Loading...
HomeMy WebLinkAbout2021-12-02 Audit Commission Minutes I ooi&'RxkSHLAND DRAFT Audit Commission Minutes (Municipal Audit Commission AMC 2.11.010) December 2, 2021 at 2:00 p.m. Meeting Held Electronically Call to Order/Opening Remarks: Meeting called to order at 2:00 p.m. by Alison Chan Roll Call Names of Attendees Recorded and Listed Paula Hyatt Present Dee Anne Everson Present Bob Kaplan Present Jane Andrianova Absent Others: Alison Chan Interim Finance Director Cindy Hanks Accounting &Audit Manager Michael Black Parks Director Tara Kiewel Parks Administrative Analyst Melissa Huhtala City Recorder, Ex-Officio Non-Voting Member Gary Milliman City Manager Pro Tern Kim Reno Moss Adams, LLP Amanda McCleary-Moore Moss Adams, LLP Approval of Minutes: Everson/Hyatt moved the approval of the meeting minutes of December 2, 2020. Discussion: None. All in Favor. Motion passed unanimously. Presentation by Independent Auditors — Moss Adams, LLP Time Stamp 00:06:45 Kim Reno of Moss Adams, LLP began by presenting to the Committee the City of Ashland Audit Results. Topics presented on included the agenda for the presentation, the engagement team, the nature of services provided, the auditor options and reports, the internal controls related matters, and the communications to those charged with governance and new standards. Reno explained that the nature of services provided included auditing in accordance with Generally Accepted Auditing and Governmental standards, Compliance testing and reporting under Oregon minimum audit standards, assistance with technical reviews, and single audit of federal grant programs and reporting. Reno explained that the compliance standards related to the single audit were not yet available and that the City's single audit would be done in January. Chan clarified that the delay in the audit was not a result of the City not being ready, to which Reno responded was correct. Reno went on to note in her presentation the critical audit areas that they as Auditors work with. These included: Internal Controls/IT Environment, Cash and Investments, Revenues and Receivables, Capital Assets, Long Term Debt, Accrued Liabilities including PERS and Other Post Employment Benefits, Grants and Reporting and Oregon Minimum Standards I ooi&'RxkSHLAND Dee Anne Everson, Committee Member asked in relation to the critical audit areas and if special work was done regarding the remote work environment this year and any sensitivities around technology. Amanda McCleary-Moore of Moss Adams LLP stated that there was not anything specifically related to this. She explained that even when they as Auditors are on site that a lot of the documentation from Management comes through their secure portal and much of this information is already in the electronic environment. She went on to also add that there are additional procedures over the IT process this year and that this was not necessarily directly related to COVID. Moss Adams Internally revamped their process within there IT controls and how they are looked at she went on to explain. McCleary-Moore stated that they tested security and change management which are the two areas that they focus on the most when they are testing IT. She ended by explaining that the City of Ashland has good controls around having electronic documents and that there was not a lot of items that they as auditors needed to look at manually. Chan explained that from an employee standpoint that the majority of the accounting staff was reporting to work and they were not working remotely. She went on to explain that social distancing was used instead. All of this she added for payroll, accounts payable, and accounts receivable standpoint did not cause processes to change during this time. McCleary-Moore explained the reports that Moss Adams issues. The first of these she stated was over the financial statements and financial reporting. This report is over statements 100 pages plus, for which the City obtains the GOFA certificate that requires additional statistical information, as well as the transmittal letter and introductory information she added. Explaining that that Audit looks to see if they are free from material errors, McCleary-Moore communicated that they were able to do this based on their testing and issue an unmodified or clean opinion. She added that this means that after all the tests were completed that they were comfortable that the financial statements were fairly presented in accordance with generally accepted accounting principles or GASB principles. She also added to this that although this is probably expected, there is still a lot of hard work that goes into putting together this lengthy of a document that follows the current basis of accounting. McCleary-Moore went on to explain the audit or Oregon Minimum Standards Report is based on compliance so there are a number of Oregon revised statutes that an entity is required to follow and that they as Auditors are required to test these. The budgetary compliance she noted was the most common of these. One area of non-compliance was noticed in the current year, but the City was not the only one that saw this issue because of all of the additional federal awards and the amount of cash that many cities had. The rule she explained is because cities are only allowed to have a certain amount of funds with the states LGIP account, but because this can change quickly the City is allowed 10 days to correct this. The City did this she stated but it was just not within the 10-day time frame. The City she added would have been under the amount in the current year, but the increase had not taken effect, so the City has corrected this currently but as of the year end it was over this amount. She suggested quicker monitoring, but this is overall not something that would cause them as Auditors to be concerned. Other than this she commented that there was no other over expenditures or issues to note. Next looking at the Government Auditing Standards Report McCleary-Moore explained that this would be where any non-compliance with laws and regulations would be noted if they led to errors in Financial Statements or Internal Controls. She also stated that although they do not express an opinion over internal controls, they do look at them to develop their audit plan and if something is identified to be a significant deficiency it would be reported. Material weakness can also be reported she added. No internal control deficiencies were reported. Next McCleary-Moore stated that the audit listed under the uniform guidance or use of federal funds was still in progress and would be completed in January 2022. She reported that the City has provided the expenditures for this. I o ooi&'RxkSHLAND Additional communications that McCleary-Moore highlighted included those charged with governance. These area she communicated included the planned scope and timing, significant accounting policies, management judgements and accounting estimates, audit adjustments made and passed, management consultation with other accountants, disagreements with management, and difficulties performing the audit. Next explained to the Commission were New Standards, including GASB Statements 84, 87, and 91. Some of these she added would be for the future. She also added that the user readability, understanding of statements and recording of revenue was also being looked at by GASB and that this may have impacts on future reports. Chan commented about the work that goes into the Audit and thanked Hanks and her team for the work that they put into it. Discussion Time Stamp 00:34:43 Everson commented to McCleary-Moore how hard the new lease standard was and asked Hanks if she had any concerns about this. Hanks responded that she did have some concerns with this including the impact of new staff members. Everson then commented that her organization has decided to purchase items instead of leasing them. Chan then commented that form a planning standpoint that sometimes knowing the work that will need to be done that is exactly what needs to be planned for. Additionally, the Commission discussed that the lease reporting standard has been put off many times. Everson then asked if McCleary-Moore would be the partner in charge for the next years audit. McCleary-Moore answered that this is her 4t" year as the partner in charge and that the company's policy was to not rotate this position unless requested by the client. Everson went on to note that previously the City had same partner in charge for 19 years which she did not think was appropriate and that for the future this is something that the City needs to pay attention to. Bob Kaplan, Committee Member asked about the assessment of the internal controls and that management has made the appropriate judgements on levels of control. He added that sometimes you hear around the City about the controls and wanted to make sure that he had heard correctly that they as auditors did not see anything that gives them cause for concern or anything that made the internal controls difficult to test. McCleary-Moore answered that they do not issue an opinion on the effectiveness of internal controls, but they do look at what could be a material weakness adding that something could be there but as part of everything that they tested nothing was at this level. She then added that nothing really made this harder and the system that the City uses is a good system that has a lot of integrations. The most complicated systems she ended by saying were those outside of the system and these pose the most risk for material errors. Kaplan asked about the MD&A statements and discussion about the ending fund balances policies. He asked further if it would be appropriate to add in a review of where the City followed the new ending fund balance policy. Chan responded that she could not comment as to why it was or wasn't there and as interim Finance Director, she did not attempt to make a lot changes in how things were presented. She added that it was a valid suggestion and that they would look at adding it in to the MD&A for next year with a write up being done to address this years ending fund balance. Kaplan asked about the increase in value of capital assets, which roughly did not change from the previous year. He then asked if historical value was the best way to value the City's assets and if anything should be different from a community depreciation of over 50% of the capital assets total valuation. Chan replied that she would assume the way that the City is doing this would be correct as it is done in accordance with GAAP. Chan further asked the question if the book depreciation I ooilxk S H L A N D was equal to the true useful life, but that she did not know, but that depreciation on historical cost does not always flow with the valuation of the current value of the property. The issue she added is that that in theory these would match up but as the reader of the statements the information is somewhat limited. McCleary-Moore also explained to the Commission how these assets are reported and that the value for depreciation should be reevaluated each year. Kaplan then asked about the low level of debt that the City has and the Moody's rating that the City has on both tax exempt and taxable bonds. Chan and Hanks responded that the rating has typically stated flat with a small decline over years. Hanks also confirmed that it was correct that the City does have very little debt compared to what they had had in the past, this being due to them being paid down at a lower interest rates and that large project funding for debt has not been sought after. Chan also clarified that a stronger forecast needed to be had prior to going to the market and taking on more debt. She anticipated that the City will be going to the market in the next two years but that there were financial items needed to be addressed before it's the right time. Paula Hyatt, City Councilor thanked everyone for their work on the Audit. She then asked McCleary-Moore about the non-compliance item and the State's LGIP account, asking what LGIP stood for. McCleary-Moore responded that this stood for Local Government Investment Pool. Chan also provided more information on what this meant for investments at the City Level. Hyatt then asked how the money is deposited into the LGIP. Chan responded that this is pushed there. Hyatt asked what is being done to watch this as this was a non-compliance piece. Chan and Hyatt responded that changes are being made. Hyatt then asked about the ending fund balance and internal service as it is related to the MD&A. With this she further asked about the policy change that had taken place to push funds into the General Fund and that she knew the large part of the current place was due to open positions, the COVI D related employment market and overall extenuating circumstances, but if these were normal times would this policy inadvertently be subsidizing the General Fund. Chan responded no that she thought the concern would be more of the opposite. Public Input- None Kaplan/Everson moved the accept of the City Annual Comprehensive Financial Report as presented. Discussion: None. Hand Vote: All in Favor. Motion passed unanimously. Adjournment: 3:03 p.m. Respectfully Submitted. Natalie Thomason, Administrative Assistant