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HomeMy WebLinkAbout2014-10-27 Audit Commission Minutes Page 1 of 6 Audit Commission MINUTES (Municipal Audit Commission AMC 2.11.010) October 27, 2014 Call to Order The meeting was called to order at 3:58pm Roll Call Present: Thomas Hepford Carol Voisin Roberta Stebbins Mary Cody Barbara Christensen (Non Voting) Other Attendees: Dave Kanner City Administrator Lee Tuneberg Administrative Services and Finance Director Cindy Hanks Accounting Division Manager Michael Black Parks Director Kenny Allen CPA Pauly, Rogers and Co., P.C. Kristy Blackman Administrative Assistant (Minute Taker) Approval of Minutes Moved/Second Voisin/Hepford Motion to approve Audit Commission Minutes of November 20, 2013; ALL AYES Motion Approved Christensen asked what the difference was between the Ashland Parks and Recreation (AP&R) being a component unit and a blended component unit and that could affect future auditing. Allen answered that it is only a requirement of the Governmental Accounting Standards Board (GASB) and it doesn’t change anything other than adding a column to the table. Nothing else would change. Christensen stated to the rest of the commission she had confirmed with Allen that if we were unhappy with this way of reporting, we could revert back to the old way and confirmed that this has no effect on the actual structure or policies of AP&R and is simply a change in reporting style. Presentation by Independent Auditors - Pauly, Rogers and Co., P.C. Representing Pauly, Rogers and Co., P.C. (PR&C), a certified public accounting firm engaged by the City of Ashland (COA) to perform auditing services, Allen presented the COA Comprehensive Annual Financial Report (CAFR), the Parks Comprehensive Annual Financial Report (CUFR), and Management Letters to the COA and the AP&R Commission. Page 2 of 6 CUFR Allen acknowledged that AP&R have received their Government Finance Officers Association (GFOA) award for FY 2012-13. Allen summarized the audit process and stated that the purpose of the audit was to determine if fair presentation of the financial statements and compliance with generally accepted accounting principles and auditing standards, applicable Oregon Municipal Audit Law and Administrative Rules, and Federal, State and other agency rules and regulations related to financial assistance had been accomplished. Allen directed the commission to page 19 and the overall financial statements for AP&R where he outlined the opinion given and stated that this was an “unmodified opinion” being the cleanest opinion available. He noted that there were no qualifications or issues with this section. Allen then directed the commission to page 85 and discussed the state minimum standard audit which covers budget law, purchasing, investments etc. He noted that there were no issues with this section. Allen pointed out that there was no management letter issued for the AP&R CUFR meaning there were no significant deficiencies this year. Tuneberg interjected and noted that not receiving a management letter from the Auditor is a positive outcome. Allen noted that there were no issues with management, staff or policies. Allen referred to GASB68 on page 4 of the board communication letter from PR&C. He noted that in the past GASB stated that if you were actuarially funding your pension program that there was no liability. This has now changed and the COA and AP&R are required to report a portion of their Oregon State PERS unfunded actuarial liability. This is a new requirement for FY2014-15 for Government Wide Financial Statements and independent firm Milliman would provide these numbers by June 30, 2015.This will need to be recorded as a number in the Government Wide Financial Statements as well as a foot note and would affect the net position for the COA and AP&R. Christensen asked if this was a GFOA requirement. Allen confirmed that it is. Regarding page 15; it was agreed to remove the title of “chair” from the Commission letter of recommendation. Hepford raised the following questions for the AP&R CAFR; • Pg 15 paragraph 2 – regarding the area that discusses the hiring of CPA firms for the Audit, Hepford asked if this was something that the commission does. Tuneberg noted that the Commission selects a new auditor approximately every 3 years and offers 2 x 1 year extensions and that this issue would be raised closer to the end of the meeting. Stebbins also noted that the commission does help with this process. • Pg 23 CUFR – Hepford noted the change in expenses and questioned the factors leading to the decrease in net position. Hepford asked for clarification regarding the charges for services increase which was reportedly due to payment of the Food and Beverage (F&B) tax proceeds received by the City for Capital Improvement Projects (CIP). Hanks explained that the City changed how they funded the AP&R CIP. AP&R now receives F&B tax proceeds which go into the COA CIP fund and is then transferred into the AP&R CIP fund as charges for services. Page 3 of 6 • Pg 24 - Hepford referred to AP&R Commissions’ leasehold improvements on pg 50 being $5,562,911, and noted that when you turn to this page there was nothing listed. This was confirmed by Hanks and Allen and it was agreed that this sum would be included in the table. • Pg 45 - Hepford stated that he thought the information was misleading and asked if it could be more clearly presented for a citizen reader that the information was relating to year one of a biennium budget. It was agreed this could be done. Voisin asked for clarification on Pg 23 under Programs/Revenues line item charges for services. Hanks explained that these are for various charges that AP&R charge for at this time e.g. skating rink, pool, golf course, and yoga. CAFR Allen acknowledged that the COA have received their GFOA award for FY 2012-13 and stated that an unmodified report was delivered regarding the overall opinion. He clarified that the auditor is responsible for opining the financial statements and the notes only. Allen stated that there were no issues and a clean unmodified opinion was given with regard to the state minimum standards as noted in the report given on page 163. This covers budget, collateral, insurance, outside funded programs, investments, purchasing etc. Allen noted that while there was an audit performed on the Schedule of Federal Financial Assistance found on page 169, focusing on the Community Development Block Grant Program, no issues of non compliance were found. Allen next referred to the City Management Letter found on page 173. He noted that the only issue was with Municipal Courts. He went on to explain that most courts are focused on because there are frequent manual changes made. Tuneberg noted that internal controls are well confined within the courts and the City has been going through a transitional period, training a new staff member to check and sign off on manual changes. This position was vacant at the time of the audit. Allen noted that there were no difficulties overall with management during the audit. Allen Noted that the earlier GASB68 statement will also apply to the COA. Christensen questioned whether the following language was standard - Pg 52 in the second paragraph under Blended Component Unit – “City has ultimate financial responsibility for the Commission. The Commission is presented as a governmental fund type. Due to the funding change at the end of the year for 2014, The Parks and Recreation Commission is now a blended component unit”. She then quoted the first paragraph under Reporting Entity, “Blended component units, although legally separate entities, are, in substance, part of the City’s operations” and asked if this was standard language? Allen stated that it is but the language on page 52 is not and it is required. Christensen raised the question to the commission, whether this language should be pointed out as being unique. Tuneberg noted that overall the language may not actually be that unique and it was his opinion that further information did not need to be added. Page 4 of 6 Kanner asked what could be changed in the definition of the statement. Stebbins suggested the city add the word “the presentation” is blended, not the departments. It was proposed and agreed that the following would be added “The financial statements are now reported as a blended component unit”. Christensen and Black requested that a note be added to page 12 of the CAFR’s City Goals stating that the AP&R Goals were developed by the AP&R Commission. Tuneberg agreed that this would be updated. Hepford talked about the paragraph on page 37 called Other Utilities and raised a question about unfunded future CIP projects questioning balances on pages 95-97. Tuneberg explained that today’s ending balance cannot be reflective of future projects and raised the question of how we could better state this? Hepford suggested noting a time frame for future projects. Tuneberg stated that this would be considered speculative and could be frowned on and he also noted that this matter was better explained in the budget document. It was agreed that the budget document could be referenced in the transmittal letter in the future. Tuneberg also suggested that he could add to, or amend the paragraph on page 37 to read “these are adhering to master plans and financial plans to fund these in the future”. It was agreed that the last sentence “both divisions have significant unfunded capital projects in the future that could warrant a larger increase” be struck from the document. Hepford questioned the seemingly large amount of cash available and the lack of decrease in debt. Tuneberg responded that a lot of the monies in question were restricted funds and unless there was a benefit in paying that debt off and the funds were available to do so, they wouldn’t pay the debt off because you can’t use operating cash. He also noted the change in debt from year to year can be offset by borrowing more money in various kinds of ways and that the debt didn’t go down as much as expected as there were needed improvements identified. Voisin presented a question about internal controls and credit card fraud in Parks. Tuneberg responded that these had been addressed and have been rectified. Voisin raised the question about an error with a grant payment. Tuneberg responded that this issue had also been addressed and rectified and that the error was contractual in nature. Cody referenced the pg 34 Reserve Fund asking if this fund had loaned money to heath benefits fund. Tuneberg explained that it had and that this was approved by council to start up our self insurance health benefits fund. He went on to explain that loans are paid back in year/s with or without interest depending on whether it is agreed if interest will be paid. Voisin raised the question about pg 34 internal service funds – health benefits funds asking if this would continue to be over budget and what is the effect of this if it continues to go over? Tuneberg answered that they anticipate expected expenses and would make adjustments in the following biennium. Page 5 of 6 Voisin referred to bullet 3 on page 36 under Economic Factors and Next Year’s Budget Rates and asked Kanner about expenses related to this. Kanner explained that increases were not due to health benefits but rather to increases in things such as cost of living and PERS for example. Report from Staff Tuneberg thanked the accounting staff for their work and also thanked the commission. He noted that the budget process is not getting easier for several reasons including GASB and auditing requirements. Tuneberg pointed out the positives of having to report to GFOA standards and stated that it is the intent of the COA to continue reporting at GFOA level. He went on to remind the commission that quarterly reports will not have Generally Accepted Accounting Principal reporting due to lack of staff availability to do this. Tuneberg closed and thanked staff for production of the audit document. Public Input None Commission motion to accept the CAFR/CUFR Moved/Second Hepford/Voisin Motion to accept the Ashland Parks & Recreation Comprehensive Annual Financial Report as presented or amended through commission discussion. ALL AYES Motion passed Moved/Second Voisin/Hepford Motion to accept the City of Ashland Comprehensive Annual Financial Report as presented or amended through commission discussion. ALL AYES Motion Passed It was unanimously agree that next year the word “chair” would be removed from the titles on the commission recommendation letter. Proposed Audit Fees Tuneberg spoke to the auditor quote process. Noted that the 2014 cost for the audit was $40,000 for the COA and $12,600 for AP&R and that the cost would go down for the FY2015-16 due to the performance of staff and the workload for the auditor being reduced. Tuneberg responded to Christensen’s question regarding what length of time the COA has used PR&C stating they have used them since 2002. Tuneberg noted he believes it would be a good thing to continue with PR&C and he credited Hanks and staff for the cost of service being reduced. Page 6 of 6 Christensen noted that while she can see the advantage of going to a new auditor, she believes that it is good to stay with the current one, advising the commission to be conscious of auditor becoming too familiar. Stebbins stated there was a lack of competitors. Voisin stated that she would like to see the contract go out for RFP. Christensen advised against this noting that requires valuable staff time. Cody recommended a 1 year extension and preparation of an RFP. Moved/Second Voisin/Cody Move to offer a 1 year extension and have staff begin to prepare an RFP. Christensen restated the motion and cautioned against putting the contract up out for RFP. She noted that this will come up again in another year and advised that staff input should be considered. Voisin asked when the best time was to do an RFP to which Tuneberg answered “now” and explained the process. He pointed out that in the event that the aforementioned motion passed, next year after the audit, he would present draft RFP and then the RFP would go out to the public. Selection would occur in January. The only issue may be respondents would then have to fit the COA into their schedule however, the COA could adjust. With permission from Cody, Voisin withdrew the previous motion. Moved/Second Voisin/Hepford Motion to extend the contract with Pauly Rogers and Co., P.C. for the 2014-15 Fiscal year. Stebbins requested a roll vote. Hepford AYE Voisin AYE Stebbins AYE Cody AYE Motion Passed Meeting was adjourned at 5.59pm. Respectfully submitted Kristy Blackman Administrative Assistant