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HomeMy WebLinkAbout2002-11-01 Audit Committee Minutes Minutes 11-01-02 Page 1 of 5 Audit Committee Minutes November 1, 2002, 2:30pm Civic Center Council Chambers, 1175 East Main Street Call to Order Chairperson Marty Levine called the meeting to order at 2:34pm. Introductions Finance Director Lee Tuneberg made introductions. Levine summarized the three functions of the audit committee. 1) Recommend to the council an independent firm to perform the annual audit of the City. 2) Review annual audit report and make recommendations regarding significant findings. 3) Make recommendations to council regarding the annual financial statements, management letter, and response to management letter submitted by city staff. Roll Call Committee Members Emile Amarotico, CPA, Marty Levine, CPA and City Recorder/Treasurer Barbara Christensen were present. Council Liaison, Mayor Alan DeBoer and Staff Liaison, Finance Director Lee Tuneberg was present. Staff Accounting Supervisor Joanie Baker, Staff Accountant Patrick Caldwell and Administrative Assistant Kirsten Bakke were present. Roy Rogers, CPA and Kenny Allen, CPA were present from Pauly, Rogers and Company, P.C. Committee Member Roberta Stebbins, CPA was absent. Approval of Minutes Committee Members Amarotico/Christensen m/s to approve the February 13, 2002 audit committee minutes as written. Presentation by the Auditors Rogers began the presentation by distributing an executive summary of the audit process and copies of the Management Letter. Rogers commented that the audit process went well. He discussed the Executive Summary of the audit process saying that they found no exceptions or significant audit adjustments. He summarized by saying the accounting records were in good condition and commended the staff for their assistance and support during the audit. Tuneberg suggested that Accounting Supervisor Joan Baker respond to the Management Letter after it was presented. Rogers pointed out that the staff was open to suggestions and ways for improvement. Audit Committee Minutes 11-01-02 Page 2 of 5 Management Letter Rogers turned the presentation over to Allen. He began discussing the Management Letter noting each item. He pointed out on item 1 that the bank reconciliations were not being reviewed by anyone in the accounting department, recommending that all bank reconciliations be reviewed and signed off by the Finance Director or a designee other than the reconciler. Levine recommended that Barbara Christensen review the bank statements. Tuneberg pointed out that it should be someone in accounting who is independent of the duties of handling the cash, doing the investments and reconciling the bank accounts. Allen continued, referring to item 2 two instances were noted where the EDEN software system could not produce needed reports. He went on to discuss item 3 saying that they noted an instance where a payroll tax deposit was not made in a timely manner, recommending that a procedure be put into place to ensure that all payroll tax deposits are made on time. There was some discussion regarding the EDEN software system. Allen went over item 4 noting that some invoices containing retainage payable were not accounted for properly, recommending that accounting put procedures in place to ensure that retainage does get accrued as a liability. Amarotico asked if retainage was being recorded at all. Allen replied that it was for some invoices, but not for others. Rogers talked about the last two issues under Other Matters in the Management Letter, stating that item 1 is an accounting pronouncement from the Governmental Accounting Standards Board (GASB). He gave a brief overview of the new financial reporting model for State and Local Governments (GASB 34). He explained that it was more like a reporting model for a private business. Beyond report format changes other material new requirements are calculation of depreciation expense on fixed assets, including infrastructure, and accrual of property taxes in the year levied. There was some discussion regarding accrual basis accounting. He moved on to Other Matters item 2 describing the General Accounting Office (GAO) recently issued independence standard that will affect the Parks Department as a component unit of the City. He said that the standard lays out items which auditors can and cannot perform. Going into effect for fiscal year 2003-2004, it states that we can prepare the financial statements for our audit clients, if we assess the client and believe that the client could prepare and understand the report on their own. He pointed out that the standard says that auditors can’t propose or make any adjusting journal entries. The Committee discussed this further. City Staff Response Baker responded to the reportable conditions in the Management Letter beginning with Item 1 saying that effective immediately the Finance Director or a designee will review bank reconciliation’s on a monthly basis as they are completed. The City has the following major bank accounts; Pool or Local Government Investment Pool (LGIP), Concentration, City Investments, Payroll, and Accounts Payable. The City also has minor bank accounts including Bank of America and Wells Fargo. The City does not, at Audit Committee Minutes 11-01-02 Page 3 of 5 this time, reconcile the Parks and Recreation accounts. There was discussion regarding the City’s bank accounts. Ann Benedict Business/Personnel Manager for Parks and Recreation spoke to the specific issues relating to the Park’s bank accounts. Tuneberg clarified the timing and scope of the consolidation of the Parks accounting with the City. Baker continued, moving to Item 2 the City sent two finance staff to the annual EDEN user’s conference held the second week of October. The purpose of staff attendance was to pursue reporting needs, acquire more knowledge about the software’s capabilities, increase staff’s knowledge of the system to be able to use the software to it’s full capacity and to address the need for reports, particularly the accounts payable and the lien program reports referred to above. The City will continue to address identified needs and pursue additional EDEN software that would be helpful to the Finance Department. Levine asked about the ability to print reports. Baker replied that one of the staff went to classes on report writing using Crystal Reports and that’s where we will be able to get more out of the system. Tuneberg detailed the challenges in employing and developing the software. He discussed the improvements and conversions anticipated in the coming year. DeBoer asked for the Auditor’s opinion regarding the EDEN software. Rogers responded saying that they didn’t see the economy and efficiency that could be realized and a lot of records were being kept manually. Tuneberg spoke of the evolution in the Finance Department and the effects of staff turnover on the software conversion. Levine verified that the challenge is to learn and implement the software. Tuneberg clarified that the software problems were not insurmountable. There was discussion regarding the software RFP process. Baker continued referring to item 2 explaining the purpose networking at the EDEN user’s conference and the process that staff used to bring all issues to the table at the conference. Tuneberg informed the Committee there were 3 conversions anticipated by June 30th that would eliminate some of the subsystems, and accommodate miscellaneous receivables. Baker clarified that a miscellaneous receivable was something that falls outside of the standard revenue stream. Baker commented that Parks is currently using Springbrook software and will be treated as a separate entity. Baker spoke to item 3 the non-payment of the tax deposit was discovered by finance staff while performing a routine bank reconciliation. The Accounting Division has implemented additional procedures to ensure all payroll tax payments are timely. The additional procedures include additional review processes and check off lists to be initialed during payroll processing. Audit Committee Minutes 11-01-02 Page 4 of 5 DeBoer asked about waving penalties. Baker said that there had been another penalty before that the IRS wouldn’t wave. She said they considered it a clerical error. Baker said 3 times this year the federal withholding went over $100,000 and that penalties have been involved when taxes went over $100,000. Levine suggested routinely making one day tax deposits. Tuneberg pointed out that a procedure had been established where an independent person checked confirmation numbers on tax deposits and that there shouldn’t be any more issues. The discussion ensued. Baker concluded by addressing item 4 saying that the City recognized the difficulty with both the understanding of retainage (holding a portion of funds due until project completion) and the coding of retainage. Effective immediately accounting staff will review all construction project invoices prior to accounts payable processing to assure retainage is properly coded and set aside per contract agreement. DeBoer asked where the error was found. Caldwell said it was found in the Library project on a Request for Check. The payments to the contractor were accurate but the accrued liability was not recorded. There was further discussion. Baker closed by thanking the Auditors. Amarotico pointed out a misspelling on the bottom of the second paragraph on page iii. He indicated that on page vi the percentage of food and beverage tax did match page iii. He questioned the decrease in food and beverage tax as compared to transient tax. More discussion followed. Parks Tuneberg asked if there were any questions regarding the Park’s report. Rogers passed out the Parks executive summary saying there was no management letter. Rogers recommended that the Audit Committee review the Park’s financial report in addition to the City’s. Levine said that there was no distinction between the Parks and the City mentioned in the Resolution. The discussion developed and DeBoer said with Parks concurrence the Council could amend that that ordinance. Christensen recommended appointing a member of the Parks Commission to the Audit Committee. Tuneberg concluded that it could be resolved this year. Amarotico referred to a table of food and beverage taxes on page 117 saying that it was inconsistent with page vi. Tuneberg noted the correct number as 307. Rogers continued saying there was nothing to report on Parks. Levine asked about merging the City’s and Park’s accounting. Rogers said they had no objections and that Springbrook is a good system. Levine asked if they had other clients with EDEN. Rogers answered that they did not. Tuneberg indicated that the City of Wilsonville was expanding their use of EDEN. City Staff Response Tuneberg thanked the Finance and Parks staff. He remarked that this was the first time in five years that there hasn’t been a technical violation on the Budget Appropriations. Audit Committee Minutes 11-01-02 Page 5 of 5 He addressed some of the procedures that have been improved such as routine monthly closings. He described the challenges in the Finance Department and concluded by thanking the Auditors. DeBoer asked if the Auditor’s time on the audit was within the scope of their bid. Rogers affirmed that it was as anticipated. Benedict concurred with Tuneberg that this years audit process went well. Signing the Annual Letter Members Amarotico/Christensen m/s to approve the Comprehensive Annual Financial Report (CAFR) as submitted. Voice Vote: all AYES. Motion passed. Other DeBoer pointed out that on page xii Chris Hearn should replace David Fine. Adjournment Meeting was adjourned at 4:02pm. Respectfully submitted by Kirsten Bakke, Administrative Assistant to the Finance Director