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HomeMy WebLinkAbout2019-04-16 (Special) Meeting Agenda Packet Please note: If you have a disability and need auxiliary aids or services, please notify the City of Englewood (303-762-2405) at least 48 hours in advance of when services are needed. 1000 Englewood Pkwy – Community Room Englewood, CO 80110 AGENDA City Council Special Meeting Tuesday, April 16, 2019 ♦ 5:30 PM Council dinner will be provided at 5:30 pm I. EEF Audit Vendor Interviews Council will interview vendors for the Englewood Environmental Foundation (EEF) audit. a. Englewood Environmental Foundation Audit Proposal Interview Information EEF Interview Information b. 6:00 p.m. Eide Bailey (In Person) EB_City of Englewood Colorado_EEF Presentation c. 7:00 p.m. CICN (In Person) Englewood Environmental Foundation Presentation 041619 d. 8:00 p.m. Marsch Minick (Skype) Marsh Minick Presentation for 3.12.19 Discussion w Englewood Page 1 of 36 Page 2 of 36 CITY OF ENGLEWOOD, COLORADO Request for Proposal no. RFP-18-45Page 3 of 36 TALKING POINTS Statement of Work Discussion 2 3 4 1 Background and Qualifications Anticipated Schedule Approach Page 4 of 36 STATEMENT OF WORK DISCUSSION & OPTIONS After Listening and Research, We Understand the Following: 1.Internal Audit -Analyze data for deficiencies in: a.Internal controls b.Compliance with management policies and procedures c.Compliance with EEF incorporating documents (Articles, Declarations and Bylaws and overarching City requirements) 2.Internal Controls Engagement -review of: a.Purchasing and accounts payable policies, procedures and processes b.Compliance with City/EEF policies and procedures: c.Vendor management and controls d.Contracts management and controls e.Proper segregation of duties and approvals f.Cash Receipts and Disbursements Controls 3.Fraud / Forensics –could there be fraudulent activity?Page 5 of 36 INTERNAL AUDIT Risk Assessment Audit Plan FieldworkReporting Follow-Up Page 6 of 36 INTERNAL CONTROL EXAMINATIONS (ICE) •Designed to explore current accounting policies and procedures. •Determine if opportunity to manipulate areas or procedures exists. •Review policies and procedures. •In-depth interviews with employees. •Provide recommendations •Strengthen current controls •Increase employee perception of detection Page 7 of 36 FRAUD & FORENSICS Fraud & Forensic Advisory Services is a specialty division of Eide Bailly The Fraud & Forensic Advisory Services provides specialists in the following areas: •Forensic Accounting •Fraud Prevention/Detection •Digital and cellphone forensics •Text message recovery •eDiscovery Management •Resolve Allegations Page 8 of 36 BACKGROUND & QUALIFICATIONS •Certified Fraud Examiners (CFE) •Certified in Financial Forensics (CFF) •Certified Forensic Interviewers (CFI) •Certified Public Accountants (CPA) •Accredited Business Valuators (ABV) •Former law enforcement professionals.Page 9 of 36 ANTICIPATED SCHEDULE Page 10 of 36 APPROACH Phase 1 –Planning Schedule interviews, request documentation, review policies and procedures for compliance. Phase 2 –Internal Audit, ICE & Forensics Gain understanding of EEF policies/procedures/manuals, Gain understanding of internal controls, Identification of weaknesses in I/C, Identification of fraud risks. Phase 3 –Testing / Examination From information gathered in Phases 1 & 2, we will develop an audit program and perform testing to 1) assess internal audit or fraud risks, and 2) evaluate existing controls. Phase 4 –Reporting Provide detailed Internal Audit, Internal Control Examination or Forensic Examination, Reports. Page 11 of 36 WHY PICK EIDE BAILLY? Because we can help you get there: •Resources •Flexibility •Experience •Specialty Services •Local and On-site Page 12 of 36 This presentation is presented with the understanding that the information contained does not constitute legal, accounting or other professional advice. It is not intended to be responsive to any individual situation or concerns, as the contents of this presentation are intended for general information purposes only. Viewers are urged not to act upon the information contained in this presentation without first consulting competent legal, accounting or other professional advice regarding implications of a particular factual situation. Questions and additional information can be submitted to your Eide Bailly representative, or to the presenter of this session. QUESTIONS?Page 13 of 36 Colorado Independent Consultants Network, LLC Proposal to Provide Englewood Environmental Foundation Audit Services Tuesday, April 16, 2019 7pm Page 14 of 36 Team Introduction Our understanding of the audit Similar audits Staff qualifications Audit cost/timeline Audit process Questions Presentation Topics Page 15 of 36 •John Olenberger, CPA, CIA •Larry Hall, CPA, CIA, CFE •Other team members listed on our proposal •Angelika Greber, CPA •Ron Hilsenhoff, CIA •Chris Horton, PhD, CIA •Kellee Brauntz, CPA Team Introduction Page 16 of 36 •CICN has been in existence for over a decade •Nearly exclusive focus in local government •Exclusive focus in internal audit/forensics/business process improvement •Local firm/local resources-All interviews, meetings, presentations to be conducted in person •Experienced in public sector report writing Firm Introduction Page 17 of 36 •Englewood Environmental Foundation(EEF) created in 1997 to oversee property as part of the Cinderella City Mall redevelopment •EEF Board: Public Works, Community Development, Finance •Various allegations of mismanagement •Primary focus-Forensic audit of expenditures •Secondary focus-Improve current controls Our understanding of the audit Page 18 of 36 •April 2017 DA’s Report •EEF “Isn’t subject to City policies” •City official gave work to friends in exchange for kickbacks •Over payment for services •Embezzlement, corruption, illegal contracts Our understanding of the audit Allegations Page 19 of 36 •Jefferson County purchasing & p-card audits •Adams County Purchasing study •Garfield County Purchasing audit •City of Aspen fraud investigation •City of Santa Fe, NM purchasing audit •Santa Clara Valley Water District construction/conflict of interest audit •Waste Management fraud investigation Similar audits Page 20 of 36 •30 professionals •Average experience: 15 years •Total years with “Big 4” accounting: > 100 years •16 CPAs; 6 CIAs; 11 CISAs; 3 CFEs •Former “Big 4” and internal audit executives •No entry level staff •Exclusive internal audit focus •Wealth of local Colorado government experience Staff qualifications Page 21 of 36 •Our cost is all inclusive-Firm fixed price •99% of the audit cost is professional service fees •Majority of work to be performed on site •4 Month timeframe from kickoff to final report issuance •Targeted completion by end of September Audit cost/timeline Page 22 of 36 •Data analytics •Statistically valid sample of 100 •Testing selections made via random number generator •Ability to restrict sample (ex. All transactions >$100) •95% Confidence level •Confidence interval of 10 •Total population of 6,500 transactions Audit Process Page 23 of 36 •Testing attributes customized to City Council’s concerns •Properly approved? •Appropriate? •Competitively bid? •Followed purchasing guidelines? •Regular status update meetings Audit Process (Con’t)Page 24 of 36 •Recommendations on policy/procedure improvement •Written report with final conclusions Audit Process (Con’t)Page 25 of 36 Questions Page 26 of 36 City of Englewood Environmental Foundation Audit March 13, 2019 Discussion Phone: 971-266-1846 Website: www.MarshMinick.com Email: Info@MarshMinick.com 1 Page 27 of 36 Presentation Outline 1.About Marsh Minick 2.Similar Past Forensic and Investigative Work Examples 3.Understanding of the EEF Audit 4.Purpose of EEF Audit, Blended Approach Forensic/Performance Audit 5.Q & A from Council 2 Page 28 of 36 Melissa Frick Minick, MS, CFE, CFCI More than 15 years of experience in this field with college degrees and certifications: •Master's of Science degree in Fraud and Forensics •Bachelor's of Science degree in Business Management •Certified Fraud Examiner (CFE) since 2012 •Certified Financial Crime Investigator (CFCI) since 2014 •Certificate from the FBI Citizens Academy since 2013 Brandi Marsh, MS, CAMS, CFE, CFCI More than 20 years of experience in this field with college degrees and certifications: •Master's of Science degree in Fraud and Forensics •Bachelor's of Science degree in Accounting •Certified Anti-Money Laundering Specialist (CAMS) since 2009 •Certified Fraud Examiner (CFE) since 2013 •Certified Financial Crime Investigator (CFCI) since 2014 Marsh Minick, P.C. About Us Oregon Based Company Marsh and Minick have been working together as a team since 2003. Specialize in forensic auditing, financial crime investigations, compliance and risk management. 3 Page 29 of 36 Saline County Board ordered a Forensic Audit of the County Clerk and Recorders Office: •Allegations were made the County Clerk and Recorder had mismanaged funds and violated a court order to comply with the County Board and Treasurer •Results were $1 million misappropriated from taxes levied from the public •Comprehensive forensic audit of all Officeholder functions and County financials 4 Similar Past Audits by Marsh Minick Reported by WSIL 3 ABC -http://www.wsiltv.com/story/37400093/forensic-audit-finds-mismanagement-abuse-in-saline-co-clerks-officePage 30 of 36 Pulaski County Court and State’s Attorney ordered a Forensic Audit of the Yorkwood Recreational District: •Allegations of fraud and mismanagement of the community facilities by the Board Members for Yorkwood •Results were $90,000 in waste of District taxpayer funds from the community pool, park and tennis court •Compressive forensic audit dating back to 1978 when Yorkwood was first established 5 Similar Past Audits by Marsh Minick Page 31 of 36 Washoe Tribal Council ordered a Forensic Audit of the Housing Authority a public entity owned by the Tribe: 6 Similar Past Audits by Marsh Minick •Allegations of corruption, conflicts of interest with Board Members and Contractors, for housing development projects funded by federal grants •Results were $5 -$6 million dollars was misappropriated and wasted due to overpayments to contractors on construction, and non-compliance with federal grant funds •Comprehensive forensic audit of all financials and internal controls for the entire Housing Authority Page 32 of 36 Oregon Secretary of State ordered a Fraud Investigation of the Business Energy Tax Credit Program: •Allegations of high-level government corruption into a State tax credit program, including State Congress people, State Agency Department Directors, State Governors, and Private Corporations •Results were over $300 million in concerning and wrongful tax credits issued, and corruption between a State Employee and Private Company •Comprehensive fraud investigation of over 14,000 tax credit projects totaling 2.4 billion in certified costs for 1.4 billion in tax credits 7 Similar Past Audits by Marsh Minick Reported by Oregonian/Oregon Live - https://www.oregonlive.com/business/2016/11/report_on_questionable_tax_cre.htmlPage 33 of 36 Understanding EEF Audit Our proposal for a blended audit is due to the RFP issued by the City and research Marsh Minick performed about the EEF. Our understanding includes… •Allegations and coverage in the news media, we are aware of reports that said: ▫EEF was formed to remediate, improve, maintenance, manage and develop property ▫Run by public officials and employees but it is a separate organization from the City ▫Financial problems reported by the media Overpayment for services Misallocation of funds Kickbacks, bribery, and conflicts of interest with EEF Board Directors Change of ownership and interest of the asset(s) ▫Public reassurance there is no evidence of duplicate payments, wasteful spending, and/or fraud •Council session videos to evaluate Councilors’ personal audit expectations, including: ▫Put allegations that have been levied to rest ▫Identify if evidence exists of financial fraud, waste, abuse or mismanagement ▫Accounting of problems with dollar amounts and quantify financial impacts ▫Professional, independent, and highly capable auditors ▫Recommendations for improvement of processes and controls •Report from 2017 by the 18th Judicial District Attorney’s Office ▫Reporting was inconclusive to warrant a criminal investigation 8 Page 34 of 36 Purpose of Audit –Blended Approach Forensic Audit Performance Audit •Special examination for allegations of wrongdoing, fraud, waste, abuse and mismanagement •Assess internal controls •Suspicious activity •Gather fact-based evidence of problems •Quantify impact and extent of loss •Identify suspects and root cause •Improvement recommendations •Used for normal business operations •Improve efficiency, effectiveness and economy of resources within operations and processes •Identify process enhancements •Evaluate current processes •Enable capabilities to meet objectives •Seek to reduce unnecessity or redundancy •Making the best use of all funds and resources Marsh Minick Proposes a Blended Audit Approach •Risk-based audit focuses on areas of greatest fraud risk, waste, abuse, mismanagement, compliance deficiency, or other problem •Evaluation of unique process risks and internal controls •Forensic,compliance and substantive testing of financial data, supplementary program documentation, and interviews •Calculate and quantify impact and extent of problems with dollar amounts •Fact-based report of findings using evidence to support conclusions •Improvement recommendations 9 Page 35 of 36 Thank You! Q & A 10 Page 36 of 36