Role of the Audit Committee

1. Role of the Audit Committee CSMFO Annual Conference February 2009 City of Belmont Thomas Fil Finance Director, CPA, CPFO

2. Background • City’s Finance Commission is Audit Committee • Quasi independent • Self selected • Council eliminates self selection • Creates Audit Committee to the governing body • Two City Council members • Elected City Treasurer • Follows Government Finance Officer Association’s (GFOA) best practices • Revises Audit Committee financial policies

3. Audit Committee Responsibility • Responsibility for quality of financial reporting • City Council • First among equals • An audit committee provides independent review and oversight • Forum separate from management • Auditors and other interested parties can candidly discuss concerns • Ensure staff properly develops and adheres to a sound system of internal controls • Procedures are in place to objectively assess management’s practices • Independent auditors, through their own review, objectively assess the City’s financial reporting practices • Management • Independent auditors

4. Audit Committee Policy • City Council is responsible for establishing an audit committee or its equivalent • Established by policy • Enabled by resolution • Directly responsible for the appointment, compensation, retention, and oversight of the work of any independent accountants • Policy prescribes the scope of the committee’s responsibilities • Structure • Processes • Membership requirements • Periodically review policy - no less than once every five years • Audit committee should have access to the services of at least one financial expert

5. Audit Committee Structure • No fewer than three members • Sufficient size for meaningful discussion, but not impede operation • Audit Committee access to the services of financial expert • Financial expert should, through both education and experience, possess • Understand GAAP • Experience in preparing or auditing financial statements • Experience in applying principle for estimates, accruals, and reserves • Experience with internal accounting controls • Understand Audit Committee functions • No governing body member with managerial responsibilities on Audit Committee

6. Audit Committee Process • Provide independent review and oversight of financial reporting processes, internal controls and independent auditors • Present annual written report • Discussed the financial statements with management, the Finance Commission, the independent auditors in private, and privately among committee members • Believes financial statements are fairly presented, to the extent such a determination can be made solely on the basis of such conversations • Report be made public • Establish process for complaints • Confidential, anonymous submission by employees of the government of concerns regarding questionable accounting or auditing matters • Adequately funded and authorized to engage experts • Periodically review policy - no less than once every five years

7. Annual Report

8. Audit Committee Members • Members of the governing body or hold the elected position of City Treasurer • Possess basic understanding of governmental financial reporting and auditing • Educated regarding role of the audit committee and their personal responsibility as members, including their duty to exercise an appropriate degree of professional skepticism

9. Audit Committee Sources • References Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, Overview and Recommendations • SEC Regulation 33-8220, Background and Overview of the New Rule and Amendments • Sarbanes Oxley Act, Section 301 and Section 407.SEC Regulation 330-8220, Background and Overview • Audit RFP Diskette, GFOA • Belmont City Code, Section 2-158 (3)