TO: City Council CC: Roger Fraser, City Administrator FROM: Tom Crawford, CFO DATE: December 22, 2008 SUBJECT: FY2008 Audit Report On Friday, December 19, 2008, Council’s Audit Committee met with the City’s outside audit firm (Abraham & Gaffney, PC) and City staff to review the results of the FY 2008 Comprehensive Annual Financial Report (CAFR). The committee reviewed, discussed and accepted the report and its findings. A full copy of this report will be published on the City’s website by December 31, 2008, and has also been distributed to the Council mailboxes. In discussions with the Audit Committee, there were clarifications requested concerning the follow-up on finding 2008-1, which states: 2008-1 PURCHASE OF TELEVISIONS FOR MAINTENANCE FACILITY Criteria: Appropriate use of public funds, also compliance with City administrative policy #208 and #512. Purchasing policy #208 calls for the following: + All purchases over $3,000 require the issuance of a purchase order and the approval of the Service Area Administrator. + For “sole source” purchases, written documentation that a specified item cannot be obtained from any other source must be submitted. + Purchases over $10,000 require living wage and civil rights certifications. Credit Card Policy #512 calls for the following: + Applicable requirements of policy #208 must be followed. + Purchases must not be split to circumvent procurement procedures Condition: During the performance of our audit procedures and inquiries related to purchasing card use, it came to our attention that certain employees at the City maintenance facility had purchased eleven (11) flat-screen televisions for use at the facility. Also purchased were several DVD players, HDMI cables, and custom installation services. These purchases were not approved in advance by the Service Area Administrator. The purchases were made using the City credit cards of several employees and arranged in such a way that they would not exceed applicable credit limits on the cards. Effect: These purchases appear to be an inappropriate use of public funds. Also, the City is not in compliance with administrative policies #208 and #512. Recommendation: We recommend that all such purchases be discontinued in the future. We recommend City evaluate the ongoing need for and business purpose satisfied by these items. Corrective Action Response: Management understands the auditors’ concerns and wants to reiterate our commitment to complying with all policies. We have re-educated staff and clearly communicated to the involved employees the importance of adhering to financial policies as they are a key component in our effort for transparency in government. Management believes we have appropriately addressed this issue and it will not occur in the future. In responding to this issue, management considered the policy compliance and business purpose issues separately as follows: Policy compliance: The manager involved with this issue received individual counseling, a suspension of p-card privileges for six months, and a note in the manager’s personnel file. Business purpose: Management re-evaluated the business purpose for the eleven televisions and determined seven are appropriate for the facility in light of the business use. These televisions are installed in the various meeting areas in the facility including two conference rooms as well as the supervisors’ and crew meeting rooms. The Wheeler Center houses most of the City’s Field Services activities. Employees are frequently not in the facility. However, at the beginning and the end of the day, there is a need for intensive sharing of information. The televisions permit on-site training, organizational information sharing, and critical updates to weather and other events that affect staff operations. In addition, the conference rooms are available for all employees to schedule meetings and training. Shortly, the conference rooms will be available for scheduling meetings through the City’s room reservation system located in Microsoft Outlook. The remaining four televisions will be re-deployed in other areas of the City where City services can be enhanced by availability of the televisions to staff or the public. If Council members have any additional questions, please let me know.