RE: Not so fast Mr. Kisela

RE: Not so fast Mr. Kisela     April 22, 2014 9:53 AM
From:   “Ted Noftall” <Ted@TedNoftall.com>
To:   “Greg Kisela” <gkisela@port-orange.org> “Robin Fenwick” <rfenwick@port-orange.org>

Thank you Manager Kisela,

You have made clear that you are operating under the same misconception as the former manager and finance director  …… namely internal control is something the Auditor comments on and,  and to which you dutifully respond back that you have resolved,  as in  …. “21 of the 24 findings and comments identified in FY 2012 were resolved”
The problem with operating under that misconception is that the Auditor’s  review of the City’s internal control is for a very limited purpose  and use — as he makes clear on P 180 of the CAFR.
“In planning and performing our audit, we considered the City’s internal control over compliance with the requirements that could have a direct and material effect on a major state project to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in  accordance with Chapter 10.550, Rules of the Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of internal control over compliance.
 Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
 The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Chapter 10.550, Rules of the Florida Auditor General. Accordingly, this report is not suitable for any other purpose”    (09-30-2013 CAFR  P 180)
 The practical effect of operating under your  misconception is that every half dozen years or so taxpayers get hosed with major asset misappropriations  due to improperly designed, implemented or monitored controls  as typified by the water debacle in the fall of 2012 which was in full swing  when  you came on board.
Since you find considering  “internal controls” in these terms   to be “ baffling”  let me help as best I can.
“The design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.“   ( Independent Auditors’ Report – CAFR  P 21 )  IS MEANT TO BE AN  ONGOING PRO-ACTIVE OPERATION.  
That means the City NEEDS TO TAKE A PAGE from the private sector where misappropriated assets belong to shareholders with a vested interest sufficiently high to be insistent on meaningful responsibility and accountability to hopefully prevent, but if not  punish such misappropriations  AND START DESIGNING, IMPLEMENTING, and  MONITORING  NEW AND ENHANCED INTERNAL CONTROLS  ON AN ONGOING BASIS.
ACCORDINGLY   I would again ask;
Does the City  sub out the  design, implementation, and maintenance of internal control,    OR  does it perform that task in house,    OR is that task not performed at all ??
AND IF  the City  performs that task in house who actually  performs that design, implementation, and maintenance ?
 AND   WHAT   qualifications and experience does   that individual or individuals   possess to adequately discharge  the  important task of designing, implementing and monitoring  controls adequate to safeguarding taxpayer assets  .…. because  if any of your Finance staff including your  Finance Director or Comptroller  is a degreed accountant, or holds a CPA designation , or has any recent professional accounting or auditing experience  those facts are well concealed on their resumes. ??
I will address your  threat or promise, real or implied   to  “remove  administrative officials”  critical of what can only be characterized as your   ‘good enough for government work standards’   in a subsequent e-mail.
Ted Noftall

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—–Original Message—–
From: Kisela, Greg [mailto:gkisela@port-orange.org]
Sent: Monday, April 21, 2014 4:42 PM
To: Ted Noftall
Cc: City Council; Roberts, Margaret; Fenwick, Robin
Subject: Response to your e-mail
Ted:
This is in response to your e-mail to me last week.  First, don’t forget to copy the City Clerk with your e-mail that you copied to some of City Council members at their personal e-mail addresses; the e-mail related to City business. I know it may take a little time for you to get used to the new process. I note and appreciated your attendance at the April 7, 2014 Sunshine Law training as well as providing comments to the recently adopted Electronic Information System Ordinance which is designed to assist the City in capturing and retaining all public records.
Secondly, I stand by my comments made to you at the last Audit and Budget Board meeting.  Your “blogging” of the former Finance employee by name was the contributing factor in her decision to leave City employment.   This is unfortunate as she was a dedicated and committed employee who truly was an asset to the City.  In my opinion, your desire as the Chair of the Audit and Budget Board to review the resumes and applications of all individuals in the Finance Department to see if they should have been hired and/or retained, oversteps your’ s and the Board’s authority.  Specifically, the City Charter empowers the city manager to “Appoint, and when he deems it necessary for the good of the city, suspend or remove all city employees and appointive administrative officials”.   I feel your past actions have undermined employee morale and if you do not refrain from your past actions you will continue to create an undesirable environment for our employees.
While I do agree with your goal of improving the City’s financial record keeping and reporting I do not appreciate your attacks on the City’s Finance Director, Wayne Saunders.  Mr. Saunders inherited many challenges last year and has over the past year attempted to correct these issues.   I have been blessed with working with many fine individuals in my private and public sector careers and Mr. Saunders stacks up with the very best.   The City has made substantial progress in improving the financial operations of the City and I am proud of Mr. Saunders’ and his team’s individual and collective efforts.
Your comment about the FY 2012 management letter and internal controls “baffles” me.  The spreadsheet that the Finance Department prepared and shared for review and comment with the Mayor and City Council as well as the Audit and Budget Board in September/October of 2013 was a summary of every finding and comment that the external as well as the forensic auditors provided the City.  This spreadsheet contained all of the findings and comments that were provided to the Mayor and City Council in June of 2013.  It also contained City management’s plan to address each of those issues. I am pleased to report that 21 of the 24 findings and comments identified in FY 2012 were resolved to the satisfaction of the City external auditors in this year’s audit.
I can assure you that if for some reason you didn’t get a copy of the FY 2012 management letter it wasn’t deliberate.  If the Audit and Budget Board feels these issues weren’t resolved correctly they can recommend to the City Council to hire an additional auditor to review them.
Mr. Saunders along with the external auditors told you last week that the CAFR and management letter were separate documents so hopefully that clarifies that issue for you.
By copy of this letter I am asking the City Attorney to brief you on the legal issues relating to this matter.
Greg Kisela
City Manager

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From: Ted Noftall [mailto:Ted@TedNoftall.com]

Manager Kisela,
The following comments  are in follow-up to our conversation at the  A&B Advisory board meeting  on April 14^th
Your  suggestion  that my posts  on blogs and elsewhere caused the finance employee who was hired to perform the monthly reconciliations of the City’s bank accounts  to resign is pathetic.
If that individual required  minimal assistance to do her job she should have received it,   AND  the monthly bank reconciliations should have been completed  on a timely basis without exception or excuse.  so as to safeguard taxpayer interests at all times.
If that individual required more than minimal assistance to complete those  reconciliations,   (a) she should  never have been hired to a position for which she was un-qualified,   and  (b) she should have  been dismissed when her lack of qualification  became obvious.
EITHER WAY the failure was yours  as was your decision  to  hide the fact that timely bank reconciliations were not completed for most of last year,  AND THEN  you compounded that deception by having your finance director mislead the A&B board regarding their bank reconciliation inquiries.
While I understand you do not want anyone reviewing the qualifications and experience  of those you employ let me  tell you why that is important and remind you that the  A&B Advisory  board was established with the  bedrock purpose  of creating a:    professionally  inquisitive and guardedly skeptical  volunteer citizen oversight board,  possessing specialized educational and practical experience in matters of audit and finance to be  on  guard  as yet another failsafe,  to alert Council and the People they are elected to represent,    as to any potential concerns regarding the independence and performance of future Auditors,  Managers and Finance Directors alike.
 Now let me tell you why this  review is relevant.  The independent Auditors opinion reads in part;

• “ The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America;  this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.“   ( Independent Auditors’ Report – CAFR  P 21 )

At the last  A&B  meeting that Auditor confirmed that while the City does not prepare its own financial statement but rather subs out that task …..  he is not of the understanding  that the City subs out the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements,  nor does his firm assist with those matters as that would impact his independence.
 So let me ask you directly – Does the City  sub out the  design, implementation, and maintenance of internal control,  OR  does it perform that task in house,  OR is that task not performed at all ??
If the City  performs that task in house who actually  performs that design, implementation, and maintenance ??,    AND   what  qualifications and experience does   that individual or individuals   possess to adequately discharge  the  important task of designing, implementing and monitoring  controls adequate to safeguarding taxpayer assets  .…. because  if any of your Finance staff including your  Finance Director or Comptroller  is a degreed accountant, or holds a CPA designation , or has any recent professional accounting or auditing experience  those facts are well concealed on their resumes.
Manager Kisela  you should be further  aware of  a serious problem with  the  veracity and competency   of what your Finance director is saying and doing .  Mr. Saunders told me not less than 6 or 8 months ago that while historically City staff  never reviewed  the monthly reconciliation  of the CITY bank account administered by Kemper Sports  they were doing so as at the time of that conversation,    YET  at Monday’s  A&B meeting he advised that last month was only the 1^st or 2^nd month those reviews had taken place.      Big difference.
When pressed  he further advised that he personally performed last month’s bank reconciliation review.  That is most curious because as you may remember at the last Golf board meeting I inquired as to an explanation regarding  the $7,664 negative number in an account labeled  Cash-Housebank  &  Other.  Not only did Mr. Saunders  not offer an  explanation at that golf meeting he was not able to  offer an explanation last evening,    some 3 weeks later although he did mumble something to the effect that he just looked at that months reconciliation.
So what exactly does Mr. Saunders  ‘ bank reconciliation review’  consist of, and is it an adequate review ??
Finally Manager Kisela the current  level  deception regarding the your Finance department’s performance is not in the best interest of the taxpaying public.
The public never received a copy of the Auditor’s management letter for the 2012 Audit ,  AND  only received a copy from the 2013 management letter  inadvertently.    Council approved that  letter  as part of the 2013 Audit package  at their March  25^th  2013 meeting  and while it was posted on  the City web site initially  it was subsequently removed   LIKELY   BECAUSE  it  not only contained a  most disparaging remark regarding  the readiness of your Finance staff,   BUT BECAUSE IT HAS CALLED  into direct  question the veracity of what Mr. Saunders advised the A&B board at their  Jan 13^th meeting regarding delays in the start of the Audit.
Is there a problem with  Mr. Saunders veracity,   OR   is the problem that he is just not well  informed as to what is going on in his department  ??.