Sarbanes-Oxley is for Companies and Agencies, but not Municipalities. Yes, they really said that.
SARBANES-OXLEY ACT OF 2002 SEC. 2. DEFINITIONS.
(7) ISSUER.—The term ”issuer” means an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)), the securities of which are registered under section 12 of that Act (15 U.S.C. 78l), or that is required to file reports under section 15(d) (15 U.S.C. 78o(d)), or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn
Beaumont Finance And Audit Committee 09 11 2017
Taylor: The Securities Act of 1933 and 1934 do not apply to municipalities.
Finance & Audit Committee Chair Elaine Morgan : This Committee and the purpose of this Committee is much different than being a Financial Audit Committee – that’s not what we’re here to do. We’re a process Audit Committee more so than anything else. We’re not Accountants. We don’t do itemized Accounting, Forensic Accounting – whatever you want to call it, that’s not what this Committee is here to do. I went back and did some background on when our Committee was structured.
Morgan: On June 6, 2016, starting at two hours and four minutes into the video is when we started our discussion on the purpose and the creation of this Committee. We had quite a long discussion about what our job functions were what we were here to do. We also, in that Meeting, had a discussion on adding ‘Audit’ to the Committee’s name instead of it just being the Finance Committee we changed it to Finance and Audit. And it was very specifically brought up and discussed in there that we were – our goal was to audit the processes so that we made sure that the City was in compliance with the State Audit that they did [State Controllers’ Investigative Report November 2015].
Morgan: And that was the depth of our auditing that we were doing. We never changed any of the original setup from the original Ordinance. We haven’t added anything to that. The purpose was never changed when we changed our name; it’s always been the same as it was originally developed. So that’s my two cents.
Morgan: I will reiterate the purpose of this Committee in the way that it was designed and set up. [reading from script] Our powers and duties consist of:
A. City Investment Policy And Practices
B. Long-Term Financial Planning
C. Such other matters the City Council may request from time to time.
Morgan: I just want to make sure that it is specifically understood that if there is a misconception about what this Committee is designed to be done or what our duties are; that’s something that needs to be taken up with City Council. If they’d like to add to our duties we’re certainly hoping to have any suggestions on what else we can do for the City and the Council. Any other comments?
Nancy Carroll: Melana, can I ask you a couple questions? I’m no CPA, but you are. It’s my understanding that Sarbanes-Oxley was setup to control proper auditing procedures and proper reporting procedures for companies, agencies, etc., but Sarbanes-Oxley did not directly apply to municipalities. Is that your understanding also?
Taylor: Yes. It was an internal control document and it was based on investigations that had been done for pubic companies, not for municipalities.
Carroll: And Sarbanes-Oxley was a wonderful thing. I mean it went forth and it systematizes reporting and standards and clarified where things really truly needs to be clarified and, you know.
Taylor: It really completely changed the way that audits are performed and the different things that are done on the audit side as well.
Carroll: And I want to make sure that we have a really good process for when we do interview Auditors in response to RFPs, etc. Is there anything on our criteria that we go through when we measure the brainpower and the authenticity and the appropriateness to any auditing firm; is there a section in that about evaluation where they have to have a fancy office.
Taylor: No.
Carroll: I think that’s probably a good idea because we really care about their professional credentials, not how big their reception area is, so please keep doing that. I appreciate that.
Taylor: In an auditing firm, it’s not a plus, but one of the things that makes auditing unusual is that generally you’re not in the office; you are at your clients’ respective businesses and all of your staff members are connected through the computer programs. So in many instances there doesn’t even need to be an office if that’s the only type of work that’s being performed. If you’re doing tax work you would want to have an office to meet your clients. But in an audit they don’t meet you at your office; you go to their location where they perform their business.
Carroll: And you go to many; you’re involved in the professional circle of Certified Professional Auditors, Certified Public Auditors. Would you rather be embarrassed not to say to your peers that you hired a firm that didn’t have a good office? Would that be something that you’d be like hoping wouldn’t come up in conversation because it was really critical to all the other CPAs in the universe?
Taylor: No.
Carroll: Alright.
Committee Member Steve Cooley: Is there any requirement by the AICPA or the State Regulators for a CPA firm to have a physical office of any particular size?
Taylor: No, they just have to have a street address where the documentation can be mailed to them, it can not be a P.O. Box, so as long as it’s an address. [shrugs shoulders]
1:08:00 Taylor: The checks may be issued, but they are not mailed until after Council’s Approval.