Inquiry Into Financial and Performance Audits for the County and Cities in the County

Conclusions 2

• CL1 Page 2
  Office of the City Auditor website: http://www.ci.san-jose.ca.us/auditor/www.shtml. Report Number 03-08, “An Audit of the Facilities Management Division of the General Services Department,” August 2003. Report Number 03-11, “An Audit of the Utilization and Replacement of the City’s Metered Equipment,” January 2004. Interviews Interview with San Jose City Auditor, September 4, 2003. Meeting with the GSD Director and Facilities Management Division staff, November 20, 2003. Meeting with the GSD Director and Fleet Management Division staff, April 15, 2004.
• CL2 Page 7
  Financial and performance audits are a proven means of reducing risk, saving money, and improving efficiency in city and county government operations. San Jose and the County have formal and extensive auditing programs that have more than paid for the costs of the audits. Several other cities in the County have less extensive programs, and a few have no formal program. Since both the costs and the savings of an auditing program should scale proportionately, the Grand Jury recommends that all municipalities perform appropriate financial and performance audits. Finding I The City of San Jose and the County of Santa Clara make effective use of internal and external financial and performance audits to improve the functioning of their government operations. Both were found to be diligent in following up on the findings and recommendations of the audits. 7 Recommendation I None. Finding II The Office of the City Auditor of San Jose makes effective use of a risk analysis to focus audits on the most vulnerable areas of government operations and those functions with the potential for greatest savings. Recommendation II-A All municipalities in the County should consider performing and annually updating a formal risk analysis of their operations similar to that done by San Jose. Recommendation II-B Municipalities in the County should consider performing internal or external audits of the most vulnerable operations identified in a risk analysis. Finding III Several cities in the County do not have financial and performance management auditing programs. Recommendation III Municipalities in the County without auditing programs should consider using local external auditors such as the City Auditor, via a contract, or the County’s external auditor to perform audits if an internal auditor is not cost-effective. PASSED and ADOPTED by the Santa Clara County Civil Grand Jury on this 13th day of May 2004. ________________________________ Richard H. Woodward Foreperson 8 Appendix A Number of Municipal Financial and Performance Audits Completed (in addition to the required external financial audit/CAFR) Municipality 2001-2 2002-3 2003-4 Comments City of Campbell 0 0 0 City of Cupertino 0 0 0 City of Gilroy 3 3 1 IF, IP, EP City of Los Altos 1-2 1-2 3-5 IF, EP Town of Los Altos Hills 0 1-2 1-2 EP Town of Los Gatos 0 0 1 EP, CIM City of Milpitas 0 0 0 City of Monte Sereno 1 1 1 IF City of Morgan Hill 3-5 3-5 3-5 EF, IP, EP City of Mountain View 3-5 >5 >5 IF, EF, EP City of Palo Alto 3-5 3-5 3-5 EF, IP City of Santa Clara 0 5 0 EP City of Saratoga 0 0 0 City of Sunnyvale >5 >5 >5 EF, IP, EP Legend: IF – internal financial, EF – external financial, IP – internal performance, EP – external performance CIM – uses continuous improvement methodology 9 References Documents “An Audit of the Fleet Management Division of the General Services Department's Vehicle Replacement Program,” City Audit dated February 7, 2003. “Analysis of County Reserves, Fund Balance And Other Funding Issues Related to the FY2003- 2004 Budget,” Harvey M. Rose Accountancy Corp. Financial Audit, June 12, 2003. “Custody Audit – Part II Internal Control Report,” County Audit dated March 27, 2003. “Management Audit of the Facilities Department Capital Programs Division of the General Services Agency,” County Audit dated January 14, 2002. Letter from the Acting Director of the General Services Agency, January 15, 2004. Letter from the Director of the Environmental Resources Agency, March 5, 2004. Management Audit of the Controller-Treasurer Department of the Finance Agency, June 27, 2002. Office of the City Auditor website: http://www.ci.san-jose.ca.us/auditor/www.shtml. Report Number 03-08, “An Audit of the Facilities Management Division of the General Services Department,” August 2003. Report Number 03-11, “An Audit of the Utilization and Replacement of the City’s Metered Equipment,” January 2004. Interviews Interview with San Jose City Auditor, September 4, 2003. Meeting with the GSD Director and Facilities Management Division staff, November 20, 2003. Meeting with the GSD Director and Fleet Management Division staff, April 15, 2004. 10

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