City of Duncanville

The audit committee of the City of Duncanville was established by Resolution 2003-102109 approved by the City Council on October 21, 2003 and amended by Resolution 2015-111714 by the City Council on November 17, 2015. The committee’s operational guidelines are set down herein and may be amended by a majority vote of the members of the audit committee. The authority and responsibility of the audit committee and the appointment and terms of members are designated in Resolution 2015-111714 and are incorporated herein by reference.

Meetings

The audit committee is to meet at least two (2) times per year and as many times as the committee deems necessary.

Attendance

Members of the audit committee are to be present at all meetings. As necessary or desirable, the chairman may request that members of management and representatives of the independent auditor be present at a meeting of the committee. A quorum of members must be present in order to conduct a meeting. If the committee consists of three (3) members, a quorum would constitute two (2) members. If the committee consists of five (5) members, three (3) out of five (5) members should be present to have a quorum.

Specific Duties

Financial Reporting

The audit committee is to:

1. Review with management and the independent auditor the City’s policies and procedures to reasonably ensure the adequacy of internal controls over accounting, administration, compliance with laws and regulations, and financial reporting.
2. Have familiarity, through the individual efforts of its members, with the accounting and reporting principles and practices applied by the city in preparing its financial statements. Further, the committee is to make, or cause to be made, all necessary inquiries of management and the independent auditor concerning established standards of conduct and performance, and deviations there from.
3. Review, prior to the start of the annual audit, the scope and general extent of the independent auditor’s planned examination, including its engagement letter. The auditor’s fees are to be arranged with management and summarized annually for committee review. The committee’s review should entail an understanding from the independent auditor of the factors considered by the auditor in determining the audit scope, including:
   
   • Risk characteristics of the City;
   • External reporting requirements;
   • Materiality of the various segments of the City’s combined activities;
   • Quality of internal accounting, administrative, and compliance controls;
   • Extent of the internal auditor’s involvement in audit examination; and
   • Other areas to be covered during the audit engagement.
4. Review with management the extent of non-audit services planned to be provided by the independent auditor in relation to the objectivity and independence needed in the audit.
5. Review with management and the independent auditor instances where management has obtained “second opinions” on accounting and financial reporting polices from other accountants.
6. Review with management and the independent auditor, upon completion of its audit, financial results for the year prior to their release to the public. The audit committee’s review is to encompass the City’s annual financial report, including the financial statements and footnote disclosures and supplemental disclosures required by generally accepted accounting principles, including:

a) Significant transactions not a normal part of the City’s operations;
b) Selection of and changes, if any, during the year in the City’s accounting principles of their application;
c) Significant adjustments proposed by the independent auditor;
d) The process used by management in formulating accounting estimates and the independent auditor’s conclusions regarding the reasonableness of those estimates;
e) Any disagreements between the independent auditor and management about matters that could be significant to the City’s financial statements or the auditor report;
f) Difficulties encountered in performance of the audit;
g) Management consultation with other accountants with respect to accounting policies or their applications; and
h) Major issues discussed between auditor and management prior to retention of auditor.

The audit committee shall also:

1. Evaluate the cooperation received by the independent auditor during its audit, including its access to all requested records, data and information. Also, elicit the comments of management regarding the responsiveness of the independent auditor to the City’s needs. Inquire of the independent auditor whether there have been any disagreements with management that, if not satisfactorily resolved, would have caused the independent auditor to issue a nonstandard report on the City’s financial statements.
2. Discuss with the independent auditor the quality of the City’s financial and accounting process and any recommendations that the independent auditor may have. Topics to be considered during this discussion include improving internal financial controls, controls over compliance with laws and regulations, the selection of accounting principles, and management reporting systems.
3. Review written responses of management to “letter of comments and recommendations” from the independent auditor and discuss with management the status of implementation of prior-period recommendations and corrective action plans.
4. Discuss with management the scope and quality of internal accounting, administrative, compliance and financial reporting controls in effect.
5. Apprise the City Council, through minutes and special presentations as necessary, of significant developments in the course of performing the above duties.
6. Recommend to the City Council any appropriate extensions or changes in the duties of the committee.
7. Recommend to the City Council the retention of the independent auditor.
8. Report annually to the City Council on the discharge of these responsibilities.

System of Internal Controls

The audit committee is to:

1. Review the City’s process for assessing significant risks or exposures and the steps management has taken to minimize such risks.
2. Consider and review with management and the independent auditors:
   • The effectiveness of, or weaknesses in, the City’s internal controls, including the status and adequacy of management information systems and other information and security, the overall control environment, and accounting and financial controls.
   • Any related significant findings and recommendations of the independent accountants, together with management’s response thereto, including the timetable for implementation of recommendations to correct weaknesses in internal controls.
3. Review internal processes for determining and managing key financial statement risk areas.
4. Review the City’s process for determining risks and exposures from asserted and unasserted litigation and claims and from non-compliance with laws and regulations.

Ethics

The audit committee will:

1. Establish, review and update periodically a code of ethical conduct and ensure that management has established a system to enforce this code.
2. Review management’s monitoring of compliance information disseminated to governmental organizations and to the public to satisfy legal and/or regulatory requirements.
3. Review with the City’s legal counsel any legal matter that could have a significant impact on the City’s financial reporting and/or financial policies and other regulatory requirements related to financial disclosures.
4. Establish and maintain procedures for the receipt, retention and treatment of complaints regarding accounting, auditing and reporting practices.
5. Establish and maintain procedures for the confidential, anonymous submission by employees regarding questionable accounting, auditing or reporting matters.