Discussion on the timeline and process for a forensic audit

1. City of Killeen, TX
City of Killeen –
Forensic Audit
March 21, 2017
4828 Loop Central | Suite 1000 | Houston, Texas 77081
PH: 713.968.1600 | FAX: 713.968.1601 |
www.mcconnelljones.com

2. City of Killeen, TX
Agenda
A. Introductions
B. Engagement Milestones
C. Today’s Process
D. Areas for Risk-Based Analysis
E. Q&A
PAGE  1

3. City of Killeen, TX
Engagement Milestones
July 31,
2017
Draft
Report
On-Site Interviews,
Walk-Throughs,
Survey and Testing
April 10,
2017
Kick-Off
Meeting
Presentation
April 10
–
28, 2017
April 10 –
June 30, 2017
July 7,
2017
July 24,
2017
July 17,
2017
Audit Advisory
Committee Briefing
(May 16, 2017)
Management
Comments
Analysis &
Benchmarking Final Report
PAGE  2

4. City of Killeen, TX
Discuss
• RED FLAGS – Concern and details of past
events.
• RISKS – What you consider today’s risks for
the activities under audit.
• FUTURE – Your vision for the future.
Today’s Process
A look at the past with an eye towards the future.
PAGE  3

5. City of Killeen, TX
• Determine if fraud and/or gross
mismanagement exists
• What were the reasons for this
dramatic increase in spending?
• How were these capital projects
financed (e.g., bond issuance,
federal/state grants, general
fund revenues/reserves)?
• Were there significant cost
overruns (change orders due to
renovations, etc.)?
Objectives
Capital Outlays
Conduct an analysis of the City's significant capital projects during the period
Scope Period
• FY2002 through FY2016
PAGE  4

6. City of Killeen, TX
Capital Outlays
Your thoughts…
Risks FutureRed Flags
PAGE  5

7. City of Killeen, TX
To determine:
• Were bond funds spent
legally and for the purpose
for which the bonds were
approved [e.g., were idle
funds used for other
purposes]?
• Were funds remaining after
project completion, if any,
used appropriately and
legally?
Objectives
Use of Bond Money
Review the City's Major Bond Issuances
Scope Period
• FY2002 through FY2017
PAGE  6

8. City of Killeen, TX
Use of Bond Money
Your thoughts…
Risks FutureRed Flags
PAGE  7

9. City of Killeen, TX
To determine:
• Were transfers from restricted
funds allowable and legal?
• Were the transfers authorized? Are
the City's policies governing
inter-fund transfers adequate to
prevent misuse or misallocation of
restricted funds?
Objectives
Inter-Fund Transfers
Review the Significant Transfer of Funds Between the Enterprise and Special
Revenue Funds
Scope Period
• FY2010 through FY2017
PAGE  8

10. City of Killeen, TX
Inter-Fund Transfers
Your thoughts…
Risks FutureRed Flags
PAGE  9

11. City of Killeen, TX
• 3 percent City-wide cost of
living adjustment (COLA)
implemented in June 2014
• 8 percent salary increase
for civil service positions
implemented in October 2014
Objectives
Pay Increases
Review City’s Fiscal Planning for the Short-Term Funding and Long-Term
Impact
Scope Period
• FY2014 through FY2017
PAGE  10

12. City of Killeen, TX
Pay Increases
Your thoughts…
Risks FutureRed Flags
PAGE  11

13. City of Killeen, TX
To determine:
• The City's participation is
in keeping with best
practices. (Sampling)
Objectives
City/Owner Agreements
Review City’s Fiscal Planning for the Short-Term Funding and Long-Term
Impact
Scope Period
• FY2002 through FY2016
PAGE  12

14. City of Killeen, TX
City/Owner Agreements
Your thoughts…
Risks FutureRed Flags
PAGE  13

15. City of Killeen, TX
• Compare the City's private
roadway ownership and City
participation to best
practices to assess the
overall efficiency of the
City's arrangements.
Objectives
Private Roadway Ownership
Review City Participation, if any, in Private Roadway Maintenance /
Improvement
Scope Period
• FY2002 through FY2016
PAGE  14

16. City of Killeen, TX
Your thoughts…
Risks FutureRed Flags
Private and Public Roadway
Ownership
PAGE  15

17. City of Killeen, TX
To determine:
• Did Council ratify
expenditures as required?
• Is there any evidence of
fraud or abuse of funds
during the period?
Objectives
Post-Recall Spending
Review Significant Expenditures During the Six-Month Period Without
a Fully-Seated Council
Scope Period
• November 2011 – May 2012
PAGE  16

18. City of Killeen, TX
Your thoughts…
Risks FutureRed Flags
Post-Recall Spending
PAGE  17

19. City of Killeen, TX
Questions
PAGE  18