Audit Committee

Draft Minutes

November 6, 2009 1:00pm

Council Chambers

1175 East Main Street

Call to Order   

The Audit Committee meeting was called to order at 1:15.

Roll Call   

Committee members Nutter, Silbiger, Christensen and Everson were present. Stebbins was absent.

STAFF PRESENT:        

MARTHA BENNETT, CITY ADMINISTRATOR

LEE TUNEBERG, ADMINISTRATIVE SERVICES AND FINANCE DIRECTOR

CINDY HANKS, FINANCE DIVISION MANAGER/ ACCOUNTING DIVISION DON ROBERTSON, PARKS DIRECTOR

MELISSA HUHTALA, ADMINISTRATIVE SECRETARY

Mr. Tuneberg discussed the election of a Chair and gave an overview of what would be discussed.

Everson/Silbiger ms Guy Nutter as Chair.  All Ayes.

Approval of Minutes

Audit Committee Minutes of October 29, 2008

Everson identified misspelling of her name on page.

Everson/Nutter ms to approve minutes as submitted. All Ayes.

Presentation by the Auditors

Kenny Allen presented to the Committee the Audit report (see attached).  Mr. Allen stated that there were no new significant deficiencies during the audit.  There were no difficulties encountered in performing the audit, no uncorrected misstatements, and no disagreements with management.  Mr. Allen thanked the staff for their assistance.  Kenny discussed how there are FDIC and collateral rule changes each year. 

Banks are looking at increasing the percentage involving collateral.  Mrs. Christensen stated that the banks will continue to increase collateral percentage as the years continue. 

Parks Management Letter:

Mr. Allen presented the Management Report for Ashland Parks and Recreation.  He suggested that City and Parks formalize their intergovernmental agreement for accounting services.

Mr. Allen discussed other matters.  He stated that over the last year or two there is more risk for investments.  Since it is a difficult time to be in investments, investments should be looked at more carefully.    

Mr. Allen discussed Local Government Investment Pool.  The Pool is an investment even though it is treated as a depository.  Ms. Christensen stated that the money is not all in the pool about 44% of the City’s portfolio is in a Pool.  She stated that the portfolio was recently updated, which includes changes in the banking industry.     

Mr. Allen discussed page 43 regarding future earnings.  He stated that each year the City looks at the investment pool and figures what the value of each share would be.  The Committee questioned how the City would be affected if the pool were to see a large amount of investors leaving.  Mr. Allen answered that the loss would be heavier for the City.  If all investors leave then the State takes the loss. 

Mr. Allen discussed Future Accounting and Auditing Issues:  GASB 51 and GASB 54 (see attached).  He stated that there is more detail of what reservations and requirements are. 

The Committee questioned whether item number three (see attached) in the Parks and Recreation Management letter continues forward as an exception.  Mr. Allen answered yes.   

The Committee questioned who is in charge of investment policy for the City.  Ms. Christensen answered she is who is in charge.

City Management Letter:

Mr. Allen went over the City Management Letter and stated that there were no new deficiencies in the FY 2008-09 audit.   Mr. Allen stated the recommendations that were repeated from the report to management for the year ended June 30, 2008 (see attached).  

Mr. Allen discussed investments and third parties.  The Committee questioned seize and desist orders and if it is addressed in investment policy.  Ms. Christensen answered that the City is only allowed in certain securities and certain banks, for example collateralization.  She also stated that not just small local banks get seize and desist orders. 

Mr. Tuneberg thanked Cindy Hanks and the Accounting group for all their hard work throughout the year.  Due to the hard work the audit was done quicker then prior years.  Mr. Tuneberg also thanked Melissa Huhtala for putting the CAFR/CUFR documents into new software.

Mr. Tuneberg thanked elected officials for their work and support.  Mr. Tuneberg stated that not all agencies do the Audit to the level that the City of Ashland does.  He thanked the auditors for their work. 

Mr. Tuneberg discussed the CAFR and CUFR replacement pages and stated that there may be more corrections until the final books go to the printer.  Mr. Tuneberg stated that both reports have clean audit opinion which can be found on page three for the City and page one for Parks. 

Mr. Tuneberg discussed historical information.  He stated that the City has gone through several years of decreases in fund balances, but in this last budgetary year the City has tightened belts and has scene improvements in the ending fund balance.

Committee Discussion: 

The Committee questioned page 45 in receivables.  The Committee questioned why this year’s receivables are higher then last years and noticed that Hotel Receivables were not mentioned last year but were this year.   Ms. Hanks responded that last year there was a minimum report required by GAP, but recommended more disclosure for this year.      

The Committee questioned how long write offs are in the books before determined not collectable bad debt.  Mr. Tuneberg answered that each write off has a different schedule.

The Committee questioned whether staff goes to Council to make sure the write offs are within the timeline of debt collected.  Mr. Tuneberg answered no, but if there was a prevalent issue then the write off would be taken to Council. 

The Committee questioned why the CPI had a decrease in the time frame that says to make the comparison (page 57).  Ms. Bennett stated that a specialty use permit for the Forest Service has a cap of $200,000.  The Committee suggested this information to be disclosed. 

The Committee questioned where the value of Ashland Community Hospital is reflected.  Mr. Tuneberg answered that the original values of the structure is reflected on page 100.  Mr. Tuneberg stated that assets stated on page 100 are secure. 

The Committee questioned what the interfund loan reflects on page 89.  Ms. Bennett answered that it was the purchase of the Clay Street property.  It is a loan from the City to the City, meaning the City owns the land and the City got a loan to purchase the land.  Since the Food and Beverage Tax has been renewed Parks now has a revenue stream.  The first $625,000 will go to pay the loan. 

Public Input-  

None

Signing the Annual Letter-

Mr. Tuneberg asked if there were any issues that would prevent the Committee from accepting the report and signing the annual letter allowing the comprehensive annual financial report to Council. 

Everson/Silbiger ms that the Committee signs the annual letter accepting the City’s audit and financial report.  All ayes. 

The letter was submitted for the Committee members to sign.

Review of Audit Contract

Mr. Tuneberg discussed the Audit contract renewal.  He stated that Fiscal Year 2009-10 is the third year of a three year contract with Pauly, Rogers and Co., PC.  There is a possibility of two, one year extensions of the contract.  Lee discussed the options of extending the contract with Pauly, Rogers and Co. or to go out and bid for a new auditor.  He stated that three years ago Pauly, Rogers and Co. was the only one to bid now there are more options. 

The Committee stated that it is recommended to bid.  Ms. Christensen stated that she is happy with auditors and supports extending the contract another year.

The Committee questioned staff as to whether or not they would prefer to bid or extend the contract.  Cindy Hanks stated she would prefer to extend the contract.

The Committee stated that it is a good idea to extend the contract as it may be difficult to switch. 

The Committee stated that by going out to bid may cause the price to go up a big chunk.  The Committee also stated that five years is usually the longest a contract should go.

After hearing the Committee’s comments Mr. Tuneberg stated that it sounded as though the group is okay with extending the contract with Pauly, Rogers and Co. 

Everson/Nutter ms to extend the contract with Pauly, Rogers and Co.  All Ayes.

Mr. Tuneberg stated a quote from Kenny Allen.  Due to the Audit being done in such a successful manner the price for audit will be reduced for next year.  Mr. Tuneberg stated that the audit was successful because of staffs hard work and dedication.  The book was written entirely by staff and is electronic format, therefore making it much easier for the auditors. 

One difficult thing during this years audit was the actuarial study.  Mr. Tuneberg stated that four or five years ago there were more problems and since then staff has been correcting those issues.  Staff has been working on internal controls, cross training, documenting and thinking about audit all year round which brings the City a successful audit!

Mr. Tuneberg suggested the Committee getting together again in March to lay out all information and talk about new requirements to plan for the audit. By March there will be an informal update on comments that the auditor made on internal controls.  

Adjournment  

The meeting was adjourned at 2:50 p.m.

Respectfully Submitted,

Melissa Huhtala

Administrative Secretary

Administrative Services Department