08-07-2015 BPU RPT 21 - Laserfiche WebLink

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's'; A I= R E N E R 11 Y I I F F = RIVERSIDE PUBLIC UTILITIES 61& Board Memorandum PUBLIC UTILITIES BOARD OF PUBLIC UTILITIES DATE: AUGUST 7, 2015 ITEM NO: 21 File ID — 15 -2627 — D SUBJECT: BOARD OF PUBLIC UTILITIES INPUT ON PROPOSED FINANCIAL AND PERFORMANCE AUDITS TO BE CONSIDERED BY THE CITY COUNCIL ON AUGUST 11, 2015 ISSUE: The issue for Board of Public Utilities consideration is to provide input and feedback for City Council consideration in formulating recommendations for the financial and performance audits. RECOMMENDATION: That the Board of Public Utilities (Board) provide input and feedback for City Council consideration in formulating recommendations for the financial and performance audits. BACKGROUND: On August 11, 2015 the City Council will consider recommendations related to financial and performance audits for Riverside Public Utilities (RPU), the Finance Department and the Human Resources Department. The City Manager is expected to recommend a series of "deep dive" financial and performance audits to be conducted by one or more outside firms. The firm or firms would be retained through a competitive process to be coordinated and executed by the City Manager's Office and former Interim City Manager Lee C. McDougal serving as a third party consultant. These audits are separate from the Examination and Performance audits recommended for the Northside property transactions, fiscal policy review and cost allocation review (recommended in Board Item #10, August 7, 2015) and the Hometown Connections Operational Checkup. At the July 28, 2015 City Council meeting, Mr. McDougal recommended that the deep dive financial audit have a look -back period of 3 years. RPU staff suggests that the scope of the deep dive financial audit be consistent across departments and be handled by one consultant. Mr. McDougal suggested that the performance audits be detailed and scoped so that the results would assist with improvements in future performance. Due to RPU's size and complexity, staff recommends a three pronged approach to the performance audits: external audits, internal audits and self- assessments. RPU staff recommends that the consultant to be used for the performance audit have expertise and experience in the utility industry. The recommended scope for each of these is outlined below: External Audit — Deep Dive 1. Contracts /Procurement: • Contract management combines the functions of procurement and contract monitoring. Determine whether general contract management (contract procurement process, the award process, and contract monitoring) adhere to policy /procedures. 2. Utilities Asset Management: • Evaluate the effectiveness of RPU's asset management practices, including whether the department effectively implements best practices in infrastructure asset management and whether the practices allow efficient identification of the location and the condition of its physical assets in order to minimize risk of failures /breaks.