit” but
changed it to “Nonprofit
Service Agreements” for
clarification.
Attachment B
PAGE 4
Title Objective(s) Start
Date
End
Date
Status Results/Comments
Contract
Oversight
Select a sample of contracts to evaluate
the contract oversight process by
determining if the City has adequate
processes to ensure that the City
receives the goods and services it paid
for, that contracts did not result in
unnecessary overlaps in services, and
that contract extensions and change
orders were appropriate.
06/18 Late
2019
In Progress This audit is in the field work
phase and will be presented to
the Policy & Services
Committee in late 2019.
Transferable
Development
Rights
Determine if the City maintains an
accurate and complete record of the
transferable development rights (both
City-owned and non-City-owned) that
have been certified, transferred, and
used to date.
06/18 Late
2019
On hold This audit was in the planning
phase but has been on hold
since July 2018 due to staff
turnover. We will resume the
audit in April 2019 and expect
to complete it in late 2019.
ERP Nonaudit
Service
Provide advisory services to the
Department of Information Technology
regarding its planning of a new ERP
system.
09/16 N/A On hold We have not provided this
service in FY 2019. We will
resume our service after the
City decides how to move
forward with its ERP project.
We will then focus on assisting
the City with addressing the
issues we identified during the
ERP planning phase and prior
audits.
National Citizen
Survey™
Obtain resident opinions about the
community and services provided by
the City of Palo Alto and benchmark
our results against other jurisdictions.
06/18 02/19 Completed We presented the National
Citizen Survey™ to the Council
at the annual Council retreat
on February 2, 2019.
Performance
Report
Provides citywide information for key
areas, including spending, staffing,
workload, and performance.
10/18 05/19 In Progress Departments provided data,
which have been compiled
into the annual report. The
report will be published in
May 2019.
Citizen Centric
Report
Provides City and community
information, performance results, and
summary revenue and expenditure
data in an easy-to-ready four-page
format.
10/18 05/19 In Progress Data have been collected and
are being compiled into the
report, which will be
published in May 2019.
Attachment B
PAGE 5
Other Monitoring and Administrative Assignments
Below is a summary of other assignments as of March 31, 2019:
Title Objective(s) Status Results/Comments
City Auditor
Advisory Roles
Provide guidance and advice to
key governance committees
within the City.
Ongoing The City Auditor serves as an advisor to the Utilities Risk
Oversight Committee and Information Security Steering
Committee. We are also serving as an advisor for the
strategic and technical planning groups for planning the
new ERP system (see comment in the Audit and Project
Work section above).
Sales and Use
Tax Allocation
Reviews
1) Identify businesses that do
business in Palo Alto that may
have underreported or misallo-
cated their sales and use tax and
submit inquiries to the state for
review and tax reallocation.
2) Monitor sales taxes received
from the Stanford University
Medical Center Project and
notify Stanford of any differences
between their reported taxes
and state sales tax information,
in accordance with the
development agreement.
3) Provide Quarterly Status
Updates and Sales Tax Digest
Summaries for Council review.
Ongoing 1) Sales and use tax recoveries for the third quarter of FY
2019 were $128,549 from our inquiries and $17,537 from
the consultant’s inquiries, for a total of $146,086 for the
quarter and $189,256 fiscal year to date. Due to
processing delays at the State Board of Equalization, 57
potential misallocations are waiting to be researched and
processed: 27 from our office and 30 from the consultant.
2) We receive prior calendar-year sales tax information for
the Stanford Medicine development project several
months after the end of the calendar year and report
these on our June quarterly report. The City has received
$3,681,743 for calendar years 2011 through 2017 as a
result of the development agreement for this project.
3) Quarterly sales tax reports are published on the Office
of the City Auditor website at
www.cityofpaloalto.org/gov/depts/aud/reports/default.asp.
Status of Audit Recommendations
Sixty recommendations were open at the beginning of the third quarter of FY 2019. One was closed and we did not add
any recommendations during the quarter, which resulted in 59 recommendations open at the end of the quarter. No
status reports were presented during the quarter due to staff turnover, even though seven were due to be presented.
These seven status reports along with five additional status reports due during the fourth quarter of FY 2019 will be
presented in June 2019. Below is a summary of the open audit recommendations as of March 31, 2019:
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Citywide Cash
Handling and
Travel Expense
Issued: 09/15/10
Due – 04/09/19
10/23/18
03/21/18
08/22/17
11/10/15
09/23/14
09/10/13
10/22/12
04/19/11
Recommendations: 11
Open: 1
Implemented during
quarter: 0
Review practice of reimbursing employee meals
when not in a travel status and report the amounts as
income to employees to conform to Internal Revenue
Service requirements (ASD)
Attachment B
PAGE 6
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Inventory
Management
Issued: 02/18/14
Due – 04/09/19
10/23/18
11/02/17
09/23/14
Recommendations: 14
Open: 4
Implemented during
quarter: 0
Implement City’s inventory management policies and
procedures (ASD/UTL/PWD/IT)
Update and enforce inventory count policies and
procedures to ensure consistent and accurate
inventory records (ASD)
Identify, formalize, and communicate inventory
management goals and objectives to City
departments (ASD)
Ensure staff identify and use key SAP inventory
management reports and appropriately configure and
update SAP parameters that affect inventory levels
(ASD/IT)
Parking Funds
Issued: 12/15/15
Due – 03/12/19
06/21/18
11/14/17
Recommendations: 8
Open: 0
Implemented during
quarter: 1
Develop policies and procedures to clarify roles and
responsibilities and ensure accurate calculation and
reporting of parking-in-lieu fees (PCE, ASD, PWD, CLK)
Disability Rates
and Workers’
Compensation
Issued: 05/10/16
Due – 04/09/19
10/23/18
02/13/18
Recommendations: 15
Open: 4
Implemented during
quarter: 0
Review departmental procedures and safety
requirements to ensure they align with citywide
policies and procedures (HR)
Identify and provide industry-specific ergonomics and
general wellness training opportunities (HR)
Address the disability leave benefits incorrectly
reported as compensation to CalPERS (HR)
Ensure that data for managing disability leave is
accurately captured through SAP time reporting (HR)
Cable Franchise
and Public,
Education, and
Government
(PEG) Fees
Issued: 06/14/16
Due – 04/09/19
10/23/18
03/21/18
08/22/17
Recommendations: 9
Open: 6
Implemented during
quarter: 0
Assess ongoing need for PEG fees; place fees in
restricted account until decisions are made about use
of fees (CMO/ATTY/ASD/IT)
Determine whether to allocate unrestricted funds,
instead of PEG fees, to subsidize the Media Center’s
operations. (CMO/ATTY/ASD/IT)
Send letters to cable companies to demand payment
of underpaid franchise and PEG fees
(CMO/ATTY/ASD/IT)
Develop criteria for assessing the accuracy of future
cable franchise and PEG fee payments and require
more detail with payment remittances (ASD)
Assign responsibility for the cable communications
program and provide effective oversight of the
program (CMO/CLK)
Draft an ordinance to update the Palo Alto Municipal
Code based on clarified assignment of responsibility
(CMO/ASD/ATTY/CLK)
Attachment B
PAGE 7
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Community
Services
Department
(CSD): Fee
Schedule Audit
Issued: 02/14/17
Due – 03/12/19
06/21/18
11/14/17
Recommendations: 3
Open: 2
Implemented during
quarter: 0
Revise City’s cost recovery policy to align with
relevant laws and reconfigure the Questica budget
system to support fees that recover more than
100 percent of costs (ASD)
Configure SAP or the new ERP system to align cost
centers with CSD programs (CSD)
Continuous
Monitoring:
Payments
Issued: 04/13/17
Due – 04/9/19
10/23/18
03/21/18
Recommendations: 7
Open: 3
Implemented during
quarter: 0
Build a continuous monitoring process into the new
ERP system to identify potential duplicate invoices
and seek recovery of duplicate payments (ASD)
Build a continuous monitoring process into the new
ERP system to identify duplicate, incomplete, or
unused vendor records (ASD)
Clean vendor master file before merging data into
new ERP system (ASD)
Green Purchasing
Practices
Issued: 04/13/17
Due – 03/12/19
06/21/18
Recommendations: 8
Open: 6
Implemented during
quarter: 0
Clearly define department(s) responsible for
implementing green purchasing policies and
determine if additional staffing and funding are
needed to implement the policies (ASD/CMO)
Develop consolidated procedures to implement green
purchasing policies (CMO/ASD/PWD)
Educate City staff on green purchasing policies (ASD)
Evaluate potential for use of 40 percent post-
consumer fiber paper towels/other green janitorial
products and monitor janitorial contractor’s
compliance with green purchasing requirements
(PWD)
Evaluate if new e-procurement system or other
technology solution can help with tracking and
reporting green purchases and establish appropriate
green purchasing performance measures (ASD/PWD)
Require vendors to provide data on amounts of green
products and services that City purchases from them
(ASD/PWD)
Utilities
Department:
Cross Bore
Inspection
Contract
Issued: 06/01/17
Due – 03/12/19
06/21/18
Recommendations: 4
Open: 4
Implemented during
quarter: 0
Prioritize uninspected sewer pipelines for inspection
and disclose potential inspection challenges in future
contract solicitations (UTL)
Identify and update missing data in laterals database
(UTL)
Incorporate relevant provisions from National
Association of Sewer Service Companies’ contract
template in future sewer inspection contracts (UTL)
Identify gaps in staff expertise and develop a training
and certification plan for field staff who will monitor
field inspections (UTL)
Attachment B
PAGE 8
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Accuracy of
Water Meter
Billing
Issued: 08/16/17
Due – 03/12/19
06/21/18
Recommendations: 11
Open: 7
Implemented during
quarter: 0
Review and correct meter records for meters larger
than 2 inches (UTL)
Explore options for addressing equity in meter size
rates (UTL)
Develop a policy and procedures to report significant,
systemic infrastructure changes to Council and
update City of Palo Alto Utilities’ (CPAU) Rules and
Regulations as needed (UTL)
Seek direction from Council before proceeding with
installing additional electronic meters (UTL)
Determine if installed eMeters should be replaced
and if billing adjustments are required (UTL)
Clarify purchasing policy and procedures for product
standardization and sole source (ASD)
Retrain staff on purchasing policies and procedures
and completion of required forms (ASD)
Continuous
Monitoring:
Overtime
Issued: 09/06/17
Due – 03/12/19
None
Recommendations: 2
Open: 2
Implemented during
quarter: 0
Explore potential of developing a continuous
monitoring process for overtime (ASD)
Form a work group to design standardized overtime
management processes in the new ERP environment
(ASD)
Information
Technology and
Data Governance
Issued: 06/13/18
Due – 03/12/19
None
Recommendations: 4
Open: 4
Implemented during
quarter: 0
Assign roles and responsibilities for IT governance to
ensure that governance coveralls all key aspects of
the City’s information systems (IT)
Adopt an industry standard IT governance framework
and create a plan to achieve a process capability
model of “established” or higher (IT)
Assign roles and responsibilities for data governance
to ensure that governance coveralls all key aspects of
the City’s information systems (IT)
Adopt an industry standard data governance
framework and create a plan to achieve a process
capability model of “established” or higher (IT)
Business Registry
Issued: 08/28/18
Will be
determined
after Council
acceptance
Recommendations: 3
Open: 3
Implemented during
quarter: 0
Clarify existing and potential uses and priorities for
business registry data and update questions in
business registry survey as appropriate (CMO, DSD,
PCE, Trans)
Identify external data that can improve accuracy of
data collected and provide the data to the business
registry consultant (DSD)
Update business registry administrative manual to
reflect current process, including roles and
responsibilities (DSD and Attorney)
Attachment B
PAGE 9
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
Code
Enforcement
Issued: 11/06/18
Will be
determined
after Council
acceptance
Recommendations: 7
Open: 7
Implemented during
quarter: 0
Clarify the City’s code enforcement strategy and
priorities with the City Council; develop an updated
enforcement procedure that is aligned with the
strategy (CMO)
Update Municipal Code sections governing code
enforcement, including combining, clarifying, and
streamlining the administrative procedures and
clarifying roles and responsibilities (CMO)
Hold regular meetings with staff who have code
enforcement responsibilities to share information and
develop collective and consistent enforcement action
plans (CMO)
Identify what complaint and case data to capture,
track, and share internally and externally; determine
which system(s) to use to track data for each code
enforcement function, including standardizing code
enforcement terminology; design reporting processes
capable of aggregating data into a citywide view;
develop citywide performance measures for code
enforcement (CMO)
Reconfigure Accela Code Enforcement to enhance
data collection and reporting, to pave the way for
other functions that may adopt Accela (CMO)
Provide general, citywide information on code
enforcement in a central location on the City’s
website and assign responsibility for ensuring that the
information is kept up to date (CMO)
Assign staff to be responsible for citywide
administration of PaloAlto311 to provide ongoing
maintenance and support, including redefining
PaloAlto311 issue types and reconfiguring workflows,
managing user access and making training materials
available for new users, and updating and maintaining
the PaloAlto311 data and dashboard on the City’s
Open Data Portal (CMO)
ERP Planning –
Separation of
Duties
Issued: 10/17/18
Will be
determined
after Council
acceptance
Recommendations: 2
Open: 2
Implemented during
quarter: 0
Transfer task of entering Accounts Payable’s invoices
to ASD Administration; have Payroll redesign manual
controls to mitigate high-risk areas of separation of
duties conflicts; and share with Utilities relevant,
adopted separation of duties practices to ensure
consistency with ASD practices (ASD)
Revisit the design and definitions of profiles and roles
according to the concept of least privilege, where
possible (IT)
Attachment B
PAGE 10
Audit Title and
Report Date
Due Date and
Prior Status
Report Dates
Total
Recommendations/
Number Open Summary of Open Recommendations
ERP Planning –
Data
Standardization
Issued: 10/17/18
Will be
determined
after Council
acceptance
Recommendations: 4
Open: 4
Implemented during
quarter: 0
Provide governance over data standardization, such
as who is responsible and what is subject to data
standardization (IT)
Review other systems and determine what is subject
to data standardization, especially for data that feeds
into the SAP system (IT)
Work with Departments to review the data within
SAP and determine what will benefit most by
standardizing data (IT)
Require Departments to implement data
standardization requirements during data cleansing in
the ERP transition (IT)
Open Recommendations by Audit Issuance Date
Fiscal Year Audit Title Number of Open
Recommendations
2011 Citywide Cash Handling and Travel Expense 1 of 11
2014 Inventory Management 4 of 14
2016 Parking Funds 0 of 8
Cable Franchise and Public, Education, and Government (PEG) Fees 6 of 9
Disability Rates and Workers’ Compensation 4 of 15
2017 Community Services Department: Fee Schedule 2 of 3
Continuous Monitoring: Payments 3 of 7
Green Purchasing Practices 6 of 8
Utilities Department: Cross Bore Inspection Contract 4 of 4
2018 Accuracy of Water Meter Billing 7 of 11
Continuous Monitoring: Overtime 2 of 2
Information Technology and Data Governance 4 of 4
2019 Business Registry 3 of 3
Code Enforcement 7 of 7
ERP Planning – Separation of Duties 2 of 2
ERP Planning – Data Standardization 4 of 4
7
0 1 00
1
2
3
4
5
6
7
8
Q1 Q2 Q3 Q4
Number of Implemented
Recommendations by Quarter
15
15
13
16
0
20
40
60
Number of Open Recommendations
FY 19
FY 18
FY 17
Prior Fiscal Years
Attachment B
PAGE 11
Fraud, Waste, and Abuse Hotline Administration
The hotline review committee, composed of the City Auditor, the City Attorney, and the City Manager, or their
designees, meets as needed to review hotline-related activities. One complaint was received during the first quarter of
FY 2019, which was closed during the second quarter due to lack of receipt of additional information from complainant.
No complaints were received in the third quarter of FY 2019, and all prior-year complaints have been closed. The chart
below summarizes the status of complaints received in each fiscal year since the hotline was implemented.
7 3 2 13 9 0 10
2
4
6
8
10
12
14
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Status of Complaints Received by Fiscal Year
Closed Complaints
Open Complaints
Attachment B