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HomeMy WebLinkAbout2008 06-02 CCM Joint Work Session with Financial Commission MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA JOINT WORK SESSION WITH FINANCIAL COMMISSION JUNE 2, 2008 CITY HALL COUNCIL CHAMBERS CALL TO ORDER The Brooklyn Center City Council met in Joint Work Session with the Financial Commission and was called to order by Mayor Tim Willson at 6:34 p.m. ROLL CALL Mayor Tim Willson and Councilmembers Kay Lasman, Mary O'Connor, Dan Ryan, and Mark Yelich. Also present: City Manager Curt Boganey, Fiscal and Support Services Director Dan Jordet, and Deputy City Clerk Maria Rosenbaum. Others present were Financial Commissioners Philip Berglin, Todd Boster, Susan Shogren Smith (arrived at 6:37 p.m.), and Rex Newman. Financial Commissioner Mark Nemec was absent and excused. COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR 2007 AUDITOR'S OPINION, SPECIAL PURPOSE AUDIT REPORTS, MANAGEMENT REPORT MALLOY, MONTAGUE, KARNOWSKI RADOSOVICH, LTD. Fiscal and Support Services Director Dan Jordet discussed that the audit was off to a late start this year due to Request for Proposals for auditing services. Malloy, Montague, Karnowski Radosovich, Ltd. had been selected for the City's Auditing Firm and Jim Eicthen was introduced to review the City's Management Report and Special Purpose Audit Report. Mr. Eichten informed that the City in general received a clean opinion and summarized the Management Report and Special Purpose Audit Report as follows: Understanding the Auditor's Responsibility Planned Scope and Timing of the Audit Audit Opinion and Findings As part of the audit's findings, there were seven matters involving the City's internal control over financial reporting that were considered to be significant deficiencies but not material weaknesses. 06/02/08 -1- i Mr. Eichten stated that if this audit would have been done last year without the new auditing standards, there would have been only one finding; and that finding is the lack of established procedures over the verification of utility meter readings. Mr. Eichten continued summarizing the seven internal control findings as follows: 2007 -1 Utilitv Billing Segregation of Duties The City should continue to look at ways to segregate the utility billing duties to satisfy all internal control recommendations. 2007 -2 Pavroll Segregation of Duties This finding has a need for compensated controls due to software issues. There is no disagreement in principle with the audit finding and the City should consider further segregation of payroll duties to satisfy all internal control recommendations. 2007 -3 Lack of Management Approval Three areas within the accounting and reporting internal accounting control systems have been found to be lacking management approval and they are as follows: Bank reconciliations are reconciled monthly; however, these reconciliations are not approved by an appropriate level of management. The appropriate level of management reviews supporting documentation or check registers for all accounts payable transactions; however, typically this is not done until after the checks have been signed and mailed. There is no approval of payroll by management, nor are payroll registers reviewed throughout the year. The allocation of payroll costs should also be monitored and approved by Department Heads on a periodic basis. There is no disagreement with the audit finding and the City is aware of the lack of approval from management and is currently working to strengthen the management approval process. 2007 -4 Inadeauate Documentation of the Components of Internal Controls The City does not have formal written accounting and financial reporting procedures. The effect is that implied or verbal accounting procedures are subject to greater variation of its meaning and the likelihood of misinterpretation increases when accounting procedures are not written. The City does, however, have a well written Accounting Policy and correcting this finding should be easy to complete. 06/02/08 -2- 2007 -5 Utilitv Billine Svstem This finding is one that has carried over and the City is currently in the process of developing plans to design, build, finance, and install an automated utility billing system which would eliminate this finding. 2007 -6 Capital Asset Internal Controls This finding is unusual because of the number of capital assets for storm drainage in that the City was including the cost of capital assets of the storm drainage system within its governmental activities instead of appropriately recording these capital assets in the business- type activities. There was no disagreement with this audit finding; however, it is recommended that the City improve controls over the processing of capital assets to ensure future adjustments to prior periods are not required. 2007 -7 Other Post- Emplovment Benefits There was no disagreement with this finding; however, this finding is just the beginning of a more complex issue. The City needs to improve documentation of the eligibility of retirees for other post employment benefits for those that currently qualify for this benefit. The City also needs to consider clarifying the language in the City Council resolutions to make it less difficult to determine eligibility for those benefits for current employees. In 2008, the City will need to implement GASB Statement No. 45 which will be phased in over a three -year period and this will help with actual liability. Mr. Eichten continued the summarization of the Management Report and discussed that there were three sensitive factors requiring estimates affecting the financial statements. Those three were depreciation, other post employment health benefit liabilities, and land held for resale. Management expects any differences between estimates and actual amounts of these estimates to be insignificant. Management procedures and underlying supporting documentation was reviewed and tested and the accounting estimates and management judgments appeared to consider all significant factors and resulted in appropriate accounting recognition. Mr. Eichten discussed the new auditing standards and informed that the new model involves a much more thorough review, analysis, and documentation of the City's environment, systems, procedures, and internal controls. Mr. Eichten informed that pages four through seventeen of the Management Report were financial results and pointed out benchmarks for Market Values, Tax Capacity, Governmental Funds Revenue per Capita, General Fund Balance and Expenditures, Operating Revenue and Income (Loss), and Statement of Net Assets. 06/02/08 -3- Mr. Eichten wrapped up his summarization informing that the City had no findings of Minnesota Legal Compliance and that this is a very positive point; the City had done an exceptional job on their Financial Report; and that he wished to express thanks for having this report done when arriving to complete the audit. The Council and Financial Commissioners discussed Tax Increment Financing and formulas used for Tax Increment Financing. ADJOURNMENT Councilmember Lasman moved and Councilmember Ryan seconded to adjourn the Work Session at 8:10 p.m. Motion passed unanimously. i 06/02/08 -4- i STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss. Certification of Minutes CITY OF BROOKLYN CENTER) The undersigned, being the duly qualified and appointed City Clerk of the City of Brooklyn Center, Minnesota, certifies: 1. That attached hereto is a full, true, and complete transcript of the minutes of a Special Session of the City Council of the City of Brooklyn Center held on June 2, 2008. 2. That said meeting was held pursuant to due call and notice thereof and was duly held at Brooklyn Center City Hall. 3. That the City Council adopted said minutes at its June 23, 2008, Regular Session. r 7 City Clerk Mayor 06/02/08 -5-