Role of the Audit Committee
CSMFO Annual Conference
February 2009
City of Belmont
Thomas Fil
Finance Director, CPA, CPFO
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
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
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
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
Audit Committee Process
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Provide independent review and oversight of financial reporting
processes, internal controls and independent auditors
Present annual written report
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Establish process for complaints
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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
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
Annual Report
Annual Audit Committee Report
December, 2007
To the City Council of the City of Belmont:
The City’s Audit Committee consists of three elected members, two of which are from the governing
body, and one holds the elected position of City Treasurer. The members are independent of all City
officers, employees, and departments. To ensure the committee’s independence and effectiveness,
no governing body member who exercises managerial responsibilities that fall within the scope of the
audit should serve as a member of the Audit Committee.
We are responsible for the appointment, compensation, retention, and oversight of the work of any
independent accountants engaged for the purpose of preparing or issuing an independent audit
report or performing other independent audit, review, or attest services and the confidentiality of
anonymous complaints. The independent auditor reports directly to us. It is our responsibility to
provide independent review and oversight of the City’s financial reporting processes, internal controls
and independent auditors. We have also established procedures to for the submission and handling
of anonymous complaints by employees regarding questionable accounting or auditing matters.
All members of the Audit Committee should possess or obtain a basic understanding of governmental
financial reporting and auditing. In achieving this objective, we have retained the services of a
financial expert for this purpose. The Audit Committee’s financial expert has relevant education,
governmental experience, and an understanding of the City’s Audit Committee functions. We have
been educated regarding both the role of the Audit Committee and our personal responsibility as
members, including their duty to exercise an appropriate degree of professional skepticism.
As required by our charter, we annually report to the City Council on how we have discharged our
duties and met our responsibilities. This report to City Council includes our discussion of the financial
statements with management, and may summarize recommendations, if any, made as a result of
private discussions with the independent auditors and amongst the Audit Committee members. In
carrying out our responsibilities, we have also discussed these matters with the Finance Commission.
In conclusion, we believe that the financial statements are fairly presented, to the extent such a
determination can be made solely on the basis of such conversations. It is recommended that this
report be made public.
Respectfully submitted,
CITY OF BELMONT AUDIT COMMITTEE
Warren Lieberman, Chair
Bill Dickenson, Councilmember
John Violet, City Treasurer
Audit Committee Members
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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
Audit Committee Sources
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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)