DATE: April 19, 2016
TO: Joe Felz, City Manager
FROM: Julia James, Director of Administrative Services
Kriste M. Saldaña, Fiscal Services Manager
SUBJECT: Internal Controls
While the City of Placentia claimed that it had been issued a “clean” audit for the 2014-15 fiscal year, their auditors were quick to issue the following statement:
“Our audit for the period ending June 30, 2015 did identify several material weaknesses and significant deficiencies in internal controls and instances of noncompliance. It was not a "clean" audit.”
Internal controls are a system of checks and balances implemented to ensure that adequate oversight is given to all financial procedures and are one of the primary focuses of the annual audit process conducted by our independent auditors. In the case of Pasadena and Placentia, a lack of internal controls was to blame.
The State of California has worked with the California Society of Certified Public Accountants to develop internal control guidelines for municipalities based on best practices adopted by the American Institute of Certified Public Accountants. This memo highlights some of the key areas of these recommendations (highlighted in bold) and the City’s current practice.
The City’s adherence to the importance of the segregation of duties as outlined above set a foundation for strong internal controls. As more specific details of the Placentia fraud and embezzlement case become available, we will analyze how Placentia’s internal controls were compromised and continually monitor the City’s practices to assess the effectiveness on ever changing operations.