Fayetteville audit committee flags record-retention gaps in surplus-auction process, reviews inventory and 2025 audit plan

Aaron, the city’s lead internal auditor, told the Fayetteville Audit Committee that recent internal reviews found generally sound controls but inconsistent documentation in the city’s surplus-property auctions and recommended consolidating related policies and clarifying record-retention requirements.

The recommendation came during an audit update in which Aaron said the city has used the GovDeals online auction platform since about 2010 and “we’ve generated $9,000,000 in extra funds for that.” He told the committee that 162 auctions in 2023 produced about $998,000 and that purchasing’s segregation-of-duties approach (separate creation, review and approval steps) appears effective, but the supporting documents retained for each sale vary by department and by asset type.

Why it matters: inconsistent retention of screenshots, payment confirmations, seller certificates, inspection forms and bills of sale can impede post-sale checks and make it harder to demonstrate compliance with grant restrictions or to detect improper votes, conflicts or fraud. Aaron recommended reviewing three separate policies (fixed assets, vehicle sales and auction procedures) and consolidating guidance about what to keep in each file.

Auction rules and fraud risk

Committee members raised the risk that employees or their associates could game auctions. One member asked whether a city employee could drive up bids and then have a relative claim the item; Aaron said the written procedures already bar anyone with direct decision-making authority over an item from bidding and suggested clarifying the policy language so it is enforceable. He proposed changing municipal policy from saying “city employees cannot bid” to instead specifying that employees may not win an auction, noting the city cannot observe every single bid as it flows through the commercial platform.

A committee member said the city should ask GovDeals whether the vendor can provide a list of bidders after an auction so staff could cross-check bidders against employee records. Aaron and other staff agreed to explore whether GovDeals will provide bidder lists and to report back to the committee.

Grants and proceeds

Members also noted that assets purchased with grant funds may carry restrictions. Aaron said purchasing staff already check grant agreements before disposal and that grant contracts sometimes require proceeds to be returned or require prior permission before sale. He said staff will look into specific contracts where questions arose.

Small grants and inventory counts

Aaron reported a small-grant review of the Arkansas Historic Preservation program. He said the city received $20,370 for the grant, staff closed the project early, and the city received reimbursement in July; committee members praised the timeliness and record-keeping for that grant.

On inventory, Aaron said the water and sewer department’s final count variance improved to -0.2% this year from -3.0% last year after focusing supervisors on monthly counts for high-value parts. He highlighted recurring issues with copper pipe counts and rising part values, noting copper prices moved from about $9.50 per foot last year to about $11.06 this year and that inventory value rose roughly $170,000 year over year.

Infrastructure and budget context

Committee members asked whether leaking pipes and recent breaks signal a need for a larger replacement program. City staff said certain plastic pipe types installed in the 1990s are reaching failure and that the city is conducting system testing and capital work to replace or relocate pipe where needed. Staff described an $85,000,000 water-line project in planning and said they are adding two teams to the water and sewer fund to respond more proactively to leaks.

Staff also warned of revenue softness: the finance staff noted this year’s revenues have been weaker than previous gains and said the general fund could see a deficit in the range of $2.5 million to $3.0 million if current trends continue, underscoring constraints on hiring additional audit support.

2025 audit plan and staffing

Aaron presented the 2025 audit plan, which keeps many recurring reviews (the retirement savings plan, parks and recreation fees and cash handling, inventory counts) but adds targeted work on the city’s Novatime time-clock system (to review sensitive roles, overtime and potential location/clock-in abuses) and a uniform policy review in the third quarter. He said he plans to perform surprise petty-cash counts in December and that an assistant auditor would increase capacity but that available budget is tight.

Next steps and committee business

Aaron said he will follow up with purchasing about consolidating disposal policies and with GovDeals on bidder-listing options, and will circulate proposed dates for the March meeting when the external auditors (Forvis) are expected. The committee approved routine meeting business (June minutes and today’s agenda) and adjourned. Aaron also announced that committee member Chad is attending his final meeting because his term ends at year-end; members thanked him for his service.