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External auditors give San Francisco—s 2014-15 financial statements a clean opinion; IT governance and other deficiencies flagged
Summary
External auditors MGO and KPMG issued unmodified opinions on the city—s 2014-15 financial statements and single audits, but MGO reported two significant deficiencies (IT governance and year-end close processes) and single-audit findings on Port procurement documentation and foster-care time studies.
External auditors presented results of the City and County of San Francisco—s fiscal-year 2014-15 financial statement and single-audit reviews to the Government Audit and Oversight Committee on April 21, and issued unmodified (clean) opinions on the CAFR and the audited departments KPMG reviewed.
Annie Louie of the external audit team (MGO) told the committee the firm issued an unmodified opinion, the highest level of assurance, on the city—s financial statements and reported on internal controls and compliance. "We did issue an unmodified opinion, which is the highest level of assurance that you can achieve under financial statement and compliance audit," Louie said.
Louie highlighted implementation of GASB 68 (new pension-standards reporting) as one of the largest changes to the statements and said MGO reported two significant deficiencies for the financial-statement audit. The first, IT governance, is a continuation of a prior comment and is partly attributed to turnover at the Department of Technology. The second concerns the year-end closing process: several departments that rely on the General Services Agency for recording transactions need better coordination to ensure liabilities are recorded in the correct fiscal period.
Louie also discussed two single-audit findings: a documentation deficiency in procurement/suspension-debarment compliance for the Port Security Grant Program (Port of San Francisco) and a foster-care reimbursement issue in which time-study hours were misclassified (sick leave and vacation). She said management has updated internal procedures (noting August 2015 changes for procurement) and is communicating corrective steps in the foster-care area.
Lisa Avis of KPMG summarized audits the firm performs separately (San Francisco International Airport, MTA, HSS and PUC components) and reported unmodified opinions and no single-audit findings for those units. KPMG noted a prior-year material weakness involving SFO—s capitalization of fixed assets and said the Port had booked an approximately $45,000,000 adjustment last year; "Happy to report that over the year, SFO remediated that finding, and no finding was repeated in 2015," Avis said.
City officials on the panel outlined remediation and next steps. Joe Voya, identified as the city—s new chief information security officer, concurred with the IT governance finding and described work under an Architectural Policy Review Board to draft an identity- and privileged-access management standard and a centralized privileged-identity program. Deputy City Administrator Ken Bukowski said GSA has instituted monthly meetings with convention facilities and Treasure Island to increase coordination and prevent similar year-end closing issues. John Woo, Fiscal Officer at the Port, said the contractor in the procurement test was not suspended or debarred and that the Port updated procedures in August 2015 to document vendor qualification checks.
No formal committee vote was taken on the audit reports; members thanked the auditors and staff and said they would monitor remediation efforts going forward.
