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HomeMy WebLinkAbout2011-06-21 MinutesMinutes of the June 21, 2011 Audit Committee Meeting The following audit committee members were present: Tony Uth, Jr. Judy Jacobs Adam Motherwell Alderwoman Adella Gray The following City staff members were present: Paul Becker, Finance and Internal Services Director Vicki Deaton, Internal Auditor Marsha Hertweck, Accounting Director The following BKD (external auditor) staff members were present: Andrew Richards, Senior Manager Rebecca Riley, Senior Auditor Approval of Minutes: The minutes of the February 25, 2011 Audit Committee Meeting were approved by all audit committee members. Draft minutes from this meeting and the February 25, 2011 final minutes will be forwarded to the City Council to keep them informed of committee proceedings. Internal Audit Update: ■ Time and Attendance Software — the Parks Department is live on the system as of 6/13/11. They are the first large department to have all of their employees using only the system — no paper. More than half of the City's employees are using the system now for timekeeping. (Uniform Police and Fire represent the largest groups of employees left to be implemented.) Implementation is scheduled to be complete in about 3 months. ■ Solid Waste Hauler Vendor Audits — the report was issued on 5/17/11. At the request of the Utilities Director, I attended the 6/14/11 Water and Sewer Committee Meeting and summarized the findings of the audit. The Utilities Director is analyzing and documenting options for the Water and Sewer Committee to consider. The options might be 1) to continue with multiple hauler agreements, 2) to have the City provide all of the services which the haulers now provide, or 3) to request proposals to have only one solid waste hauler besides the City to perform the services. The Utilities Director plans to review the options with the committee at their next meeting. Adella Gray, who is also a member of the Water and Sewer Committee, said they would have to carefully consider the financial implications of having the City provide all hauling services. Paul Becker said that we may also need to have a solid waste rate study performed. There was discussion about monitoring the haulers if we continue with the agreements as they are now. ■ Accounts Receivable Collections — the final report was issued on 2/22/11. ■ Police Department Property and Evidence Control Audit — the final report was issued on 3/25/11. ■ Authority of City Employees to Contract with the City — the final report was issued on 5/27/11. ■ General Employees Retirement Savings Plan & 457 Plan Reconciliation — the report is in draft and HR is awaiting a response from the plan trustee regarding updating the status of participants in their records. ■ The Division of Legislative Audit reviewed the City's court accounting procedures as of 11/2/10. They did not find any areas "in which the Fayetteville District Court Clerk and Police Department were lacking good internal controls and the basic required accounting records," but they did make a few recommendations to the District Court Clerk, Judge and Police Chief. Both the District Court Judge and Police Chief responded to the recommendations at the end of March, 2011. Based upon the review, the Legislative Joint Auditing Committee issued an exemption from certain accounting system code requirements, authorizing alternative procedures. ■ Arkansas Act 1174, An Act Regarding the Arkansas District Courts Accounting Law, and for Other Purposes, was passed by the 88th General Assembly of the State of Arkansas, to be effective on 1/1/12. When this act takes effect, the Fayetteville District Court will only need exemption for a few procedures. ■ The Lean Government pilot project that focuses on the Billing and Collections division processes of new service accounts, service transfers, and service disconnects is underway. The first introductory and training event was held on 6/17/11. More events will be held during June and July with both the team and an outside peer panel. ■ FEMA declared disaster — The City of Fayetteville is eligible for public assistance related to FEMA 1975 -DR -Arkansas. The disaster was declared due to severe storms. The incident period is from 4/23/11 through 6/3/11. The City has compiled a list of damages to be considered for reimbursement from FEMA and the State of Arkansas. Damages are primarily to roadways, bridges, and trails. Paul Becker has estimated the City damages at approximately $1.2 million. FEMA reimburses for eligible expenses at 75%, the State of Arkansas at 12.5%, with the remaining 12.5% being funded by the City. Internal Audit will be working with Peggy Bell, Contract and Grant Accountant, to facilitate the process with FEMA and coordinate grant documentation. Presentation of 2010 draft audit report by BKD: Rebecca Riley, Senior Auditor and In -Charge Auditor for the City's 2010 audit, led the committee through the basic layout of the Comprehensive Annual Financial Report (CAFR). She talked briefly about the introductory section, then progressed to the financial section. The financial section includes the Independent Accountant's Report on Financial Statements and Supplementary Information, the Management's Discussion and Analysis, the Basic Financial Statements, and the Combining and Individual Fund Statements and Schedules. An unqualified opinion was issued on the financial statements and supplementary information. The committee asked several questions related to the budget to actual comparison financial statements. Paul Becker explained some reasons for differences between the original budgeted amounts, the final budgeted amounts, and the actual expenditures. There were also several questions about the level of public safety funding in relation to other City service funding, and the level of funding for street repairs and maintenance. Rebecca briefly talked about the next section of the CAFR — the statistical section, which provides up to 10 years of comparative information related to the City's financial health. The subsequent section of the CAFR is another required accountant's report, the Independent Accountants' Report on Compliance with Arkansas State Requirements. BKD opined that the City complied, in all material respects, with various acts and statutes pertaining to accounting, courts, purchasing, cash, and investments. Rebecca mentioned the receipt of an exemption letter by the City for certain accounting system code requirements from the Legislative Joint Auditing Committee. The City performs certain accounting, ticketing, and court procedures in a more technologically advanced manner than allowed by Arkansas statutes, so an exemption letter was obtained. The final section of the CAFR is the single audit section, which reports on compliance with requirements of major federal program monies received by the City. BKD issued the Independent Accountants' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards and the Independent Accountants' Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133. There were no deficiencies or findings noted. The final item that Rebecca brought to the attention of the committee was the communication concerning internal control over financial reporting in the Mayor, Council, and Audit Committee Letter to be incorporated with the audit of the 2010 financial statements. The letter talks about the audit scope and results, significant accounting policies and practices, audit adjustments, and accounting principles. No significant issues were reported. Rebecca discussed the immaterial and unrecorded audit adjustments proposed by BKD. One adjustment was related to other post employment benefits and one was related to the addition of a fixed asset to the general ledger. One comment was made in the letter as a constructive suggestion for modifying and improving accounting controls and financial and administrative practices and procedures. The comment was that the City should continue to consider its options to address the unfunded pension obligations associated with the original fire and police defined benefit plans. Paul Becker told the committee, based on the City Attorney's interpretation of state law, management believes that if these plans were to become insolvent, the City would not be legally obligated to fund any deficiency. The meeting was adjourned.