Ventura County Grand Jury
• 2002-2003
Independent Auditing within Ventura County Government
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 26 findings
F1
The Board of Supervisors has the fiduciary responsibility for all County government.
No recommendations for this finding
F2
The County Executive Officer is the Board of Supervisors’ agent in implementing the County’s internal control system.
No recommendations for this finding
F3
The Auditor-Controller is the Board of Supervisors’ agent for implementing an independent audit. This is discussed in Appendix C.
No recommendations for this finding
F4
With respect to the new auditing standard the Board of Supervisors is the head of County Government. Appendix D.
No recommendations for this finding
F5
In the California Government Code, the Legislature has found that it is essential to establish audit procedures that conform to Federal standards of independence and quality.
No recommendations for this finding
F6
In terms of full time employees, auditors represent a small fraction of the employees of the Office of the Auditor-Controller.
No recommendations for this finding
F7
Some of the other important business and accounting functions of the Auditor- Controller are: o Claims and Disbursing o Payroll o General Ledger o Reconciliation of Accounts o Invoices/Billing o Collections/Accounts Receivable o Accounting for Fixed Assets o Preparing the Comprehensive Annual Financial Report o Maintaining and developing the County’s Accounting System o Overhead Allocations and Cost Studies o Accounts Payable
No recommendations for this finding
F8
In 1981 there were 17 auditors. By 1989 there were about a dozen auditors. Currently there are six auditors.
No recommendations for this finding
F9
In Fiscal Year (FY) 1981-1982 the audit department performed 55 audits. In Calendar Year (CY) 1989, 35 audits were on the agenda of the Board of Supervisors. In CY 2000, seven audits were on the agenda of the Board of Supervisors.
No recommendations for this finding
F10
The majority of areas that internal audit would normally address are in the Auditor- Controller’s operations or areas where the Auditor-Controller sets accounting policy. 2
No recommendations for this finding
F11
The current structure places the Auditor-Controller in a conflicting situation when there are differences between the Controller staff and the Audit staff.
Related Recommendations (3)
R1
In order to insure that the County meets the newer standards for independent audit the Board of Supervisors establish an effective oversight mechanism to insure adequate audit resources and independence.
R2
The Grand Jury recommends the establishment of an Audit Oversight Committee reporting to the Board of Supervisors. This committee would be charged with responsibility for oversight of internal controls and independent audits within the County. It would be composed of a Chair, a Co-Chair, The Chief Executive Officer, the Auditor- Controller, the Treasurer–Tax collector as a non-voting member, and one outside member from the private sector appointed by the Board of Supervisors. The Purpose of this committee would be: A. Oversee the establishment and maintenance of the County’s internal control structure. B. Oversee the quality of financial reporting activities. C. Oversee and monitor County compliance with internal controls, pertinent laws, regulations and standards. D. Oversee the resources allocated to the internal control and internal audit functions. E. Receive regular briefings from the internal audit staff on all planned and in- process audits. F. Study the Orange County paradigm to internal audits with a view to avoiding potential audit weaknesses. G. Review the possibility of separation of the duties of Auditor-Controller. The Auditor responsibilities would return to its elected status while the Controller responsibility would report to the CEO.
R4
That, considering the current budget difficulties, the Board of Supervisors be committed to a long term process to turn around a deteriorating situation with respect to independent audits. This effort should include the following: A. Accept the responsibility for the hiring and termination of the head of the internal audit function. This position should be filled through a nation-wide competitive 5 process. To insure integrity, this position should have a severance package associated with it. B. All the positions of the internal audit function should be budgeted at the senior level. The actual placement of individuals can be at a lesser level. C. Develop a plan to improve the quality and effectiveness of the audit function through external recruitment, internal training or in contracting of outside capability.
F12
The current audit policy was last issued in 1991 and revised in 1997. It supports a collegial approach to performing the auditing process and states “.audit reports will be discussed with the auditee staff and management. At this point, the focus will be on improving operations and correcting noted deficiencies in a mutually agreed upon manner. The auditee will be given the opportunity to initiate corrective actions on any noted weaknesses."
No recommendations for this finding
F13
On some audits the attitude engendered by the current collegial policy has led to excessive delays between the issuance of a preliminary report and a final report.
Related Recommendations (3)
R5
That auditing policy be reviewed and revised to focus on the timeliness of audits. At a minimum the revision should require no more than a sixty day time limit for an audited department to respond to all draft audits.
R6
That draft audit findings be released to the audited organization as quickly as possible without waiting for the completion of the draft report.
R7
That the Auditor-Controller review and benchmark current audit activities against the Best Practices identified by NALGA. That a team approach be utilized for complex audits to improve the timeliness of audits. This should include peer reviews of planned and in-process audits as well as a “lessons learned” on all completed audits.
F14
Past Boards of Supervisors had members participating in an Audit Advisory Board. For the current Board of Supervisors, visibility into the audit process has been limited to the end product.
Related Recommendations (1)
R2
The Grand Jury recommends the establishment of an Audit Oversight Committee reporting to the Board of Supervisors. This committee would be charged with responsibility for oversight of internal controls and independent audits within the County. It would be composed of a Chair, a Co-Chair, The Chief Executive Officer, the Auditor- Controller, the Treasurer–Tax collector as a non-voting member, and one outside member from the private sector appointed by the Board of Supervisors. The Purpose of this committee would be: A. Oversee the establishment and maintenance of the County’s internal control structure. B. Oversee the quality of financial reporting activities. C. Oversee and monitor County compliance with internal controls, pertinent laws, regulations and standards. D. Oversee the resources allocated to the internal control and internal audit functions. E. Receive regular briefings from the internal audit staff on all planned and in- process audits. F. Study the Orange County paradigm to internal audits with a view to avoiding potential audit weaknesses. G. Review the possibility of separation of the duties of Auditor-Controller. The Auditor responsibilities would return to its elected status while the Controller responsibility would report to the CEO.
F15
The value to the Board of Supervisors of some audits is limited due to the excessive time taken to complete the audits.
Related Recommendations (1)
R1
In order to insure that the County meets the newer standards for independent audit the Board of Supervisors establish an effective oversight mechanism to insure adequate audit resources and independence.
F16
Current policy has led to the auditee having too strong an influence over the content of a final audit report.
Related Recommendations (1)
R2
The Grand Jury recommends the establishment of an Audit Oversight Committee reporting to the Board of Supervisors. This committee would be charged with responsibility for oversight of internal controls and independent audits within the County. It would be composed of a Chair, a Co-Chair, The Chief Executive Officer, the Auditor- Controller, the Treasurer–Tax collector as a non-voting member, and one outside member from the private sector appointed by the Board of Supervisors. The Purpose of this committee would be: A. Oversee the establishment and maintenance of the County’s internal control structure. B. Oversee the quality of financial reporting activities. C. Oversee and monitor County compliance with internal controls, pertinent laws, regulations and standards. D. Oversee the resources allocated to the internal control and internal audit functions. E. Receive regular briefings from the internal audit staff on all planned and in- process audits. F. Study the Orange County paradigm to internal audits with a view to avoiding potential audit weaknesses. G. Review the possibility of separation of the duties of Auditor-Controller. The Auditor responsibilities would return to its elected status while the Controller responsibility would report to the CEO.
F17
Recent attempts to increase size and expertise of the audit staff have been minimally successful.
Related Recommendations (3)
R1
In order to insure that the County meets the newer standards for independent audit the Board of Supervisors establish an effective oversight mechanism to insure adequate audit resources and independence.
R3
That the Board of Supervisors take active responsibility for internal audit resources including annual budget, staffing size, salaries and position classification. This responsibility would consider the recommendations of the Audit Oversight Committee.
R4
That, considering the current budget difficulties, the Board of Supervisors be committed to a long term process to turn around a deteriorating situation with respect to independent audits. This effort should include the following: A. Accept the responsibility for the hiring and termination of the head of the internal audit function. This position should be filled through a nation-wide competitive 5 process. To insure integrity, this position should have a severance package associated with it. B. All the positions of the internal audit function should be budgeted at the senior level. The actual placement of individuals can be at a lesser level. C. Develop a plan to improve the quality and effectiveness of the audit function through external recruitment, internal training or in contracting of outside capability.
F18
The audit staff, in the recent past, was seen by County agencies as not possessing the depth of expertise necessary to do performance auditing of technical functions.
Related Recommendations (3)
R1
In order to insure that the County meets the newer standards for independent audit the Board of Supervisors establish an effective oversight mechanism to insure adequate audit resources and independence.
R3
That the Board of Supervisors take active responsibility for internal audit resources including annual budget, staffing size, salaries and position classification. This responsibility would consider the recommendations of the Audit Oversight Committee.
R4
That, considering the current budget difficulties, the Board of Supervisors be committed to a long term process to turn around a deteriorating situation with respect to independent audits. This effort should include the following: A. Accept the responsibility for the hiring and termination of the head of the internal audit function. This position should be filled through a nation-wide competitive 5 process. To insure integrity, this position should have a severance package associated with it. B. All the positions of the internal audit function should be budgeted at the senior level. The actual placement of individuals can be at a lesser level. C. Develop a plan to improve the quality and effectiveness of the audit function through external recruitment, internal training or in contracting of outside capability.
F19
There is no policy associated with a required response time to draft audits by audited departments. This deficiency has resulted in an inordinate time frame to complete some audits.
Related Recommendations (2)
R5
That auditing policy be reviewed and revised to focus on the timeliness of audits. At a minimum the revision should require no more than a sixty day time limit for an audited department to respond to all draft audits.
R6
That draft audit findings be released to the audited organization as quickly as possible without waiting for the completion of the draft report.
F20
The County administrative manual contains a number of topics associated with internal controls but no explicit internal control policy and no review mechanism.
Related Recommendations (1)
R8
That the County Executive Officer develop a focused policy on internal controls which would act as the enabling policy for all County departments and that the Auditor- Controller provide the technical support and training to implement this policy. This policy would include, after an initial review, a staggered tri-annual review by the County Executive Officer of the internal controls in every County department. Responses Required Board of Supervisors (R-1, R-2, R-3, R-4) Auditor-Controller (R-2, R-5, R-6, R-7, R-8) Chief Executive Officer (R-2, R-8) 6
F21
Each department, by the nature of its activities, has a unique set of internal controls.
No recommendations for this finding
F22
Efficient audits of a particular activity require an objective statement of internal controls. Such objective statements are not in evidence for some departments. This deficiency can lead to disputes between auditors and management that adversely impacts the timely completion of audits.
Related Recommendations (1)
R8
That the County Executive Officer develop a focused policy on internal controls which would act as the enabling policy for all County departments and that the Auditor- Controller provide the technical support and training to implement this policy. This policy would include, after an initial review, a staggered tri-annual review by the County Executive Officer of the internal controls in every County department. Responses Required Board of Supervisors (R-1, R-2, R-3, R-4) Auditor-Controller (R-2, R-5, R-6, R-7, R-8) Chief Executive Officer (R-2, R-8) 6
F23
Given the small size of the audit office the standard practice in the office is relatively inefficient in the following ways. A. Generally auditors work as individuals not as a team. B. There is no guidance or support provided to working auditors at the beginning of an audit. C. Feedback by middle management to the audit staff seems only to be provided after substantial effort has been expended. D. Training is limited.
Related Recommendations (1)
R7
That the Auditor-Controller review and benchmark current audit activities against the Best Practices identified by NALGA. That a team approach be utilized for complex audits to improve the timeliness of audits. This should include peer reviews of planned and in-process audits as well as a “lessons learned” on all completed audits.
F24
Some audit personnel consider the integrity of their efforts compromised by multiple negotiations engendered by the “collegial” approach.
No recommendations for this finding
F25
Other Accounting Standards identify the critical need of the internal audit organization to report to the audit committee of an organization and not to the Auditor- Controller. Appendix E.
Related Recommendations (2)
R1
In order to insure that the County meets the newer standards for independent audit the Board of Supervisors establish an effective oversight mechanism to insure adequate audit resources and independence.
R2
The Grand Jury recommends the establishment of an Audit Oversight Committee reporting to the Board of Supervisors. This committee would be charged with responsibility for oversight of internal controls and independent audits within the County. It would be composed of a Chair, a Co-Chair, The Chief Executive Officer, the Auditor- Controller, the Treasurer–Tax collector as a non-voting member, and one outside member from the private sector appointed by the Board of Supervisors. The Purpose of this committee would be: A. Oversee the establishment and maintenance of the County’s internal control structure. B. Oversee the quality of financial reporting activities. C. Oversee and monitor County compliance with internal controls, pertinent laws, regulations and standards. D. Oversee the resources allocated to the internal control and internal audit functions. E. Receive regular briefings from the internal audit staff on all planned and in- process audits. F. Study the Orange County paradigm to internal audits with a view to avoiding potential audit weaknesses. G. Review the possibility of separation of the duties of Auditor-Controller. The Auditor responsibilities would return to its elected status while the Controller responsibility would report to the CEO.
F26
The Benchmarking and Best Practices Survey of the National Association of Local Government Auditors (NALGA) for the year 2000 determined that internal auditing activities returned savings averaging $3.36 per $1.00 spent in internal audit costs. Also, the City of San Jose determined that, from May 1985 through June 2001, $7.00 was returned for each $1.00 of internal audit costs. Conclusions C-1.The Board of Supervisors has the fiduciary responsibility to ensure the proper operation of County Government. This responsibility rests on two legs. The first leg is the development and operation of a system of internal controls. The second leg is an effective independent audit process to insure that the system of internal controls is effective. (F-1, F-2, F-3, F-4) C-2. The current structure of independent audit does not meet the independence criteria of Government Auditing Standards Amendment No. 3. There is an inherent conflict between Auditor and Controller responsibilities. (F-5, F-6, F-7, F-10, F-11, F-25) C-3. Past administrations have allowed the auditing capability to deteriorate significantly yet the size, complexity and technology of County government have increased significantly over the past ten years. (F-8, F-9, F-17, F-18) C-4. The existing internal control policies, procedures and practices and audit policies, procedures and practices need to be revised in light of the new policy on independence from the Comptroller General of the United States. (F-5, F-12, F-13, F-14, F-15, F-16, F- 19, F-23) C-5. The perceived independence of the audit process has been eroded due to the current collegial policy. (F-13, F-24) 4 C-6. There is no clear, focused policy on internal controls within the County government. (F-20, F-21, F-22) C-7. There is deficiency in oversight by the Board of Supervisors over both internal controls and independent audits. (F-14, F-15, F-17, F-20) C-8. Internal audit functions can more than pay for themselves. (F-26) Recommendations
No recommendations for this finding
Conclusions 1
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CL1 Page 4C-1.The Board of Supervisors has the fiduciary responsibility to ensure the proper operation of County Government. This responsibility rests on two legs. The first leg is the development and operation of a system of internal controls. The second leg is an effective independent audit process to insure that the system of internal controls is effective. (F-1, F-2, F-3, F-4) C-2. The current structure of independent audit does not meet the independence criteria of Government Auditing Standards Amendment No. 3. There is an inherent conflict between Auditor and Controller responsibilities. (F-5, F-6, F-7, F-10, F-11, F-25) C-3. Past administrations have allowed the auditing capability to deteriorate significantly yet the size, complexity and technology of County government have increased significantly over the past ten years. (F-8, F-9, F-17, F-18) C-4. The existing internal control policies, procedures and practices and audit policies, procedures and practices need to be revised in light of the new policy on independence from the Comptroller General of the United States. (F-5, F-12, F-13, F-14, F-15, F-16, F- 19, F-23) C-5. The perceived independence of the audit process has been eroded due to the current collegial policy. (F-13, F-24) 4 C-6. There is no clear, focused policy on internal controls within the County government. (F-20, F-21, F-22) C-7. There is deficiency in oversight by the Board of Supervisors over both internal controls and independent audits. (F-14, F-15, F-17, F-20) C-8. Internal audit functions can more than pay for themselves. (F-26)
No Responses Found 2
Government entities assigned to respond to this report. No response documents have been linked in our database.
Ventura County Auditor-Controller
Elected County Office
Ventura County Board of Supervisors
Elected County Office