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CITY OF SAN LEANDRO <br />MEMORANDUM ON INTERNAL CONTROL <br />JUNE 30, 2014 <br />CURRENT STATUS OF PRIOR YEAR OTHER MATTERS <br />FS2013-03: Investment Policy — Internal Control <br />Criteria: Per the City's Fiscal Year 2012-2013 Investment Policy Statement (Reso. 2012-093, <br />adopted on July 16, 2012), page 7 of 13, under the heading "Internal Control and Review": <br />"The Finance Director will establish an annual review process to be conducted by an <br />independent external auditor. The review will provide internal control by assuring <br />compliance with established City policies and procedures." <br />Condition: In planning and performing our audit of the City's basic financial statements, our <br />considerations of the City's internal control over financial reporting (internal control) as a basis for <br />designing our auditing procedures is for the limited purpose of expressing our opinions on the <br />financial statements. We have not been specifically engaged to perform any review the City's <br />Investment Policy internal control or compliance. We understand that no such reviews are conducted <br />by other independent external auditors. <br />Effect: It appears that the City is not in compliance with this part of the Investment Policy. <br />Cause: We understand that the City's former auditors were, at one point, engaged to conduct this <br />type of review. In addition, due to transitions of Finance Directors, it appears that the City has not had <br />the opportunity to update this section of the Investment Policy. <br />Recommendation: If deemed not necessary, the City should remove this section from the Investment <br />Policy. Alternatively, as required by the Investment Policy, the City should engaged an independent <br />external auditor to perform an agreed upon procedures to review the internal control and compliance <br />with the City's Investment Policy. <br />Management Response: City will further review the Investment Policy and, if appropriate, change or <br />remove the statement that requires external auditor review to ensure that the City complies with its <br />Investment Policy. Staff currently provides annual updates to the City's Investment Policy, quarterly <br />performance reports and distributes monthly transaction detail for the City Investment portfolio. <br />Current Status: The City adopted a new Investment Policy effective in FY14/15 which excludes the <br />statement that requires external auditor to perform annual review to ensure City's compliance with <br />established policies. <br />10 <br />