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HomeMy WebLinkAboutAudit Committee Resolution 2018.1 - Exhibit A (Adopted)1 EXHIBIT A CITY AUDITOR AND AUDIT COMMITTEE BYLAWS AND RELATED PROCEDURES BACKGROUND The Audit Committee and the City Auditor are established pursuant to Article III, Section 18 of the Charter of the City of Bremerton (“City”). City management, not the Auditor, is responsible for establishing, implementing, and maintaining the City’s internal controls. Management establishes control policies, processes, and practices to help the City achieve the following four objectives: 1. Effectiveness and efficiency of operations 2. Reliability of financial and management reporting 3. Compliance with laws and regulations 4. Safeguarding of assets CITY AUDITOR RESPONSIBILITY As an objective and independent advisor, the primary responsibility of the City Auditor is to perform audits to evaluate whether management’s controls are present and operating effectively, and if not, provide recommendations for improvement. As an advisor, the City Auditor is not responsible for the execution of City activities. The City Auditor may also provide advisory services and conduct proactive fraud audits to identify potentially fraudulent acts; participate in fraud investigations; and conduct post investigation fraud audits to identify control breakdowns and establish financial loss. The Auditor’s scope of work may also include: a) Assurance Services - traditional audits, investigations and testing, performance evaluation, limited assurance. b) Consulting and operations improvement services - Business process reviews, internal control education, and other training and special projects as requested and approved by Audit Committee. c) Ethics Compliance reviews per Chapter 2.96 BMC and compliance with all applicable Federal, State and local laws and regulations. d) Serve as a liaison between external auditors to assure audit coordination. The City Auditor reports directly to the Audit Committee and may submit internal audit reports for the Committee’s review and approval. In the course of the Auditor’s work, memos summarizing findings and/or recommendations and draft reports may be issued directly to management. 2 AUDIT COMMITTEE RESPONSIBILITY The Audit Committee’s responsibility is to assure elected City officials and management that the internal auditing of the municipality and its departments, programs and activities is performed in accordance with standards for the practice of internal auditing and with professional standards of conduct. To this end, the Committee will: a) Be responsible for the appointment, retention, and oversight of the work of the City auditor. b) Conduct annual appraisals of the City Auditor's performance as to effectiveness and efficiency, including a comparison of planned and actual audits. c) Review and approve the internal audit work schedule and planned budget for the coming year. d) Review results of external and internal audits with specific attention to: i. Restrictions ii. Cooperation received iii. Audit findings iv. Audit recommendations e) Review and approve appropriate special audit requests. f) Review and recommend revisions to policies relating to unethical and illegal procedures. g) Ensure the City Auditor's independence of management. h) Meet regularly with the City Auditor. i) Help to assure that management is exercising due professional care. AUDIT COMMITTEE MEMBERS AND TERM Pursuant to Article III, Section 18 of the Charter of the City of Bremerton (“City Charter”) and Chapter 2.18 of the Bremerton Municipal Code, there shall be an Audit Committee consisting of three designated members (“Designated Members”) and two selected members (“Selected Members”) for a total of five members as follows: a) Designated Members: Two Council Members and an independent Certified Public Accountant designated by the City Council; and b) Selected Members: Two residents of the City of Bremerton selected by the Designated Members of the Audit Committee. The designation of the Council Members to the Audit Committee shall be by the Council President. The designation of the Certified Public Accountant to the Audit Committee shall be by majority vote of the City Council. The selection of the two residents of the City of Bremerton shall be by majority vote of the Designated Members of the Audit Committee. During the first meeting in January, the Committee shall elect one of its members as Chair and one as Vice Chair to serve a term of one year. The Chair, or in his or her absence the Vice Chair, will conduct the order of business at meetings, coordinate communications of the committee, and perform all other 3 duties as specified by the Committee. Only the Audit Committee’s City Council members can approve the Auditor’s payroll and expenses, and approve the City Auditor’s planned budget. Audit Committee members shall serve terms as follows: c) The two Council members designated by City Council shall serve one-year terms or less if the current term of their elected office expires earlier. d) The independent Certified Public Accountant Designated by City Council shall serve a three- year term. e) The two City of Bremerton residents selected by the Designated Members of the Audit Committee shall serve three-year staggered terms and may re-apply to serve additional terms. In the event that any member does not serve a full term, either by resignation or removal, a replacement shall be selected by the original appointing authority to serve the remainder of the term. AUDIT COMMITTEE MEMBER REMOVAL By majority vote of the entire membership of the Committee sitting as a whole, the Audit Committee may request the appointing authority of a member to remove that member from the Committee. VOTING AND CONFLICT OF INTEREST General decisions of the Committee shall be by majority vote of the voting members in attendance. A Committee member may abstain from participating and voting at will or may be requested by Committee consensus to abstain from participating and voting on issues that are subject to that member's area of control or influence. Three members are required to be present to constitute a quorum for the transaction of Committee business. There shall be no voting by proxy except that any member who will be absent may prepare a written statement of position to the Chairperson in advance of any meeting to be read to the members present during that meeting. In the event a quorum is necessary and not otherwise available, then a committee member may participate remotely in all or part of an Audit Committee Meeting if the following conditions are met: a) Prior approval is given by the Chair for good cause; b) All persons participating in the meeting are able to hear each other at the same time, such as by the use of speaker phone or internet; During a meeting that a committee member is attending remotely, the Chair shall state for the record that a particular committee member is attending remotely and the reasons for such attendance. Committee Members attending remotely may participate and vote during the meeting as if they were physically present at the meeting. Any technical prohibitions or difficulties that prevent all parties present at the Audit Committee Meeting from adequately communicating with one another will negate any authorization previously given to attend remotely by the Chair. CONFIDENTIALITY 4 All Audit Committee meetings shall be conducted in conformance with the Open Public Meetings Act (RCW 42.30). Until an audit is complete and the audit report is ready for Audit Committee review and approval, Audit Committee members will be held to a strict standard of confidentiality to protect the integrity of the audit. Except for information shared in public meetings, strict confidentiality will be maintained for all audit-related communication between the City Auditor and Committee members or between individual Committee members. It is further understood that the City Auditor is to retain all confidences obtained from City employees during performance of an audit. The City Auditor may communicate confidences obtained during an audit at the time a report or memo summarizing recommendations is presented to the Audit Committee if such information is significant to the report conclusions and findings, or if it is relevant and necessary to a request of the Committee to change the scope of an audit. Confidences that relate to illegal activities shall be immediately communicated to the City Attorney and/or State Auditor. REPORTING Pursuant to state law, Audit Committee meetings are open to the public. Some subject matter may be inappropriate for an open public meeting, such as incomplete audit findings which are preliminary and, therefore, confidential; or topics set forth in RCW 42.30.110(1) that should be discussed in executive session. Unless and until an audit report or memo summarizing recommendations is issued for final approval, it is essential that the City Auditor and the Audit Committee members keep all internal audit deliberations and matters confidential. As part of the audit process and at the sole discretion of the City Auditor, the City Auditor may at any time opt to share draft reports and/or analyses, or other pertinent information with appropriate City personnel. Deliberation of preliminary internal audit work may occur in informal groups of Audit Committee members, provided the group is fewer in number than a quorum. In addition to deliberating preliminary audit work, the informal work groups may review and approve preliminary audit reports before the reports are submitted to the whole committee for final review and approval.