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HomeMy WebLinkAbout2024.07.08 EDAM REGULAR SESSION7/8/24 -1- MINUTES OF THE PROCEEDINGS OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA REGULAR SESSION JULY 8, 2024 CITY HALL – COUNCIL CHAMBERS 1. CALL TO ORDER The Brooklyn Center Economic Development Authority (EDA) met in Regular Session called to order by President April Graves at 8:24 p.m. 2. ROLL CALL President April Graves and Commissioners Marquita Butler, Kris Lawrence-Anderson, Dan Jerzak, and Teneshia Kragness. Also present were City Manager Reggie Edwards, Director of Fiscal & Support Services Angela Holm, Director of Parks and Recreation Cordell Wiseman, Assistant City Manager/City Clerk Barb Suciu, Deputy City Clerk Shannon Pettit, and City Attorney Siobhan Tolar. DISCUSSION ON HERITAGE CENTER CATERER SITUATION Dr. Edwards introduced the item and invited Parks and Recreation Director Cordell Wiseman to continue the Staff presentation. Mr. Wiseman explained that a new General Manager had started in March 2024, and they had gone over the budget together. During the process, concerns with some invoicing came up. They reviewed the contract, and so did the city attorney. The contract revealed the city could not afford the agreement with FLIK for catering anymore. Mr. Wiseman pointed out that a number of measures have been put in place to avoid similar issues in the future. First, staff has added a step in the process for the general manager to sign off on the invoice before passing it along to the finance department. They will begin quarterly meetings regarding the budget with FLIK, which will give the city a better understanding of revenue and profits. Mr. Wiseman added a 60-day notice was sent to FLIK to terminate the contract. Therefore, the contract will end toward the beginning of September 2024. He is finalizing the Request for Proposals and will pass it along to legal for review. During the gap in catering, he has secured a caterer to handle events. 7/8/24 -2- Mr. Wiseman stated the Finance Department has reviewed some discrepancies in the invoices. They are prepared to take steps to recover the money. They hope to resolve the issue through conversations, but the Finance Department will consult with the City Attorney as needed. Finance Director Angela Holm pointed out during the last conversation with the EDA regarding the caterer that a large number was presented to the EDA, reflecting the overages FLIK owes to the city. FLIK is not supposed to exceed 70 percent of the cost of business in comparison to the catering revenue. The calculation was presented to FLIK, but they disagreed and offered an alternative calculation. Staff reconciled the numbers provided by FLIK and learned the internal calculations included information that shouldn't have been part of the consideration. Ms. Holm explained before 2020, a portion of the Heritage Center catering salaries could have been included in the calculation for the cost of business. However, the current contract only includes that assistance if FLIK were to ask for it specifically. Before 2020, it was more of an overhead cost to cover part-time employees and administrative efforts, and it amounted to $60,000. The catering Staff at the Heritage Center has increased. Ms. Holm noted once the expenses were removed, staff spoke with FLIK again with a new calculation. The new calculation is lower than the one previously reported to the EDA. The years 2022 and 2023 were within the 70 percent range. The new calculation from staff and the initial calculation from FLIK are much closer. It only different by a few thousand dollars. She anticipates a quick response from FLIK. Ms. Holm stated there was ultimately a breakdown in communication resulting in the discrepancy. The calculation was not provided during the transition. The Finance Department and the Heritage Center look forward to working more closely together in the future. President Graves noted it is encouraging that new lines of communication are being opened and that the discrepancy is much smaller than previously believed. Commissioner Lawrence-Anderson stated it would be important for contract negotiations be under the Finance Department and legal team. The financial contract professionals should be overseeing the process. She asked if the invoices were sent directly to the Finance Department. Ms. Holm stated that an electronic format was sent out to everyone. From there, the Finance Department codes them and moves them along in the process. If invoices are sent all over, then they may sit in someone's mailbox. Due to the volume of supporting documents for the FLIK invoices, it has been determined that the Heritage Center staff will work with FLIK to ensure there aren't any obvious errors before passing the invoices along to the Finance Department. Commissioner Lawrence-Anderson suggested the request from the Finance Department to receive all of the invoices directly should be a policy. 7/8/24 -3- President Graves asked if the city was conducting financial practices properly. She asked how new staff are being adequately onboarded to ensure consistency over time and that best practices are followed. Commissioner Lawrence-Anderson suggested Dr. Edwards meet with the Directors to reiterate the invoicing process. Commissioner Kragness stated her understanding from the previous meeting about catering was that the Finance Department received the invoices and paid them without additional review from the Heritage Center. She asked if the Finance Department was paying invoices without the proper receipts or other documentation. She asked how the leadership in the Finance Department didn't catch the error. Mr. Wiseman pointed out that the process requested by the Finance Department has always been followed. The change is to have more communication between the Heritage Center and the caterer. The invoices will be more closely reviewed. The Heritage Center didn't understand the contract due to inconsistency amongst the leadership. Commissioner Kragness stated there needs to be a better onboarding process for new employees and transitions. This mistake cost the city $300,000 because the contract was misunderstood. Commissioner Kragness asked what charges were being made over the 70 percent. Ms. Holm stated the cost of business was the consolidated amount of what they were charging, such as food, supplies, and staff time. 2020 and 2021 need to be considered in a different light financially because of the strain on hospitality. FLIK continued to have employees at the Heritage Center despite the lack of events, and the city is responsible for paying for some of its benefits. What FLIK was doing was around the 70 percent mark. When staffing time at the Heritage Center was added, it exceeded 70 percent. Commissioner Kragness noted that when the city's revenues were lower due to the pandemic, FLIK continued to send their employees to the Heritage Center. It seems as though FLIK overcharged and took advantage of the contract. She asked why the city would consider having another contract with them. Mr. Wiseman stated he doesn't believe he has the right to tell any caterer they cannot apply for an RFP. Commissioner Lawrence-Anderson noted her agreement with Commissioner Kragness. However, she doesn't want a lower-quality caterer to take over the role. She asked if Ms. Holm was involved in the entire contract process. Ms. Holm stated she wasn't involved in the development of pre-existing contracts. However, she has been promoting collaboration across Departments so the Finance Department can provide input on financial contracts. It is also helpful for the Finance Department to understand their reporting requirements. 7/8/24 -4- Commissioner Lawrence-Anderson asked the EDA if there was a consensus to recommend that the Finance Department be involved in contract development across departments. Commissioner Kragness stated the Finance Department doesn't need to be part of the negotiation. However, they must be aware of the reporting requirements and financial implications. Mr. Wiseman pointed out several eyes on contracts before approval, such as those for finance, legal, and city management. It is a similar process to the RFP. President Graves acknowledged Ms. Holm had to do some clean-up for the city's financials upon her arrival. She suggested that the Finance Department host training for other employees regarding contracts, invoices, and the like. Commissioner commended the staff for finding the error and creating additional steps to avoid similar problems. Commissioner Jerzak stated he doesn't want to micromanage finance policies. However, it would benefit finance staff to review contracts before they are finalized. Commissioner Jerzak pointed out that the EDA was presented with inaccurate information regarding the contract and discrepancies at the last meeting. The information from staff influenced the EDA's decision to terminate the contract with FLIK. The information must be correct. He thanked staff for acknowledging their mistake and noted the importance of accountability. Commissioner Jerzak stated the Heritage Center needs to be profitable. He requested regular updates on the profits. It is not the taxpayer's role to offset wedding and corporate event costs. Commissioner Jerzak reiterated the importance of collaboration across Departments, especially for the Finance Department to review financial contracts as they are ultimately responsible for the audits. Commissioner Kragness noted that if FLIK doesn't agree with the numbers prepared by staff, staff should be prepared with the numbers and point out that FLIK has been overcharging the city since the beginning of the contract. Ms. Holm stated the current contract was reviewed. However, there were previous contracts with other stipulations. Commissioner Kragness' suggestion would require reviewing old contracts. Commissioner Kragness stated that if the city will invest money in the legal route to recoup anything, then all financial considerations need to be explored. Commissioner Jerzak stated FLIK does have the right to re-apply for the contract. However, it should be stipulated that they pay up on any discrepancies before being awarded another contract. Mr. Wiseman stated he is looking forward to move on and learn from this relationship. We are going to have new processes. He assured everything needs to be reconciled and he didn’t believe that within 60 days the trust can be established. 7/8/24 -5- 3. APPROVAL OF AGENDA AND CONSENT AGENDA Commissioner Lawrence-Anderson moved, and Commissioner Butler seconded to approve the Agenda and Consent Agenda, and the following items were approved: 3a. APPROVAL OF MINUTES 1. June 24, 2024 3b. DISCUSSION ON HERITAGE CENTER CATERER SITUATION Motion passed unanimously. 4. COMMISSION CONSIDERATION ITEMS None. 5. ADJOURNMENT President Graves moved, and Commissioner Lawrence-Anderson seconded adjournment of the Economic Development Authority meeting at 9:08 p.m. Motion passed unanimously.