Audit and Finance Committee (AFC) Meeting Transcript – 11/12/2024 Title: ATXN-1 (24hr) Channel: 1 - ATXN-1 Recorded On: 11/12/2024 6:00:00AM Original Air Date: 11/12/2024 Transcript Generated by SnapStream ================================== Please note that the following transcript is for reference purposes and does not constitute the official record of actions taken during the meeting. For the official record of actions of the meeting, please refer to the Approved Minutes. [9:32:54 AM] >> Good morning. It is November 12th, 2024. My name is Alison alter and I'm chair of the audit and finance committee. I'm joined today on the dais by vice chair, pool and council member Ryan alter. I know that council member Fuentes is on city business elsewhere. This morning we have a lot on our agenda and we are going to bounce around a little bit to accommodate schedules. So please bear with me and give me a shout out if we if we miss something important along the way. Our plan is to break at ten or just before ten, depending on where we are in items to go into executive session to cover the cyber items. We will take other items as much as we can up. Up until that point, but we do want to make sure that we have the time that we need for the cyber related audit and resolution reports. We're going to begin, and I guess I should say it was [9:33:56 AM] and I guess I should say it was 933. We are going to begin with public communication, and we have one speaker. This morning. Steven Apodaca, you'll have three minutes. Welcome. >> Good morning, chair and members of the audit and finance committee. My name is Steven Apodaca. I serve as chair of the community technology and telecommunications commission. I'm here in support of afc 003. The proposed revisions of the commission's bylaws. The bylaw updates were crafted in close partnership with city staff and the telecommunications and regulatory affairs. Tara, who serve as our contact points and liaisons as well as the clerk's office to ensure that we're fully aligned with any city policies and procedural requirements. So I'm pleased to share that every member of our commission voted in favor of these resolutions of these revisions, at our October meeting, reflecting our shared commitment to streamlined adoption of these updates. To my knowledge, this is the first [9:34:57 AM] knowledge, this is the first time any of these bylaws have been modified since the commission's inception. As technologies evolve, so is the scope of our work. The proposed updates are not an expansion of our mandate, but rather a reflection, a reflection of what we're currently actively doing in support of Austin's technology and telecommunications goals. In other words, these changes formalize our current state of our commission's role and responsibilities, ensuring our bylaws accurately reflect our ongoing work within the city. One example of this alignment is the addition of language, emphasizing our commitment to digital equity. The commission has long focused on making internet access fair, affordable, and accessible to all residents a priority that is now more clearly articulated in the revised bylaws. Another key update is the inclusion of emerging technologies like artificial intelligence, where we're already engaged in discussions and efforts to help Austin navigate the opportunities and challenges these technologies present. Additionally, the revised bylaws simplify our name to technology [9:35:58 AM] simplify our name to technology commission. This change makes our identity identity more approachable, signaling that our work encompasses a wide array of technology issues that impact everyday austinites from broadband access, leading practices around emerging technologies, to digital skills and training. Another formalization of the revisions is our support for the grant for technology and opportunities program, otherwise known as gitops, which are currently our we are already actively involved in the updated bylaws outline our current practice of selecting volunteer reviewers and advising on final award allocations, which help extend technology, access and resources across our community. Because these updates merely codify our existing work, we anticipate no procedural changes within the city. As a result, the commission partners. But we're fully aware we cannot direct the staff's work and is simply a step towards ensuring that the commission's bylaws reflect the actual work we are doing today and the way we are already serving our community. So we [9:36:59 AM] serving our community. So we appreciate your support and advance these bylaw updates, which will help us continue providing meaningful and effective service to city council and Austin's residents. Thank you so much, chair. >> Thank you and we appreciate your service. Leading the commission and will take those items up shortly. >> Thank you. Thank you. >> Any other public speakers? No. Okay, great. So what we're going to do is we'll we'll take up the items that we have in order now until we hit about that 10:00 time, and we'll see where we're at. If we need to adjust at any point in time. So I will entertain a motion to approve the minutes of the audit and finance committee meeting from October 9th. Moved by council member Ryan alter, seconded by vice chair pool with no objections. We will adopt and approve the minutes. Thank you. The second item relates to the city of Austin employees [9:38:01 AM] city of Austin employees retirement system board. Diana Thomas, did you want to present this item, please? >> Good morning. Committee members. Diana Thomas, deputy cfo. I have before you an item to reappoint doctor Kelly crook to the city of Austin employees retirement system. Doctor crook's term ends in December, and she has been an active member of the board of trustees and would like to continue. Happy to answer any questions. >> Thank you. Council member. Mayor. Pro tempore. >> Happy to make the motion to approve the continuation of doctor crook on board. >> Seconded by council member Ryan alter. With no objections, we will forward that reappointment to the full council as approved by the audit and finance committee. And thank you to council member pool for her service over these many years on the employee retirement system board herself. Thank you. Item number three is the [9:39:03 AM] Item number three is the community development commission and community technology and telecommunications commission. Proposed bylaws. Miss hall. >> Hi. Good morning. Excuse me. Stephanie hall, assistant city clerk. I'm here to present two bylaw amendments from two different commissions today. The red line versions are in backup for reference. And there's also a spreadsheet that kind of details them. So I'm just going to briefly go over them. If you have any questions, please let me know. The community development commission has amended parts of the article three regarding membership. They have removed the reference to organizations. This is to align with some legal requirements, as well as to kind of make the process more efficient for selecting members of the related neighborhoods. The city clerk's office has no issue with these amendments, but we would defer to the staff department, which I do believe is here. If you have any questions or need any additional clarification. And then the community technology and telecommunications commission has amended their bylaws as chair outlined. Much better than I possibly could. [9:40:04 AM] better than I possibly could. They do have some substantial changes, as in changing their name and changing some of their purposes and functions. As the chair referenced. The clerk's office again has no issues with this, but since they are substantial, we would just defer to the staffing departments if there's any implications on there. And then just a note for both of these amendments for both commissions. It would require an ordinance because it does impact their outlines and city code. So if the recommendations move forward, we would also bring forward ordinances to amend those related sections of code. And I do believe staff is here. If you have any questions on either of those commissions or would like to hear from them. >> Thank you. Are there any staff who want to speak to this item? >> Good morning, I'm Houghton Harmon. I'm a program manager for community technology at economic development. And we are the liaisons to the community technology commission. We do not [9:41:05 AM] technology commission. We do not have any objections to the changes. However, we would like to have two points of clarification on the record, if that's possible. Thank you. For one article, one on second page, it number three below that it says the commission shall support the grant for technology opportunities. Grant gitops in the following ways. Number two under that says appoint commission members to serve as non-voting chairs. That should be chair. That's a typo there. There's one chair. We want to make sure that that's clear. And number three, appoint commission members to serve as voting review panel members as needed. Historically, there have been no more than two commissions as voting members on the panel, because we want to make sure that the community has an opportunity to serve on the panel. And we've reviewed these with the chair and there is agreement on it, and all changes [9:42:05 AM] agreement on it, and all changes currently reflect the current practices. So thank you that those are the two items. >> Thank you. Appreciate that. Are there other points that maybe let's take one at a go ahead. >> Good morning council members. Donna Sundstrom with Austin public health. And it's a different commission on the community development commission. But we support the amendments. And also it has been voted in support at the community development commission by the commission members as well. >> Thank you. Okay. So I think we need to take these up separately. I believe, to move them forward or can we do it in one? >> You can do them together, especially if you're moving forward with both of them and just one motion. >> Okay, so I'll entertain a motion to move these forward, making sure that the typos that ere mentioned by miss Harmon [9:43:05 AM] ere mentioned by miss Harmon are addressed for the community technology commission moved by vice chair pool, seconded by Ryan alter, with no objections. We will approve these to move on to council with the appropriate ordinances as required. Thank you. So I'm guessing that may take a meeting or two to get to us. >> Yes. Thank you. >> Great. Thank you. And thank you for anyone who's serving on those commissions who's still in the room as well. So we need to move forward with setting some meeting dates for the audit and finance committee meeting. Auditor will speak to that. >> Yes. So you have should have in the backup a list of potential dates. These are very tentative. Obviously several of you will not be on the committee next time. But we wanted to get some dates reserved and rooms reserved so that we had kind of placeholders on the calendar. So we used the approved council [9:44:06 AM] we used the approved council calendar for 2025 to come up with these dates. Obviously we'll adjust them as needed. But starting meetings in February and yeah, meeting throughout 2025 with a couple of blank meeting dates just for breaks and or trying to merge meetings. >> Thank you. Mr. Alter. Did you have any concerns about these dates at this point? No. Okay. So vice chair pool moves approval, seconded by council member Ryan alter with no objections. We will approve that proposed calendar. I will just note for folks with no meeting in January, our December meeting is going to be packed. So please be prepared for that. And be in attendance. And I believe that's on December 11th. Is that correct? >> Yes, that sounds right. I can double check that. >> We'll be sad to do it without [9:45:06 AM] >> We'll be sad to do it without y'all. You guys will be fine. We'll be. >> You'll be fine. You'll have to start. Lead through it. Okay, great. So we now have about 15 minutes and I'm going to go ahead. And we're going to postpone item six to the next meeting, which is the fire department's overtime costs. And at this point I don't know if the auditor we can go with item five. The employee reimbursement audit, are we or we can go ahead with the small business local preference program. Do you have a since I think your staff need to be here. Yes. Anyway. Yeah. Your staff's going to be here either way. So if Mr. Scarborough would like to go ahead with the update on the program enhancements for the local and small business procurement programs, we'll let you do that. So you don't need [9:46:06 AM] you do that. So you don't need to wait around. Good. >> Good morning. Committee chair. Alter members of the committee James Scarborough, financial services department. I am your chief procurement officer. I am returning to do a quick update regarding the enhancements that we made last year to the city's local business and small business procurement programs. So, as you may recall, and there'll be a number of contents in this presentation that you've seen before. So I won't spend too much time rehashing what has already been presented previously. But in 2019 and 2020, the city conducted its most recent disparity study in support of the city's minority and women owned business. Enterprise program. The results of that disparity study showed [9:47:08 AM] of that disparity study showed that the city's performance in doing business with women and minority owned companies had improved to an extent to where some changes to the program were merited as a result of those changes, council expressed interest in enhancing other procurement programs to possibly offset any reduction in the in the in goals or any other elements of the mwb program. That is, when we brought forward financial services department, brought forward some recommendations to make changes to our local and small business program in pursuit of council's request. In developing those enhancements, we had several meetings with stakeholders and members of the business community. We've also presented multiple times to the audit and [9:48:08 AM] multiple times to the audit and finance committee, as well as presenting to the business community. Most recently in the small business conference this past September. The result of the feedback was very positive. Predominantly, there was an interest that any changes that we make to the existing programs did not negatively impact the mwbe program. There was a preference that we maintain the sba small business size standard when we recognize certifications of other entities, and that we define a company as being local based on their headquarters. Only, but that the area for the local presence be expanded to a larger area to greater Austin specifically. There was also an interest in maintaining the programs, being separate, so that one could work. And another [9:49:08 AM] that one could work. And another would work. But but they would compound in their benefit if both programs applied. There was also an interest to include subcontractors if possible, and encouragement to explore future enhancements as these programs continue to mature. Some concerns included the possibility that programs enhancements may not impact all groups equally, and with regard to the inclusion of professional services, specifically, professional services associated with construction as not being applicable to these enhancements. So the programs have been enhanced now for one year, and we do have one year's worth of data regarding these enhancements for the local business program. The prior definition was limited to the Austin full purpose jurisdiction only. Now for the last year it has been the greater Austin or the five county msa. Again, we limited the definition of local [9:50:10 AM] limited the definition of local from headquarters or branch office to now just headquarters. We are continuing to provide the same preferences incentives in the solicitations from 3 to 10%, depending on the type of contract that we're soliciting for. Previously subcontractors. And the inclusion of subcontractors were included for the purposes of this enhancement. Since we expanded to the five county msa, we did not include subcontractors for the last year of the enhanced program. Excluded have continued to be construction over 100,000 and professional services. All. For the small business program. The enhancements. Previously we had no preference provided at the formal threshold. So anything over $50,000, there was no small business program. We [9:51:10 AM] no small business program. We applied it at the informal program only going forward for the last year, we have recognized certifications that include the small business size standards. That includes city of Austin certifications, state of Texas. Historically underutilized business certifications, and federal government sba certifications. We are extending to those companies the same preferences that we provide to local companies. So if you are local and small, you get the benefit of both preferences. We are also not including subcontractors for the time being, and the program enhancements are not subject to construction. Over 100,000 or professional services. So as you can see here, for our primary solicitation methods, the invitation for bids and the request for proposals in the categories that we've defined here, from 50 to 100,000, 100,000 to 500,000 and 500,000 to 50 million, you can see where the local discounts and points [9:52:10 AM] the local discounts and points incentives are identified. The small discounts and points incentives are identified and together the impact to the competition. If both local and small characteristics are identified. So what did that result? We initiated a two year pilot to look at the enhancements to make sure that they were working to make adjustments where necessary before we bring to council recommendations for longer term policy. So far, with the enhanced local and small preferences, the city conducted 115 solicitations. Of those, we received 443 responses. Of those 443 responses, 124 or about 28% were from local offers, 54 or about 12% were for small offers. The result of those [9:53:11 AM] The result of those solicitations were 149 contracts. About 40%, or 58 were to local companies and 17 or 11% were to small companies. Overall, the enhancements to these programs changed the outcomes of the solicitation four times, or 3.4%, so some takeaways. Solicitation participation did not negatively suffer as a result of these changes. In fact, we had a slight improvement in participation from 3.7 to 3.9 offers per solicitation. Also, solicitation competitiveness recognized no major impacts. Again, only 3.5% of the solicitation outcomes were actually changed. What we recognized was the benefit was the higher participation and therefore higher outcome of local and small participants, particularly from the local [9:54:13 AM] particularly from the local offers. Local participation was meaningful at 28%. Their outcomes were significant at 40% of the resulting contracts. Small participation was limited, but their outcomes were proportionate. They made up 12% of the overall responses and 11% of the resulting contracts. So from the first year of these enhancements, we recommend continuing with the enhancements in part and making a few adjustments for the second year. Second and final year of the of the pilot. Continue the local program as is at roughly a third of our of our total offers, and over 40% of the resulting contracts. We feel that that program is performing as we continue to expand our outreach. We feel like those numbers will maintain, if not improve further. We do recommend making some adjustments to the small program to enhance it further, adding additional certifications [9:55:17 AM] adding additional certifications to the city, certification, state and federal. We would also look at recognizing regional certifying authorities. There are two predominant such associations located in north Texas and in south Texas. We're also looking at the certification organizations that are maintained by other local governments. Specifically, we are looking at city of Houston. We are also recommending that we decouple the application of the small business preference from the local business preference. When the local program is not allowed, as you recall from previous presentations, there are more legal constraints on when we can and cannot apply the local program. Initially, we recommended that we apply the local and small at the same time so that that one program would not be preferred over over the other. Based on our first year [9:56:20 AM] other. Based on our first year of data, however, we see that the local program is performing more strongly than the small program. So we would recommend to offset that by applying the small program more broadly, including in instances when the local program would not otherwise be allowable. We are also examining the inclusion of subcontractors in preference small business subcontractors when no mwbe and WBE goals apply. That would be roughly the majority of our general procurement solicitations. When there are no mwbe and wb goals, there would be no negative incentives to choose non city certified firms over city certified firms. So we are looking at the possibility of adding subcontractor preference to the small business program. We just have to determine the [9:57:21 AM] We just have to determine the shape of that inclusion to make sure that we provide proper incentives. But we don't incentivize offers in a way that will be contrary to a competitive process. We also would recommend further expanding our outreach on both programs. So overall, council members, in a nutshell, the programs are working. We are still gathering baseline data. We believe that a couple of small adjustments on the small business program are merited. Otherwise, we look forward to checking back with the committee in another six months to let you know how the back end of the pilot is performing and preparations for making some formal recommendations for policy changes with regard to both programs. With that, if you have any other questions, I'll be glad to answer them at this time. >> Thank you, councilmember Ryan alter. >> I just have one. When we looked at this, whenever it was last time, we had some discussion about some of our [9:58:21 AM] discussion about some of our regional governmental entities and seeing if they might also either piggyback on our efforts or just do something in this regard. I'm curious, have those conversations occurred or where are we in that? >> Yeah. Council member that's correct, because particularly the local program identifies a geopolitical area that includes other governments by other governments recognizing a program or something substantially like it. We believe that our program would benefit from that. We've made overtures to our colleagues in the other procurement organizations within the five county msa. We have yet to meet with them, but we've had interest and we are following up with those with those discussions also, because we are recognizing the certifications provided by other entities like the state of Texas, federal and now we're looking at regional certifying organizations. The [9:59:22 AM] certifying organizations. The more that we include certifications in addition to city certifications, the more likely that these other entities would be interested in either sharing or adopting a very similar version of the city's program. Again, to our benefit and to their benefit. So in a nutshell, we are following up with these other other governments. We haven't had traction just yet. Okay. >> Thank you, thank you. >> I've appreciated working with you on this initiative. And I think it's, you know, important to do the pilot part first and get it right and then make it a more permanent program. So I appreciate the care with which you and your staff are approaching. >> Committee chair alter, thank you for your leadership in this regard. It's been a pleasure working with you as well, and we look forward to the program achieving the policy objectives that you and the committee have set forth for us. So thank you very much. >> Great. Thank you. So now what we're going to do is we're going to go into our executive session. When we come out of the [10:00:24 AM] session. When we come out of the executive session, we'll take up the remaining items, which are the future items and the employee reimbursement audit. So the committee will now go into closed session to take up one item pursuant to sections five, five, 1.076 and 551.089 of the government code. The committee will discuss security audit matters related to item eight, discuss an update on cybersecurity items, including a penetration testing audit, prior audit recommendations in fiscal year 25, budget item 16 related to contract efficiencies. Is there any objection to going into executive session on the item announced? Hearing none. The committee will now go into executive session. And so if you're participating in that, please meet us in the executive session room. Thank you. We are out of closed session and [11:21:59 AM] We are out of closed session and closed session. We took up and discussed security audit matters related to item eight. Do you need me to repeat that for the record? We are out of closed session and closed session. We took up and discussed security audit matters related to item eight. We will now take up the audit briefing on employee travel reimbursements. Good morning. >> Good morning, committee members. And this audit we looked at the employee travel reimbursement process. And let's see. Just at a high level. So that process involves employees traveling on official city business. Those employees can be reimbursed for work related expenses. And the city has a travel policy to outline those [11:23:00 AM] travel policy to outline those rules. Our first finding is that the city updated its travel policy earlier this year, replacing a policy from 2001. We identified travel policy best practices and compared them with the city's policies. The new policy includes 90% of the best practices, which is a marked improvement from the 2001 policy. However, one of the missing best practices was to regularly assess and update the policy to ensure it remains current. Let's see. For our second finding, we looked at a sample of travel requests, both advances and reimbursements, to identify any compliance issues. We did not see any issues with the city's travel advances for reimbursement requests. We noted employees did not consistently file them timely, and those late requests were more likely to experience processing delays. Pardon me? Specific to the reimbursement, 60% of our sample requests were not submitted to financial services on time. [11:24:00 AM] financial services on time. These late requests took longer to approve, or only 37% were approved within established time frames. By contrast, 67% of requests submitted on time were approved within the time frames. This indicates the late request may have had other issues that created a time consuming back and forth in that approval process. The main problem areas we saw were date and signature issues on the documentation. We reached out to department staff to find out why there were delays. Most of the responses fell into one of these three categories shown here. Emergency deployments such as for fire or staff. Those made sense for the other reasons. We noted the new policy has been helpful to clarify some of the issues, and financial services has provided training for travel staff, and they set up a teams channel, really, to share travel related questions and answers among all departments. And so that has helped as well. We issued two recommendations to address these issues. And management has agreed that is the presentation. Happy to take any questions. [11:25:02 AM] Happy to take any questions. >> Thank you. Is there any kind of management response at all point that they want to make? You don't have to. I just if you wanted to. >> Only if you have questions. >> Okay. Thank you. Colleagues are there any questions? Thank you. Appreciate this work. And I'm glad that the new policy is in place and hope that it addresses the challenges that we are experiencing. So the last item that we have. Thank you. The last item we have are identify items to be discussed at future meetings. >> And we have quite a list of items for next month. As we discussed today, we postpone the fire overtime discussion that will be on the December agenda, along with two items from my office. One just an update on the status of all of our audit recommendations, and the other is our, I guess, biannual twice a year update. Related to our integrity unit work. Then we also my list. I had earlier. So [11:26:05 AM] also my list. I had earlier. So this will be my second time. But we also have updates on the human capital management system, the strategic. What is that called the city strategic plan. And I'm sure I'm missing I know there's a board and commissions, items regulations, and I'm not sure if we need to do the mix interviews. >> Do we need to the mix? >> I believe my conversation with the clerk earlier today is just there aren't currently applicants, so it will just depend on on whether or not applicants come in before that date. Okay. So I do think that's all. >> So that's a part. So the bottom line is that that is right now a packed meeting. I believe we've asked to go to noon on that day. Is that correct? >> Yes, I believe we have. And we can I know we have the space reserved until noon and we can check and make sure council members are available until noon. [11:27:05 AM] >> Okay. And again, hopefully we'll go quickly and we'll see. We'll talk to the council members that are continuing on the committee and see what they want to have push over into the new year and what needs to definitely be on this agenda. That makes sense. And I know there are some other other things in the air as well. So does anyone have anything they want to add for the agenda or anything? Okay. Well with that then we will adjourn this meeting at 11:27 A.M. Thank you everyone. Appreciate it. Thank you