CSMFO Magazine May 2016 by CSMFO Magazine

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The California Society of Municipal Finance Officers is the statewide organization serving all California municipal finance professionals. We promote excellence in financial management through innovation, continuing education and the professional development of our members. CSMFO members are deeply involved in the key issues facing local agencies. We value honesty and integrity, and adhere to the highest standards of ethical conduct. Thank you to all the authors in this issue for sharing with us their time and expertise. If you have an idea for a future article, please contact Melissa Dixon at the CSMFO office at melissa.dixon@staff. csmfo.org.

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For more information on CSMFO or this Magazine, please contact the CSMFO office at 916.231.2137 or visit the website at www.csmfo.org.

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CONTENTS MAY 2016

6 9

President’s Letter John Adams

Executive Director’s Letter Melissa Dixon

A Viewpoint from a Managing Partner of an Audit Firm

Managing the Independent Audit RFP Process

CSMFO Brings New Training Opportunities

Tips for Streamlining Audit Prep

Richard K. Kikuchi

Matt N. Pressey Scott Catlett

Debbie Harper

League Policy Committee Update: Environmental Quality

24 26 28 34 35

The Trust Factor

37 39

Diary of a Host Committee Chair

Kenneth Pun

New webpage, same goal Marcus Pimentel

STOP THIEF! Ernie Cooper

Reaching the Summit with CMTA John Adams

Message from CMTA President Margaret Moggia Drew Corbett

Job Opportunities

Kathryn Downs

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It is our Responsibility to Set the Tone As I started writing this month’s President’s Message, I quickly recognized that it will probably be one of the more challenging messages for me to write because of this month’s focus on fraud and audits. Not to mention, it does not really help if you start it late, thus the primary reason why the Magazine is a little late this month!

PRESIDENT’S LETTER JOHN ADAMS

JOHN ADAMS FACTS

John’s dream car is a Porsche 911.

For over half a century, the Richard K. Kikuchi, CPA, Managing California Society of Municipal Finance Partner with Lance, Soll, & Lunghard, LLP Officers has promoted values of honesty (LSL). and integrity, and expects its members Hopefully you will take the to adhere to the highest standards of opportunity to read Margaret’s ethical conduct in performing their message to CMTA members, which duties. In light of recent news, I thought she allowed us to reprint in this issue I would write on our responsibility of CSMFO Magazine. The message as municipal finance officers to be reminds us of the importance of more diligent in promoting a strong internal control a higher standard in framework regardless of financial management the size of the agency; by increasing “I am blessed to that following best transparency and practices is crucial work for a premier engaging our and policies & agency that has a governing boards. procedures are

governing board

Unfortunately, a must; that you that sets the tone at fraud does occur should engage your the top” and impacts both staff, management, private and public and business entities. And no partners to assist you in matter how strong the strengthening your controls controls, you cannot eliminate as our environment has changed fraud; you can only mitigate it and with new technologies and processes reduce the potential for it to occur. As that are developed to be more efficient, a government finance officer that has potentially making controls weaker. a fiduciary responsible in managing But the most important part of her public funds, I want to share my message is that embracing a culture thoughts with the members of CSMFO where proper education and training on fraud that impacts local agencies. is a requirement must be a priority. For agencies not to invest in training Before doing so, there are two is penny wise and pound foolish. people to whom I want to express my CSMFO, CMTA, and GFOA provide appreciation for sharing their thoughts tremendous trainings that are well worth with me: the investment. Margaret Moggia, CPA, Finance Director with West Basin Municipal Water District and President of the California Municipal Treasurers Association; CSMFO MAGAZINE MAY 2016

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Also included this month is an article written by a close colleague that I have known for almost 20 years, Rich Kikuchi with LSL. After the news regarding Placentia broke, I reached out to Rich to see how he was doing, get his thoughts, and to provide him support, as LSL is the external financial auditor for Placentia. Over the next couple of weeks, LSL provided email updates to their clients regarding the incident. The alleged incident in Placentia really impacted Rich’s perspective on the challenges that exist within the municipal finance profession. When fraud does occur, the perpetrator is ultimately held accountable. Unfortunately, it is often assumed that the agency’s external financial auditors also share some responsibility. That perspective is usually wrong, as it is management and governing boards who are responsible for internal controls that mitigate risks like fraud.

From my experience, you have to advocate for and emphasize: 1) the importance of highly trained and technical staff, 2) the need for an internal auditor, 3) the establishment of an audit committee, 4) development of comprehensive policies and procedures, 5) annual funding for internal control audits, 6) deploying an employee fraud hotline, and 7) preparation of a city-wide risk assessment. These items should be your baseline, and are well worth the investment. To conclude, I want to leave you with a quote from Winston Churchill. “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Please take this opportunity to talk to your staff, management and governing board and discuss how you can improve your organization to avoid being the next headline.

Please read his article and consider how you as a finance officer can set the tone for your agency and enhance your internal audit functions. Now, as for my perspective, I am blessed to work for a premier agency that has a governing board that sets the tone at the top. Honesty, integrity, and the highest ethical standards are the starting point for my City Council. I am fortunate that they have allocated the resources to safeguard the public assets that I have a fiduciary responsibility to protect. With the recent news, we have an opportunity to engage with those that are in charge of governance. We need to educate them on internal controls, specifically discussing COSO’s Internal Control Integrated Framework and focusing on the five components; 1) Control Environment, 2) Risk Assessment, 3) Control Activities, 4) Information and Communication, and 5) Monitoring Activities.

7 CSMFO MAGAZINE MAY 2016

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How to Get Away With Murder O

EXECUTIVE DIRECTOR’S LETTER MELISSA DIXON

MELISSA DIXON FACTS

Melissa is portraying Regan in a film adaptation of King Lear.

kay, maybe not murder. ‘How to Get Away With Fraud’ would be more accurate. Or ‘How to Get Away With Other People’s Money’. That at least has a sexier ring to it. I imagine the audits I go through are wasn’t monitoring those dollars. Chapter markedly different than yours…in scope, bank accounts were typically held by if nothing else. But I still get asked all the chair’s agency or, worse, in the the standard audit questions, my favorite chair’s name directly. Nothing was of which is “How could someone commit under CSMFO’s tax ID, though the fraud within this organization?” It’s a chapters were affiliated with CSMFO question that forces you to think like a and operating under its name. This criminal, and I find it fascinating. I fancy response spawned an audit comment myself Danny Ocean trying to steal that later led to CSMFO handling the from the Bellagio, or Mark Wahlberg banking/accounting for the chapters. from The Italian Job. (Interesting—I Now, chapter chairs provide meeting can’t come up with any information to the CSMFO office, female movie criminal and we take payments here masterminds. Maybe at headquarters (credit Kathleen Turner in card and check). While I Body Heat, but suppose there’s still the then you get into possibility of someone the femme fatale paying with cash “your dedication and onsite and the person caricature. Are there any movies efforts are very much at the door pocketing that feature a the money, the risk of appreciated.” female criminal fraudulent activity is mastermind that greatly reduced. It’s a doesn’t somehow satisfying thing, feeling use sex to get away like you had a hand in with the crime? If you making the organization a can think of any, let me tighter ship. know! But I digress.) I begin In light of the recent headlines out of thinking of the ways CSMFO brings Placentia, I questioned whether to be in money…it’s easier, at least at the so flippant on the title of this article. association level, to commit fraud as I decided it was catchy, and I don’t the money comes in rather than goes believe in not being fun or creative out. We have checks and balances simply because there are people in the on outgoing checks, multiple people world who do bad things. What you looking at bank reconciliations and do—the trust inherent in your positions approving check runs and I just don’t as keepers of public funds—it’s a see a possibility there without getting all sacred thing. And those that abuse Neal Caffrey* about it. So, incoming that trust aren’t just stealing from their funds…checks coming into the office agency—they’re damaging the public’s are all addressed to CSMFO. Credit perception of the good work that the rest card transactions deposit directly into of you do. It’s abhorrent and sad and CSMFO’s bank account. The only disappointing, and I feel for the honest weak link is when someone pays majority of you that have to weather onsite. And typically that happens the repercussions of the dishonest few. at the chapter level. A couple years Know that your dedication and efforts ago, I was asked this question from are very much appreciated. CSMFO’s auditor and my response was that to commit fraud against CSMFO, someone could become a Chapter Chair because, at the time, CSMFO *from the TV show White Collar

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Viewpoint from a Managing Partner of an Audit Firm

By Richard K. Kikuchi, Partner Lance, Soll & Lunghard, LLP

In light of the recent events at the City of Placentia, I would like to use this opportunity to share some of my thoughts regarding the audits of local governments. First of all, my heart aches for all who were closely affected by the recent occurrence: the City Council members, citizens and the hardworking dedicated honest employees of the City. Secondly, the thoughts in this letter are not just for myself, not just for the firm of LSL, but I believe all the other CPA firms conducting the audits of local governments. Hardworking and dedicated professionals who are passionately dedicated to abiding by professional standards and providing valuable information to the governing boards of governments throughout the country. Our world is ever changing and local governments are no exception. Over the recent years we have seen a significant strain on local government budgets caused by the overall economic climate and most recently with the tremendous and transparent rising costs of government pensions. Due to financial strains, budgets for local governments have been significantly trimmed. This has, among other things, resulted in reduced personnel for local government (which ultimately reduces internal controls due to lessened segregation of duties) and has required government officials to make difficult decisions on where to spend and how to cut. Governing Board Members and Administrators......my heart goes out to CSMFO MAGAZINE MAY 2016

you! You are people who have chosen to put great efforts into government. To make a difference and serve the public. To tell you truthfully, that is why I personally have chosen the career of providing financial audits to governments and to give back to the community.

of the City. In order to obtain assurance that the amounts on the accounting records are correct, financial auditors perform various types of test work. Some of these tests are looking at documentation, correcting mistakes, asking penetrating questions, reconciling account balances, etc.

The heart of the matter, in my opinion, is that there is disconnect between the objective of a financial audit and what governing board members are looking for in an audit. If I were to put myself in the shoes of the mayor of a city in 2016, I could tell you that, yes, I would be interested in what the fund balance is in the General Fund and how it compares to the budget. However, I would be much more interested that the City has sound internal controls and that the employees of the City are abiding by those policies. That would help me sleep at night knowing that the City is in compliance with Rules, Laws and Regulations, and that the chances of fraud are being mitigated to the extent possible.

Before we even start testing the account balances, we look at the internal controls in place to obtain an understanding of the system of controls so that we might be able to plan the extent of our procedures on the financial statements.

When the word audit or the term auditor comes to mind, there are a few things that most people think about. Most are not flattering! The vision of someone looking around at documentation, correcting mistakes, and asking penetrating questions and pointing fingers for not doing things right are certainly common. In actuality, in the world of accounting and auditing, there are numerous types of audits. Some examples of these are: • Financial Audits • Compliance Audits • IRS Audits • Internal Audits • Forensic Audits CPA firms are often engaged to perform financial audits. The objective of which is to “render an opinion” regarding the material accuracy of the financial statements at the end of each year, in accordance with generally accepted accounting principles.

A financial audit, by its nature: • Has the primary goal of issuing an opinion on the financial statements (whether the statements are materially correct or not), • Requires the auditor to assess internal controls to determine extent that the financial reporting system can be relied on to correctly summarize the books and records • Takes place, the same time every year. The audit is scheduled months in advance, because the goal is to get a timely financial statement out (that is materially correct) to bond agencies and other outside interested readers. As stated above, as financial auditors, like all financial auditors, our objective is to render an opinion on the yearend financial statements, and we use our assessment of internal control as a planning mechanism for our own audit. However, sound internal controls (policies and procedures) are only effective if they are being monitored by the local government and there is a culture of accountability. Bottom line, sound controls are essential, but if they are not followed and monitored, they can be rendered ineffective.

I say all this in hopes of helping to create an understanding that what many citizens and governing board members think is an audit, is most certainly not what financial auditors are engaged to perform. I am an auditor, not a council The financial statements are basically member, but if I were a council member, a financial “snapshot” of the financial results at each year end. These financial I would want to know two things statements are prepared by summarizing regarding finances: the amounts on the books and records • Number 1. What the financial

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status of the organization is at any point in time and particularly year end. • Number 2. And more importantly, are the internal controls and safeguards of the local government working and being followed? I personally, would be more interested in knowing that controls are in place and being monitored, the auditor being a watch dog and making sure people are doing what they should be doing. A watch dog is more aligned with activities of an internal auditor rather than a financial auditor. An internal auditor often does...and should: • Be independent and work with the audit committee and staff. By creating an audit committee, this will create an opportunity for collaborative communications with the internal auditor or equivalent.

• Center their focus on policies and procedures of the local government (internal controls and safeguards). A watch dog is what governing members and citizens are looking for and that is what internal audit type work can focus on. • Perform audits throughout the year and on a surprise basis. As financial auditors, we are usually at the local government one week in the spring and another week or two in the fall. So, only two to three weeks out of the entire year! Also, the local government knows months in advance when we are coming, it has been scheduled since there is a tight deadline to

issue the financials after each year. To be a watch dog, it should also contain an element of surprise. So what are some final thoughts? • Cities and other local governments require financial audits to make sure their records are accurate and issue financial statements for distribution to certain outside users. However, it is clear that cities and local governments need internal audit type work done throughout the year. Question, in light of tightened budgets, is this something that local governments can afford? Absolutely....they can’t afford not to! • Many CPA Firms have provided internal audit type work for local governments over the years who have been proactive and have seen the need for this watch

dog type work. One example, which comes to mind, is a City where LSL reported directly to the audit committee. We compiled a listing of a couple of dozen internal audit type procedures that could be performed. Examples: review of journal entries, bank reconciliations, and wire transfers. The audit committee would randomly select three areas per quarter and we would test these areas and report back to the committee. These types of procedures done on a surprise basis and working directly with the audit committee is what I believe government officials are looking for!

• The City of Pasadena (a current client), is setting the ideal model for local governments. In light of the recent fraud that took place at the City, the City of Pasadena engaged LSL and has elected to: • Spend more time and money with expanded scope audits (LSL has been asked to audit every fund of the City regardless of the dollar amount. The City made the “investment” of almost doubling the audit fees for the peace of mind in knowing all funds are being looked at. This resulted in feed back to the governing board of over 25 material weaknesses in the first year alone which are being addressed by management), • Hire a separate firm to conduct internal audits, • Hire an internal auditor employed by the City on a full-time basis.

Audits and the term auditor mean different things to different people. With the recent occurrence at the City of Placentia, it is a call for all Local Government Officials to recognize the need for more internal audit type work!

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Managing the Independent Audit RFP Process Matt N. Pressey, CPA, Finance Director, City of Salinas

13 CSMFO MAGAZINE MAY 2016

With the May issue of CSMFO

I called a Partner of one of the firms I Asked Question supplement. The worked for for 8 years, who specializes Frequently Asked Questions document focusing on audits, this article is focused in local government audits, and asked can be found at this address: on managing the Request for Proposal him for tips he would recommend http://tinyurl.com/gpkq3nc (RFP) process for procuring audit to agencies going out for RFP. He Scope of Service services. For those who have never mentioned that most of the RFPs walked along this path, the fear of the The boilerplate RFPs on he has seen are pretty boiler unknown can be daunting, especially the CSMFO website all plate. He does, however, when it comes to the technical aspect have good scopes of find himself asking the of preparing a scope of service, were services that cover the same questions each some of the requirements could be â&#x20AC;&#x153;the path and process variety of services you time and recommended better written by the auditor themselves. from beginning to end is may need. Aside from that agencies include Thankfully, the path and process from answers to these a well-trodden path.â&#x20AC;? the main services, beginning to end is a well-trodden path. you should consider questions somewhere in the other services you the RFP package. See Tip Preparing the RFP may need or want and #2 at the end of this article There are plenty of good boiler plate include them. Other services for a partial list of these RFPs found on the CSMFO website that may include a special audit of questions. have all of the important elements that a Revenue Measures, TOT Agreed The answers to these questions will you need: http://www.csmfo.org/ Upon Procedures, other specific audit most likely be requested by the audit resources/current-rfps requirements, other Agreed Upon firms as part of the RFP process and This is a great place to start. Procedures, or preparation of the the agency will typically respond to the Download a few samples, do a quick Financial Statements, notes, schedules, questions in writing (Q&A) and send it review, select the one you feel is the best RSI, statistical in the Comprehensive out to all of the firms who responded. In and then incorporate the elements from Annual Financial Statements (CAFR). a recent RFP from Feb/March 2016, the the others that you like. Most agencies have their auditors City of Monterey published a Frequently prepare the CAFR. CSMFO MAGAZINE MAY 2016

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The most typical contract term in the industry is for three years plus two oneyear extensions. A fixed maximum price will be given for each of the five years. The 2013 RFP for the City of San Mateo was particularly complete and included a few features that I have not seen before: http://www. cityofsanmateo.org/documentcenter/ view/43690

Issue RFP The best way to send an RFP out is by email and to as many firms as you can. I searched the CSMFO website for a list of audit firms and email addresses, but did not find a list. The best way to get the list is to ask your fellow CSMFO members through the “list serve” to send you an email address of the contact for their firm. You will probably get close to 100 replies that same day and some will will send their email list they used (don’t forget to publish your survey results for all CSMFO members to see). Publishing your RFP on your web site and on the CSMFO website is easy and always a good idea. Firms will review the RFPs and will mostly likely have additional questions. Setting a due date for the question period is a good idea so you have a cutoff and can respond timely to the email list the RFP was originally emailed out to.

evaluating the price is to make sure your RFP has, not only the total cost for each of the audits (financial audit, the single audit, and any other audits) broken out, but also a matrix that shows each staff member (Partner, Manager, Supervisory Staff, Audit Staff, and other staff) and their respective hours, standard hourly rate, and total cost for each audit, as well as any other costs (out of pocket costs). This will allow you to see how many hours will be spent by the more experienced staff members and their hourly rates to compare between firms. You want to know what you are paying for. The firms are accustomed to filling out these tables. Firms successfully meeting the criteria in Phase I can be evaluated and invited to an interview with the evaluation committee in Phase II. You should make sure to require the firms to bring the Supervisory staff who will be running the day-to-day audit engagement. The Supervisory staff is in-charge of running and completing the audit and reports to the manager. He/She will be the main point of contact and your evaluation committee (agency staff who will work with the auditors) needs to feel comfortable with that person.

Selection

Selecting new auditors is a big deal. Most all the firms are highly qualified so the selection may come down to price Bid Opening and Evaluation and personality. If price is close, select a firm based on customer service. They This is the fun part. Hopefully you are there to provide you a service that receive a good number of proposals and you are paying for. Select the firm with have a good selection to choose from. the best people and the firm that treats An evaluation committee can be formed their people good so they stay with the with appropriate staff to help evaluate firm longer and are more likely will stay the firms. The evaluation criteria can working on your audit longer. be broken up where one committee Tip #1: There is a lot of work that member reviews all the firms for one or goes into orienting new auditors. You more criteria and scores them. Those will need to orient them to your agency, evaluation criteria should be and are all of the funds, and provide them with typically listed in the RFP. a lot of documents, which the auditors Most agencies evaluate firms in a call “permanent file” documents. Your two phase process. Phase I includes agency will need to pull and copy or evaluating the proposals according to a scan all these documents that are not standard set of criteria. I like to setup a all in one location. It is standard in the selection matrix (grading card) with all audit industry for a predecessor audit of the evaluation criteria and a numeric firm to allow a new firm to review their point system that appropriately weights audit “workpapers”, especially for each scoring criteria. getting comfortable with the beginning Also included in phase I is the balances for each fund they will audit. evaluation of the price. The key to In this digital age, you may consider

requesting that your prior auditors provide you with a digital copy of the main “permanent file” documents that you provided them in the course of their years of auditing so that you can pass it on to the new auditors. This should be very easy for them since they are all located electronically in one place. This practice should be the standard in the industry but it is not. This will be a big time saver for you and the new auditors.

Tip #2: Here are a few of the questions you may want to answer in the RFP or in a supplement to the RFP such as a Frequently Asked Questions: 1. Has the organization changed recently?

2. Does the organization anticipate changes in the period of audit?

3. Were there recent changes in key personnel a. Management b. Staff who work on the audit

4. Is the City making any change in the financial system? 5. In the most recent audit

a. Did the Auditor identify adjustments? b. Once the Trial Balances are provided to the Auditor, where there post-closing entries given to the auditors. If so, how many?

6. Please provide a copy of the management letter (if not already published online).

7. Why is the agency going out to bid?

8. What is the agency looking for in an audit firm?

These questions are obviously selfserving to the audit firm. If your agency typically has a clean and fast audit, then this is your chance to shine and it will require the auditors to be more competitive in their pricing. If your agency takes a little more time and work to close, that is okay to describe. The additional time the auditor may spend is just part of the cost and is worth it. The price will still be competitive.

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INSIDE LOOK

CSMFO Brings New Training Opportunities If you attended the CSMFO conference in March,

Scott Catlett, City of Yorba Linda

you may have heard about the Revenue Fundamentals pre-conference session that was very successful. Michael Coleman, as well as Paula Cone and Lloyd DeLlamas from HdL, presented to a sellout crowd. What you may not know is that this pre-conference session was the launch of CSMFO’s latest core course offering – Revenue Fundamentals I. For a number of years, CSMFO has offered both introductory and intermediate governmental accounting courses. These were supplemented later by a course in fiscal policies and long-term financial planning. Most recently, in 2012 CSMFO added a popular course on investment accounting. While the first three classes are offered 5-10 times per year throughout the state, the investment accounting offering marked a departure from that model with a more focused topic that is offered 1-2 times per year. As part of CSMFO’s most recent strategic planning efforts, the CSMFO Board tasked the Career Development Committee with expanding this type of course offering. The Committee’s subsequent research indicated that CSMFO members have a strong appetite for a course covering government revenues, and so the Revenue Fundamentals course was born.

SCOTT CATLETT

Fundamentals I course receive a copy of the League of California Cities’ Municipal Revenue Sources Handbook included with their registration fee.

The Career Development Committee is very excited about these new course offerings. We hope that the sell-out attendance at the pre-conference trial run of the first course In planning the pre-conference session, is a strong indication the Committee realized that there was that these new too much information on government courses will be revenues to be packed into a single “the Revenue as successful as day course offering. The course Fundamentals CSMFO’s other launched at the Conference is pre-conference session core courses. If therefore the first of two planned was very successful.” you have ideas courses – Revenue Fundamentals I – regarding possible and its first post-conference session is future course planned for San Leandro in the fall (date additions or any pending). The second course, Revenue other feedback related to Fundamentals II, will be launched later this year with the first session planned for Southern California in CSMFO’s career development efforts, please contact Scott the fall. The courses are planned to alternate north to Catlett, Career Development south every six months, so that members will be able Committee Chair, at scatlett@ to attend both courses in either Northern or Southern yorba-linda.org. The Committee California in a single year. welcomes your feedback. Both courses offer an introductory overview of local government revenues. Revenue Fundamentals I covers property tax, sales & use tax, state subventions, and other important revenues in depth. It also provides a history of the state/local fiscal relationship. Revenue Fundamentals II will cover uses fees & rate setting, property-related fees, development impact fees, benefit assessments, CFDs & other parcel taxes, and enhanced infrastructure financing districts. Each course is a single day in length, lunch is included in the cost of registration, and fees are a very reasonable $125 per person. Of particular value, attendees at the Revenue

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Tips for Streamlining Audit Prep Debbie Harper, CPA, Audit Partner Lance, Soll & Lunghard, LLP

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As an auditor for over 15 years, a

meeting with departments throughout You can work backwards from the the agency that affect your general date of the presentation to set realistic ledger preparation to financial statement goals. presentation to the governing body. xx/xx/xxxx Governing board

common question throughout the years has always been, “How can we make the audit go smoothly?” or “Who is Accoutability your best audit and why?” There are key factors that come up every time It is important to identify all the tasks there is a bump in the audit process. needed to complete the audit and “What is holding up the audit and to identify an accountability person who and when will it get done?” An to monitor that task and make audit that is set up for success sure it gets completed. Ask has a method for quickly your auditor for a “PBC” identifying any delays and List (Prepared By Client easily identifies who to List) well in advance. contact to correct the “This tool is not to These items should be process. This tool is not point fingers, it is to prepared and ready for to point fingers, it is to effectively identify any the auditor upon their effectively identify any obstacles...” site visit. Many time obstacles so they can be these items are being addressed in an efficient prepared while the auditor manner. Even audits that is on-site, which delays deviate from the original the auditor in timely testing. audit plan, due to unforeseen These can be easily identified by obstacles, can be a successful audit. management if monitored ahead of

Audit Game Plan

Every successful audit has an accountability plan. Key players should be identified with clear expectation and goals, with hard dates for completing the expectations. These should be monitored frequently to hold key players accountable for their success and to identify problem areas in a timely manner, which will avoid surprise delays and frustration. For an audit, your plan should cover the entire process from

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time. During the final exit meeting of an audit engagement, set clear goals for any pending item list. Identify who is to complete the item and provide a date for completion. Discuss and document clear steps to complete the final financial report in time for the governing board presentation.

presentation

xx/xx/xxxx Date to clerk for agenda xx/xx/xxxx

Final partner review for release of opinion

xx/xx/xxxx Final comments from management due for partner review xx/xx/xxxx 2nd Draft due for management review xx/xx/xxxx Review comments due from management xx/xx/xxxx 1st draft due for management review xx/xx/xxxx Manager/Partner review of financial report for management review xx/xx/xxxx Pending items due for financial statement preparation

Be realistic with the dates. Don’t expect to provide final pending items and receive the financial statements for review on the same date. Pending items delay the proper review process, so limiting these items is the key to a success audit. Allow for adequate review time at both the management level and auditor level. The goal is a quality report. CSMFO.ORG

Status Meetings Set frequent status meetings internally within the organization and externally with the auditor. A daily status report can be provided quickly through an email at the end of each day during the audit fieldwork. This provides timely feedback on any outstanding items requested by the auditors and status of the audit progress. A face-toface meeting at the end of each week promotes healthy dialogue for audit progress and solutions to delays, if any.

Proactive Solutions

Add these items to your internal audit plan so they can be provided to auditors prior to financial report preparation. These items can easily be updated and addressed in the first draft provided to management for review. As the Director of Finance, it is important to stay involved in the progress reports from the beginning. This provides tone at the top with the entity. The audit is an important function for the entity and needs efficient and effective attention to make it a successful audit from all parties involved.

Your financial report has many footnote disclosures about the entity that requires an annual review and updates each year. This review process can be time consuming and stressful during the end of the year, when time constraints are heightened. A proactive approach to this review can be to review the prior year financial report footnote disclosures ahead of time. Assign the footnote disclosures to the appropriate personnel with the proper expertise, such as, the Insurance footnote to the Risk Management Department.

21 CSMFO MAGAZINE MAY 2016

INSIDE LOOK

League Policy Committee Update: Environmental Quality Kathryn Downs, City of Carson

CSMFO

has a long-standing partnership with the League of California Cities. As part of the League’s Advocacy program, Policy Committees have been established by topic to review proposed legislation and make recommendations to the League’s Board to “support” or “oppose”. There are eight Policy Committees: Administrative Services; Community Services; Employee Relations; Environmental Quality; Housing, Community and Economic Development; Public Safety; Revenue and Taxation; and Transportation, Communication and Public Works. Each year, the CSMFO President appoints one member to each Policy Committee. The Committees meet at least three times annually. Meetings begin with a general session briefing covering recent League efforts, state budget proposals, and other current issues. After the stage is set, the general session is adjourned to individual Policy Committee meetings. The CSMFO member of each Policy Committee serves an important role, especially as, in some cases, the only finance officer on the committee is the CSMFO appointee. It is the appointee’s role to provide a finance officer’s perspective. The CSMFO appointee reports to the CSMFO The Environmental Quality Policy Committee (EQ) reviews issues related to air, water and water quality, Board after each Policy Committee meeting, and climate change, CEQA, integrated waste management, prepares an annual report. Participation in the Policy Committees is a wonderful opportunity to see hazardous materials, coastal issues, and utilities. how League Advocacy works, and a great way to In addition to review of proposed legislation, each bring home information relevant to our agencies. If Policy Committee receives relevant informational you’re interested in learning more, tune into CSMFO presentations. The EQ received 2016 presentations Board meetings or contact the CSMFO appointee from CalRecycle, the State Water Resources Control to the Policy Committee topic you’re interested in. Board, CalEPA, and the San Diego County Water Appointees are listed in the CSMFO Directory each Authority. Presentations covered the status of California’s waste diversion goal, CalRecycle’s budget year or on the leadership contact spreadsheet on the challenges, emergency water conservation regulation, website. Cap and Trade Plan opportunities for greenhouse gas emission reductions, and an overview of the new Carlsbad Desalination Plant. This year, to date, the EQ has made the following recommendations: • AB 1800 (Hadley) Utility Outage Compensation Claims: Annual Posting – recommended support if amended. • AB 2709 (Quirk) Mylar Balloons: Power Outages – recommended support if amended. • SB 1000 (Leyva) General Plan: Environmental Justice – recommended oppose. • S. 2533 (Feinstein) California Long-Term Provisions for Water Supply and Short-Term Provisions for Emergency Drought Relief Act – recommended support.

CSMFO MAGAZINE MAY 2016

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CSMFO Reception at GFOA Conference

Monday May 23, 2016 5:45pm â&#x20AC;&#x201C; 7:30pm

CN Towers - Horizon 301 Front Street W, Toronto ON 23 CSMFO MAGAZINE MAY 2016

The Trust Factor Kenneth Pun, The Pun Group

Spring is the season for planning,

whether it focuses on spending time with family or pursuing our professional goals. For government agencies, it’s also the busiest time of the year. Management must not only prepare the next year’s budget, but also coordinate the audit for the current year. It can be a difficult balancing act, particularly when you look at what’s on the line – both financially and politically.

The Risk of Routine Because municipalities are required by state law to be audited, the exercise frequently becomes a routine annual process. Between April and December, auditors come to your office and perform various audit procedures, obtaining sufficient evidence necessary to express their opinions concerning your financial statements. As government officials, no matter how much you may like your auditors, you would prefer to have the their work completed in the most efficient way possible, without adding disruption to your day-to-day operations. Thanks to the use of technology, auditors today CSMFO MAGAZINE MAY 2016

enjoy an unprecedented ability to streamline the process for increased efficiency. Those advancements notwithstanding, the audit objective is to provide an independent opinion as to whether management’s financial statements are accurate and fairly presented.

Raising Questions The Pun Group surveyed some 105 cities and 14 counties across California over a 10-year period, examining each jurisdiction’s Comprehensive Annual Financial Report (CAFR) and performing a number of separate analyses on the data provided. One of the analyses involves reviewing the relationship between prior period adjustments due to correction of error (“restatements”) and the audit opinions issued. Interestingly, on average, about 65 cities and 8 counties reported restatements, yet received an “unmodified” opinion from their auditors. Experienced practitioners know that any prior period adjustments mean there are material misstatements noted in the financial statements that

auditors were not able to identify in their procedures. Given that outcome, it’s fair to raise the question: By streamlining the audit process, are we substantially increasing the risk of leaving these material misstatements unidentified? That answer then leads one to the ultimate question: Can these financial statements be considered reliable and meet expectations from stakeholders?

Why it Matters Government serves a broad crosssection of stakeholders, which generally fall into one of three groups: Taxpayers, citizens, and elected officials – Because government revenues are generated on an involuntary basis rather than a willing exchange of values found in a typical business transaction, taxpayers and citizens have the right to know whether their jurisdictions or agencies are spending their tax dollars wisely. Correspondingly, they require assurance that their elected officials

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prudently budget and allocate tax money to satisfy expectations regarding public safety, public works, and other community service needs. Taxpayers and citizens fully understand whether services provided by government are supported by tax revenues, thus providing them a basis for which to evaluate any new funding measures that may need to be imposed.

repayment of the debt as well as the guaranteed return on their investment.

Closing the Trust Gap Reliable financial statements represent the key to meeting stakeholder expectations. To ensure reliability and strengthen public trust, both auditors and auditees must pay close attention to detail when preparing for the audit. I’m a firm believer in the philosophy of “Garbage in, garbage out!”

Grantors and other oversight groups Even though the process can be – Government programs are often streamlined through technology, subsidized by federal, state, and a good audit still requires a other local grant funding. By significant level of manual providing the necessary input. Otherwise, the financial support, grantors process becomes robotic and oversight agencies “(Spring) For and the utility of the have the responsibility government resulting information to ensure that these agencies, it’s also suffers. A good audit programs are free of the busiest time of always starts with good fraud, waste, abuse planning - and that the year.” and other forms of responsibility falls on the mismanagement. The auditors, as well as the financial statements can auditees. To ensure reliable provide information about financial statements, here are few the sources and programmatic guidelines to follow: uses for these funds, and effectively create the audit trail. Monitoring actual 1. Understand the ordinance or compliance with budgeted public charter and identify any unique policies can produce performance requirements outside of those measures that promote transparency and associated with a general-law accountability. city. Bondholders and others in the financial community –

Governments issue municipal securities to finance a wide variety of projects and generate necessary cash flows. The debt service payments may come from general revenues of the issuer, specific tax receipts, or even revenues generated from a public project. These municipal securities may be secured by letter of credit, other government guarantee, or an insurance policy. Audited financial statements are arequired part of continuous disclosures and provide bondholders with comfort and confidence regarding the

People are the key to any organization. However, agencies should ensure that information is transparent and properly communicated to the right audiences.

6. Organizations should continuously monitor results and make necessary adjustments based on changing conditions 7. Evaluate the user of the financial statements and put yourself in their shoes. Ask the question: If things go wrong, what are the major consequences? 8. Identify any unique transactions that require additional attention. Invest the incremental resources needed to fully address them.

Takeaway Without auditors and auditees understanding – and, more importantly, embracing – proper process, the audit can become a commodity of questionable value. Kenneth Pun, CPA, CGMA, is Managing Partner of The Pun Group, a full-service CPA firm headquartered in Orange County, California.

2. Evaluate the “Tone at the Top” to ensure that the organization promotes high integrity and retains competent employees for its mission 3. Evaluate internal controls and perform risk assessment. By understanding the risk appetite, you can deploy the necessary resources to those high-risk areas and eliminate any waste of resources. 4.

Organizations should embed design, implementation and proper internal control measures to mitigate risk.

25 CSMFO MAGAZINE MAY 2016

INSIDE LOOK

New webpage, same goal: Innovate to educate and develop our members Marcus Pimentel, City of Santa Cruz We are excited to provide a redesigned and engaging platform to connect you seamlessly, across all devices, to our www.CSMFO.org resources you need. Our goal was simple: Make easily accessible what matters to you most no matter what device platform you are using.

access across multiple device platforms. In addition, our pages are brighter; our homepage is more engaging and highlights key information with an uncluttered design and rotational photo format. Overall, we wanted to make the new website faster, easier to navigate, and more user-friendly.

However, we found it useful to retain the overall structure of our website As a membership of peers serving our with our content divided into the same peers, we endeavor to provide you with seven main sections: About CSMFO, the most accurate, up-to-date information Membership, Events, News, Careers, and share our collective knowledge Resources & Professional Development. and expertise to support innovation, education our members, and share best Why has it changed? practices to develop our collective skills The pages have been redesigned to and experiences. be easy to browse and to help you get What has changed? what you’re looking for, with streamlined hover menus, wider pages and cleaner We’ve enhanced our website to a lines to provide engaging content. responsive design that allows easier CSMFO MAGAZINE MAY 2016

We’re also incorporating our new style guide to provide a total structure and brand refresh. Finally, we upgraded our webpage structure to embrace a modern, responsive design. Our user research and website analytics, along with evaluation by subcommittees, our Technology Committee, resources from SMA, and our board has identified gaps with our current platform; ranging from limited use on multiple device platforms to overall layout and user interfaces gaps. During this time, our website analytics showed our members and guests were interested in training programs, in looking at job opportunities, in accessing list serve research, and in accessing their member account information. In addition, our review CSMFO.ORG

found that our former homepage was overwhelmed by too much text, that new member information was hard to find, that our overall design tended to feel cluttered and the former drop down lists were too intrusive once opened. Based on this information, we embarked with SMA to develop our new website that incorporates our new style guide design. Over the past several months, we have been testing new website approaches to see what works best for our users and are proud to now unveil our new website.

What is a Responsive Design?

I can’t find what I’m looking for? If you’re having problems with finding any content, please contact the CSMFO office at 877-282-9183.

Is there a mobile version? Yes. All of our new sections are automatically optimized for any mobile and tablet platforms.

It’s for you? We’re hoping what you’ll notice about our website is that soon it doesn’t feel different, but rather you are more engaged and immersed than ever, getting exactly what you want, when you want it, wherever you are.

Responsive web design allows the website to automatically respond to our member’s device screen size, platform and orientation. The practice consists of a mix of flexible grids and layouts, images and an intelligent use of CSS media queries. In other words, as you switch from a PC or laptop to any mobile or tablet device, our CSMFO website will automatically switch to accommodate for resolution, image size and scripting abilities. This eliminates the need for a different web design and development phase for each new gadget that comes on the market.

Is anything else changing? Yes. The Technology Committee is embarking on a new content management system which will allow us to maintain the high standard of our information more easily, manage our list serve reference materials, while enhancing your membership benefits and ease in event registration. Although this change will occur behind the scenes, it will improve internal operations and ultimately may add new features to your membership portal.

27 CSMFO MAGAZINE MAY 2016

STOP THIEF! Ernie Cooper, CPA/CFF, CFE, Former FBI Agent

Fraud continues to be a prevalent

issue for cities, counties, and special districts across the nation. This “fraud cost” can amount to thousands of dollars and in some cases disrupt operations, impact going concern, and significantly damage the municipality’s reputation among the community. And don’t think it just happens to Enron-type organizations—it can happen to any organization or municipality. In my thirty-plus years of dealing with the fraud world, not only as a forensic accountant but also as an FBI Special Agent for over twenty years, I have seen first-hand many sad cases, where just an ounce of fraud prevention could have minimized and in some cases prevented these losses from ever occurring.

Often organizations have the mentality that their auditor will catch any fraud occurring within their organization. “Auditors are responsible for planning and performing an audit to obtain reasonable assurance about whether an organization’s financial statements are free of material

Be Aware of the Prevalence of Fraud

According to the Association of Certified Fraud Examiners’ 2016 “Report to the Nations on Occupational Fraud and Abuse,” government organizations had a median loss to fraud of $100,000. Of governmental fraud cases, local governments were victims of 32.3% of the cases and state/ provincial governments were victims of 31.3% of the cases. When ranking the percentage of cases by industry, government and public administration fraud cases came in second, only after fraud cases in the banking and financial services sector. CSMFO MAGAZINE MAY 2016

Be Aware of Fraud’s Breeding Grounds Fraud breeds where there is a breakdown of internal controls. A recent scandal in the City of Placentia, which made headlines just this April, exemplifies this type of fraud scheme and how it can take place within a municipality. According to The Orange County Register, a Placentia finance official has been charged with embezzling $4.3 million from the city. The official transferred money to personal accounts, bypassing four accounting safeguards in the process. He also manipulated computer software to modify bank ledgers, which prevented city officials and auditors from noticing the true destination of the wired funds.

While there is always the risk of being subject to fraud, there are some basic, key steps you can take to prevent and detect fraud at your municipality.

One of the best ways you can help protect your municipality is to first of all understand that fraud can happen and may even be happening at your municipality.

regarding fraud occurring within your municipality with your auditor so they can help you build your defense against it.” Don’t bury your head in the sand. It is real and it is happening in today’s environment.

misstatement, which could be caused by error or fraud. As such, auditors don’t always catch fraud,” explained VLS Partner Renée Graves, CPA, CGFM, who specializes in audits of governmental entities. In fact, according to the Association of Certified Fraud Examiners, only 3.8% of fraud cases were initially detected by an external audit. “Auditors can, however, help identify weakness in internal control systems and conduct forensic audits to support organizations in preventing and detecting fraud,” Renée said. “Be sure to discuss any concerns you have

“This is a prime example of a municipality not consistently assessing risk and revising internal controls to protect itself against the risk,” said Renée. “It is the municipality’s responsibility to do this, but often they wait for their auditor to come in, gain an understanding of their systems, and then tell them where their systems are weak. By the time the auditor has done this, it’s too late. Municipalities need to be doing it on a pro-active and ongoing basis—keeping up with technology and electronic processing and the schemes that are out there creating risk.” Another case that made headlines involved a former Southern California city employee being arrested in

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December 2014 on suspicion of embezzling at least $5 million from city coffers over the course of a decade, according to the Los Angeles Times. How is this possible? What happened to allow such a major fraud scheme to take place? According to published reports in newspaper articles, it appears that many “opportunities”—also known as internal control breakdowns—may have existed within the city’s financial operations. This created an environment where financial irregularities can occur without detection.

Implement a Fraud Prevention Checklist The most cost-effective way to limit fraud losses is to prevent fraud from occurring in the first place. Start by implementing a Fraud Prevention Checklist to test the effectiveness of current prevention measures and to identify areas of weakness. The key questions to include in your Fraud Prevention Checklist (as developed by the Association of Certified Fraud Examiners) are as follows:

1. Is the tone at the top a State Controller John Chiang positive one of honesty found similar breakdowns and integrity? Does within another Southern management lead by California city, noting the “just an ounce of example or “walk the following: “Among the talk?” Inform, educate, fraud prevention could most glaring problems and talk with your was the lack of internal have minimized and in employees about the some cases prevented controls. We found [the importance of basic these losses from ever city’s] administrative core values and ethics, occurring” and internal accounting including transparency, control system to be, accountability, and honesty. in effect, nonexistent, as all financial activities 2. Are strong internal and transactions revolved around control systems in place and one individual—the former chief operating effectively? Keep administrative officer—who apparently an eye out for these common had complete control.” internal control weaknesses: According to published reports, here are just a few of the internal control issues that came to light in one city’s case, which unfortunately are far too common:

1. Excessive responsibility, control, and authority given to an employee perceived as being trustworthy

2. Lack of written and documented policies and procedures

3. Approval for payments of invoices without a proper purchase order, contract, or agreement

what constitutes fraud? Have the costs of fraud to the municipality and everyone in it – including lost profits, adverse publicity, job loss and decreased morale and productivity – been made clear to employees? Do employees know where to seek advice when faced with uncertain ethical decisions, and do they believe that they can speak freely? Has a policy of zero-tolerance for fraud been communicated to employees through words and actions? 4. Is an effective fraud reporting mechanism in place? Have employees been taught how to communicate concerns about known or potential wrongdoing? Is there an anonymous reporting channel available to employees, such as a third-party hotline? Do employees trust that they can report suspicious activity anonymously and/or confidentially and without fear of reprisal? Has it been made clear to employees that reports of suspicious activity will be promptly and thoroughly evaluated?

5. To increase employees’ perception of detection, are the following proactive measures taken and publicized to employees? Is possible fraudulent conduct aggressively sought out, rather Lack of segregation of duties than dealt with passively? Does the and/or no oversight municipality send the message that it Inadequate cash receipts system actively seeks out fraudulent conduct and delayed deposits through fraud assessment questioning Inadequate budget analysis by auditors? Are “surprise audits” performed in addition to regularly Bank reconciliations not scheduled audits? Is continuous auditing prepared or incomplete software used to detect fraud and, if so, Cancelled checks missing or not has the use of such software been made reviewed by a third party known throughout the municipality? Employees with no vacations 6. Does the internal audit and very seldom out sick department, if one exists,

5. Lack of segregation of duties in approving vendor invoices for payment, preparing invoice payment requests, and picking up check payments

have adequate resources and authority to operate effectively and without undue influence - Original records not maintained, from senior management? Are disorganized, or missing they also conducting fraud risk - Informal process for purchases, assessments? including conflicts of interest

Keep an eye out for these types of internal control issues, remember the dangers of internal control breakdowns, and consistently and pro-actively assess risk to help protect your municipality against these common fraud schemes.

- Lax policy for use of the official credit card

- Lack of computer, IT and electronic internal controls

4. Acceptance of vendor invoices lacking sufficient information

- Unusual or confusing adjusted entries

3. Is ongoing fraud and ethics training provided to all employees? Do employees understand

29 CSMFO MAGAZINE MAY 2016

7. Does the background policy for the hiring process include the following (where permitted by law)? - Past employment verification - Criminal and civil background checks - Credit checks - Drug screening - Education verification - References check

- Assess employee morale via anonymous surveys?

9. Do you have an oversight group responsible for implementing your anti-fraud program? Consider forming an antifraud group and select a chair person for the group. Each department should have input, including finance officers, human resource, general counsel, security, IT, audit committee, internal audit, etc.

Putting these key steps in place will not only help you prevent and detect fraud within your municipality, but also arm your municipality against future - Assist employees struggling with fraudsters. Remember, just a few basic steps can save you from a large cost to addictions, mental/emotional fraud! health, family or financial

8. Are effective human resource and management programs in place which: problems?

- Provide an open-door policy that allows employees to speak freely about pressures, providing management the opportunity to alleviate such pressures before they become acute?

CSMFO MAGAZINE MAY 2016

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Reaching the Summit with CMTA

on spring break, was able to join us skiing. An amazing way to end a conference, to be out on the slopes for what was a beautiful ski day in April. I will say that the best skier, let’s call him “Tim”, did go down K2!

CMTA

A couple final thoughts on the CMTA Annual Conference. First, if you are in the field of public investing and treasury, CMTA could really use any finance officers are your help! CMTA is a tremendous also city treasurers, and if you are organization, and it is because of the a public treasurer in California, REACHING THE SUMMIT: amazing people that are involved. hopefully you are a member of the CALIFORNIA’S FINANCIAL FUTURE CMTA is seeking out more people, like April 13 15, 2016 California Municipal Treasurers th yourself, to get involved and volunteer. N Association (CMTA). CMTA is a great CM O With that said, thank you to Rudy C TA A organization, with a simple mission: NN UAL Livingston (Ojai) for volunteering to “To lead in promoting and enhancing the fiduciary responsibility and integrity Office introducing a short/medium term be President-Elect for 2017 and Tim McGallian (Concord) for volunteering to of individuals responsible for public pool as an investment option for local be the new North Division Chair. Way funds”. CMTA does a wonderful job agencies through the Local Agency to go guys! Second, I just want to thank in hosting educational workshops for Investment Fund. He told me that his the following people: Pamela Arendsinvestments and treasury management, staff does not want him to talk about it King for her leadership as the 2015 and often teams up with CDIAC and at the luncheon, so I told him I would CMTA President, Margaret Moggia, CSMFO in various trainings. If you or not tell anyone. So I have not, except for being the 2016 President, Lily Ng your staff have attended any of their that I would tell you that you should for her active participation in CMTA trainings, I am sure you will agree they check out AB 2638 (Gatto), which is representing the commercial sponsors, are top notch. If you have not, please the Treasurer’s proposal to offer an and Michelle Durgy for getting me check them out at www.cmta.org. alternative investment option offering involved in CMTA several years ago. So talking about training…in mid-April longer maturities and higher returns. And finally, thank you to the whole I was able to join two close friends, CMTA always has amazing speakers, CMTA Board for hosting me, and for Pamela Arends-Kings and Margaret Yelena Martynovskaya taking care of all like Tim Seufert, Rick Phillips, Doug Moggia, in Lake Tahoe at the CMTA the details. Adams Out! Robinson, Susan Munson, Linda Annual Conference. Actually, there Patterson, Ned Connolly, Ellis Phifer, were several people (~175) I know that and Tim Schaefer, just to name a were in Squaw Valley for the annual few! But the most interesting session conference, many I had the privilege occurred on Thursday at the luncheon to see in March at the CSMFO Annual led by Scott Johnson, partner at Macias, Conference. I attended the CMTA Gini & O’Connell (MGO). The topic conference not just as a city treasurer, was “Avoiding Headlines: Strategies but as President of CSMFO, and I just for Mitigating Municipal Employee happen to be the CMTA appointment to Fraud.” The reason why this was the the League of California Cities Revenue most interesting session is just an hour & Taxation Policy Committee. Part of earlier the news broke about the fraud being the CMTA appointment is that I in Placentia. The speakers were not even am invited to attend the CMTA Board aware of the breaking news. When Meeting. the Q&A period started, there was a The CMTA Annual Conference is very lot of discussion about the most recent fraud to occur at a local agency. This is intimate and really focuses on treasury what inspired me in writing this month’s and investing, which makes selecting CSMFO President’s Message. a track or session very easy, especially for me. The conference kicked off On a lighter note, since I was in Lake with the State Treasurer John Chiang Tahoe with my snowboard, I was able talking about many new initiatives in the to join a few colleagues on the slopes Treasurer’s Office. I had the pleasure Friday afternoon. I won’t incriminate of sitting next to John at lunch, and one them by telling you their names, but of the exciting things he talked about hopefully you can see them in the was the possibility of the Treasurer’s picture. Also, my oldest son, who was

By John Adams, CSMFO President

CSMFO MAGAZINE MAY 2016

CSMFO.ORG

Message from CMTA President

Margaret Moggia, CPA, 2016 CMTA President and Past CSMFO Board Member

For nearly 60 years, the California

Municipal Treasurers Association (CMTA) has advanced the mission to lead and promote the fiduciary responsibility and integrity of individuals responsible for public funds. We do this by offering conferences, educational workshops, online training and certificate programs. In light of recent news, we believe it is useful to remind you to review your internal control procedures and ensure proper segregation of duties. In addition, your agency should evaluate who has security access to the banking and financial systems. We also encourage you to take some time to review best practices for cash and investment activities: 1. Employ third-party custodians to hold securities, not broker-dealers with whom the agency effects purchases and sales. 2. Utilize a dual approval system (requiring two approvers) for all account openings. 3. Establish multiple levels of authorization for wires and dual signers for wire transfers, including separation between wire transfer personnel and approvers (reporting to different department heads). 4. Create a separation between accountants who create monthly reports and CAFRS, and those approving/ providing oversight (and multiple approvers), as well as those who are effecting securities purchases and sales. 5. Employ external and internal audit team/s separate from any personnel performing tasks 2-4.

6. Separating the asset custody from the reporting since this is a primary responsibility for an elected treasurer (and state treasurer). We recognize that many of you are working with a small staff and limited resources, so it may not be possible to implement all of these safeguards above to the best extent. We encourage your agency to utilize as many as you can to strengthen your agencyâ&#x20AC;&#x2122;s internal controls and guard against the possibility of future fraud and criminal activity. In addition, you already have a great resource in many of your business relationships like your auditors or banking professional that we anticipate would be available to identify appropriate safeguards and processes. Individuals responsible for public funds have diverse and challenging roles and we know the vast majority of us truly want to do a good job for the entities we serve. As events like this unfold, we cannot help but think about the importance of our mission. We ask you to join us to embrace a culture where the proper education and continual training of public stewards is a priority. The few thousand dollars a year it may cost to train elected officials, finance, accounting and treasury staff is the most crucial investment any public agency can make. CMTA stands by as a resource to help anyone interested in implementing a suitable training program for your agency.

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C SMFO CONFERENCE 2017 SACRAMENTO FEBRUARY 7 - 10, 2017

SACRAMENTO

(Headquarters for CSMFO) HYATT REGENCY/SACRAMENTO CONVENTION CENTER SACRAMENTO, CALIFORNIA

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INSIDE LOOK

Diary of a Host Committee Chair STORY BY DREW CORBETT and M&AMS working on CSMFO’s behalf. The level of detail and precision required to pull an event like the annual conference off is hard to comprehend. A number of issues to resolve came out of the meeting, but nothing insurmountable, especially with the folks we have on the case. After lunch we took a quick tour of our conference space at the hotel and convention March 17-20, 2016: Continued center, and then we met up with to have email exchanges with Melissa, DREW CORBETT members of the Host Committee who are Janet, and Teri to exchange ideas, working on planning the Thursday night coordinate timelines, and lay the end, Viki and I are set to have a phone event. At that point we did another foundation for the Host Committee’s meeting, along with a few others, to get quick look at the facilities that we have work, which will be ramping up soon. coordinated. available at the hotel and convention The four of us are set to meet with March 25, 2016: David Cain, center at our disposal for Thursday representatives from the Hyatt and the who is a member of the Host Committee, night, and then we left for a walking Sacramento Convention and Visitors joined me on a conference call with tour of a few offsite venues that could Bureau on April 7th and then will have Viki and Ronnie Campbell (Vice Chair possibly be utilized for that event as some members of the Host Committee well. As a side note, one of the great (those tasked with planning the Thursday of Program Committee) to discuss joint efforts between our two committees, with things about our location in Sacramento night event) join us for a site tour of a focus on keynote and general session is that there is so much within a short the hotel, the convention center, and a speakers. For those of you who have walk of the conference hotel and few other locations in close proximity. attended previous conferences, convention center. It opens up This will give the members planning the you know the caliber of so many opportunities for the Thursday night event an idea of what keynote and general Thursday night event, as they have to work with for that night. session speakers that well as the “free” night on Speaking of the Thursday night event, Wednesday when many the ideas are already flying around, and we bring in to speak. “I am very excited about of the vendor receptions Finding the right person they are good! I’m not going to give what the group has for the keynotes and are held. There are anything away right now, but based come up with so far for lots of great restaurants general sessions factors on what’s been brought up so far, the Thursday night.” in a lot of different within close proximity of Host Committee is going put together a considerations with the the conference, so you’ll phenomenal event. intent of getting someone have plenty to choose from I’ve also had some email exchanges who will entertain, engage, while you are there. with Viki Copeland, chair of the and enlighten, all within the After we finished the walking Program Committee. Coordination context of providing some linkage tour, we retreated to a conference room between the Host and Program to us professionally. That’s a tall order at the hotel to begin discussing ideas Committees is essential because so and requires a lot of background work for the event. A lot of great ideas were much of what each committee does has from both committees to ensure the right brought up and the group left with some some overlap with the other. As such, fit. The meeting itself went well, and good direction about the event. More it is really important that we’re on the we all left with a good understanding to come on that in future diaries as same page about who is responsible of next steps and are excited to start plans start to get firmed up, but needless for what and how we can best work searching for our speakers. to say, I am very excited about what together most efficiently and effectively. the group has come up with so far for This is especially important during April 7, 2016: I drove to Thursday night. At about 4:00, we left this planning cycle because the 2016 Sacramento for our first site visit. I met the hotel to take a look at another few conference in Anaheim was a little later Melissa, Janet, and Teri at 11:30, and restaurants, but not for the Thursday than usual and the 2017 conference our first order of business was a lunch night event. With plenty of overlap is a little earlier than usual (February meeting with a representative from the 7-10, 2017…mark your calendars!!!). Hyatt Regency and a representative from between the Thursday night event subWith about a month less than usual the Sacramento Convention and Visitors committee and the President’s Dinner sub-committee, we took the opportunity to pull everything together there’s no Bureau. Meetings like these remind time for duplicating efforts, and to that me of how glad I am that we have SMA As President-Elect and Host Committee Chair Drew Corbett works on preparations for the 2017 Annual Conference in Sacramento, he thought it would be fun to give the membership a glimpse into the process of putting the conference together. Each month, Drew will provide a running commentary on some of the work that goes into conference preparations.

CSMFO MAGAZINE MAY 2016

to check out a few potential options for the President’s Dinner as well, including doing some impromptu tasting at the Empress Tavern. We wrapped up around 6:45 that evening and headed on our way energized from the day. April 8, 2016: After the busy and productive site visit, I started some email exchanges with Joan Michaels Aguilar, lead of the Thursday night event sub-committee, and Pamela ArendsKing, lead of the President’s Dinner sub-committee to discuss next steps and coordinate the best way for the sub-committees to move forward on the planning. With everyone in different locations, and of course, with regular day jobs, coordinating schedules can be tough. So with that, making the best of everyone’s time will be an important aspect of the Host Committee experience.

April 8-14, 2016: Continued to exchange emails with Melissa, Janet, and other members of the Host Committee to discuss various conferencerelated topics, but predominantly focused on the planning for the Thursday night event and the President’s Dinner. Based on a discussion I had with Janet while in Sacramento, I also worked on some adjustments to the conference scholarship policy to clarify logistical arrangements and expectations for scholarship recipients. You may not be aware of this, but CSMFO budgets to provide scholarships to potential conference attendees who meet the eligibility criteria and can demonstrate financial hardship that would otherwise prevent them from attending the conference. It’s a great program and a great opportunity for our members to experience the conference, and (like most things) each year our experience provides us with ideas to improve the program and ease the administration of it. I’m hoping to firm up my proposed adjustments soon so I can take it to the Board of Directors for consideration at one of our upcoming monthly meetings.

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CAREERS JOB OPPORTUNITIES Finance Director, Prothman Salary Range: $100,484 - $148,499/year Application Deadline: Open Until Filled Finance Analyst, City of Monterey - Finance Dept. Salary Range: $73,104 - $88,872/year Application Deadline: 05/30/2016 Controller, Oakland Housing Authority Salary Range: 9330 - 10819/monthy Application Deadline: Open Until Filled Finance Operations Supervisor, Monrovia Salary Range: $73,105 - $97,969/year Application Deadline: 05/17/16 Deputy City Treasurer, City of Torrance Salary Range: $8,093-$11,271/monthly Application Deadline: 05/26/16 Purchasing Agent, Moulton Niguel Water District Salary Range: $35.13 - $44.97/hourly Application Deadline: 05/13/16 Senior Accountant, San Carlos Salary Range: $7,986 - $9,707/monthly Application Deadline: 05/20/16 Planning and Air Monitoring Manager, Monterey Bay Air Resources District Salary Range: 125,000-135,000/year Application Deadline: 05/27/2016 Finance Director, City of La Quinta, CA Salary Range: 118,352 - $147,940 Application Deadline: 05/30/2016

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www.csmfo.org 877.282.9183

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