By Chris Frost
Oxnard-- The Finance and Governance Committee received an update on the Corrective Action Plan (CAP) under single audit findings, and heard some good news, Jan. 14.
The audits were held from fiscal years 2015 through 2018.
Assistant Chief Financial Officer Donna Ventura presented the item to the city council, and she introduced two new employees, Christine Williams, who has been with the city for 4.5 years as city controller and Tanya Chang, who took over the controller position for Williams.
Chang is a Certified Public Accountant who comes from the private sector.
Ventura said the update goes back to the Fiscal Year 2014-2015 single audit conducted by Eadie & Payne that had 11 findings.
"Each year, there have been additional audits that produced some additional findings that totaled 172," she said. "We developed a corrective action plan that started before I arrived, and we've been making slow progress on that corrective action plan."
Throughout the action plan, resource constraints and system issues have been an issue, she said, which slows the process down.
The last city update came in April 2019, and the city will have another update in May after Eadie & Payne complete the 2019 single audit.
There are six different categories, she said, including complete meaning, the finding is resolved, and the auditors tested the fix and deemed it resolved.
To be tested means the city feels it has corrected the problem, but the auditors still have to check the corrective action.
"A lot of the findings relate to finding policies and procedures, so that means we are still in the draft phase of that and waiting to get those policies and procedures finalized," Ventura said. "In progress may or may not relate to having a new policy and procedure. We've started, but we haven't completed the implementation. Not started is obvious. Past and no longer required are findings that the auditors put forward, but for various reasons decided it is no longer required."
Since the last report, she said the city reduced the number of findings from 87 to 57.
Ventura focuses on material weaknesses, which means control is either non-existant and non-functioning in a way that prevents material errors from occurring in the city's financials.
"We've made a lot of progress, and there are still 23 material weaknesses left to be resolved," she said. "What that means is the auditors, because we have material weaknesses, they need to perform more audit procedures. They may need to do more testing than they normally would to be sure there aren't any material errors in the financials."
The city has 22 significant deficiencies remaining.
"Non-compliance are particularly related to grant requirements and best practices," she said. "Some of the findings are repeated year-after-year, there are 22 repeated findings, so what we are interested in understanding are how many unique findings there are. Of that 170, there are 148 that are unique. There are 57 of those that are still unresolved."
The city has resolved 12 material weaknesses and 17 material deficiencies.
"I want to to give credit where credit is due, and 21 of the findings were related to IT (Information Technology) general controls," she said. "They have made some good progress, and 11 of those have already been resolved. They are close on the remaining 10."
Additionally, the city has implemented procedures for daily cash and improved the accuracy and documentation of the city's journal entries.
"There has been a lot of improvements in the purchasing practices and debt reconciliation," she said. "We've made some important improvements."
Additionally, Ventura said training is an ongoing mission, and the group remains dedicated to raising competencies.
"We keep people abreast of ongoing changes in accounting principals, so we've been sending a lot of staff to GFOA (Governmental Finance Officers Association) and the California Society of Municipal Finance Officers," she said. "Those are the two main organizations we can get training through."
During public comments, Jim Lavery said he's having a difficult time wrapping his head around all the deficiencies and material weaknesses, but the city still gets a clean audit.
"I can't reconcile that in my mind," he said. "The assistant (Donna Ventura) said the controls are non-existent. Those were her words. If the controls are non-existent, how do you get a clean audit? This has been going on for years. I don't know how to translate that, and it is hard to take this seriously. Year-after-year, the same material weaknesses come up. A lot of them are repeat issues."
Mayor Tim Flynn commented that the city has a corrective action plan. If the city continues making progress on the corrective action plan, it will not trigger a further inquiry from the state controller.
"That is correct, and we do file a report with the state controller every year," Ventura said. "We'll do that again in March, this year."
Having weaknesses in internal controls, she said, doesn't necessarily mean that Oxnard will have inaccurate financial statements.
"What it means is that you can't be sure that you have accurate financial statements unless the auditor does a lot more testing and a lot more work," she said. "For example, one of the material weaknesses we have is performing timely bank reconciliations. Obviously, we want to make sure we are reconciling our books to the cash in the bank, and we do that. Our bank reconciliation process is extremely complex and extremely manual. Sometimes, it takes us three months or more to get it complete. We haven't found any fraud. The process and the systems make it difficult to get our bank reconciliations done timely."
Committee Member Gabriels Basua said she is happy to see the progress.
"What I would like to see is those numbers come down as far as the deficiencies and controls," she said. "The fact that you were able to do that in the first year you were here, I commend you."
Committee Member Bert Perello said he has the "highest respect" for Lavery and the auditors.
"The concern, what it sounds like, is how are we getting a clean audit," he asked. "Are we implying that the auditors are not doing a good job? I don't know."
Ventura said the city gets a clean audit by performing more testing than what is needed.
"That ends up costing the city a little bit more because of audit fees, because of the extent of audit testing they have to perform," she said.
Perello said the improvements over the last year have been like night and day.
"We spent a lot of money with a lot of auditors, we've accepted the work they're doing and spent a lot of money on four laminated boards on each side of this room," he said. "I think it is time. You either put a checkmark that something is done because we've reduced the number of complaints from 87 to 57. That means 30 of them have been resolved over a 20-month period. There has got to be something that we can show the public when we come in and go holy crap, that's the scorecard?"
Flynn asked Ventura to talk about the Enterprise Resource Planning (ERP) system and the major attributes that will pierce through the whole chart.
Ventura said that many of the city processes are paper-based. The process is slow because they have to wait for the paper to compile the data.
"Data gets input incorrectly, and we have to find it and correct it," she said. "What modern systems allow is more validation of the data upfront. If we take, for example, timesheets, somebody else enters their timesheet in the system, and we find out that this particular person is not authorized to charge time to this particular project. Then, we have to go back and fix it."
Deputy City Manager Shiri Klima said Ventura and Riper are too modest.
"They've had an incredible turnover," she said. "The story they are not telling you is there has been a lot of turnover, and they've filled a lot of positions with excellent new folks. We're very, very excited, and proud of them because of all of their growth. In that process, they've managed to do all this."