Ad Hoc Audit Committee

Regular Meeting

Lansing, MI · November 18, 2024

Minutes

MINUTES Ad Hoc Audit Committee Monday, November 18, 2024 @ 4:00 p.m. City Council Conference Room CALL TO ORDER Council Member Spadafore called the meeting to order at 4:07 p.m. PRESENT Council Member Peter Spadafore, Chair Council Member Tamera Carter, Vice Chair- arrived at 4:08 Council Member Trini Pehlivanoglu, Member OTHERS PRESENT Sherrie Boak, Council Office Manager Charles Randall, Internal Auditor Lisa Hagen- Lawrence, OCA Minutes MOTION BY COUNCIL MEMBER PEHLIVANOGLU TO APPROVE THE MINUTES FROM OCTOBER 28, 2024 AS PRESENTED. MOTION CARRIED 2-0. Public Comment No public comment at this time. Discussion/Action: Continued DISCUSSION – Defined Annual Audit Plan Council Member Spadafore recapped the charge from the last meeting for the Internal Auditor. After the update, this Committee will present feedback and if there is any changes those will be made and submitted to Council on 12/16/2024 in their Committee report. Council Member Pehlivanoglu asked, once this Committee approves and move forward, then will Council have input as well. Council Memer Spadafore confirmed, however there is another charge for the Committee as well before the report goes to Council, which is to decide if they want to proceed with this Committee in the future as a permanent City Council Committee. Council Member Spadafore concluded that if this Committee seeks to have that occur, they can look at a resolution amending the Council Rules adding Committee on Audit. Mr. Charles Randall went through his proposed FY 2025 Audit plan, which has a priority using the payroll, invoices and expense report as high audit areas. By looking at the City 2025 budget he would look at the department spending, allocating out testing samples. For a control test, he believes that you would not allocate it out if is being done the same in all departments. This will be same control testing, the samples will be sub-selected to each department. Police and fire have the largest spending and payroll, therefore being first. There will be a focus on police and fire beginning in December and running through February. Mr. Charles Randall anticipates samples will not be completed but carry over to March, because he anticipates questions. He will then begin adding in Public service, Parks and others. Mr. Charles Randall stated he plans to have all testing completed in May and report out in June/July. The expense reporting will not be broken out by department, because they are not balancing expenses on credit cards monthly. Council Member Spadafore asked what his process will be for payroll. Mr. Charles Randall stated that there is an employee entering their time sheet, supervisor approving, using time to processing payroll, then sent on to distribution. Council Member Carter asked how he determined the number of samples. Mr. Charles Randall stated that normally for control you would do 45, and this is just to get a baseline for most departments. This is over sampling, but wanted depth so they are aware the payroll and invoices are being audited. Regarding invoicing, they depend on the department based on their monthly invoicing. Council Member Carter asked for January, if the police and fire will carry over to March due to the volume, and Mr. Charles Randall confirmed he anticipates that, due to volume and potential questions. Mr. Charles Randall assured the Committee that he plans to provide monthly status reports to this Committee. Council Member Spadafore referred back to an earlier statement made where the audit would be on expense reporting on credit cards, asking if there are also cash reimbursement expense reports to be audited. Ms. Boak confirmed that the City does do expense reports, and Mr. Charles Randall stated he would ask Finance about that and see what the volume is. Council Member Pehlivanoglu asked if the departments roll into later months then listed on the timeline, will the sample numbers be adjusted. Mr. Charles Randall assured the Committee that there should be enough time, because with payroll the process is the same for everyone; not a lot of variation. This is set for the highest number first, and depending on this committee feedback could shut off. Council Member Spadafore asked for Mr. Charles Randall to make the update and the Committee will finalize at their 12/9/2024 meeting, along with deliberation and action on a resolution to adopt the audit plan and recommend a permanent audit Committee to the Council at their 12/16/2024 meeting. OTHER No other topics of discussion. ADJOURN Adjourned at 4:21 p.m. Submitted by, Sherrie Boak, Recording Secretary, Lansing City Council Approved by the Committee as amended on December 9, 2024

Agenda

Packet

AGENDA Ad Hoc Audit Committee November 18, 2024 at 4:00 PM Lansing City Hall, City Council Conference Room 124 W. Michigan Avenue, 10th Floor To provide input or ask questions on any item that is listed on the agenda, members of the public may contact the City Council at city.council@lansingmi.gov or (517) 483-4177 prior to the meeting. To participate in public comment and view the meeting live: https://www.lansingmi.gov/1212/Council-Committee-Meetings Councilmember Peter Spadafore, Chairperson Councilmember Tamera Carter, Vice Chairperson Councilmember Trini Pehlivanoglu, Member 1. Call to Order 2. Roll Call 3. Minutes A. October 28, 2024 4. Public Comment on Agenda Items (Up to 3 Minutes) 5. Discussion/Action: B. Continued Discussion on a Defined Annual Audit Plan - Internal Auditor 6. Other 7. Adjourn Persons with disabilities who need an accommodation to fully participate in these meetings should contact the City Council Office at 517-483-4177 (TTY 711) 24 hour notice may be needed for certain accommodations. An attempt will be made to grant all reasonable accommodation requests. Page 1 of 5 DRAFT MINUTES Ad Hoc Audit Committee Monday, October 28, 2024 @ 4:00 p.m. City Council Conference Room CALL TO ORDER Council Member Spadafore called the meeting to order at 4:01 p.m. PRESENT Council Member Peter Spadafore, Chair Council Member Tamera Carter, Vice Chair Council Member Trini Pehlivanoglu, Member OTHERS PRESENT Sherrie Boak, Council Office Manager Charles Randall, Internal Auditor Lisa Hagen- Lawrence, OCA Desiree Kirkland, Finance Minutes MOTION BY COUNCIL MEMBER CARTER TO APPROVE THE MINUTES FROM OCTOBER 7, 2024 AS PRESENTED. MOTION CARRIED 3-0. Public Comment No public comment at this time. Discussion/Action: DISCUSSION – Annual Audit Plan as Proposed by Internal Auditor DISCUSSION – Internal Auditor Audit Schedule Council Member Spadafore noted that since 10/7/2024 the Internal Auditor has been working on documents. Mr. Randall went over the “Crash Course” document in the packet. He noted this matches with the IAA – Internal Audit Association. Outlined next was the Ad Hoc Audit Committee role providing guidance and oversight. Mr. Randall summarized where this all fits within the organization. Included in the document was a Internal Audit Three Lines Model along with how those are performed in the audit process. Council Member Spadafore asked Mr. Randall to define “risk”, and he stated “risk” which is the possibility of something bad happening; what could go wrong, and how do we prevent or address the impact. This about managing the day to day activities. Page 2 of 5 DRAFT Council Member Carter asked for the introduce meeting, is there a time frame. Mr. Randall stated the timing is depending on activities that are coming up, but his role is to be respective of their responsibilities but also laying out the timeline of his audit to collaborate with the departments. Council Member Pehlivanoglu asked about the interviews, and who those people would be. Mr. Randall stated this would be with the key individuals to map out what is going on with the audit. It would be more detailed in the understanding, and the interviews with management would have been in the initial request. Mr. Randall then went through a handout distributed at the meeting on an example of Intern Control Audit Strategy. This outlined accuracy and valuation, existence, completeness, rights and obligations. There would also be the population, the scope before the testing of the internal controls. If there is a reconciliation performed, will it be performed the same every time. Lastly, Mr. Randall went through the draft audit plan which list out the categories in the Charter. Things adherent to the position, key activities to perform throughout the year, who is key in the organization, expense/disbursement focus, internal controls, monitor material changes, processes and systems. To start he noted he would start looking at samples per month, any findings, then coming towards year end finalizing. Regarding material changes, monitoring key project management activities; milestones being met, as systems implemented monitoring to make sure those steps are continuing. Regarding internal controls of financial reporting; material weaknesses, significant deficiency in processing of payroll; compliance with laws. Council Member Carter asked about the timeline on monthly samplings; will that report back to Ad Hoc or the full Council. Mr. Randall stated it would be Ad Hoc, and Council Member Spadafore noted then this Committee would report out. Council Member Spadafore asked if with the audit plan can be a defined plan on when those engagement letters would be coming, and Mr. Randall confirmed. He was asked to refine the plan by the next meeting on November 18, 2024. Mr. Randall asked the Committee if there was anything specific the Committee wants added. The Committee consensus was interested in the calendar for the next year on which departments. Council Member Carter asked if the Mayor response would be back to the Ad Hoc. Council Member Spadafore asked OCA that the Mayor adhere to the Charter. Ms. Hagen-Lawrence read the Charter stated it is referred to the Mayor, but no response. It indicates it is a presentation to the full Council on the report, and it be provided to the Mayor, but she did not see any requirement from the Mayor. (4-102.6) does speak to response from the Mayor, within 30 days and recommendation to irregularities. It is not in the Internal Auditor section of the Charter but in the Mayor. Where there is a irregularity, presented to Council, provided to Administration, then within 30 days Mayor can respond to the report. Council Member Pehlivanoglu asked Mr. Randall, that if when he goes through the process if he does not have the resources, please let the Ad Hoc Committee aware. Council Member Spadafore noted that by November 18th the Committee should be firming up what to present to the full Council in December. Page 3 of 5 DRAFT OTHER No other topics of discussion. ADJOURN Adjourned at 4:26 p.m. Submitted by, Sherrie Boak, Recording Secretary, Lansing City Council Approved by the Committee on Page 4 of 5 CITY OF LANSING INTERNAL AUDITOR 124 W MICHIGAN AVE FL 10 LANSING MI 48933-1605 (517) 483-4159 Date: November 18, 2024 To: Ad-Hoc Committee From: Charles H Randall, Internal Auditor Subject: 2025 Audit Plan FY 2025 Audit Plan Process Timeline & Sampling Allocation Dec Jan Feb Mar Apr May Jun Process / Depts Police Police Fire Public Svc Park & Rec All Other Total Process Payroll 18 55 57 2 7 11 150 Invoices 4 12 8 16 3 7 50 Total Dept 22 67 65 18 10 18 200 Non-Dept Exp Rpt 10 0 0 5 5 5 25 Reporting Plan Monthly Status Report @ first Ad-Hoc meeting of the month. Department Control Report Process Report Page 5 of 5