2021-081 Internal Audit Advisory CommitteeOctober 1, 2021 Report No. 2021-081
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Proposed Internal Audit Advisory Committee
BACKGROUND:
In 2009, the City of Denton City Council established the Audit and Finance Committee to be
composed of three City Council members. This Committee was charged with assisting Council in
its oversight duties related to the City’s internal audit function as needed or directed by Council as
well as several other finance oversight related duties. During the City Council retreat held on
August 21, 2021, the City Council directed Staff to dissolve the Audit and Finance Committee of
the City of Denton. During this discussion, Staff noted that the City Auditor would present options
to the City Council on how to address internal audit items going forward.
DISCUSSION:
Based on Staff’s research, both the Association of Local Government Auditors and the Institute
of Internal Auditors recommend that organizations establish an audit committee to assist the
local legislature or board in fulfilling its oversight responsibilities. In general, these audit
committee provide oversight by offering objective advice and recommendations to the legislature
or board on whether the organization’s governance, risk management, and internal control
processes are suitably designed and working as intended to achieve the objectives. Both
organizations note that the following attributes of audit committees are important:
Independence – members of the audit committee should not be employed by the
organization’s management; and
Knowledgeable – members should collectively have an appropriate mix of skills and
expertise necessary to effectively exercise their committee duties.
In addition, Staff explored whether other Texas cities had audit committees and, if so, how the
committee was composed. The table below summarizes these findings:
City Audit
Committee?
Representatives
Council Resident Other
Houston No NA NA NA
San Antonio Yes 3 2 0
Dallas No NA NA NA
Austin Yes 50 0
Fort Worth Yes 4 0 0
El Paso Yes 4 0 City Auditor & City Manager
Arlington No NA NA NA
Corpus Christi Yes 4 0 0
Lubbock Yes 0 4 Utility Board Member
Garland Yes 30 City Auditor
McAllen Yes 2 0 Utility Board Member
College Station Yes 3 2 0
October 1, 2021 Report No. 2021-081
CONCLUSION:
Based on this research, Staff is proposing that the City Council create an Internal Audit Advisory
Committee as outlined in the attached Internal Audit Advisory Committee Draft Ordinance.
Under this ordinance, the Internal Audit Advisory Committee would be composed of four
Denton citizens and the City Auditor. Citizens would be nominated by the City Auditor and
appointed by the City Council. Preference in appointments would be given to residents in
relevant professional fields such as auditing, finance, and public administration including the
teaching of such knowledge.
This Committee would assist the City Council with its internal audit oversight duties by
providing recommendations to the City Council on the annual internal audit plan, adopted
auditing standards, and could report on any concerns about the Internal Audit Department’s
performance. In addition, the Committee would assist the City Auditor by providing advice on
audit activities and governance.
The creation of the Internal Audit Advisory Committee would not impact current internal audit
reporting procedures. Specifically, the findings of all audit reports would be presented to the City
Council for discussion and the City Council would be ultimately responsible for adopting the
annual internal audit plan, reviewing the performance of the City Auditor, and approving the
auditing standards used by the Internal Audit Department.
The creation of the Internal Audit Advisory Committee is scheduled to be considered by the City
Council on the October 12, 2021 consent agenda. In addition, Council will have the opportunity
to discuss this proposal during the October 4, 2021 Work Session when the Fiscal Year 2021-22
Annual Internal Audit Plan is presented to the Council for discussion and to receive direction.
ATTACHMENTS:
1. Internal Audit Advisory Committee Draft Ordinance
STAFF CONTACT:
Madison Rorschach, City Auditor
Internal Audit Department
(940) 349-7228
Madison.Rorschach@CityofDenton.com
REQUESTOR:
Staff Initiated
PARTICIPATING DEPARTMENTS:
None
STAFF TIME TO COMPLETE REPORT:
15 Hours
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF DENTON CREATING AN INTERNAL AUDIT
ADVISORY COMMITTEE TO ADVISE THE CITY COUNCIL AND CITY AUDITOR ON
AUDIT ACTIVITIES AND GOVERNANCE; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City Council is of the opinion and hereby finds that there are many
important issues and responsibilities facing the City Council that require a specific standing audit
advisory committee (the “Internal Audit Advisory Committee” or “Committee”) to provide advice
on the organization’s audit activities and governance; and
WHEREAS, subsection 2.08(q)-(r) and Section 2.13 of the City of Denton Charter
authorize the Council to provide for the auditing and investigation of the municipal affairs of the
City; and
WHEREAS, it is important that the City’s internal audit function be independent and free
from improper influence or coercion; and
WHEREAS, the Government Auditing Standards, promulgated by the United States
General Accountability Office, Section 3.18 provides that the general standard related to
independence is that in all matters relating to audit work, the audit organization and the individual
auditor should be free both in fact and appearance from personal, external, and organizational
impairments to independence; and
WHEREAS, the establishment of the Internal Audit Advisory Committee will help to
ensure independence in such audit matters; and
WHEREAS, it is important that members of the Internal Audit Advisory Committee have
the collective, specific expertise necessary to effectively exercise their Committee duties and
provide advice on audit activities and governance; and
WHEREAS, the City Council is of the opinion and hereby finds the establishment of the
Internal Audit Advisory Committee is in the public interest; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1.
There is hereby created an Internal Audit Advisory Committee as a standing committee of the City
of Denton. The Internal Audit Advisory Committee shall consist of four (4) voting members. In
addition, the City Auditor shall serve as an ex-officio non-voting member of the Committee. Any
recommendation which does not receive a majority of votes shall be deemed a negative report. A
quorum of the Committee members must be present to hold a Committee meeting or to take
Committee action, with three (3) members considered a quorum. The City Auditor shall not count
towards the establishment of a quorum.
Members of the Internal Audit Advisory Committee shall be nominated by the City Auditor and
appointed by the City Council. Members shall be appointed for two (2) year, staggered terms and
may not be reappointed for more than three consecutive terms. Inaugural Internal Audit Advisory
Committee members shall draw straws to determine which two (2) members shall receive an initial
term of one (1) year in order to stagger terms.
Membership on the Internal Audit Advisory Committee is limited to qualified voters of the City
of Denton. Preference in appointments shall be given to individuals in such professional fields as
auditing, accounting, finance, public administration, and risk management including the teaching
of such knowledge.
The following shall disqualify a person from serving on the Internal Audit Advisory Committee:
(1) Current service as a City of Denton employee;
(2) Separation from service as a City of Denton employee within one (1) year of
appointment; or
(3) Familial relations to a City of Denton employee within the third (3rd) degree of
affinity (marriage) or consanguinity (blood or adoption).
SECTION 2.
The Internal Audit Advisory Committee shall perform the following duties:
(a) Reviewing the City Auditor’s Annual Internal Audit Plan and providing recommendations
to the City Council on its adoption;
(b) Providing oversight of the internal audit function, including:
(1) Monitoring Annual Internal Audit Plan progress;
(2) Ensuring transmission of audit reports to the City Council and the public;
(3) Monitoring follow-up on reported findings to assure corrective action is taken by
management; and
(4) Reporting to the City Council on concerns at such times as deemed appropriate;
(c) Periodically evaluating and making recommendations to the City Council on auditing
standards adopted for use by the internal audit function;
(d) Evaluating the findings and recommendations of the internal audit peer review as required
by the adopted auditing standards;
(e) Providing advice to the City Auditor on audit activities and governance; and
(f) Assisting the City Council in other oversight duties related to the City’s internal audit
function as needed or directed by City Council.
SECTION 3.
Any matters not covered by this ordinance, to the extent applicable to the City’s advisory
committees and advisory committees’ members, shall be governed with respect to the rules,
procedures, operation and affairs of the Internal Audit Advisory Committee by the Code of the
City of Denton, Texas, including, but not limited to Section 2-29 and Article III of Chapter 2, and
the City of Denton Handbook for Boards, Commissions, and Council Committees, each as
amended from time to time. The Committee shall have the authority to meet in closed session in
accordance with the requirements of the Texas Open Meetings Act.
SECTION 4.
This ordinance shall become effective immediately upon its passage and approval.
The motion to approve this ordinance was made by __________________________ and seconded
by _________________________________, the ordinance was passed and approved by the
following vote [___ - ___]:
Aye Nay Abstain Absent
Gerard Hudspeth, Mayor: ______ ______ ______ ______
Vicki Byrd, District 1: ______ ______ ______ ______
Brian Beck, District 2: ______ ______ ______ ______
Jesse Davis, District 3: ______ ______ ______ ______
Alison Maguire, District 4: ______ ______ ______ ______
Deb Armintor, At Large Place 5: ______ ______ ______ ______
Paul Meltzer, At Large Place 6: ______ ______ ______ ______
PASSED AND APPROVED this, the _____ day of _____________, 2021.
_______________________________________
GERARD HUDSPETH, MAYOR
ATTEST:
ROSA RIOS, CITY SECRETARY
BY:
APPROVED AS TO LEGAL FORM:
CATHERINE CLIFTON, INTERIM CITY ATTORNEY
BY: