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Auditors give city a clean opinion on FY2008 CAFR, flag compliance and IT governance issues and outline 2009 audit plans
Summary
External auditors issued an unqualified opinion on the city's FY2008 financial statements and single audit but identified one significant deficiency (food stamps timely reporting) and several management-letter items (procurement classification, IT governance, subsidiary records). Auditors outlined 2009 audit plans and timelines and asked the committee to treat the briefing as a primer and reconvene for detailed review.
External auditors told the Government Audit and Oversight Committee they issued a clean, unqualified opinion on San Francisco—s fiscal 2008 financial statements and on the single audit of selected federal-award programs, but they flagged several control and reporting matters for corrective attention.
Linda Hurley of Macias, Jeanie and O'Connell reported to the committee that auditors did not identify material audit adjustments that affected the opinion, though they did note immaterial classification and timing differences. Hurley said the auditors found eight management-letter comments and "one significant deficiency in internal control related to the food stamps program," citing untimely reporting of program data to federal authorities. On federal compliance, auditors also identified a Summer Food Service Program procurement classification error that should have been recorded as a vendor contract rather than a subrecipient arrangement.
Hurley told supervisors that the city—s decentralized information-technology governance produced variations in user-access rights, password configurations and change-management procedures. The auditors recommended that the Committee on Information Technology (COIT) prioritize drafting enterprise IT policies to promote consistent controls across departments. Hurley also noted a subsidiary-records issue at San Francisco General Hospital that will be addressed in the next audit cycle.
KPMG partner Steve De Vetter summarized enterprise-level observations at Muni, the Public Utilities Commission and San Francisco International Airport, citing spare-parts inventory procedures, capitalization and timing of asset transfers from construction in progress to in-service (which affects depreciation), and mechanical compilation errors in cash-flow statements. De Vetter said many prior-year comments were cleared, though some items remain under correction.
Representatives of CSG and O'Connor outlined FY2009 audit plans and schedules: interim fieldwork was planned to begin in August, year-end fieldwork in September through November, and single-audit compliance work August through December, with a goal to issue the CAFR opinion by November (no later than December) and single-audit reports in January. Auditors highlighted that stimulus-related grant activity could affect future audits and that fair-value accounting for retirement-system alternative investments is an area requiring substantial management judgment in the current market.
Chair Ross Mercurimi advised members to treat the presentations as a primer and recommended continuing substantive action to a follow-up GAO meeting (targeted for August 13) so committee members have time to study the detailed reports and interim management-letter comments.
Next steps: auditors will furnish interim management-letter comments toward August and return to the committee for a more detailed review; the committee continued the item to a future GAO meeting for further deliberation.
