Loading...
HomeMy WebLinkAbout2003-1117 Audit MIN Audit Committee Draft Minutes November 17, 2003 2:00pm Civic Center Council Chambers, 1175 East Main Street Call to Order Chairperson Marty Levine called the meeting to order at 2:06 PM. Roll Call Committee Members Present: Roberta Stebbins, Marty Levine, and Barbara Christensen Committee Member Absent: Alan Case Council Liaison Present: Alan DeBoer Staff Present: Cindy Hanks, Joan Baker, Bryn Morrison, and Scott Whitman Approval of Minutes Approval of minutes from previous budget meeting dated: May 27, 2003 Christensen/DeBoer m/s to accept minutes as presented. Presentation by the Auditors Audit 1. Comprehensive Annual Financial Report Kenny Allen and Roy Rogers, for Pauly, Rogers and CO., P.C., presented the Comprehensive Annual Financial Report. Allen spoke of the City’s compliance to GASB 34. The City has converted to the new government wide Statements to the full accrual model. Rogers spoke to the report’s overall contents, the GASB 34 compliance. He added there were no disputes with staff, no disagreements in regard to any accounting estimates, treatments, or policies. They completed the Parks report, converting to GASB 34. Tuneberg spoke to the report. He explained that it is still in draft form, there would be no changes in the material, just grammatical changes. Tuneberg explained the transmittal letter and how it has changed. The new model talks about the organization of the City and presents the rest of the book. Spoke of enhancements that were made to make it more readable. He spoke to the Financial Section, that the Auditors stated it was a clean opinion. That it presents fairly the City’s financial position. He spoke to MD & A, Management’s Discussion and Analysis. He added that next year will have comparison data in more detail. He spoke to the reports that were required. He pointed to P. 15, 16, 17 and they are the basis of financial report for City. GASB 34 replaced the Balance Sheet, revenues and expenses, which were previously there for compliance. He explained how it shows governmental Activities and business type Activities. He pointed to P. 16-17 and that they may need to make them more readable. It shows a change in Net Assets. Parks shows positive number. City negative. DeBoer asked about the change in Net Assets, a definition, if it takes into affect the Assets that were required. Tuneberg answered it is, Assets that we build and construct become part of our Total Assets, cash that goes for operating expenses is a reduction. DeBoer asked if they identified what caused the $5.5 million. Levine answered that part of that was depreciation of Assets. DeBoer asked how much of that would be depreciation of Assets. Christensen asked if there was not an easy break down of this figure. Rogers answered $4.486 million in governmental Activities. Allen stated $5 million in business type Activities. Christensen asked how it compared to last year. DeBoer added it was hard to state a true comparison. Rogers added on business type it wouldn’t be a whole lot different since it is the same methodology, but government type funds never recorded it before. Levine asked about government and business versus other cities our size. DeBoer added that no other City our size would have those kind of numbers. Levine asked if that was that true. Rogers replied that with his experience, that others do not do the same activities we do. Levine asked for a percentage breakdown. Tuneberg replied that this was the basis for GASB coming up with Statement 34 to get all the cities reporting the same way. Levine asked what year the compliance was required. Tuneberg answered it has been transitioned over the last three years. DeBoer asked if the Auditors felt it helped with clearer reporting. Rogers replied that accountants in Oregon were not thrilled with 34, he doesn’t mind the MD & A, these big reports are a lot to ask. Tuneberg spoke about format of previous reports, that they have not changed much, we have reconciliation of budgetary Statements, Net Assets and Activities in the front. A new presentation on P. 20, 21, the difference is in governmental funds. The bottom line number ties with p. 15, 16-17. He then spoke to the Proprietary Fund and the Notes. Required Supplementary Information, the presentation of General and Street Fund. The variance between final and actual. He added that Supplementary Information shows smaller funds that are combined. Proprietary funds, on each give budget and GAAP presentations. The Statistical Section presents graph information for trends, assessed values, population, major insurances. DeBoer questioned if we update the miscellaneous information for the annexations. Christensen added that the annexation has not been completed. Tuneberg went on to add that the last Section is Auditor Comments and Disclosures. Rogers stated that on P. 118, they had to give positive assurance if there are any errors. Rogers gave compliments to staff. Christensen asked about specific rules and AFN. Rogers added that these are compliance issues. Stebbins commented and congratulated the staff on the achievement. She spoke to P. 40, the wording under C. “The fund ended….” “the business plan anticipates…” “ the deficit will be eliminated…” it was a profound Statement. Tuneberg responded that we could interject anticipate. Stebbins added she would be more comfortable with that. DeBoer agreed. Stebbins added on P. 119, P. 41 the discussion of deposits, bank Balance is collateralized, bank pledged securities. That they are adequately covered, banks will usually pledge more securities, needs to be addressed. Rogers explained issue between GAAP and state law. Gave example of under state law the banking industry wanted to lower percentage. GAAP wants to know what is really there. Christensen clarified that we are collateralized. DeBoer questioned the uncollateralized Statement. Rogers replied that was a correct Statement, if the bank failed tomorrow you wouldn’t have it. Rogers added that the theory was that they would liquidate enough loans to pay out. Stebbins questioned P. 52, the last paragraph, "government wide Statements of Activities includes this amount of long term liabilities" she wasn’t sure why it would be in Statement of Activities. Tuneberg answered it was meant to be in the Statement of Net Assets. DeBoer asked about introductory Section and the correction of the 1200 acre campus at SOU. Called SOU and it is 175 acres. Tuneberg understood the 1200 included other properties they own. DeBoer added that the workforce number surprised him. Christensen asked where the figures came from. Tuneberg replied from reports from business licenses that are turned in to the City. Christensen asked if it was in the City limits. Tuneberg responded that they are issued for business that is done in the City limits not residing in City. Levine asked if it was based on business, that there is 7,048 employees employed in the City. DeBoer added that these were private business only. Stebbins asked about if a big business comes into town, if they will have to register all of their employees or only the ones that work in Ashland. Hanks answered that was correct, only the ones that work in Ashland. DeBoer asked about P. 26, contributions of MT. Ashland Fund, if that was the lease value, if it was a journal entry. Levine responded that it was Statement of change in Net Assets. Tuneberg responded that was the Total value. DeBoer responded that the City didn’t put any investment in the ski area. He questioned the Statement that doesn’t show that and the donations that were far higher than that. Stebbins asked if that was capitalizing the land value. DeBoer responded that Ski Ashland put an arbitrary number on their books for the lease value that they bought for the ski area and no one ever paid for that. Rogers responded that he looked at that himself and wondered what the million dollars was and how it came through. He stated that it is a little confusing, that sometime in the future they will get the Assets back. DeBoer responded that what happened was that people donated $1.8 million, it flowed through City and they passed it through to Ski Ashland Association. They carry on their Balance Sheet the leasehold value on the land. Tuneberg stated they are depreciating the lease, his understanding was that this was their investment in Assets at June 30, 2003. DeBoer asked why it would carry on ours. Levine asked why it would be a change in Net Assets. Christensen asked what their investment Balance was that she keeps. Tuneberg replied it has no value on books. DeBoer asked why it was $1.014 million. Rogers asked if it is the intention of the City that they don’t own the Assets, if it were to be gone tomorrow, they would own the Assets. Tuneberg responded that the lease says if they discontinued operation the Assets revert back to us. Rogers responded that we do own the Assets. DeBoer added that we didn’t pay anything for them. Rogers asked if we were depreciating them. Tuneberg responded no, to his understanding that when Ski Ashland was created, that the Assets went to them used by them, until such time they ceased operation and ownership would revert back to the City. He asked the Auditors how he should present this so it was clear. Rogers responded that it was a pure fiduciary fund so he can remove that page and just have a Statement of Assets. DeBoer added the expansion will be paid for by private donations. DeBoer explained that if they cease to operate, then the City will receive all Assets. He added that we are on the lease to the Forest Service and if they cease to exist, we have to restore the mountain. Rogers asked how much it was. DeBoer replied between $200-400,000. Tuneberg responded that currently it is $267,000.DeBoer added that it goes up every year due to cost of living. Rogers asked if instead of $228 it should be $267,000. Tuneberg replied that is not correct. DeBoer added that there is no tie into that cash. Levine clarified that we are the primary lessee for Forest Service and we have an obligation to restore the mountain if it ceases to exist, and we require them to maintain sufficient Assets at all times if that should occur. Rogers pointed to p.56 that we don’t have a contingent liability note. Levine responded that was probably where it should go, with a disclosure that there are sufficient Assets at the Ski Area to cover our obligation. Rogers asked if they had zero cash and lifts, would that cover the liability. DeBoer responded not the lifts, the snow cats are worth $250,000, skis, and equipment. Stebbins agreed on P.26 that there needs to be a disclosure. Tuneberg added at this point they are compliant with the lease, we will take out that page. DeBoer added that they do carry an account of $300,000 for the purpose of security. Tuneberg clarified that they would be required to perform reclamation not restore, permit is for skiing activities only. Levine asked if the Auditors have an obligation that the liability is covered by Assets held by the association. Rogers replied that just having the $300,000 account doesn’t really mean anything. DeBoer added they cannot lean our Assets and cannot do anything without the City’s approval. Levine added legally they can’t, but who will stop them. DeBoer replied that no lender will ever loan to them without a signature. Tuneberg added they don’t ask Barbara Christensen or him how to use the money. Christensen asked what the difference is between Mt. Ashland and the hospital. Why are they treated differently. Rogers responded that the difference is that the hospital’s Assets are on our books. Christensen asked in terms of liability, if hospital should go belly up, what is the City’s responsibility. DeBoer replied, everything, that we are the sole stockholder. Christensen asked why that was not listed as a liability. Stebbins added it is contingent. Rogers responded the most that would happen if the City were sued; the most they would lose is the Assets. Levine added that we don’t own the association, we do own all of the stock of hospital. Christensen added that they need our permission on a loan because they are expanding, we have to sign off and sign on, not disclosed in report. Should be listed as asset, liability, contingency, etc. DeBoer responded that this year it is not in the audit, the loan will not occur for a while. Stebbins asked if the hospital is listed as an investment in an security. Tuneberg replied that it is part of the City’s Total Assets. Stebbins asked for proper reflection. DeBoer added there is no security. Levine added it is 501 C3. Christensen added the matter of public records; the hospital did not allow their financial information to be reported in the City’s public information records. Levine added why the hospital split because of the difficulty they had with insurance companies, so they would not have to report publicly. Stebbins added that she thought it would be prudent that they couldn’t invade into other City Assets. Rogers replied that they ask about that in their audit procedure and nothing has been reported back. Tuneberg added the hospital is not a component unit, and it does not need to be reported in the financial document. Stebbins voiced concerns if we do have a contingent liability, there should be more disclosure. Tuneberg responded if something happened to the hospital, it wouldn’t effect the rest of operations. Levine added the real question is, can someone sue the hospital and get the City, the Auditors should disclose that. Tuneberg responded that our attorney has made that representation to them. DeBoer questioned restoration of the hospital and the Assets will increase in value and our Assets will show that, but where does our debt show that. Levine asked if the City is spending the money. DeBoer answered the hospital is borrowing and paying for it and we have signed to guarantee the debt. Levine asked how it will get on our books. Allen answered that you would disclose it on the books as a contingent liability. Rogers asked if they were a guarantor. DeBoer answered that we pledge the Assets. Rogers said it is not contingent, it is a debt, they may be paying it for the City. DeBoer added it is secured by the property of the hospital. Rogers explained how GASB 34 takes the Assets less the related debt. Levine asked what the entry would be. Rogers responded the City would have to run it through the Operating Statement. Levine clarified that it would be a direct credit to retain earnings. Tuneberg spoke to P.26, that it will become an “A”. He asked committee if they could sign accepting report. Component Unit Financial Report Kenny Allen spoke to the component unit. He pointed to P. 6-7, Total Net Assets were $11 million on the full accrual basis of accounting. Most of that was tied up in capital Assets. On P.7, changes in Net Assets were $305,000 on full accrual model. P. 8-9, shows the old budgetary Statements. P.10-11, show the differences. The opinion is clean. There is only one issue on Oregon Minimum Standards, on P. 41, the were two sample items where the Commission did not obtain bids or quotes. DeBoer asked if it will be given to the Parks Commission. Tuneberg answered a complete report will. He spoke that the accounting work was done in the City Accounting Department. Levine asked if the City was doing all Parks Accounting. Tuneberg answered that they are. He added that there was no Management letter for Parks. Management Letter City Allen read the Comments on the report. He spoke to the court clerks responsibilities, general bail liability, court restitution liability and court assessments liability need to be reconciled monthly. Levine asked if they were bank accounts. Allen responded that they were liability accounts. Levine asked what they were being reconciled to. Allen responded to the back up of every docket that comes in. Stebbins added it was like a detailed accounts payable. Tuneberg responded to the three page letter of response. To P. 1, he spoke about the courts. He agreed with all the Comments made by the Auditors. The old software, they are understaffed, courts has become part of Finance. They are in the process of reviewing software, cross training. The Finance Department is limited in labor hours to provide them. They have many volunteers that do help out. Unfortunately they are not always available. Christensen added she has confidence in staff. Tuneberg spoke of possibly adding personnel in next years budget. Allen spoke of the problem of the utility billing software. Tuneberg added that the person that was crossed trained on the software has left the City. Eden has capabilities. The bigger issue is with the employee that has worked at the City. There are problems with support in other areas. Christensen added that Pat Hopkins is the only one that knows how to run Laser Fische. Tuneberg replied that is a management issue. There are many other areas that need to be addressed in the budget process. Levine asked if IT was a separate department. Tuneberg answered that IT is part of the Electric Department. There is no Department Head that is computer oriented only. Levine responded that is getting critical. Tuneberg added that a goal is that the City will do the component unit report. Parks-none Public Input None Other Ambulance Services Review Update Allen spoke to the procedures and policies and finances of services. They have called the City of Springfield to get their business plan to look at for Ashland. There is a billing question when an ambulance gets called out. They looked for controls in place between the Fire and Accounting Departments. Springfield has detailed tickets to represent calls. They send a Balance Sheet at the end of each month that gives a detail of AR, Balance payments, write-downs, write-offs, and adjustments. The City of Ashland does not reconcile with what the City of Springfield sends back to them. It would require that the detail run Sheets are updated with Springfield’s reports. He added that it will take time to make an in-house process. It would require one FTE for the position and for Medicaid training. Another thing to implement is the collection process. Tuneberg asked about what software they are using. Allen responded that he didn’t know what kind they were using. Christensen asked what their collection rate was. Allen answered that will be in the final report. He added that they looked at how much is expensed within the division. Right now the Ambulance service is expensing two full time persons plus any overtime hours. He recommended that the staff in the Fire Department track the time more accurately that each call represents through time Sheets and that Ambulance needs to be in it’s own fund. Rogers added that they will look at what the expenses are and the procedures and processes, and what is the reporting model. It appears that the allocation of FTE is not accurate. Christensen added that in order to have the true picture, they need to separate it in Accounting. Stebbins asked about Springfield, what the offset would be to hire an extra person. Allen replied that it would be $42, 434. Levine clarified that in Rogers opinion that it would not make a profit if it stood on its own. Rogers responded that they were not asked to look at that, the information is accurate but it is not all-inclusive. Levine thought the purpose was to look at whether it was a going concern. Tuneberg responded that this is the time for course correction. He would like to see the things that they would like to do better. Cost, revenue, determination if it is an enterprise activity or a general government activity. Look at implications in general fund. Need to look at Total costs to take back from Springfield. Do we have any choice of providing service outside of Ashland. Christensen added there were other providers interested in providing service. DeBoer added that he was concerned about what we can do better as far as costs. Rogers asked if they want them to explore enterprise fund or governmental function issue. DeBoer responded that he feels it is clearly an enterprise fund, liability that we have taken on outside of the City limits. Rogers responded that it is not an enterprise fund now, and asked should it be. Christensen asked if that is the only way to separate out of Fire to keep track of expenses. Tuneberg responded that if we extract the service from General Fund, it has no other place to go than the Enterprise Fund. DeBoer added that it is a political decision and their report may or may not generate that. Tuneberg added that with the software that we implemented, we could do a more precise tracking of activity through the time Sheets and material and services. Christensen added that she needs to be able to see the two separated. Tuneberg responded that we somewhat do that, there are some cross subsidy that appears to be going on and we can get to that with the new software. Levine added that the Ambulance comes up for hearing at Jackson County next summer for rates, they wanted to look at Net profit on a separate basis. They wanted to have some basis to raise rates to show Jackson County. Tuneberg asked if that was the committee’s wish. Asked if they wanted a Statement of the revenues and costs. Levine replied that they would like to be able to support the claim if we need to charge more money for rates. DeBoer didn’t know if there was a cost benefit and that we will have to generate the report anyway. Tuneberg responded that it is better to have them do it upfront. Stebbins adds that we need to do what the Auditors are saying and the procedures need to be corrected. Allen added that right now they have budgetary numbers, expenditures, and revenues. They will work on getting the numbers accurate. DeBoer proposed to have them complete the report. Stebbins added that it is not her background. Tuneberg added that he wants them to have the information that they want. Asked about not being able to raise rates high enough in the enterprise fund, if they want them to look at it. Christensen suggested letting them finish the report and then discuss. Tuneberg asked Auditors if they had enough direction to finish report and present to the committee. Rogers answered that they can finish report the way they were directed. Tuneberg concluded that they would finish report and get back together in January. It was discussed that DeBoer was a liaison of committee and that was why he was not on Report to the Audit Committee. Christensen and Levine thought he should be on the Report. Tuneberg responded they would present it to him with the City Council. Committee signed letter of approval. Adjournment 4:15 PM Respectively Submitted, Bryn Morrison Administrative Secretary Finance Department