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HomeMy WebLinkAbout2011/08/15 - ADMIN - Minutes - City Council - Study Session 1/1St. Louis Park OFFICIAL MINUTES MINNESOTA CITY COUNCIL SPECIAL STUDY SESSION ST. LOUIS PARK, MINNESOTA AUGUST 15, 2011 The meeting convened at 6:30 p.m. Councilmembers present: Mayor Pro Tem Susan Sanger, Anne Mavity (arrived at 6:33 p.m.), Paul Omodt(arrived at 7:22 p.m.), Julia Ross, and Sue Santa. Councilmembers absent: Mayor Jeff Jacobs and Phil Finkelstein. Staff present: City Manager(Mr. Harmening), Deputy City Manager/Human Resources Director (Ms. Deno), Controller (Mr. Swanson), Finance Supervisor (Mr. Heintz), and Recording Secretary(Ms. Hughes). Guests: David Mol, CPA (HLB Tautges Redpath, Ltd.) and Andrew Hering, CPA(HLB Tautges Redpath, Ltd.). 1. 2010 Financial Statements—Auditor's Presentation and Discussion Mr. Swanson presented the staff report and introduced David Mol, CPA, and Andrew Hering, CPA, from HLB Tautges Redpath, the City's new auditors for 2010. Mr. Hering stated that five reports were issued as part of the 2010 audit, including an opinion on the fair presentation of the financial statements, report on internal controls, report on compliance with the Minnesota Legal Compliance Audit Guide for Political Subdivisions report on compliance with requirements of Federal programs (single audit), and communication to those charged with governance. He explained that the audit was performed in accordance with Generally Accepted Accounting Standards (GAAS) and an unqualified, or clean, opinion has been issued stating that the financial statements are presented fairly in all material respects. He noted that the Government Finance Officers Association (GFOA) has issued the City a Certificate of Achievement for Excellence in Financial Reporting for 27 consecutive years. He explained the audit process and results obtained in the report on internal controls, stating that two findings were noted related to audit adjustments and approval of journal entries, bank reconciliations, and other transactions. He indicated that anytime an adjustment is required to be made to prior period financial statements will result in a deficiency in internal controls, but added it was determined that this was not material to the financial statements. He explained that one example related to an energy grant which had expenses recorded in 2010 but the revenue was received in 2011; the revenue should have been recorded in 2010 and this finding only relates to the timing of receipt of the revenue and when it gets recorded. He discussed the second finding related to approval of journal entries, bank reconciliations, and other transactions in which the audit found no evidence of approval in six journal entries tested. He stated that the person performing the bank reconciliation duties were not reviewed by another employee, the audit noted two credit card transactions out of 29 tested that were approved by the same person making the transaction. He noted that the total was $53.29, so it was not a significant amount. He reviewed the recommendation contained in the report and stated that the procedures were modified in 2011 with the goal of eliminating this finding. Mayor Pro Tem Sanger stated that it appears the two items noted by the auditors were technical irregularities involving compliance with housekeeping and consistency in recordkeeping. Special Study Session Minutes -2- August 15, 2011 Mr. Hering agreed. He then discussed the report on compliance with the Minnesota Legal Compliance Audit Guide which is a 54-page checklist published by the State Auditor which tests the City's compliance with State Statutes and this report found no findings of noncompliance. He reviewed the report on compliance with Federal program requirements, or single audit, which is required when a City expends more than $500,000 in Federal monies. He stated that in 2010, $7.9 million was expended by the City for highway planning and construction related to Highway 7/Wooddale and this report found no findings of noncompliance. He then reviewed the required communications to those charged with governance. He advised that the City adopted two new accounting standards in 2010 related to intangible assets (GASB Statement No. 51) and GASB Statement No. 54 related to fund balances. He discussed the accounting estimates in the financial statements, noting that the most prominent estimate relates to the City's obligation based on health insurance, participation, and retirement rates. Councilmember Mavity asked if any adjustments should be made in the City's planning for future health care costs. Mr. Heintz stated that the City has retained an actuary to determine the appropriate level of funding for health care in future years. He noted that this liability is not a cash liability and retirees who stay on the City's health insurance pay 100% of their premium. Mr. Hering advised that no difficulties were encountered in the performance of the audit, there were no uncorrected misstatements, and there were no disagreements with management. Mr. Mol reviewed the summary of financial activity for the year ended December 31, 2010 which lists all funds maintained by the City. He stated that the increase in fund balance at year end relates to the City's issuance of approximately $12 million in bonds at the end of December for the fire stations as well as the City's approximate $3.6 million refunding of its 2000 G.O. bonds in February 2011. He also noted that the General Fund had a transfer of$1 million to the City's Flex Spending Internal Service Fund and $550,000 was transferred to the Park Improvement Fund. Mr. Harmening pointed out that these transfers were approved by Council in December last year. Mr. Mol discussed the constraints on the City's fund balances and the various categories used by the City, including non-spendable, restricted, committed, assigned, and unassigned. He explained that the City has $11,986,027 in restricted funds representing fire station bonds and these funds are restricted for use on the new fire stations. He reviewed the General Fund's working capital needs and the fluctuations in monthly cash balances based on receipt of property taxes and other revenues. He also reviewed the history of the General Fund balance, noting that property tax revenue makes up 72% of the revenue in the General Fund which is used for cash flow purposes. He stated that the City has adopted a policy of maintaining an unassigned fund balance of 35- 50% and the City is as at 44%. He reviewed the Debt Service Funds and stated that no issues were found. He then discussed the City's water, sewer, and solid waste utility funds and stated that the City has done a great job with its budget and capital improvement program and anticipating when major projects will need funding. He noted the history of the City's tax capacity and tax rate as well as continued financial challenges for the City related to the fiscal disparities pool. Mr. Harmening stated that the Comprehensive Annual Financial Report (CAFR) will be posted on the City's website. Special Study Session Minutes -3- August 15, 2011 Mayor Pro Tern Sanger expressed the City Council's thanks to staff and the auditors for all of their work on the 2010 audit. The meeting adjourned at 7:26 p.m. NancyStroh, it Clerk Susan Sanger, Mayo Pro Tern