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Agendas and Minutes

Municipal Audit Committee (View All)

Audit Committee Meeting

Agenda
Monday, November 19, 2001

Audit Committee

Minutes

November 19, 2001, 2:30pm

Civic Center Council Chambers, 1175 East Main Street
I. Roll Call
Present: Roberta Stebbins, Emile Amarotico, Martin Levine, Barbara Christensen, City Recorder/Treasurer, Alan DeBoer, Mayor (Council Liaison), Lee Tuneberg, Finance Director (Staff Liaison)

Staff: Joanie Baker, Pat Caldwell, Ken Mickelson, and Kirsten Bakke

Auditors present from Moss Adams: Jerry Burns, Paul Neilson, Brian Conover, Bob Rawls

II. Call to Order
Martin Levine called the meeting to order at 2:45pm.

III. Introductions
Introductions were made.

IV. Approval of Minutes:

DeBoer motioned to approve the Audit Committee Minutes of October 23, 2001 as written. Christensen seconded the motion. Voice Vote: all AYES. Motion passed.

V. Presentation by Auditors
Burns began with an overview of the audit plan, process and procedures. He stated that the CAFR met all the compliance requirements necessary. He said they had submitted the draft of the Audit Committee Report. He recommended a SCORE review (Systems Control Organization Risk Evaluation), a way of testing large samples of transactions and looking for improvements to the process.

Christensen asked how tracking with SCORE would effect the City Treasurer responsibilities. Burns continued to explain the benefit of a comprehensive SCORE review. He described the status of prior recommendations, including the recording all of the fixed assets and infrastructure, which will be important in the transition to GASB 34, statistical tables 9 and 10, and controls over federal programs. Burns discussed the changes with the transition to GASB 34. Neilson gave an overview of the challenges involved in the implementation of GASB 34. Neilson explained that it would go from a modified accrual to a full accrual basis. The Committee discussed the changes involved with GASB 34. The conversion date of 2002-03 was confirmed.

Conover reported on each item of the Required Communications to the Audit Committee, starting on page 7. He pointed out on Item #2 the continuation from last year's deferral of AFN startup cost. There was a discussion about the operating stage beginning on May 1, 2001 and the 15-year amortization schedule.

Conover continued reviewing Item #2 moving on to Self-Insurance and Post-Retirement Benefits, Commitments and Contingencies, Depreciation, and Amortization. Burns said the reason these specific items were brought up are that these estimates are in the financial statements.

Conover continued reviewing, moving to Item #3, Significant Adjustments Proposed and Recorded: capitalized interest costs, ambulance operations recognized as revenue in the General Fund. The Committee discussed the ambulance billing and recording system. Conover continued reviewing Item #3, Miscellaneous Receivables overpayments. Tuneberg clarified the ongoing relationships with both parties involved. He explained that in the first instance we are reconciling with the primary contractor for the amount of $107,000. In the second instance, the error had to do with work done on the Calle and the contractor submitting a bill to the City and Parks submitting a second bill. We reimbursed the Parks for theirs so we paid 2 $74,000 payments. Tuneberg stated that we don't anticipate this happening again with the change in our check production, invoice review process and also insuring that other departments are signing off in an appropriate fashion, at an appropriate level. Amarotico asked about invoice number duplication. Tuneberg confirmed that we have that ability in our system and a better review process than we had 6 months ago. Levine asked if the periodic contract report would help in this situation. Tuneberg said that the report was needed for purchasing requirements. He said we were looking at what was signed off by the appropriate project manager and approved to pay and reviewing our input to insure that we haven’t had a key error that allowed the payment to go through. Christensen clarified that the contract report made sure that everything was is order and signed off before we cut a check for the services

Conover continued reviewing Item #3, dealing with the restatement of GASB 33 criteria for non-exchange transactions. The CDBG Fund was classified as a non-exchange transaction. Conover concluded the review of the major audit adjustments. He stated that the attached adjusting entries were considered, but it was determined that they not be made.

Conover continued reviewing, moving to Item #10 giving an overview of the minimum standards for testing.

Stebbins asked how the double payments came to light. Conover said that they weren’t in the sample and came to light when looking at fixed assets. Levine asked if they found a reason to expand the sample after finding the errors. Conover said that the items came up in actual fieldwork about a month ago. Burns said that there were 3 kinds of tests being done, controls for purposes of doing analytical review, including using analytical review of comparisons from the last 3 years of materials and services and capital outlay by departments and funds. And that $107,000 didn't create a ripple in either one of those areas.

Christensen spoke of her involvement with accounts payable and her confidence in the Finance Department's ability to follow through. She stated that Finance was dedicated to the ongoing process. Amarotico asked if it was possible that other transactions got through as well. Burns said he didn't think that it was possible because on the capital additions, they vouched the transactions later when they were being capitalized.

DeBoer asked when overpayments occurred. Tuneberg said that they both occurred in the calendar year of 2001 before the current process of review and controls was implemented. He stated that we didn't anticipate having this problem again. Levine asked about electronic payments. Tuneberg replied that in some areas we do, like taxes, and it makes it more important to have software that checks for potential duplications.

Stebbins asked if flags were raised on the overpayments. Tuneberg gave a detailed explanation of the basic causes of the overpayment errors and the steps taken to prevent future duplications. Burns concluded the presentation.

VI. Discussion of June 30, 2001 Audit and the Management Letter
Levine asked if there was continued discussion. Amarotico referred to page 4 Current Year Recommendations. Levine asked if at the October 23, meeting they had talked about the RFP process. Tuneberg replied that they had discussed the upcoming RFP process, logistics, price, and scope. They needed another meeting to discuss this in further detail, particularly planning the transition to GASB 34 and certainly SCORE would be a part of that discussion.

Conover referred to page 27 of the CAFR, section on Stewardship, Compliance and Accountability. He pointed out the 2 over-expenditures in the Water Fund and the Central Services Fund. Amarotico asked if that would be included in the final management letter. Conover confirmed that it would. Burns talked about interfund financing. The Committee discussed issues regarding interfund financing. Burns spoke of the status of prior recommendations.

Tuneberg said he enjoyed working with Moss Adams and agreed with this report. He continued giving a detailed description of the steps being taken to develop procedures and where necessary redesigning procedures to make sure that we have good accounting controls and review processes. He stated that we were working closer with both the Departments and the City Recorder's office to insure that we are getting the right information up front.

Amarotico asked if we needed the auditor’s support on anything else. Tuneberg didn’t have anything that he’d like to pose at this time.

Amarotico moved to accept the Management Letter as amended. Stebbins seconded. Voice Vote: All Ayes. None opposed. Motion passed unanimously.

Levine confirmed that there was no separate management letter on the Parks, and asked if they wanted to accept the Parks report. Amarotico said they just received last year's statement from the Parks. Levine asked if this could be an agenda item at the next meeting. Tuneberg asked if the Auditors were requested to be at the next meeting. Levine said it wasn't necessary. Tuneberg described the audit acceptance process, saying that they still had to do a recommendation accepting the Financial Report.

Amarotico moved to accept The CAFR as submitted. Christensen seconded. Voice Vote: All Ayes. None opposed. Motion passed unanimously.

VII. Committee Comments
Tuneberg asked when the Committee should reconvene. It was agreed to meet on Wednesday, November 28, 2001 at 2:00pm in Council Chambers. Tuneberg thanked the Committee, the Auditors and staff. Levine thanked everyone for their efforts, and stated that he enjoyed the participation with the City.

VIII. Adjournment
Meeting adjourned at 4:42pm

Respectfully submitted by Kirsten Bakke, Administrative Assistant