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<br />Attachment III <br /> <br />City of Redwood City <br />Fiscal Year Ending June 30, 2006 <br />Audit Committee Presentation, Continued <br />December 11, 2006 <br /> <br />Current Year Recommendation to Management: <br /> <br />Fraud Policy: <br /> <br />Observation: Based on inquiries with the City's personnel it was determined that the <br />City does not have a formal written policy on fraud. <br /> <br />Recommendation: The City should consider developing a written fraud policy which <br />outlines what would be considered fraudulent acts, how fraudulent acts should be <br />reported, and how an investigation will be conducted by the City. <br /> <br />Response: The City will review the sample fraud policies to be provided by C&L and <br />will work through the City Manager, Finance Committee and HR Director to determine <br />if a fraud policy is necessary. <br /> <br />Payroll Expense Allocation: <br /> <br />Observation: It appeared that the City used a budgetary factor for allocating payroll <br />expense for the CDBG program. <br /> <br />Recommendation: It is recommended that the City maintain functional time cards to <br />support the time charged to a grant program. <br /> <br />Response: The Finance staff who work on CDBG related items currently track all time <br />spent directly on their time cards. As a result of this observation and recoJTll1lendation, <br />Community Development Services Department staffs who work on CDBG related items <br />will now report all time spent on these items directly on their time cards rather than <br />reflecting an automatic distribution of their time. <br /> <br />Page 3 of]O <br />