1. Association of Local Government Auditors 1 Best Practices for Effective Internal Controls - Citywide Presentation to: California Society of Municipal Finance Officers February 20, 2009 Ann-Marie Hogan, CIA, CGAP City Auditor, Berkeley, CA ahogan@ci.berkeley.ca.us

2. Association of Local Government Auditors 2 1.Review the unique internal control challenges of cities 2.Explain the challenges for finance directors in impacting “tone at the top” of the organization and operating departments 3.Best practices and bright ideas Objectives

3. Association of Local Government Auditors 3 Control Environment (tone at the top: elected and appointed managers) Risk Assessment (absent the profit motive, how thoroughly is risk assessed?) Internal Control: COSO and Cities...

4. Association of Local Government Auditors 4 Control Activities (invisible activities and problems) Information and Communications (frank communication in a fishbowl) Monitoring (and airing dirty laundry) Internal Control: COSO and Cities...

5. Association of Local Government Auditors 5 Leadership Challenges “Tone at the Top” - Leading the way

6. Association of Local Government Auditors 6 City Manager Human Resources Director Information Technology Police Chief Leadership… Building Alliances

7. Association of Local Government Auditors 7 Consistent message Good delivery Timing is all Leadership… Persistence and Opportunism

8. Association of Local Government Auditors 8 Change in leadership Negative press Opportunity Knocks

9. Association of Local Government Auditors 9 Leadership: Walking the Walk You can start in your own department Internal Controls Training Testing and Certification Policies: Ethics, Internal Controls Who should you tell? Defining workforce skills needs

10. Association of Local Government Auditors 10 Best practices: Does your city have… Agreement on what responsibilities are centralized where? Clear expectations for the role of the Finance Department? Best Practices and Bright Ideas

11. Association of Local Government Auditors 11 Best practices: Does your city have… An Ethics Policy An Audit Committee Performance Measures A Whistle Blower Hot Line (or equivalent)

12. Association of Local Government Auditors 12 An independent performance auditor? California Government Code section 1237: “All state and local agencies with an aggregate spending of fifty million dollars ($50,000,000) or more annually shall consider establishing an ongoing audit function.” Best practices: does your city have…

13. Association of Local Government Auditors 13 Getting the message out: On site training – PowerPoint City of Berkeley Finance Department: Cash Handling City of Riverside Internal Controls On line training – videos Maricopa County Auditor Bright Ideas

14. Association of Local Government Auditors 14 Berkeley Finance Department Training

15. Association of Local Government Auditors 15 Inserting Videos in PowerPoint

16. Association of Local Government Auditors 16 Finance Directors can… Create a PowerPoint (City of Riverside)

17. Association of Local Government Auditors 17 Finance Directors can… Create a Video Maricopa County, Arizona posts several on the Auditor’s web site

18. Association of Local Government Auditors 18

19. Association of Local Government Auditors 19 Finance Directors Can… Educate Management One page bulletins on Internal Control for managers from the Maricopa County auditor’s web site

20. Association of Local Government Auditors 20 Maricopa County Control Bulletins

21. Association of Local Government Auditors 21 ALGA Resources These resources and more are on websites for Maricopa County, City of Riverside and the City of Berkeley: see “ALGA Members – Member Web Sites” on the ALGA website. www.governmentauditors.org

22. Association of Local Government Auditors 22 Considering a performance audit function or audit committee?? The Role of Auditing in Public Sector Governance and Practice Advisory 1110-2: CAE Reporting Lines www.theiia.orgwww.theiia.org Model Legislation Guidelines for Local Government Auditors and A Government Official’s Guide to Establishing a Performance Audit Function www.governmentauditors.orgwww.governmentauditors.org

23. Association of Local Government Auditors 23 THANK YOU FOR ADDITIONAL INFORMATION, CONTACT: ASSOCIATION OF LOCAL GOVERNMENT AUDITORS (ALGA) MEMBER SERVICES 449 LEWIS HARGETT CIRCLE, SUITE 290 LEXINGTON, KY 40503 memberservices@governmentauditors.org or Ahogan@ci.berkeley.ca.us or visit the ALGA website at: http://www.governmentauditors.org