Council to receive results of internal audit

Yahoo

a day ago

Jun. 10—In early April, Lodi City Manager Scott Carney made public claims about widespread credit card fraud at city hall, and now a recent internal controls review has determined that some misuse has occurred, although to what extent is remains unknown.
The City of Lodi contracted Moss Adams, LLP to perform an evaluation of its internal controls framework in September, and the Lodi City Council will receive a report on the document during a special meeting Tuesday afternoon.
The report, which was completed in January, focused on assessing internal controls for protecting city assets and resources, as well as timely processing and reporting of financial information.
Some of the firm's recommendations include implementing a fraud, waste and abuse hotline; establishing an internal audit function; assessing staffing levels; assessing the necessity of fleet vehicles and dispose of vehicles that are no longer needed; and strengthening credit card use and review process, among others.
In its report, Moss Adams found that city employees had been using CAL-Cards for inappropriate personal purchases, which constitutes potential fraud and abuse and demonstrates a lack of a controlled purchasing environment, the firm said.
Based on interviews with staff, multiple departments said employees might use their personal credit cards for small transactions rather than the CAL-Card, and they subsequently file for reimbursement through the city
Using personal credit cards instead of city credit cards violates use policy, the firm said, results in non-compliance issues and gives the city less oversight over the purchasing process.
In addition, using personal credit cards could subject the city to inappropriate or fraudulent purchases, and creates inefficiencies as there is a higher volume of employee reimbursement requests, the firm said.
The report suggested the city implement pre-approval processes for certain types of purchases, set transaction limits on CAL-Cards that would restrict the amount that can be spent in a single purchase or within a month, and conduct regular audits of CAL-Card transactions to identify any patterns of misuse.
The firm also suggested ensuring goods purchased with CAL-Cards are shipped to a city address to secure purchases, and to review and update its use policy to appropriate use of the cards.
To address employees' using personal credit cards for small transactions instead CAL-Cards, it was recommended the city establish clear guidelines that detail when personal cards should not be used and the preferred methods of payment for city-related expenses.
In addition, it was recommended the city provide annual training sessions emphasizing the importance of adhering to purchasing policies and the potential issues associated with using personal cards.
During an April 1 special meeting, Carney made reference to personnel matters being investigated by city staff while accusing the city clerk and city attorney of editing staff reports without his knowledge or approval in a non-agendized statement. Carney was placed on leave days later. The Brown Act forbids city staff and elected officials from discussing personnel matters that are not placed on an agenda.
The council will also be discussing potential litigation from Carney and his attorneys during closed session Tuesday.
In its report, Moss Adams also found that the city does not have a mechanism in place for reporting potential fraud, waste or abuse, which creates the risk that potentially suspicious activities may not be investigated or resolved.
This may lead to potential misappropriation of assets, fraudulent financial reporting, or other related activities, the firm said.
A hotline would offer employees, residents and vendors a confidential avenue to report suspicious activities or concerns in a timely manner, which would allow the city to respond and address the concerns, the firm said.
In addition, the firm said a hotline would enhance transparency, encourage accountability and foster a culture of integrity in the city.
Moss Adams added the lack of an internal audit function can result in less oversight, which can lead to undetected errors, mismanagement or fraudulent activities within departments.
The firm suggested the city outline the scope and objectives of an internal audit function, and create a comprehensive plan that prioritizes high-risk areas and establishes a schedule for regular internal audits of various departments and functions.
The city should also identify qualified resources to carry out the internal audit function, either through recruitment or outsourcing to a qualified firm, and regularly assess its effectiveness and make adjustments as necessary to improve its impact on departmental and operations, the firm said.
To view the entire document, visit tinyurl.com/COLinternalcontrols.
Tuesday's meeting begins at 3:30 p.m. at Carnegie Forum, 315 W. Pine St. It will also be livestreamed at www.facebook.com.CityofLodi.