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*Roll Call Amended
www.modestogov.com
AMENDED AGENDA
City of Modesto
SPECIAL AUDIT COMMITTEE
COUNCIL WORKSHOP
2001-40 Del Puerto Room
Tenth Street Place, 1010 10th Street
Modesto, California
(To Access Meeting Please See Instructions Below)
Thursday, October 26, 2023 at 4:00 PM
Roll Call: Sue Zwahlen, Chair
David Wright, Vice-Chair
Nick Bavaro, Member
* Jennifer Barillas, Public Member
* Camille Garcia, Public Member
Alternates: Eric Alvarez, Rosa Escutia-Braaton, Chris Ricci, Jeremiah Williams Council has not delegated directive or final approval authority to the Committees.
Committee actions are recommendations to the full City Council, not final decisions on an issue. * Public Comment will only be in-person. Members of the public who wish to address the Committee, by providing public comment, during the meeting must do so in-person in the 2001-40 Del Puerto Room. As an alternative, members of the public may also provide written public comment submitted via email as indicated in the Submitting Comments by Email instructions on this agenda. Zoom will still be available for viewing and Wordly translation. *Members of the public will be allowed to provide public comment through Zoom if a Committee Member is participating remotely pursuant to the provisions of Assembly Bill 2449 *Effective March 1, 2023, if a technical issue arises with Zoom or the phone dial-in option, the Committee meeting will continue unless the meeting is being held pursuant to the provisions of Assembly Bill 2449. Alternative viewing options are listed below, and the meeting is physically open to the public.
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“Wordly” can translate into 25+ different languages! To access written translation during the meeting, please scan the QR Code or click this link https://attend.wordly.ai/join/RJDY-6364.
"Wordly" puede traducir a más de 25 idiomas diferentes! Para acceder a la traducción durante la reunión, por favor escanee el código QR o haga clic en el enlace https://attend.wordly.ai/join/RJDY-6364.
You may observe a livestream of the meeting at http://media.modestogov.com. You may also view or listen to the meeting as indicated below.
THE MEETING CAN BE VIEWED BY ZOOM VIDEO
CONFERENCING OR TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
Enter the following link into an Internet Browser
https://us02web.zoom.us/j/86945970570,
Enter the following link into an Internet Browser https://zoom.us/ and using the Webinar ID 869 4597 0570
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To use Zoom, please visit: https://zoom.us/ and either sign-up for a free Zoom account or continue as a guest. Once you have downloaded the app onto your mobile device, joined from your web browser, or downloaded the Zoom software on your computer you will be ready for the upcoming Committee meeting.
Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can listen by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID 869 4597 0570 Passcode 84326
PUBLIC COMMENTS IN PERSON
Three-minute time limit per speaker
Only interested persons in the audience may present these matters. Under State law, Committee Members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee Member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.
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SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the Committee Members and placed in the record but will not be read aloud during the meeting. Written comments must be received two hours before the meeting.
This Agenda is on file in the City Clerk’s Office, Sixth Floor, 10th Street Place, Posting Board at entry of 10th Street Place, and is available on the City’s Web site at www.modestogov.com.
In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting.
CONSENT ITEMS – ROLL CALL VOTE REQUIRED:
Information concerning the consent items listed below has been forwarded to each Committee Member prior to this meeting for study. Unless some member of the audience or Committee Member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item.
Any and all of the following agenda items are subject to action by the Modesto City Council.
NEW BUSINESS
1. Internal Audit Overview and Discussion (Funding Source: Not Applicable) Receive presentation and provide direction related to Audit Committee logistics, such as meeting frequency, status report format, and process for recommendations.
CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected]
2. Consider Approval of the Proposed FY 23-24 Internal Audit Work Plan (Funding Source: Not Applicable)
Motion approving the Proposed FY 23-24 Internal Audit Work Plan and forwarding to Council for approval.
CITY AUDITOR; Colleen Rozillis, 206-302-6795, [email protected] - 3 -
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ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
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10/26/2023
City of Modesto:
Internal Audit Overview
October 2023
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01 02
03 04
05 Agenda
01 02
03 04
05 2 City of Modesto: Internal Audit Overview
INTERNAL AUDIT BACKGROUND
PURPOSE AND ROLE OF INTERNAL AUDIT
AUDIT COMMITTEE BEST PRACTICES
ANNUAL INTERNAL AUDIT PROCESS
RESOURCES
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• Different perspective than financial audit
• Objective and independent are not mutually
exclusive of collaborative and constructive
• Prioritize opportunities for reducing risks,
strengthening controls, and enhancing
performance
• Goes beyond the finance department
• Government code requirement to evaluate the
need
• Best practices
• Alignment with strategic goals
Why Internal Audit?
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Role of
Internal Audit
4 City of Modesto: Internal Audit Overview Source: IIA
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The City retained Moss Adams to serve as the
designated Internal Auditor and conduct projects
focusing on:
• Risks
• Internal controls
• Efficiency and effectiveness
• Best practices
• Compliance
Work is completed under appropriate industry
standards (IIA, GAGAS, AICPA)
Introduction to Moss Adams
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Your Internal
Audit Team
6 Jenny Fox
Audit Support
Charnee Foston
Capital Program, Construction
Audit Project Manager
Andrew Koumelis
Internal Control Audit Analyst
Kevin Villanueva
Lead, IT and CYB Audit
Brad Hagaman
Audit Support
Chelsea Ritchie
Internal Control Project
Manager
Jordan Wahl
Capital Program,
Construction/Contract Audit
Analyst
Colleen Rozillis
Lead, Operational/Performance
Audits
Colleen Rozillis
Engagement Partner
Terry Dinkins
Audit Support
Magda Tucker
Operational Audit Analyst
Stephen Bacchetti
Lead, Capital Program,
Construction/Contract Audits
CITY OF MODESTO
Halie Garcia
Lead, Internal
Controls/Compliance Audits
Tammy Lohr
Performance & Contract Audit
Project Manager
Annie Rose Favreau
Operational Audit Project
Manager
Maria Stroth
Operational Audit Analyst
Emily Hayes
Benchmarking & Survey Lead
Tommy Conkling
Audit Support
Micky Nguyen
Audit Support
Annie Fadely
Audit Support
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• Program development
• Training at all levels
• Follow up and follow through
• Confidentiality protection per CA state law
• Protection from retaliation
• Quarterly reporting
Administering FWA Program &
Ethics Hotline
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• Objective
• Independent
• Collaborative
• Constructive
• Comprehensive
Sustaining Philosophy &
Approach
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The purpose of the Audit Committee is to advise the City Council on items related to the work of the City Auditor and the City's financial statement audits. Among other duties, the Audit Committee shall:
1. Review the Auditor's audit plan annually and submit annually to the City Council;
2. Provide suggestions and comments for the annual audit plan;
3. Review and consult with the Auditor on quarterly reports or updates of the City Auditor's activities and findings;
4. Report irregularities raised by the Auditor to the City Council;
5. Ensure that audit reports are transmitted to the legislative body and to the public;
6. Monitor follow-up on reported findings to assure corrective action is taken by management;
7. Report to the legislative body on problems or problem areas at such times as deemed appropriate
8. Provide input on, and participate in, the selection of the firm conducting the annual financial statement audits; and
9. Review and forward to the City Council materials related to the City's annual financial statement audit Modesto Audit Committee Purpose and Duties
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Oversight Effectiveness
Independent review and oversight of the City’s financial reporting process, internal controls, and audit functions Align audit committee meeting agendas
and meetings with priority areas
Ensure management properly develops and adheres to a
system of internal controls, procedures are in place to assess management practices, and independent auditors
objectively assess financial reporting practices
Distribute materials in advance to enable
review
Understand and monitor City risks, mitigation strategies, and corrective actions
Highlight issues and critical discussion
points
Understand and oversee the FWA program Encourage open dialogue and candid discussion to promote improvements
Shape the internal audit program by directing areas of
focus and approving work plans
GFOA Audit Committee Guidance
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Internal Audit Program Components
Internal Audit Plan
Risks Internal
Controls Compliance Performance
Accounting and financial reporting, asset management, capital programs, compliance, economics and funding, fraud, governance, human resources, internal controls, maintenance and operations, management, operations and service delivery, organization and staffing, processes and procedures, procurement, public safety, risk management, and technology
Functions Components Plan
City Internal Audit Annual
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Holistic Internal Audit Program Components
Tracking &
Reporting A Program Inputs B Opportunities C
• Enterprise
Assessments
• Employees and
Residents
• Performance
Metrics
• Risks
• Controls
• Compliance
• Performance
• Findings &
Recommendations
• Corrective Actions
• Implementation
• Validation
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Key Inputs
ANNUAL AUDIT
PROGRAM
PERFORMANCE
METRICS
EMPLOYEES &
ENTERPRISE STAKEHOLDERS
ASSESSMENTS
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Enterprise Assessments
Enterprise Risk Assessment Enterprise Internal Controls Review Asset Management and Capital Program Payroll
Operations/Service Delivery Monthly Account Reconciliation and Closing Risk Management and Internal Controls Budgeting
Governance, Management, and Organization Cash Receipts and Cash Handling Funding and Economics Revenues and Billings
Human Resources Accounts Receivables and Write-offs
Technology Grants Management and Compliance
Safety and Security Information Technology Access
Accounting, Financial Reporting, and Procurement Accounts Payable Fraud, Waste, and Abuse Overall Control Environment
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Typical Internal Audit Program
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Internal Control Testing
Performance Audit
Ongoing Internal Audit Program Management
July Oct Jan Apr
= Quarterly Audit Committee Meetings
Present annual work plan in May for Committee approval and forward to Council Internal Control Review Policy Review
Efficiency Study
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• Meeting frequency
• Content and format of status reports
• Finding and recommendation tracking and
validation
Audit Committee Logistics
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• Government Finance Officer’s Association (GFOA)
• GFOA Best Practices Guide on Audit Committees
• Institute of Internal Auditors
• IIA Publication “The Audit Committee: Internal
Audit Oversight”
• U.S. Government Accountability Office (GAO)
• American Institute of Certified Public Accountants
• Association of Certified Fraud Examiners
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Resources
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Questions?
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The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought.
Assurance, tax, and consulting offered through Moss Adams LLP. ISO/IEC 27001 services offered through Cadence Assurance LLC, a Moss Adams company.
Investment advisory offered through Moss Adams Wealth Advisors LLC. ©2022 Moss Adams LLP
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CITY OF MODESTO
I. PROJECT UNDERSTANDING
The City of Modesto engaged Moss Adams LLP to provide internal and performance audit consulting services. Based on the current status of the City’s internal audit function, we propose multiple projects for FY 23-24, as well as ongoing program management. The proposed scopes, timing, and budgets are described below.
II. PROPOSED PROJECTS: FY 23-24
Internal Audit Program Establishment
Scope: Re-establish the City’s internal audit program through the following activities:
- Interview Audit Committee members, City Council, and department leadership to gain an understanding of the City’s current goals, risks, and priorities for the internal audit function - Review 2022 enterprise risk assessment, last three years’ financial statement and single audit reports, budgets, organization charts, performance metrics, and other relevant documentation - Conduct entrance meeting with Audit Committee to determine meeting frequency and communication protocols
- Conduct training for Audit Committee on roles and responsibilities and best practices - Conduct training for the City’s department head group on the purpose and role of internal audit, roles, and responsibilities
Timing: October-December 2023
Fees: $10,000
Internal Controls Review
Scope: Conduct a review of the City’s internal controls, comparing to best practices, focusing on key controls that are critical to protecting the City’s assets and compliance with policies:
- Identify control objectives in specific areas and identify controls that would satisfy each control objective
- Review policies and procedures
- Examine relevant documentation in support of select key controls - Perform control walkthroughs to observe the design of key controls and understand workflow processes
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Scope of Work for City of Modesto | 2
II. PROPOSED PROJECTS: FY 23-24
- Determine the characteristics of each relevant control activity (i.e., who performs it; how often it is designed to operate; whether it is designed to mitigate fraud; whether it is manual or automated; and whether it is preventive, detective, or corrective) - Assess whether the controls in place would prevent or detect errors - Identify key controls that need to be implemented or changed - Evaluate monitoring activities currently in place
Timing: October 2023-February 2024
Fees: $40,000
Fraud, Waste, and Abuse Policy Update and Training
Scope: Review and update the City’s Fraud, Waste, and Abuse (FWA) policies and procedures; conduct training for City staff and elected officials.
- Review the current FWA policy and procedure for alignment with best practice, state law, and City policies, and identify recommended updates
- Review policy and procedure updates with City Attorney, Human Resources, and other relevant stakeholders, and finalize
- Provide training sessions (in-person and virtual or recorded) to City staff, supervisors, and elected officials
Timing: September-December 2023
Fees: $20,000
Additional Audits to Be Determined
Scope: Based on the results of our internal controls review, the 2022 enterprise risk assessment, and interviews with Council and management, identify a project to mitigate risk, improve internal controls, and/or improve performance.
• Develop scope in collaboration with City leadership
• Conduct fieldwork and analysis
• Develop draft and final reports
• Present results to Audit Committee
Timing: TBD
Fees: $25,000 to $50,000 per audit
Ongoing Program Management
Scope:
- Conduct bi-weekly status calls with the City’s project manager - Manage the program and perform quality assurance
- Manage the City’s FWA hotline
- Support the Audit Committee and City Manager’s Office by conducting research, surveys, analysis, and other on-call consulting
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Scope of Work for City of Modesto | 3
II. PROPOSED PROJECTS: FY 23-24
- Present project plans and results to the Audit Committee, City Council, and leadership team Timing: Ongoing
IV. TIMELINE
Project Budget J A S O N D J F M A M J
Internal Controls
Review $40,000
Internal Audit
Program
Establishment
$10,000
Fraud, Waste, and
Abuse Policy Update
and Training
$20,000
TBD Project 1 $25,000-
$50,000
TBD Project 2 $25,000-
$50,000
TBD Project 3 $25,000-
$50,000
Ongoing Program
Management $30,000
Total Fees $250,000
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