Title
Consider Directing Staff to Place the Audit Report Approved April 20, 2021 on a Future Agenda to Allow the City Auditor to Give a Presentation. (Councilmember Herrera Spencer)
Body
COUNCIL REFERRAL FORM
The Council can take any of the following actions:
1) Take no action.
2) Refer the matter to staff to schedule as a future City Council agenda item. Concurrence that staff time will be devoted to the item does not signify approval.
3) Take dispositive action only on time sensitive legislative matters if sufficiently noticed such that the public and Council have been provided sufficient information by the published agenda, and no formal published notice of a public hearing is required.
Name of Councilmember requesting referral: Councilmember Trish Herrera Spencer
Date of submission to City Clerk (must be submitted before 5:00 p.m. on the Monday two weeks before the Council meeting requested): 5/3/2021
Council Meeting date: 5/18/2021
Brief description of the subject to be printed on the agenda, sufficient to inform the City Council and public of the nature of the referral:
At the City Council Agenda April 20, 2021, Special Meeting of the Successor Agency to the Community Improvement Commission (SACIC), Agenda Item 2-C, Recommendation to Accept the Fiscal Year 2019-20 Audited Financial Statements and Compliance Reports, the City Auditor Kevin Kearney was precluded from completing his remarks. Auditor Kevin Kearney had contacted staff prior to the April 20, 2021 meeting (similar to what he always does) informing staff that he would be calling in via Zoom to speak on the item. There may have been a misunderstanding between staff prior to the meeting or by staff when they agendized the item, however, the elected City Auditor was given only two minutes to speak and was not allowed to complete his report. At that time, my motion to extend his speaking time required a supermajority of Council to pass and failed since only three councilmembers supported (Councilmembers Daysog, Knox White, and myself).
Thus, I am requesting that Council allow the elected City Auditor to complete his comments on the Fiscal Year 2019-20 Audited Financial Statements and Compliance Reports and that the item be agendized as soon as possible.
The auditor is an elected City official pursuant to the City Charter with enumerated duties. [Article IV, p. 10.]
<https://www.alamedaca.gov/files/assets/public/departments/alameda/city-clerk/documents/2016_alameda_city_charter_0.pdf>
ARTICLE IV Auditor
Sec. 4-1. The Auditor shall have, at the time of his/her election, a degree in accounting or business administration or be licensed as a Certified Public Accountant and five years of accounting experience.
Sec. 4-2. The Auditor shall provide for at least annual audits of the City's financial operations, books and records to assure that the City's financial transactions, accounts and records are maintained in accordance with the requirements of the City Charter, state and federal laws and generally accepted accounting principles.
It is especially critical that the Auditor be allowed to complete his public comments because of the City's audit findings of Material Weaknesses and Significant Deficiencies. The staff report for Agenda Item 2-C, in pertinent part, includes:
"The City implemented the provisions of Statement No. 95 in FY 2020.
The Management Letter lists material weaknesses, other matters, and significant deficiencies identified by the auditors during their review and testing as noted below:
Material Weaknesses
• 2020-01- Timeliness and Accuracy of Year-End Close
Significant Deficiencies
• 2020-02 - Prior Year Recommendations Not Yet Implemented
o 2019-02 - Segregation of Duties in Major Control Areas
o 2019-03 - Timely Review of Bank Reconciliations
o 2019-04 - Timely Preparation and Review of Quarterly Investment Reports
o 2018-01 - Segregation of Duties in Major Control Areas
o 2018-03 - Purchasing Policy Compliance
Other Matters
• 2020-03 - Investment Policy and Procedures Internal Controls
Significant Deficiencies in the Alameda Municipal Power Audit
• 2020-01 - Inventory Observations
The Management Letter lists the findings by the auditors during their review and testing. Staff prepared responses to the audit findings that are included in the attached report and will work on strengthening the internal controls in FY 2021."
Furthermore, The Single Audit Report, Exhibit 10, provides,
"Our audit did disclose significant deficiencies and material weaknesses..
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. We identified certain deficiencies in internal control, we consider to be material weaknesses as listed on the Schedule of Material Weaknesses, included as part of our separately issued Memorandum on Internal Control dated March 17, 2021, which is an integral part of our audits and should be read in conjunction with this report.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We identified certain deficiencies in internal control, we consider to be significant deficiencies as listed on the Schedule of Significant Deficiencies included as part of our separately issued Memorandum on Internal Control date March 17, 2021, which is an integral part of our audits and should be read in conjunction with this report
...The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it."
file:///C:/Users/star/Downloads/Exhibit%2010%20-%20Single%20Audit%20Report.pdf </..//../Users/star/Downloads/Exhibit 10 - Single Audit Report.pdf>
The City Council, at its July 25, 2020 Priority Setting Workshop, established the following 5 priorities for 2021:
1. Preparing Alameda for the future
2. Encouraging economic development across the Island
3. Supporting enhanced livability and quality of life, including addressing the housing crisis and homelessness
4. Protecting core services
5. Ensuring effective and efficient operations
Briefly describe which Council priority the subject falls under and how it relates:
The matter falls under Priorities 1 and 5 due to potential impacts based on material weaknesses.
[Since this referral was submitted prior to the form being revised on May 18, 2021 the Priority Ranking was as follows:
Priority Ranking:
|
↑ Urgent |
2 |
3 |
|
|
1 |
4 |
|
|
Important → |
____ 1 = Not urgent, not important
____ 2 = Urgent, not important
_X__ 3 = Urgent and important
____ 4 = Not urgent, important]