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Internal audit reports gaps in Community Development grant controls and vendor master file; ALRC-ordered audits under way
Summary
The Internal Audit unit reported findings from a Community Development Division performance audit and a vendor master file review, and noted two alcohol-license audits ordered by the Alcohol License Review Committee are in progress.
Kola, head of the city’s internal audit unit, presented a midyear audit update to the Finance Committee on July 28, reporting final findings from audits of the Community Development Division (CDD) and the vendor master file and summarizing work in progress.
The CDD performance audit found four primary issues: (1) instances where tax or invoice charges were applied to the city (the city is tax-exempt), increasing program costs; (2) delays in submission of grant reports; (3) awards to ineligible subrecipients on at least one examined grant; and (4) outdated or inadequate standard operating procedures and work instructions. Kola recommended regular staff training on procurement and tax‑exempt status, stronger review protocols for subrecipient eligibility, a reporting calendar and automation for grant deadlines, and routine SOP reviews.
The vendor master file review identified 9,027 inactive vendors with no transactions since Jan. 31, 2025, duplicated or temporary vendor records still active, excessive and redundant user access roles, and no formal SOP for vendor file management. Audit recommendations included deactivating inactive/duplicate vendor records with management approval, performing routine vendor cleans, conducting annual access reviews to enforce role‑based access controls, and creating formal SOPs for vendor file governance.
Kola also said the internal audit unit conducted special audits at the request of the Alcohol License Review Committee (ALRC) for two restaurants (doing business as 2 Pillars/Chiba Hut and 7 Iron Social) to verify gross receipts and compliance with the city’s alcohol licensing rules; those reports are under senior management review before delivery to the ALRC. Alder Revere asked for a written CDD report; staff said the report is in the packet and will be reattached and posted to the internal audit webpage.
CDD Director Jim O'Keefe thanked the audit team, said the division welcomes scrutiny and was already taking steps to address findings (noting the increased volume of grants CDD manages), and said missteps identified were limited in scope. Committee members asked about selection criteria for ALRC audits; staff said the ALRC decides whether to request audits and transmits those requests to finance for execution.
No committee vote was required for the briefing. The internal audit team signaled it will continue work on fleet services and cash-count audits, begin scheduled Q3/Q4 audits (parking, employee assistance program and annual risk assessment) and monitor implementation of recommendations.
