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Item 4HCity of Southlake, Texas M E M O R A N D U M January 30, 2008 TO: Shana K. Yelverton, City Manager FROM: Alison Ortowski, Assistant to the City Manager Resolution No. 08-008, Establishing an Audit Committee and SUBJECT: Appointing Members to the Committee Action Requested : City Council approval of Resolution No. 08-008, establishing an Audit Committee and appointing members to the committee. Background Information : Endorsed by the Government Finance Officers Association (GFOA) as a recommended practice since 1997, audit committees help to enhance the financial statement auditor’s real and perceived independence by providing a direct link between the auditor and the governing body. Additionally, audit committees facilitate communication between management, the auditors and the city council. They also help to limit the reliance governing bodies place on the technical expertise of the independent auditor as well as serve to focus and document the government’s process for managing the financial statement audit. As the City Council is ultimately responsible for the proper stewardship of the public’s funds and as the City Council has chosen “Accountability” as one of the City’s five core values, establishing an Audit Committee provides an added tool for responsibly managing these funds. City staff surveyed eleven area benchmark cities to learn the prevalence of audit committees in the area as well as the composition, purpose and appointment process in those cities that do have such a committee. Six out of the eleven cities surveyed do have an audit committee: Bedford, Colleyville, Frisco, Grapevine, Hurst and University Park. Of those six, four audit committees are composed of three council members. The remaining two are composed of two council members and ten citizens, respectively. Additionally, Euless and Farmers Branch do not have formal audit committees but do have council members attend meetings with the auditors, and Euless also has an Investment Committee that includes the Mayor as a member. If established, the City of Southlake Audit Committee will be composed of three council members appointed annually by the City Shana K. Yelverton, City Manager January 30, 2008 Page 2 of 2 Council during the regular appointment process of the City’s boards and commissions. With regard to the proposed committee size, the GFOA Audit Management Handbook states, “the committee must be large enough to encompass the range of expertise needed to properly advise the governing body but small enough to operate efficiently and effectively.” Audit Committee responsibilities will include: a. Meeting with the external auditor prior to the annual audit to discuss scope and issues b. A review of the preliminary audit before the audit is presented to the City Council c. Any other matters as may be determined by the City Council and/or Audit Committee Financial Considerations : There are no financial considerations relating to this agenda item. Financial Impact : There is no financial impact relating to this agenda item. Citizen Input / Board Review : Not Applicable Legal Review : Resolution 08-008 has been reviewed by the City Attorney. Alternatives : Not Applicable Supporting Documents : Supporting documents include the following items: Copy of Resolution No. 08-008, establishing an Audit ▪ Committee and appointing members to the committee Staff Recommendation : City Council approval of Resolution No. 08-008, establishing an Audit Committee and appointing members to the committee. RESOLUTION NO. 08-008 A RESOLUTION OF THE CITY OF SOUTHLAKE, TEXAS, ESTABLISHING AN AUDIT COMMITTEE AND APPOINTING MEMBERS TO THE COMMITTEE, AND PROVIDING AN EFFECTIVE DATE. WHEREAS , the City Council of the City of Southlake, Texas (the “City”) is ultimately responsible for the stewardship of the City’s funds; and WHEREAS, an annual audit is required by the City Charter; and WHEREAS , it would be an enhancement to the City’s financial management to establish an Audit Committee; and WHEREAS , the Government Finance Officers Association has made the establishment of an audit committee a recommended best practice as a means of providing independent review and oversight of a government’s financial reporting processes, internal controls and independent auditors; and WHEREAS , this committee would be composed of three council members and their responsibilities would include: a. Meeting with the external auditor prior to audit to discuss scope and issues; b. A review of the preliminary audit before the audit is presented to the City Council; and c. Any other matters as may be determined by the City Council and/or Audit Committee NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS THAT: Section 1. An Audit Committee is hereby established. Section 2. The City Council hereby appoints the following council members to serve as members of the Audit Committee. Appointments shall be made annually as a part of the regular appointment process of the City’s boards and commissions. 1. 2. 3. Section 3. The City Council authorizes and directs that this action be made part of the City’s permanent records. Section 4. This resolution shall become effective from and after the date of its passage. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS th ON THIS THE 5 DAY OF FEBRUARY 2008. APPROVED: Andy Wambsganss, Mayor ATTEST: Lori A. Payne, City Secretary