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HomeMy Public PortalAbout20080214AuditMinutes.pdfCity of TYBEE ISLAND Audit Committee Meeting Monday, February 11, 2008 4:00 PM Tybee Old School – Room 7 MINUTES Member Attendance: John Major, Sam Adams, Freda Rutherford, Jim Anderson, & Sue Off Council Liaison: Dick Smith Staff: John Redmond Guest: Bill Blakey John Major called the meeting to order at 4:05 PM. Sue Off motioned to approve the minutes from the January 14, 2008 meeting, Sam Adams seconded. All approved. BUDGET - CONSIDER RECOMMENDING SOPs  Process Discussion: John opened the discussion by providing background. He said that the city manager asked members of the AC to assist on a special project. He then asked Sue to bring the committee up to date on what Diane had asked she and David to review. Sue said she asked them to review the „08 budget in preparation for the council budget workshop. Both David and she reviewed at home and David gave Sue his notes to meet with Diane. They had been asked to look for anomalies. Sue said she and David picked up the same things on their review, i.e. projections on income and expenses. John Redmond described the budget process. He said that he compiled the overall budget from those submitted by department heads., then met with them to review. After his review Diane also met with department heads. Sue said she was surprised by the lack of direction given to the CFO and department heads in goals and objectives for the city. Glaring examples were salaries, benefits and particularly retirement accounts which jumped 30- 40%. Also the water meter fees were based upon projected revenues that had not yet been approved by council. She recommended that the Audit Committee be more involved in the budget development process. She further recommended an internal report for the completed budget that displays a percentage increase/decrease. John Major reviewed the Audit Committee scope with the committee. Freda asked whether a budget narrative would be useful. It would help reviewers understand the assumptions and would serve to help departments keep track of their assumptions. Sue said that Diane and John Redmond need to give departments direction on economic assumptions. John Redmond said he and Diane went through Sue‟s and David‟s recommendations, along with other changes, and made some amendments which will be presented to council members on Wednesday at a budget workshop. Sue recommended a procedure for budget development. John Major asked if Sue and Freda would work on developing some ideas. Sue suggested that the request should come from the City Manager or council per our ordinance. Sam asked if the City Manager was delegating this important function to the AC though it would seem to be a very important part of the CM‟s job. Any budget begins with a set of educated assumptions which are then converted to revenue and expense. These assumptions must also include “big “ picture” assumptions to the extent that they can be known. A change of the makeup of the elected body often causes a change in certain assumptions. John Major said he thought Diane just wanted another review. He added that we need to stay focused on process rather than product because we are responsible for the audit. Sue said she didn‟t think the budget should have ever been presented with unanswered questions. John Major said that there could have been some problems because Diane was holding down both finance and zoning for a good portion of the year. John Redmond didn‟t come on board until May 21st and Brannyn after that.  Budget Adjustments: Freda asked Redmond if budget adjustments could be done in real time. She said that the „06 budget was adjusted as late as March and it looked like the „07 budget would also require very late adjustments. She supported Sue in the recommendations for the development of SOPs for the entire budget and budget adjustment process. Major asked Redmond if department heads had to explain deviations? Redmond said that they get reports but do not have a review process. UPDATE ON FINANCIAL STATEMENTS, John Redmond passed out the December 2007 balance sheets and said that the situation was a little better than it looked last month. The shortfall in the general fund is about $45,000 He also handed out the „08 budget and walked the committee through the adjustments. He explained plans to finance projects through GIFA. Major asked about the deficits in revenue for the enterprise funds. Redmond said they will still run a deficit because we are not charging the actual cost of services. He added that he city has the engineers reviewing the water and sewer rates and a recommendation will be forthcoming. Q & As followed. Redmond said a step and COLA increase raises salaries 4.8%; pensions increased 14% because of under funding; 20% increase in health insurance was budgeted (we came in at about a 10% actual this year); removed health and pension for part time workers. Freda asked about the 5-year capital budget? Redmond said council has not looked at it yet. Major said we can draw comfort that the balance sheet is balanced. Redmond said the double posting of payroll was as system problem – not a personnel problem. Sue asked if there was a 33% increase in the budget. Redmond said, No –that included debt. The actual increase over „07 is about 7%. STATUS OF MAULDIN & JENKINS 2007 AUDIT John Redmond cited a letter from the Department of Audits And Accounts stating that all corrective action from the 2006 audit had been accepted. Major handed out an email from Craig Moye saying that they still plan to begin the audit on March 17th. Moye requested the audit confirmations and accounts receivable information that he needs. Redmond said it will be sent. Major said we will have out March meeting on the day that the auditors show up so that we can have an entrance conference with them. We need to meet a little earlier because we have our annual meeting and the election of officers. REVIEW OF SECTION VI OF GFOA PUBLICATION, ‘AUDIT COMMITTEES’ Sam began training on the last section of the GFOA publication. He stressed that one of the principal rolls of the Audit Committee is to facilitate communication between the auditor, management, and Council. The publication states that the AC should meet at least once privately with the auditor, with the management and with the council. The Audit Committee must engage in private communications with each party, he said. GFOA recommends some exception of the Open Meetings Act for audit committees. Sam said that he feels that Bubba is prepared to address this issue and Bubba should be consulted so that the AC knows its bounds in this area. He said that the Audit Committee should report annually in writing to the governing body. The report should include that the Audit Committee has met with the auditor and management separately and if that Audit Committee reasonably believes the financial reporting is adequate. .Sam said that the GFOA recommended an Aidot Committee structure that had the Audit Committee made up of elected members of the Council with a very expensive paid expert (expertise on the level of the outside auditor). Sam said that small municipalities often have a low level of accounting expertise on the part of its elected officials and the expense of the outside expert is prohibitive. Tybee has instead established an Audit Committee made up of citizens with a certain level of experience. The Tybee Council has not delegated this core responsibility to its Audit Committee, but it has empowered the Audit Committee to advise only thus striking a workable compromise. The group thanks Sam for his time and effort in training us on the publication over the past year. ANNUAL MEETING DISCUSSION John announced that we are not recruiting members as in past years since council has been observing a more formal process. He told Dick Smith that he would hate to see anyone excluded and asked if there were more people interested than the seven seats if council would consider expanding the size of the group? Dick Smith said council is considering changing the budget year so that a new council will not be faced with a budget that they didn‟t create. DISCUSSION OF CONCEPT OF INTERNAL AUDITS John Major deferred the discussion until later in the year. OLD BUSINESS: Sam Adams read his letter of resignation to the Audit Committee. He announced that he is being nominated as the new chair of Hospice Savannah and will not have the time to continue. The committee expressed their regrets at losing one of the charter members to the committee and wished him well. The meeting was adjourned at 5:55PM Respectfully submitted, Freda Rutherford, Secretary