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Home My Public Portal About20070409AuditMinutes.pdfCity of TYBEE ISLAND Audit Committee Meeting Monday, April 7, 2007 4:00 PM Tybee Old School – Room 7 MINUTES Attendance: John Major, Freda Rutherford, Sue Off, David Birdwell, Jim Anderson, Sam Adams Guests: Jan Fox, Kathryn Williams John Major called the meeting to order at 4:05 PM. There was a motion by Jim, second by Sam, to approve the minutes from the March 19th Auditor Entrance Meeting as presented. All approved. There was a motion by Jim, second by Sue to approve the minutes from the March 19th Audit Committee meeting as presented. All approved. There was a motion by Jim, second by John, to approve the minutes from the Auditor Exit Conference as presented. Discussion of the independent audit ensued. Effective for fiscal year 2006, Statements of Accounting Standards (SAS) 103 and 112 were implemented. The new standards re-defined thresholds of materiality so that each fund is now evaluated individually and those funds with audit adjustments equal to or greater than 20% of the fund value were identified and reported. As a result of these changes in standards, our auditors identified a number of such incidents of materiality and an audit finding was written. A second finding was likewise a result of the SAS changes. Sue asked if Tybee was aware of the new regulations. She said we pay the auditors enough so that they should communicate the new rules. Jan said she while she had been aware of SAS 112 and had attended workshops on the requirement, the city had not fully anticipated the impact of the changes. John said that the auditors had stated that for this first year of implementation, many municipalities would be in a similar situation because of the changes. Jan said that it is not unusual for communications from the auditor or from the State to go to the elected officials. John asked that any communications dealing with changes in regulations be copied to the audit committee. John handed out the Auditor’s Government Materiality Limit Determination Memo which had been provided by the Auditor and explained the thresholds for materiality. Jan reviewed the chart and explained each column. John handed out the four slides from a presentation downloaded from the internet explaining the SAS changes. He noted that the document is dated July 25, 2006 and was effective immediately. Sam noted that the auditor didn’t get the information until half-way through the year to be audited. John pointed out that SAS 104-111, which is effective in 2007, is described as the most far-reaching changes in standards in 20 years. Jan commented that the new standards will require considerably more work on the part of the municipality – financial documents previously prepared by the auditor will now be required to be done by staff, while the auditor will be required to do significantly more field work and testing than before. John said he wasn’t pleased with the auditors’ response to our list of concerns. A number of issues had been raised in our initial telephone conference on November 1, 2006, covered in emails prior to the audit and reiterated at the opening meeting. Jan clarified that while not much was said in the exit meeting about these issues, she felt that the auditors had done more thorough “digging”, including in these areas, than they had in the past, and that she felt they had gone deep enough to have identified problems had they been there. Freda said that in her experience that for a law to be enforced you must have at least 95% compliance. If most communities cannot comply the audit issues will not be meaningful to the state, or anyone. We need to focus on findings that we think are important. John indicated that he had expected to receive a draft report at the conclusion of the audit. Jan said she has a draft trial balance but not an audit report, and that the trial balance had been her understanding. Sam asked if the auditors were looking for fraud in the new requirements. Jan said no – compliance. John asked how many staff had accounting degrees; Jan responded zero. She said only the CFO position requires a degree. Jan said we are competitive on pay. She said that the implementation of the new regulations will increase the importance of having an internal audit function. John said that with SAS 104 – 111 there will be a greater emphasis on testing and a lot of field work. According to our auditors, the new regulations can be expected to increase. As a final comment on the audit, John said that the exit meeting should not take place until the conclusion of on-site auditing activities. All approved the motion to accept the Exit Conference minutes. Kathryn informed the committee that David’s reappointment is on the agenda for the next council meeting. John raised the complaint that Freda had received about the ceramic center, i.e. that a city building was being used for a private purpose. Freda asked about the auditor’s comments of his understanding that $6,000 had been budgeted for the purchase of supplies and that all citizens could use the center. Jan said the Tybee Arts Association had received $3,000 for the Tybee Turtle and $3,000 for an arts show but that the ceramic center gets no funds from the city. Freda said she objected to the use of a city facility and utilities for a private group but future use of the facility is up to the council. John said that the issue had been reported to the City Manager and that she was pursuing it. Kathryn asked about bids for dune cross-overs. Jan said the bids could not be evaluated because there were no drawings. John asked about what happened at W & S. Jan said the director did not survive the probationary period. John reported that the interviews for the new CFO are moving forward. Second interviews are this week. John handed out the “Elected Officials Guide to Audit Committees” developed by the Government Finance Officers Association. He proposed that we take a section each month. Sam Adams offered to lead discussion on Section 1 for May. John said that, per the guide’s recommendation, he wants to start reviewing the monthly and quarterly budget vs. actual that are sent to the council. Jan said she would ensure that the committee received whatever updates the Council is given. Ethics Committee Report: Sue reported that the ordinance is moving along. The committee gave it to the City Attorney for his review and putting in a legal format. It is scheduled for a first reading at the April 26th council meeting. John asked if the existing committee will function as the ethics committee. Sue said no there is an appointment procedure in the ordinance if adopted. Sam asked that if the council cannot delegate the responsibility for hearing complaints how will they function? Sue said they will be quasi-judicial and will have the power to investigate and recommend action to council. She also said she had researched who was covered and said it is all city employees including judges. AUDIT RFP John stated that the current three year audit contract with Mauldin and Jenkins expires at the conclusion of the 2006 audit. Under the terms of the present agreement, the contract may be extended for two years, if both the City and the Auditor agree to terms, conditions and price. John suggested that the committee move ahead and begin a draft RFP. Freda said she would rather negotiate with Mauldin and Jenkins first to see if we can reach an agreement. John stated that since we had been put on notice that the price with our current auditor is going up due to new requirements, we need to be prepared in the event we do not reach acceptable terms, and to confirm that the terms of the extension are competitive. Jan suggested the committee look at the representation letter from M & J. Jan said if we can get agreement on conditions and price we could continue with M & J and that there is a great deal of benefit from dealing with an auditor who has been through the learning curve. Old Business: David asked if the community organizations are in compliance with their contracts. Jan said they are. Jan said audited financial statements are available at the city web site under the Finance Department page. New Business: None The meeting was adjourned at 5:35 PM. Respectfully submitted, Freda Rutherford, Secretary