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R114951 City Council Meeting: December 13, 2022 Santa Monica, California RESOLUTION NUMBER 11495 (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AMENDING AND RESTATING AUDIT SUBCOMMITTEE RULES OF CONDUCT TO CLARIFY THE TIMING OF THE ELECTION OF THE AUDIT SUBCOMMITTEE CHAIR AND VICE-CHAIR WHEREAS, the City Council of the City of Santa Monica (the “City Council”) recognizes the importance of transparency and accountability in the administration of public resources, and the City Council is ultimately responsible for ensuring that the City of Santa Monica (the “City”) is meeting its internal controls and financial reporting responsibilities; and WHEREAS, on July 14, 2015, the City Council adopted Resolution Number 10897 (CCS) (“Resolution 10897”), which established an Audit Subcommittee of the City Council (the “Audit Subcommittee”) to ensure regular and direct communication between the City’s independent auditors and the City Council and further the City Council’s goals of transparency and accountability in the administration of public resources; and WHEREAS, on July 28, 2015, the City Council adopted Resolution Number 10901 (CCS) (“Resolution 10901”), which reflected the City Council’s intent that the Audit Subcommittee consist of three Council members and two City residents with relevant expertise to be selected through a public process; and WHEREAS, Resolution 10901 also defined the duties and responsibilities of the Audit Subcommittee; and DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 2 WHEREAS, on April 20, 2017, the Audit Subcommittee recommended that the City Council adopt Rules of Conduct for the Audit Subcommittee in order for the Subcommittee to efficiently conduct its meetings in compliance with applicable State and local laws; and WHEREAS, on May 9, 2017, the City Council adopted Resolution Number 11042 (CCS) (“Resolution 11042”) adopting Rules of Conduct for the Audit Subcommittee; and WHEREAS, on June 27, 2017, the City Council adopted Resolution Number 11046 (CCS) (“Resolution 11046”) revising the Rules of Conduct for the Audit Subcommittee in order to recognize scheduling challenges resulting from restrictive attendance requirements and ensure that Audit Subcommittee business moves forward in a timely manner; and WHEREAS, on March 27, 2018, the City Council adopted Resolution Number 11103 (CCS) (“Resolution 11103”) revising the Rules of Conduct for the Audit Subcommittee to provide additional flexibility in the management of the Audit Subcommittee; and WHEREAS, on October 22, 2019, the City Council adopted Resolution Number 11212 (CCS) (“Resolution 11212”) adding as a responsibility of the Audit Subcommittee the monitoring of the City’s implementation and ongoing management of a confidential ethics hotline; and WHEREAS, Resolution 11212 repealed Resolutions 10897, 10901, 11042, 11046, and 11103; and WHEREAS, Resolution 11212 provides that a Chair and Vice-Chair will be elected at the first meeting of the year; and DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 3 WHEREAS, members of the Audit Subcommittee have requested clarification on whether the term “year” refers to the calendar year (beginning January 1) or the fiscal year (beginning July 1); and WHEREAS, the Audit Subcommittee is a subcommittee of the City Council, with three of the five members required to be members of the City Council; and WHEREAS, City Council members begin and end their staggered four-year terms on the City Council in December, which may result in a vacancy on the Audit Subcommittee, including the Chair or Vice-Chair, that must be filled expediently. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The City Council of the City of Santa Monica has established and hereby sets forth the composition, rules of conduct, and duties and responsibilities of an Audit Subcommittee, which shall assist the City Council in fulfilling its oversight responsibilities for the financial reporting process, the framework for internal control, and the audit process. SECTION 2. Composition. The Audit Subcommittee shall consist of three members of the City Council and two City residents who shall be appointed by the City Council through a public process and shall be qualified to serve by virtue of their experience and expertise with accounting and internal financial controls. The five members of the Audit Subcommittee shall be appointed by the City Council to staggered four-year terms. To establish staggered terms, the initial members of the Audit Subcommittee shall be appointed so that two Council members and one public member DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 4 serve four-year terms and one Council member and one public member serve two -year terms. Thereafter all members shall be appointed to serve four-year terms. SECTION 3. Open Meeting Laws. Audit Subcommittee meetings shall be held in compliance with the State’s Open Meeting Laws. Notice of meetings, including adjournment, shall also be given in accordance with the provisions of the Ralph M. Brown Act, California Government Code section 54950 et seq. (the “Brown Act”). In the event of a conflict between the provisions of the Brown Act or any other law and any provision of these Rules of Conduct, the Brown Act, or other law, shall prevail. The noticing provisions shall further be subject to any amendments of the Brown Act. SECTION 4. Quorum. A majority of Audit Subcommittee members shall constitute a quorum for the transaction of business, except to adjourn. One City Council member who is a member of the Audit Subcommittee must be present for an Audit Subcommittee meeting to occur. The Finance Director, or designee, and the City Attorney, or designee, shall attend all Audit Subcommittee meetings. The Finance Director, or designee, or the City Attorney, or designee, shall implement Audit Subcommittee directives as appropriate and report back on recommendations made in audit reports as directed by the Audit Subcommittee. SECTION 5. Officers Powers and Duties. At the first regular meeting of each calendar year, the members of the Audit Subcommittee shall elect a Chair and a Vice- Chair for a one-year term. Until new officers are elected, the outgoing officers shall continue to serve, when a quorum is needed and no officers are available. The Chair shall be the Presiding Officer at all meetings. In the absence of the Chair, the Vice Chair shall preside. In the absence of both the Chair and Vice Chair, the City Clerk or designee shall DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 5 call the Audit Subcommittee members present to serve until the arrival of the Chair or Vice Chair or until adjournment. Meeting agendas shall be prepared by the Chair in consultation with the Finance Director. SECTION 6. Conduct of Meetings. Except as otherwise provided, the Audit Subcommittee shall follow the City Council Rules of Order and Procedures, Resolution Number 11427 (CCS) (“Resolution 11427”), as applicable, and as may be amended from time to time, in the conduct of its meetings. A copy of Resolution 11427 is attached hereto as Exhibit A and incorporated herein by this reference. SECTION 7. Regular Meetings. Regular meetings of the Audit Subcommittee shall be held at least quarterly on such dates, at such locations, and at such times as may be fixed by the Audit Subcommittee. SECTION 8. Ad Hoc Committees. The City Council may approve the creation of an ad hoc committee to take part in Audit Subcommittee discussions. Any such ad hoc committee shall serve for a limited time and scope of work, as approved by the City Council. Any ad hoc committee formed shall be subject to the Open Meeting Laws and shall only convene during public meetings of the Audit Subcommittee. Any ad hoc committee formed may not: (a) take any final action on matters which also require Audit Subcommittee members’ approval; (b) fill vacancies on the Audit Subcommittee; or (c) make any appointments to the ad hoc committee. Members of any ad hoc committee formed may not meet except as allowed in accordance in the Brown Act. DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 6 SECTION 9. Duties and Responsibilities. The duties and responsibilities of the Audit Subcommittee include but are not limited to: (a) Reviewing, upon completion, all City audit reports, analyzing all findings in audit reports, and consulting with external and internal auditors regarding any irregularities and deficiencies disclosed in their reports; (b) Determining what corrective action, if any, should be recommended to the City Council; (c) Reporting to the City Council on the outcome of all audits, on any audit findings, and on any other pertinent communications, and making appropriate recommendations; (d) Ensuring that timely and appropriate action has been taken in response to City Council directions arising from audit reports; (e) Considering the effectiveness of the framework for internal control, reviewing the effectiveness of the systems for monitoring compliance with laws and regulations, and reviewing the processes for communicating the City’s compliance policies to City personnel and monitoring compliance therewith; (f) Monitoring the City’s implementation and ongoing management of a confidential ethics hotline as a method through which employees, taxpayers, or other concerned stakeholders may confidentially report suspected illegal, improper, wasteful or fraudulent activity; and DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D 7 (g) Provide oversight of the periodic review and selection of external and internal auditors including, but not limited to, reviewing proposals and making recommendations. SECTION 10. Resolution 11212 is hereby repealed in its entirety. SECTION 11.The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ Douglas Sloan City Attorney Exhibit A – Resolution #11427 DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D Adopted and approved this 10th day of January 2023. __________________________ Gleam Davis, Mayor I, Denise Anderson-Warren, City Clerk of the City of Santa Monica, do hereby certify that Resolution No. 11495 (CCS) was duly adopted at a meeting of the Santa Monica City Council held on the 10th day of January 2023, by the following vote: AYES: Councilmembers Brock, de la Torre, Parra, Torosis, Zwick Mayor Pro Tem Negrete, Mayor Davis NOES: None ABSENT: None ATTEST: _____________________________________ Denise Anderson-Warren, City Clerk DocuSign Envelope ID: EB776BBD-BAF9-4DE2-97FB-8378E3C0E86D