Committee Minutes

Minutes of the Grand Forks City Council/Finance-Development
Standby Committee Wednesday, August 1, 2007 - 12:00 Noon___

The Finance/Development Standby Committee met on Wednesday, August 1, 2007 at 4:00 p.m. in Room A101 in City Hall with Committee Chair Christensen presiding. Present at roll call were Christensen, Brooks.

Also present were John Schmisek, Saroj Jerath, Candi Stjern, Rick Duquette, Chief Packett, Joe Martin and Janelle Mulroy of Brady Martz & Associates, P.C.

2.1 The Comprehensive Annual Financial Report of the City of Grand Forks for the year ended December 31, 2006, and the Independent Auditor's Report.
Joe Martin of Brady Martz Associates presented brief overview - that there are three documents that they will touch on today - the CAFR and two smaller documents.

The independent auditor's reporting requirements for Single Audit Act, which includes their letters stating that they did the audit in accordance with the Single Audit Act, that they have to test the federal programs for compliance to make sure that they are following the laws and regulations, and that if they have any findings in those tests; this is a non-compliance that are material to those programs and need to report those in this report; that there were no material instances of non-compliance or any internal control issues as relates to federal programs, that this is a clean report on the federal programs. He noted that starting on page 5 thru page 8 is the schedule of all the federal money that the City received - about $12.8 million of federal dollars. There were no questions by committee.

The second document/report is the Management Report and that there are four observations that came to their attention during the audit and want to bring those to the committee's attention:

1) Municipal Court - it was noted that dual signatures are required on all checks, one is live and one is done with the signature stamp but one individual has control over both of those and that if requiring dual signatures, need to have that stamp with someone else, if the same person has control over it, don't have dual signatures.

2) Library - credit card statement - that when purchasing things with credit cards they were paying from the credit card statement but weren't getting the detailed invoices attached, and that is the control - recommend reminding the Library that they need to do that.

3) Urban Development - there was an escrow account that was taken out at Bremer Bank during the year and there was a misunderstanding or something between Urban Development and Bremer but the money wasn't collateralized - not proper collateral on those funds and noted that during the audit visited with Saroj as soon as they found out about it and she called the Bank and they had it taken care of right away.

4) Urban Development - Intro controls at Urban Development reminding them that there are some leases and debt agreements that happen and that someone needs to be in charge of reviewing those, monitoring them and communicating with City finance to make sure that they are aware so doesn't wait until the end of the year and these things show up - should get them during the year as they happen so know if it is just an operating lease, capital lease, and these debt agreements are reported properly on the City's books. They are recommending that as those things come up that it is communicated to City finance.

John Schmisek, city auditor, reported they had issues at Municipal Court, they are refunding bonds to individuals immediately; total amount of account is $3,000, and finance audits that account. Chairman Christensen stated he understands the concern and asked why they need two signatures; and it was recommended to simply change controls as long as only handle $3,000.

Chairman Christensen stated he would like to have Urban Development here re. items 3 and 4. Mr. Schmisek stated they have talked with Urban esp. re. item 3 and that if Urban doesn't send that info. to finance, don't know about it, and would like recommendation on Monday. Brooks noted that normally have Management's response to recommendations, and asked if could also have that on Monday night so know that action is being taken.

Mr. Martin presented matter of CAFR. He also handed out info. from Office of State Auditor of State of MN re. amount of fund balance, a statement of position showing what is adequate to have in the General and Special Revenue Funds and they are recommending having 35 to 50% of fund operating revenues or no less than five months of operating expenditures which is about 41.7%. Chairman Christensen stated this isn't material, that this is for MN and no application to the City of Grand Forks. Mr. Martin stated information is just a guideline and showing what others have out there, was available and would share it with the committee. Brooks stated we shouldn't compare MN with ND but gives us a guideline and when look at how many months, that is pertinent, need to look at cash flow and items like that in terms of what want in your reserves but is still good information since we don't have anything from the State Auditor of ND. It was noted that the State Auditor of MN's role is primarily to do these types of things, policies, procedures, etc. but in ND they are auditing the state agencies and actually doing more audits. Mr. Martin stated it is a policy decision and put out as a guideline, and is not part of their role as auditors. Chairman Christensen stated that according to page 3 of your report, we have 25% of the total General Fund in reserves. Mr. Schmisek stated they would send info. to committee.

Mr. Martin stated on page 1 and page 2, is their opinion on the financial statements, and that the financial statements are put together by management and are the responsibility of management, and is their job as auditors to come in ands express opinion whether or not the financial statements are presented fairly and in accordance with general accepted accounting principals, and that they do have a clean opinion, unqualified opinion saying that they are fairly presented.

He stated as an overview on page 3 management's discussion and analysis and is great place to find highlights of the report - that from pages 3 to 19 takes all the details following. He stated he would walk through the report and review any details they may want.

There was discussion re. transfers in and out, repayment, etc. and Christensen stated that he would ask in the future to have a summary put together that tells the amount of funds owed by one department to another department. Schmisek stated they would make a note that is information you want in the report; and also reviewed advances for the committee.

Chairman Christensen asked if there was anything management or staff wanted to give them. Schmisek stated the things committee has asked about, will work up a fund balance history and get that information to them and will include the schedule of receivables of funds and the other debt service schedule for the other issues.

Chairman Christensen presented questions which were not pertinent to the audit but more to the budgeting - Mr. Schmisek and Ms. Jerath reported they will present detailed information prior to Monday's council meeting.

Chairman Christensen thanked Mr. Martian and Ms. Mullroy for their report. Mr. Martin noted that he will be out of town on Monday and if have any questions, come back to another meeting or how they would want to do that.

It was moved by Brooks and Christensen to accept the report and the CAFR, and recommends finance staff to follow up on the items in management letter with the appropriate departments, and authorize finance department to forward audit report it to the state auditor's office and make final payment to the audit firm upon acceptance of the audit by the state auditor. Motion carried.

Christensen asked what comprises the Miscellaneous.- Schmisek stated catch all and one of the biggest expenditures is the line item for electricity for street lighting, traffic signals, also includes where they budget and start with market survey where tells what wage increase looks like, and since they don't know how it is going to get allocated because based on pay for performance and lump that dollar amount of increase in there and how pay raises are and move it to the different departments; and also includes transfer to E9121 - PSAP that covers expenses for fire, police for radio costs. Christensen asked if they could also include that in the detailed report. There was some discussion re fees paid to E911 (City, County and Altru pay for radio service). It was noted they are two separate areas, Mr. Morken administers both. Mr. Schmisek stated they had talked about adding on Police Building before jail situation, that County said could do that without a mill and then the jail situation happened - Brooks is on the E911 Board. - should step back and look at that money to see what can be done to give PSAP room over there, and will be seeing that project.

Brooks stated he had several items he would like looked at - average year's service of employees, average salary including longevity, and leave pay.

The meeting adjourned at 1:00 p.m.

Alice Fontaine
City Clerk