HomeMy WebLinkAboutItem 26. Phase One - Financial Process Assessment PresentationIndependent Phase One
Financial Process Assessment
October 7, 2026
Eric Levitt, City Manager
Zuyva Ruiz, Deputy Director of Finance
Background
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•June 2024: Council raised concerns about budget
assumptions;
•Council directed City Manager to pursue a forensic
audit and assessment;
•Staff consulted with Eadie Payne LLP, current City
auditors.
Three Types of Review
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•Financial statement audit: Gives an opinion on financial
statements and test samples.
•Forensic investigation: Targets a specific, identified
allegation or transaction and follows the evidence.
•Financial process/internal control assessment: evaluates
how processes are designed, authorized, documented, and
executed.
Phase One Purpose
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•Independently assess whether key financial processes comply with the SBMC,
Council actions, adopted budgets, City policies, delegated authority, and
contracts
•Evaluate whether internal controls are designed well and working
•For material deficiencies - identify condition, criteria, cause, effect and risk
•Deficiencies brought to Council to direct targeted forensic work
•Recommend practical corrective action
•It does not start from a predetermined finding of fraud or misconduct
Scope of Work (1 of 2)
•Budget & Spending Authority
➢Budget documents, budget vs
actuals, Council presentations,
testing of budget actions
•Procurement & Contracting
➢15 risk-based contracts per fiscal
year, from solicitation through
closeout
•Contract Administration &
Vendor Payments
➢Invoice matching, receipt of goods
and services, payments after
contract authority was exhausted
•Payroll & Position Control
➢15 employees per fiscal year,
reconciliation to the adopted
position schedule and budget
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Scope of Work (2 of 2)
•Restricted Funds, Grants &
Special Funding
➢Eligibility of expenditures, transfers,
reporting, subrecipient monitoring
•Financial Reporting &
Reconciliations
➢Bank, investment, interfund,
AR/AP, capital assets
•Manual Journal Entries
➢All entries obtained, with a risk-
based sample tested
•Corrective Action
➢Status of prior audit findings
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Review Period Options
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Option A Option B
Review Period
(Fiscal Years)
FY 2024 – FY 2026 FY 2023 – FY 2026
Hours 700 – 750 900 - 950
Cost $140k - $150k $180k - $190k
Basis Eadie Payne’s
recommendation
If Council opts to include
an additional FY
Timeline & Deliverables
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•14 – 18 weeks from Kickoff to Council presentation
•Phased Work: Initiation; document review and interviews; testing; draft report; final
report
•Deliverables: Work plan; interim communications; draft report; public final report;
corrective action matrix; Council Presentation
•Identified deficiencies will be brought to Council to direct targeted forensic work
•Legally protected or confidential items will be handled separately, as the City
Attorney determines
Recommendations:
1.Approve the proposed Phase One assessment, subject
to procurement;
2.Select review period: Option A or B;
3.Identify any specific processes, funds, or transactions to
add;
4.Direct to Exclude CFD/LMD matters from Phase One;
5.Provide direction on public reporting and presentation of
assessment;
6.Direct staff to complete appropriate procurement
process and return to Council with a proposed PSA
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Discussion
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