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Minutes/Finance/Development Standby Committee
Wednesday, July 28, 2004 - 11:15 a.m.___________

Members present: Christensen, Hamerlik.
Also present were: John Schmisek, Saroj Jerath, Candi Stjern; Joe Martin. Ron Johnke and Janelle Mulroy of Brady, Martz & Associates, P.C.

1. 2003 Audit Report.
Joe Martin presented short listing of items they would like to review, and that council would receive copies of the CAFR for 2003 and copies of the Management Report and Schedule of Federal Awards that includes two letters - letter on governmental auditing standards and letter on single audit testing in accordance with OMB Circular A-133, that they are required to perform tests on the larger federal programs and if they have instances of non-compliance, they need to report those in those letters, but did not have any instances of non-compliance.

He reported that this is the first year that the GASB Statement 34 was implemented and that this report is quite different than previous reports, and explained what has changed and will review certain sections. He noted the first section is the introductory section which includes the letter of transmittal from the finance department explaining some of the things that happened this past year as to how everything is set up and reported economic condition outlook, accounting systems and acknowledgements; and Management's Discussion and Analysis.

He stated the financial section includes their opinion on the financial statements and their opinion is an unqualified opinion which is the best opinion you can have, clean opinion; and that the City adopted GASB Statement 34 during the year. That pages 3 to 17 are the management's discussion analysis and this is designed to put into words what happened during the year, takes information behind this and summarizes and gives financial high-lights and overview of the financial statements, and explains why better or worse than what budgeted, gives changes in assets, graphs showing expenses vs. program revenues in governmental activities and business type activities. He stated this is the part they should really look at, gives an overview of what has happened.

He explained the new format of the GASB Statement 34.

He noted there was a breakout of the Alerus Center, Exhibit 6, page 28. Christensen stated it would be important for someone to put together something that shows source and application of funds. Hamerlik stated there are two objectives, one is communicating with the public and that this is a governmental requirement. Need to understand how to read.

Mr. Martin stated the notes to the financial statement are from pages 37 through 78; next section, combining statements, from pages 79 through 146 are detailed statements; and detailed schedules that detail out the capital assets and the debt, pages 147 through 168; and statistical information in the back, on taxes, principal taxpayers. He stated if they had any questions to call his office.

Management Report: He stated they had several items where they did their internal control reviews, some issues and the one department with the most concerns was Municipal Court, they do things a little differently there and are recommending that they work with the finance department, put together a flow chart on how they do things, and need to look at their procedures and work with finance department to get procedures that are easy to understand, and this is part of the new SAS 99 and finance department agrees that they need to look at procedures. He stated first comment was on the payroll system to make sure that the department heads as it is their responsibility to notify HR as there could be time lag where someone could get paid after already terminated and better way of tracking that. He stated there were several comments on the Alerus Center, as they have a charge account at DeMers Amoco for refueling vehicles and their recommendation is that it might be more advantageous to use the central garage. He noted that there are several people at the Alerus who have credit cards and not a lot of controls. He noted that journal entries at the Alerus, and recommending for better segregation of duties. He noted last comment is new bank law that this going to be effective October 28, 2004, Check 21 Act, and that any bank in the federal reserve system is going to have the ability to substitute or take the paper check out and put electronic check in and at that time, that check will clear right away, and eliminate the flow time and clear the bank, and as people not getting paper copies of the checks only images front and back, but won't even have the ability to get the paper check because won't know which bank will have that. He stated that the City has good procedures but to let you know that is out there to continue your good procedures because as part of this there is a 40-day protest period, and have to make sure that you reconcile the banks statements timely and even if the bank makes an error, have to notify them within those 40 days.

He reported on the audit committee letter and if there are any disagreements with management or any major adjustments that needed to be made, they would have communicated that long before this, and this is standard issue stating they didn't have any of those issues.

It was moved by Hamerlik and seconded by Christensen to accept the report and that the appropriate departments follow-up on the recommendations of the items in the management letter, and that the recommendations be implemented by October 1, 2004.

The meeting adjourned.

Alice Fontaine
City Clerk