HomeMy WebLinkAbout2025-04-29; City Council; Resolution 2025-100Exhibit 1 RESOLUTION NO. 2025-100
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING THE FY 2025-26 INTERNAL AUDIT PLAN
WHEREAS, the City Council of the City of Carlsbad, California, has determined that the Internal
Audit Manager performs independent and objective assurance services to safeguard city resources and
improve city operations; and
WHEREAS, the services provided may include internal audits of any city department, division,
function or program; and
WHEREAS, as required by City Council Policy No. 89, the Internal Audit Manager has presented
a Fiscal Year 2025-26 Internal Audit Plan (Attachment A) for the City Council’s review and approval
; and
WHEREAS, the purpose of the Internal Audit Plan is to outline internal audits and other value-
added engagements the Internal Audit Manager proposes to conduct during the fiscal year; and
WHEREAS, the Fiscal Year 2025-26 Internal Audit Plan includes information about the basis for
audit engagement selection, preliminary objectives and the consideration of resources; and
WHEREAS, once approved, the Fiscal Year 2025-26 Internal Audit Plan will serve as the
operating roadmap for the city’s Internal Audit Manager.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.That the above recitations are true and correct.
2.The proposed action is not a “project” as defined by CEQA Section 21065 and CEQA
Guidelines Section 15378(b)(5) and does not require environment review under CEQA
Guidelines Section 15060(c)(3) and 15061(b)(3), because the proposed action to adopt
the Internal Audit Plan is an organizational or administrative government activity that
does not involve any commitment to any specific project which may result in a
potentially significant physical impact on the environment. Any subsequent action or
direction stemming from the proposed action may require preparation of an
environmental document in accordance with CEQA or CEQA Guidelines.
3.That the City Council approves the Fiscal Year 2025-26 Internal Audit Plan, attached as
attachment A.
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PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City
of Carlsbad on the 29th day of April, 2025, by the following vote, to wit:
AYES: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.
NAYS: None.
ABSTAIN: None.
ABSENT: None.
______________________________________
KEITH BLACKBURN, Mayor
______________________________________
SHERRY FREISINGER, City Clerk
(SEAL)
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CITY OF CARLSBAD
Internal Audit Plan for Fiscal Year 2025-26
Overview
City Council Policy 89, Internal Audit Framework, requires the Internal Audit Division to prepare
an annual internal audit plan and to submit it to the City Manager and City Council for review
and approval. The plan includes a listing of audits scheduled for FY 2025-26 and other work
performed by the Internal Audit Division.
The plan is based on a citywide risk assessment, input from city management and a review of
audit plans from other cities. Work for FY 2025-26 includes four performance audits, oversight
of the transit occupancy tax audit and administration of the Fraud, Waste and Abuse Hotline.
This report details:
•The risk assessment and audit selection processes
•The resources (time) available for the Internal Audit Division
•Budget estimates for the proposed audits and other work
This level of detail provides transparency to the City Council and city leadership and allows for
more informed feedback and review. Stakeholder feedback is important for audit functions,
especially for a small internal audit function.
Conducting the risk assessment begins with identifying all city areas that can be audited using
the city’s budget document, which lists departments and their divisions and provides basic
information about their funding and staffing levels.
This is followed by additional steps to consider inherent risks, controls and other factors.
Risk is simply the possibility that something bad may happen, and it is evaluated by considering
potentially harmful events and quantifying them in terms of severity and frequency. Other
potential audit areas that do not appear as separate budget items are also identified.
Concerns are expressed in terms of assurance objectives – how things should work – and risk
scenarios – bad events that could occur. These reflect the Internal Audit Division’s perspective
as well as feedback from the City Manager, deputy city managers and chiefs and their division
directors.
In keeping with City Council Policy 89, the plan is flexible and includes unallocated audit hours
to accommodate any subsequent requests for work from the City Manager or City Council. If
such work is substantial, the plan can be amended, and the City Council will be informed of any
impact on audit schedules.
Attachment A
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The risk assessment yielded more potential audit topics than can be completed in one year with
current audit resources, so another assessment does not need to be conducted for the next
three years. However, the citywide risk assessment will be reviewed each year and revised as
necessary to account for significant events and changes that impact risks within city
departments and operations.
How areas are selected for audit
•Is the area or risk event within the competency of Internal Audit and the jurisdiction of the City of Carlsbad?
1. Is the area amenable to audit?
•Are there large, adverse potential impacts on the city's finances, or on the health, safety, security and welfare of our residents?
2. Evaluate inherent risks
•Mitigating factors: Stability of a function; strong internal controls; favorable, recent prior audit findings, other oversight.
•Exacerbating factors:Significant economic, regulatory, or technological changes; high staff turnover; City Council and management concerns.
3. Consider additional factors
•Research issues and audit findings at similar municipalities
•Discuss potential audit areas with Deputy City Managers, Chiefs, Department Directors and staff.
4. Identify potential audit areas
•Solicit additional mangement and leadership feedback.
•Consider audit resources and schedules constraints.
•Obtain City Manger and City Council approval.
5. Develop an annual audit plan
No
Very low
Low to
medium
Communicate
risks, if
necessary
Do not audit
Monitor for
changes
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Considerations in audit selection
• Auditable areas
Although some areas may be exposed to various risks, they may not be auditable if they fall
outside the jurisdiction of a city and involve state or federal activities or international
events. For example, there is little a city can do to mitigate the risk of an oil spill in the
ocean, even though it may have to contend with a prolonged and costly beach cleanup.
• Inherent risk
Inherent risk is the natural level of risk that exists within a place or activity. Risk can be
assigned to departments, programs and processes. For example, a municipal skate park
carries an inherent risk of injury to skaters.
Factors that impact the assessed level of risk include the size of an area, measured by
budgeted personnel expenses, operational costs and the number of employees employed
within it; the nature of the work and potential impact on public health, safety and security;
and the prospect of a large financial loss (whether acute or long-term).
• Mitigating or exacerbating factors
Some activities and events can modify the level of risk. Continuing with the prior example
about the skate park, the frequency and severity of injuries can be reduced by requiring
skaters to wear protective helmets, elbow pads and knee guards.
In general, significant economic, staffing, regulatory, or technological changes in an area
tend to raise the level of risk because breakdowns are more likely to occur during
transitional periods.
• Identify potential audit areas
Potential audit areas are identified by reviewing City Council meeting agendas, prior
internal audit reports at the City of Carlsbad and other government agencies and soliciting
input from the City Manager, deputy city managers and department directors and City
Council members.
• Audit resources
One full-time auditor can provide approximately 1,500 audit hours annually, with other
time allocated to administrative work and required continuing professional education.
Budgeting for performance audits entails informed guesswork, as each audit subject differs
from previous ones. In contrast, budgeting for annual financial and compliance audit tend
to be accurate because they are based on past budgets and can build on previous work.
After their initial creation, financial and compliance audit plans and procedures require
minimal modification – except when there are significant changes in regulations or systems.
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Proposed internal audits for fiscal year 2025-26
Category Hours
Transit occupancy tax (oversight only) 160
Police Department inventory and storage 320
Information Technology (specific topic TBD) 320
Employee overtime 320
Liability claims handling 240
Unallocated hours (available for management requests and
other consultations) 140
Total allocated audit hours 1,500
The city contracts with a public accounting firm to audit a sample of businesses every year to ensure
that hotels and other businesses are properly accounting for and remitting transit occupancy taxes., The
internal auditor provides oversight and assistance for this work.
The rationale for selecting the other areas is as follows:
• Police Department inventory and storage was selected due to concerns regarding the adequacy
of storage space for evidence and other assets.
• Information technology is a rapidly changing field that encompasses many distinct and complex
activities. The internal auditor is currently working with the IT department to determine suitable
audit topics.
• Overtime across a large organization should be used appropriately; misuse or inconsistent use of
overtime is problematic for a variety of financial and management reasons.
• Proper liability claims handling is a crucial activity that can reduce the city’s liability exposure
and improve the city’s risk management efforts.
The audit budgets are built by adding weekly estimates of various audit phases: planning and research,
evidence gathering, analysis, report writing and quality control and review. The audits in this plan are
estimated to take 6 to 8 weeks.
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Risk assessment and audit selection process
The main steps of the risk assessment and audit selection process are shown in the figure below
and its results are detailed in the tables and text that follow. The first step in selecting areas for
audit began with setting a threshold for selection based on the size of a work area. While this is
a somewhat basic approach, larger functions tend to carry more risk and any problems within
them will likely have a greater impact than problems in smaller function.1
Work areas with over $5 million or 10 FTEs
The threshold for selection was set at over $5 million or 10 full-time equivalent personal (FTEs),
representing approximately 1% to 2% of the operating budget dollars or number of employees.
Almost half (24 out of 52) of the areas did not meet this threshold and were eliminated from
selection. The 28 areas that did are listed in the following table.
1 Thresholds are an accepted approach in auditing; for example, the methodology for conducting
financial audits of federal aid entails setting thresholds to classify programs based on the amount of
federal funds expended.
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l.6fl[] 1) Identify work areas over $5 million or with 10 FTEs
0 2) Make adjustments (deletions) and provide rationale
0 3) Make adjustments (additions) and provide rationale
I I 4) Identify potential audit areas
6
Work areas budgeted for over $5 million or with 10 FTEs (Meets selection criteria)
Department / Division Budgeted
expenditures
Personnel
services
Operating
expenses
Full-time
employees
Finance $5,631,964 $3,708,988 $1,922,976 26.0
Human Resources $5,136,218 $2,393,196 $2,743,022 13.0
Risk Management $7,397,470 $429,648 $6,976,822 2.5
Worker’s Compensation $5,988,115 $249,013 $5,739,102 1.5
Information Technology $18,705,537 $8,418,368 $10,287,169 48.0
Community Development - Land
development engineering $2,275,442 $1,763,838 $511,604 10.0
Community Development – Planning $3,671,219 $2,916,621 $754,598 19.0
Federally funded community assistance
programs $13,867,943 $601,320 $13,266,623 5.0
Library & Cultural Arts – Public services $7,499,138 $4,807,612 $2,691,526 26.0
Parks & Recreation – Administration $2,830,646 $2,045,238 $785,408 11.5
Parks & Recreation – Recreation $9,652,485 $5,457,947 $4,194,538 23.3
Parks & Recreation – Parks and trail
maintenance $10,390,651 $2,412,654 $7,977,997 18.5
Parks & Recreation – The Crossings
Municipal Golf Course $10,762,000 $0 $10,762,000 0.0
Fire Department – Administration $7,537,497 $1,002,590 $6,534,907 5.0
Fire Department – Emergency operations $31,328,026 $28,829,242 $2,498,784 108.0
Fire Department – Community risk
reduction $3,098,057 $2,343,062 $754,995 11.0
Police Department – Administration,
grants and asset forfeiture $8,869,262 $1,841,231 $7,028,031 8.0
Police Department – Field operations $25,935,754 $21,807,751 $4,128,003 84.0
Police Department – Support operations $18,625,351 $16,689,787 $1,935,564 63.0
Police Department – Administrative
support operations $5,260,830 $4,897,845 $362,985 28.0
Construction Management & Inspection $3,068,292 $2,321,180 $747,112 15.0
Environmental Sustainability $4,753,450 $2,391,232 $2,362,218 16.5
Facilities $7,249,050 $3,511,036 $3,738,014 25.9
Fleet – maintenance and replacement $8,611,435 $1,424,977 $7,186,458 10.1
Transportation – Traffic, Mobility,
Transportation Engineering $10,332,167 $5,305,034 $5,027,133 35.3
Utilities – Potable water operations $58,158,391 $4,905,925 $53,252,466 31.2
Utilities – Recycled water operations $10,814,449 $1,955,001 $8,859,448 11.5
Utilities – Wastewater operations $33,253,062 $3,355,847 $29,897,215 20.9
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The list above can be thought of as a menu from which audits will be chosen. In addition to the
areas listed above and as noted below, performance measures, employee overtime and
insurance coverage will also be considered for auditing.
Added areas
Storm Drain Maintenance & Engineering did not meet the budget selection threshold but was
added given the city’s topography and the increasing weather variability in our region.
Department / Division Budgeted
expenditures
Personnel
services
Operating
expenses
Full-time
employees
Transportation - Storm Drain
Maintenance and Engineering $2,410,461 $970,247 $1,440,214 6.6
Other areas that do not appear as separate items in the budget were also added. These are
listed below, along with the rationale for their selection. Two areas that merit auditing but will
not be considered for audit are also identified, along with the reasons for their exclusion.
Other additions and rationale
Performance measures
Performance measurement is essential for government operations, as it is difficult to obtain
performance feedback through other means. For example, businesses in a competitive industry
may receive feedback through growth and profitability or loss of customers and declining
revenue. However, government services such as those provided by a water department are not
subject to market feedback. Developing appropriate performance measures for various
municipal operations and ensuring that they align with other organizational goals takes skill.
The wrong measures can drive dysfunctional behaviors and yield undesirable results. The
integrity of reported performance results is also crucial, and appropriate controls must be
placed, especially since people are often reporting the results of their own performance and
have a stake in the outcome. Measurement should be used for feedback and not reward or
punishment.
Employee overtime
There are many appropriate uses of overtime, including using it for temporary or cyclical
increases in workload and as a cost saving measure when it is more economical than hiring new
employees. However, overtime is subject to abuse when it is not closely monitored and can
result in excessive cost and reduce employee morale in some cases such as excessive
mandatory overtime.
Insurance Coverage
Insurance coverage amounts, self-retention threshold and reserves are periodically reviewed
and established based on actuarial studies, or other financial analysis and a survey of the
insurance marketplace.
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Other areas carrying high inherent risk
The following two areas also do not meet the budget threshold for audit selection, but they
merit auditing for other reasons. However, they will not be considered for audit at this time.
Treasury operations
Functions such as investment strategies and cash management are important and should be
audited. However, the City of Carlsbad has a newly elected Treasurer who is currently reviewing
treasury operations. Scheduling an audit at this time may simply duplicate some of the work
that the Treasurer is conducting. Furthermore, the Finance Department publishes a monthly
report on city investments that is provided to management and council members, and the
investments appear to be stable.
Fire Department – Brush management
The extreme drought conditions in Southern California and the recent fires in Los Angeles and
San Diego counties and other places make brush management and mitigation efforts one of the
highest priority areas for audit. However, this area is currently receiving attention from many
officials at the state and local level, including the Carlsbad Fire Department. A new audit is
unlikely to contribute much information to evolving efforts to reduce fire risks.
Assurance objectives and risk scenarios in potential audit areas
Historically, auditors selected areas for audit based on their experiences, interests and
judgment. While professional experience can make for good judgment, an approach that is
primarily driven by judgment is susceptible to various biases and does not help auditors explain
the reasoning for their choices. It was also common practice to place certain functions (e.g.
payroll) on a rotation schedule to be audited every two or three years. While audit schedules
greatly reduce the effort required to develop audit plans, they can be wasteful because they
result in repeat audits of areas that may carry little risk.
Over time, the audit profession adopted a risk-based approach to audit selection, which is
structured and transparent.2 However, there are other legitimate methods of selecting audits in
government entities, and premier audit organizations such as the U.S. Government
Accountability Office and the California State Auditor conduct most of their audits at the
request of elected officials.
The areas that follow include bulleted listings of processes or functions that are performed
within them. These are the subjects that the Internal Audit Division would seek to examine to
check whether they are operating properly and to make any recommendations for
improvement. Within most areas, there are many functions and processes, which ones end up
as the focus of an audit is determined during the audit planning phase as part of the process of
setting audit objectives.
2 While risk-based audit selection is the current best practice, it is not a scientific process. Auditors do
not back test audit plans to assess their validity, that is, to test past data (or audit plans) to see how past
selections performed. The relatively small number of audits that municipal audit departments conduct
annually, as well as the variety of audit topics and risks encountered generally precludes such analyses.
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Evaluation of potential audit topics within areas selected
FINANCE
Budgeted expenditures: $5,631,964
Personnel services: $3,708,988
Operating expenses: $1,922,976
Full-time employees: 26
Because financial functions carry a high inherent risk of mismanagement and fraud, the city
undergoes a required annual financial audit designed to uncover significant misstatements. The
city also has an Ethics and Fraud Hotline that employees can use to report any concerns about
financial mismanagement.
For a variety of reasons, financial controls in government agencies are stronger than those in
other entities such as small and medium-sized businesses. Furthermore, government employees
are not subject to strong incentives and pressures to manipulate financial performance that exist
in many publicly traded companies, as there is no pressure to report continuous profits for
shareholders and there are no bonuses to be earned for strong financial performance.
Cases of municipal mismanagement and bankruptcies do occur, with notable examples such as
Orange County in 1994 (risky investment strategies), the City of Stockton in 2012 (financial
mismanagement) and the City of Bell (public corruption) that became public in 2010.
Nonetheless, these cases are rare, and the finances of the City of Carlsbad are subject to
adequate oversight.
HUMAN RESOURCES
Budgeted expenditures: $18,521,803
Personnel services: $3,071,857
Operating expenses: $15,449,946
Full-time employees: 17
Human Resources performs many important functions, including recruitment of employees,
administration of employee benefits, labor negotiations, compliance with labor and
employment laws and investigations of complaints. Human Resources department personnel
are also involved in responding to litigation by employees.
The city conducts informal audits of Human Resources practices and policies by comparing
them to that of other organizations to ensure consistency and efficiency. In addition, these
regular informal audits can help the city adapt to changing employment laws and business
practices. Employing the results of these audits may support the city with establishing new
hiring practices, compensation structures, and benefit allocations.
Safety audits are also conducted informally to ensure the city maintains updated safety policies,
reduce workplace risk, and potentially identify the necessary personal protective equipment for
staff.
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RISK MANAGEMENT
Budgeted expenditures: $7,397,470
Personnel services: $429,648
Operating expenses: $6,976,822
Full-time employees: 2.5
Potential audit focus areas / Assurance objectives
• Claims are being processed and evaluated in a timely manner and in compliance with
California Government Code sections 810-998.3
• Claims files are properly documented
• There is a citywide claims handling strategy that incorporates financial, legal and public
policy perspectives
• Claims are analyzed to detect patterns and monitor trends and stakeholders are provided
with regular reports
• There is a process that provides for the investigation of claims, identification of related
hazards, a study of root causes, communication with relevant stakeholders (generally the
departments who either own or are responsible for the asset or issue that is the subject of
the claim), monitoring of remediation efforts and prevention activities (e.g., inspections and
training).
• There is a robust loss recovery function that utilizes relevant departments for damage
assessments and is in communication with the police
WORKER'S COMPENSATION
Budgeted expenditures: $5,988,115
Personnel services: $249,013
Operating expenses: $5,739,102
Full-time employees: 1.5
Potential audit focus areas / Assurance objectives
• There is a workplace injury prevention program
• Workplace injuries are investigated, and any needed corrective and preventive actions
are taken
• Injuries are tracked and analyzed to detect patterns and monitor trends
• Appropriate disciplinary measures are taken for preventable injuries that resulted from
policy violations, horseplay, or negligence
• There is a return-to-work program that facilitates employee reengagement
• Indications of fraud in injury reports are scrutinized and referred to qualified
investigators
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INFORMATION TECHNOLOGY
Budgeted expenditures: $18,705,537
Personnel services: $8,418,368
Operating expenses: $10,287,169
Full-time employees: 48.0
Potential audit focus areas / Assurance objectives
• Information Technology’s security function has sufficient independence and is staffed by
qualified personnel; resourced with appropriate tools such as network and endpoint
intrusion detection systems; has developed plans to improve security and remediate
vulnerabilities; has adopted or adapted a security standard such as the National Institute of
Standards and Technology Cyber Security Framework.
• IT operations are well managed, and the workload is controlled; staff are not simply
responding to breakdowns
• IT infrastructure assessments are conducted
• The IT Department has current plans for acquisition and replacement of hardware that are
based on funding, technological change and user needs
• There is an adequate governance structure for the IT Department and good management of
personnel (as indicated by a low turnover rate) and other resources
• IT implementations adhere to project management best practices
• IT procurements are not driven by customer requests or vendor recommendations
• IT implementations use qualified advisors
• Decisions regarding insourcing or outsourcing IT work are based on a comparative analysis
of costs and capabilities and are not made haphazardly
• There are proper controls over IT assets
• The IT Department has prepared a disaster recovery plan and participates in the
preparation of other plans such as the business continuity plan
COMMUNITY DEVELOPMENT – LAND DEVELOPMENT ENGINEERING
Budgeted expenditures: $2,275,442
Personnel services: $1,763,838
Operating expenses: $11,604
Full-time employees: 10
The Land Development Engineering Division ensures that all grading and public improvements
required for new development projects and work in the public right-of-way comply with
adopted codes and engineering standards.
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COMMUNITY DEVELOPMENT – PLANNING
Budgeted expenditures: $3,671,219
Personnel services: $2,916,621
Operating expenses: $754,598
Full-time employees: 19
Planning work is technical and consists of regulatory compliance and updating plans. Planning is
also an area that is subject to oversight from the City Council and residents.
FEDERALLY FUNDED COMMUNITY ASSISTANCE PROGRAMS
Budgeted expenditures: $13,867,943
Personnel services: $601,320
Operating expenses: $13,266,623
Full-time employees: 5
These programs provide housing vouchers and other housing assistance, and they are subject
to federal requirements as a condition of funding. Compliance with grant terms is essential, as
discrepancies and significant noncompliance can result in federal audits and demands for the
repayment of funds. However, this area is audited annually as part of the city’s Single Audit,
and the last Single Audit report reviewed for the year ending June 30, 2023, had no findings in
this area.
LIBRARY & CULTURAL ARTS – PUBLIC SERVICES
Budgeted expenditures: $15,111,747
Personnel services: $8,872,058
Operating expenses: $6,239,689
Full-time employees: 51
Library functions tend to carry a low risk, and issues that present themselves in libraries can
often be addressed through means other than audit. For example, concerns about the use of
library bathroom facilities by transients are best addressed by management and the police
when necessary. Concerns about the types of materials carried by libraries are best addressed
through community engagement. Finally, libraries often face public demand for increased
hours, but that is generally a funding issue and not an audit risk.
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PARKS AND RECREATION – ADMINISTRATION
Budgeted expenditures: $2,830,646
Personnel services: $2,045,238
Operating expenses: $785,408
Full-time employees: 11
This area does not meet the financial threshold and slightly exceeded the personnel threshold
for audit selection with 11.5 FTEs. Given that other divisions within the Parks and Recreation
Department are significantly larger, it is best to prioritize those rather than the Administration
section.
PARKS & RECREATION – THE CROSSINGS MUNICIPAL GOLF COURSE
Budgeted expenditures: $10,762,000
Personnel services: $0
Operating expenses: $10,762,000
Full-time employees: 0
Even though it has a budget of over $10 million, The Crossings is administered as an enterprise
fund, which means that its costs are funded by customer and other fees and not the City’s
General Fund. This reduces the financial exposure to the City. The Crossings is managed by a
vendor and the City provides oversight for The Crossings through a steering committee
comprised of senior city managers and an audit of The Crossings was conducted with a report
issued in July 2020. Another audit is currently not necessary, considering other potential audit
areas.
FIRE EMERGENCY OPERATIONS
Budgeted expenditures: $31,328,026
Personnel services: $28,829,242
Operating expenses: $2,498,784
Full-time employees: 108.0
Potential audit focus areas / Assurance objectives
• Emergency medical service response times within target
• There are adequate resources to respond to wildfires
• Firefighter and emergency first responder training meets or exceeds legal and
professional standards
• Emergency management plans are in place and updated frequently
• Evacuation plans for residents
• Coordination among local emergency agencies is strong
• Identification of shelters and periodic review
• Firefighter safety is prioritized, and equipment is new and in good condition
• Firefighters and EMS personnel Response protocols during shootings
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POLICE ADMINISTRATION, GRANTS & ASSET FORFEITURE
Budgeted expenditures: $8,869,262
Personnel services: $1,841,231
Operating expenses: $7,028,031
Full-time employees: 8.0
Potential audit focus areas / Assurance objectives
• Improper asset forfeiture
• Compliance with grant terms
• Recruitment, selection and retention of police officers
• Police officer morale
POLICE FIELD OPERATIONS
Budgeted expenditures: $25,935,754
Personnel services: $21,807,751
Operating expenses: $4,128,003
Full-time employees: 84.0
Potential audit focus areas / Assurance objectives
• Competent preparation for a response to a shooting incident, especially a school shooting
• Officer safety and protective equipment
• Process for handling complaints against police officers
• Process for investigating allegations of police officer misconduct
• Capacity to handle complex (e.g. homicide) investigations
POLICE SUPPORT OPERATIONS
Budgeted expenditures: $18,625,351
Personnel services: $16,689,787
Operating expenses: $1,935,564
Full-time employees: 63.0
Potential audit focus areas / Assurance objectives
• Use of analytics and performance measures
• Proper evidence storage
• Firearms inventories
• Equipment (vehicle) condition
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Docusign Envelope ID: 23DE9A9B-607A-4E5B-B20D-FD21511D3771
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CONSTRUCTION MANAGEMENT & INSPECTION
Budgeted expenditures: $3,068,292
Personnel services: $2,321,180
Operating expenses: $747,112
Full-time employees: 15
The engineering staff in this division function akin to compliance auditors, checking to verify
that construction projects for City assets are being conducted in accordance with proper
engineering specifications.
ENVIRONMENTAL SUSTAINABILITY
Budgeted expenditures: $4,753,450
Personnel services: $2,391,232
Operating expenses: $2,362,218
Full-time employees: 16.5
As is the case with other planning and regulatory compliance functions mentioned above, this
function carries lower inherent risk than other divisions in Public Works.
FACILITIES
Budgeted expenditures: $7,249,050
Personnel services: $3,511,036
Operating expenses: $3,738,014
Full-time employees: 25.9
Potential audit focus areas / Assurance objectives
• Condition assessment
• Maintenance schedules
• Regular inspections
FLEET MAINTENANCE & REPLACEMENT
Budgeted expenditures: $8,611,435
Personnel services: $1,424,977
Operating expenses: $7,186,458
Full-time employees: 10.1
Potential audit focus areas / Assurance objectives
• Fleet planning and management
• Maintenance decisions (i.e. internal, outsourced, what to maintain)
• City policy on vehicle rentals
April 29, 2025 Item #8 Page 20 of 22
Docusign Envelope ID: 23DE9A9B-607A-4E5B-B20D-FD21511D3771
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TRANSPORTATION - TRAFFIC, MOBILITY, TRANSPORTATION ENGIN.
Budgeted expenditures: $10,332,167
Personnel services: $5,305,034
Operating expenses: $5,027,133
Full-time employees: 35.3
Potential audit focus areas / Assurance objectives
• Street and sidewalk condition assessments
• Street paving plans based on appropriate factors and street conditions
• Pedestrian, bike and vehicular safety
UTILITIES - POTABLE WATER OPERATIONS
Budgeted expenditures: $58,158,391
Personnel services: $4,905,925
Operating expenses: $53,252,466
Full-time employees: 31.2
Potential audit focus areas / Assurance objectives
• Water rate increases
• Watermain breaks and resulting flooding of business, residences and damage to streets
(e.g., sinkholes)
• Infrastructure management (pipes, treatment plants)
• Environmental monitoring and compliance
• Improper treatment of water can cause a health hazard
UTILITIES - WASTEWATER OPERATIONS
Budgeted expenditures: $33,253,062
Personnel services: $3,355,847
Operating expenses: $29,897,215
Full-time employees: 20.9
Potential audit focus areas / Assurance objectives
• Infrastructure replacement and management (pipes, treatment plants)
• Environmental monitoring and compliance
• Wastewater overflow from holding tanks and spillage from rainstorms
• Groundwater or watershed contamination from sewer pipe breakage or seepage
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Docusign Envelope ID: 23DE9A9B-607A-4E5B-B20D-FD21511D3771
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Conclusion
The City of Carlsbad’s Internal Audit function is small and therefore susceptible to disruption
from staff turnover. While creating documents such as the risk assessment entails significant
effort, such a document can help preserve organizational knowledge of city operations and
risks. Furthermore, communicating the Internal Audit Manager’s perspective through meetings,
discussions and trainings will enable other city staff to adopt an audit perspective on their work
when needed. The transparency that such communication brings can also benefit management
and the City Council by providing additional insights into city operations.
April 29, 2025 Item #8 Page 22 of 22
Docusign Envelope ID: 23DE9A9B-607A-4E5B-B20D-FD21511D3771