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Home My Public Portal About20070611AuditMinutes.pdfCity of TYBEE ISLAND Audit Committee Meeting Monday, June 11, 2007 4:00 PM Tybee Old School – Room 7 MINUTES Attendance: John Major, Freda Rutherford, David Birdwell, Jim Anderson, Sam Adams Guests: John Redmond John Major called the meeting to order at 4:01 PM. There was a motion by Sam, second by Jim, to approve the minutes from the May 21st meeting. All approved. John Major informed the AC that Diane Schleicher requested that our minutes be put on the city web site. The group discussed that going back to the beginning would be cumbersome. Anyone is entitled to look at the oldest minutes but beginning with January 07 for the web site seemed more practical. Therefore, the AC is proposing that John Major forward minutes from meetings beginning with January 2007 to Diane and that subsequent meetings be posted by Vivian. A discussion of Muni Code followed regarding the shortcomings of the system in capturing old data. REVIEW OF AUDIT REPORT FROM INDEPENDENT AUDITORS John Major handed out an e-mail from Craig Moye, from our independent auditor, Mauldin and Jenkins, asking if we wanted a cost proposal for next year or if we wished to be provided with a letter of engagement. It was decided that we would request a cost proposal from Mauldin and Jenkins, reminding them that after three years experience, they should not have the same learning curve as they did initially. John Redmond said he would provide a list of other firms with which he is familiar and that together we would modify our last Request for Proposal and begin planning to shop the audit. John then turned the audit discussion over to John Redmond who proceeded to provide the AC with highlights from the audit report. He said the most important thing was that the auditors gave a clean opinion: “The financial statements present fairly, in all material respects, the respective financial position of the government activities, the business-type activities, and each major fund, and the aggregate remaining fund information of the City of Tybee Island as of December 31, 2006.” He then gave a financial summary: A) revenues increased by $2.2 million; B) expenses increased by $1.1 million; C) net assets increased by $3.4 million; D) total net assets of $18.2 million comprised of $10.2 million of unrestricted assets, which include $1.05 million in designated beach improvements; E) long-term debt increased $8.8 million, of which $7.13 million was used to purchase the campground and most of the remainder to fund the completion of the Butler Avenue water project. Redmond responded to Freda’s inquiry about the unrestricted funds for catastrophic events. He said that he thought there were enough unrestricted funds for the city to operate for six months in such an event. Redmond went on to say there were five issues of material non-compliance relating to the new financial reporting standards. These issues resulted in several audit adjustments considered material by the new standards (SAS 103 and SAS 112). Prior to the adoption of these new standards, materiality was determined relative to the aggregate of all funds combined. Under the new regulations, which were finalized in the last half of 2006, materiality for each fund is calculated separately. Redmond said the five findings would not have been material when measured against the old standard but will be corrected by management in subsequent periods. He said one finding in the previous year, regarding separation of duties was found to be corrected in 2006. Beginning in fiscal year 2007, SAS 104-111 will be effective which will result in an enhanced suite of risk assessment standards, require more in-depth field testing by independent auditors, and possible result in a more costly audit. Freda asked if staff had the capacity to keep up with the journal entries in this year. Redmond responded that he and staff are attending additional training in September and that he is confident that they can stay on top of journal entries for this year. The September seminar will help them to get up to speed on the SAS 104-111 rule changes. Redmond walked the AC through the five audit findings. Discussion followed on the presentation of the audit to the mayor and council on Thursday. It was agreed that John Major would make the audit report to Council and that John Redmond would participate as necessary. Sam asked about the 2-month cycle on water and sewer billing. Redmond said that there is a new system that will allow for remote meter reading. When implemented, the city will be able to go to monthly billings. There will be additional postage expenses, but a reduction in labor costs. An added benefit is that the system will allow leaks to be identified immediately. David pointed to page 9 of the Annual Audit Agenda regarding requirements of field testing internal controls. He asked what kind of review would need to occur. He added that we had never received a final report on the parking meter issue. Redmond addressed the parking meter problem first. He said the new parking meters will be much easier to monitor. John Major asked if they were hoping to totally phase out the old meters. David asked for Redmond to report on internal controls at a future meeting. Discussion followed on the “expert opinion” referenced by M & J that audit expense will go up 20%. In conclusion Redmond said that as an “outsider” he didn’t see anything serious in the audit findings. John Major asked for copies of SAS 104 – 111 and that Redmond would brief the committee on what the auditors will be looking at. Major then scheduled the next meeting for July 19th and said that by scheduling it late it will be a combined July-August meeting. REVIEW OF FINANCIAL STATEMENTS Redmond handed out Budget to Actual as of May 31, 2007. He pointed out the campground line that while we have spent 50% of the budget in five months he thinks we will be OK because revenues are accelerating. He said that he will consider revising the budget process to reflect seasonal variations rather then simply dividing it by 12 as it is the current practice. He explained that he and Diane have been working with Woody to launch a Host Worker Program. This will help the budget since such workers will provide labor at the campground in return for campsites. John Major commented the Law line item is 70% of budget. The AC reviewed and discussed other line items. REVIEW OF SECTION 2 OF GFOA PUBLICATION, “AUDIT COMMITTEES” Sam conducted his tutorial of the audit committee section of the GFOA publication. He noted that an audit committee must: 1) satisfy itself that management information is correct; 2) make sure that management reporting practices are objective and appoint an outside auditor; 3) even if the auditor says everything is OK the AC must form its own opinion; and 4) it must satisfactorily resolve problems found in the audit. Other key points were for ACs to focus the governing body on financials and to facilitate indirect communication between the governing body and the auditors. Major asked Sam to continue his tutorial at the next meeting by covering two more chapters. Sam agreed. DISCUSSION OF RFP FOR 07 AUDIT The committee discussed whether to extend the M & J contract or to issue an RFP. After discussion the committee decided to request a cost proposal for M & J and for Major and Redmond to update the RFP for issuance. ETHICS COMMITTEE REPORT Sue Off was not present but John Major said that the council approved the new ethics ordinance on the 2nd reading at their last meeting. Being no new or old business the committee adjourned at 5:45 PM. Respectfully submitted, Freda Rutherford, Secretary