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Home My WebLink About08-22-11 Fiscal Affairs Committee MeetingCHUCK ENGELKEN, CHAIR Councilmember District 2 DARYL LEONARD Councilmember District 3 TOMMY MOSER Councilmember District 4 f JOHN ZEMANEK Councilmember At -Large A Alternate Member 1 JAY MARTIN Councilmember District 5 Alternate Member 2 CITY OF LA PORTE FISCAL AFFAIRS COMMITTEE MEETING AGENDA Notice is hereby given of a meeting of the City of La Porte Fiscal Affairs Committee to be held on Monday, August 22, 2011, at 5:00 p.m., in the La Porte City Hall Council Chambers, 604 West Fairmont Parkway, La Porte, Texas, regarding the items of business according to the agenda listed below: 1. Call to Order 2. Consider approval of minutes of the August 2, 2011 and August 15, 2011 meetings of the Fiscal Affairs Committee — P. Fogarty 3. Approve and sign the engagement letter from auditors Null - Lairson for the City of La Porte Development Corporation — M. Dolby 4. Review and discuss proposed Resolution for GASB 54 — M. Dolby 5. Set date for next meeting — M. Dolby 6. Administrative Reports — R. Bottoms 7. Committee comments regarding matters appearing on agenda; recognition of community members, city employees, and upcoming events; inquiry of staff regarding specific factual information or existing policies — Committee members Engelken, Leonard, Moser, Martin, and Zemanek. 8. Adjourn In compliance with the Americans with Disabilities Act, the City of La Porte will provide for reasonable accommodations for persons attending public meetings. To better serve attendees, requests should be received 24 hours prior to the meetings. Please contact Patrice Fogarty, City Secretary, at 281.470.5019. CERTIFICATION I certify that a copy of the August 22, 2011, agenda of items to be considered by the Fiscal Affairs Committee was posted on the City Hall bulletin board on August 19, 2011. Sharon Harris, Assistant City Secretary I certify that the attached notice and agenda of items was removed by me from the City Hall bulletin board on the day of 1 2011. Name and Title Page 1 of 1 August 22, 2011, Fiscal Affairs Committee Agenda CHUCK ENGELKEN, CHAIR Councilmember District 2 DARYL LEONARD Councilmember District 3 TOMMY MOSER Councilmember District 4 JOHN ZEMANEK Councilmember At -Large A Alternate Member 1 JAY MARTIN Councilmember District 5 Alternate Member 2 MINUTES OF MEETING OF FISCAL AFFAIRS COMMITTEE AUGUST 2, 2011 The Fiscal Affairs Committee met on August 2, 2011, at 3:00 p.m. in the La Porte City Hall Council Chambers, 604 West Fairmont Parkway, La Porte, Texas, to consider the following items of business: 1. Call to Order Chairman Chuck Engelken called the meeting to order at 3:01 p.m. Committee Members present were Councilmember Tommy Moser; Councilmember Jay Martin, Alternate Member 2; and Councilmember John Zemanek, Alternate Member 1. Absent: Councilmember Daryl Leonard. Councilmember Dottie Kaminski was also present at the meeting. 2. Conduct interviews of Auditing Firms for Independent Auditor Services — M. Dolby The Fiscal Affairs Committee interviewed the following firms for independent auditor services: Null - Lairson, BKD, Weaver - Tidwell, Sandersen, Knox and Company, and Hereford, Lynch, Sellars and Kirkham. The firms were asked the following questions: 1. Size of firm; number of CPAs; number of CPAs with municipal experience; diversity of staff; and background of those assigned to the engagement. 2. Explain the testing of transactions for accounts receivable, cash, payroll and accounts payable. Explain some of the tests that auditors perform to ensure revenues and expenditures are accurate. 3. For how many municipalities has the firm performed a financial audit and expressed an independent auditor's opinion. 4. How will the firm handle audit staff and client conflicts, explaining the philosophy for issuing letters to management addressing significant deficiencies, material weaknesses and other control deficiencies. 5. Does the firm have a software program to assist the client in preparation of the CAFR? 6. Explain how GASB 54 affects the City of La Porte and what steps should be taken to implement the new standard. The committee took a break at 4:39 p.m. and reconvened at 4:43 p.m. Interviews concluded at 5:40 p.m. Per Chairman Engelken, the recommendation of the Fiscal Affairs Committee is to contract with Null - Lairson as the auditing firm for independent auditing services. Page 1 of 2 August 2, 2011, Fiscal Affairs Committee Minutes 3. Administrative Reports — R. Bottoms There were no administrative reports. 4. Committee Comments — Matters appearing on agenda; recognition of community members, City employees, and upcoming events; inquiry of staff regarding specific factual information or existing policy. There were no Committee comments. 5. Adjourn There being no further business, Committee Member Moser moved to adjourn the meeting at 5:56 p. M. Respectfully submitted, Patrice Fogarty, City Secretary Passed and approved on the 22n day of August, 2011. Chairman Chuck Engelken Page 2 of 2 August 2, 2011, Fiscal Affairs Committee Minutes CHUCK ENGELKEN, CHAIR Councilmember District 2 DARYL LEONARD Councilmember District 3 TOMMY MOSER Councilmember District 4 JOHN ZEMANEK Councilmember At -Large A Alternate Member 1 JAY MARTIN Councilmember District 5 Alternate Member 2 MINUTES OF MEETING OF FISCAL AFFAIRS COMMITTEE AUGUST 15, 2011 The Fiscal Affairs Committee met on August 15, 2011, at 5:00 p.m. in the La Porte City Hall Council Chambers, 604 West Fairmont Parkway, La Porte, Texas, to consider the following items of business: 1. Call to Order Chairman Chuck Engelken called the meeting to order at 5:00 p.m. Committee Members present were Councilmember Daryl Leonard; Councilmember Tommy Moser; and Councilmember Jay Martin, Alternate Member 2. Absent: Councilmember John Zemanek, Alternate Member 1. Councilmember Dottie Kaminski attended the meeting. 2. Approve and sign the engagement letters from Null - Lairson for the City of La Porte and La Porte Area Water Authority — M. Dolby Finance Director Michael Dolby and Tom Pedersen with Null - Lairson discussed engagement letters for the City of La Porte and the La Porte Water Authority. The Committee was informed the La Porte Development Corporation would be included as a part of the City audit processes utilizing random sampling. If the Committee desires an additional audit of the La Porte Development Corporation, a separate engagement letter would be required. Chairman Engelken advised Mr. Dolby the Committee does want a full audit of the La Porte Development Corporation transactions for the past two years, and a separate engagement letter would be needed. The Committee will meet August 22 at 5:00 p.m. to approve an additional engagement letter for the La Porte Development Corporation. Committee Member Leonard questioned Mr. Pederson on how random samplings are determined. Mr. Pederson responded the population is determined with a random number generator being applied to the population. The firm is also required, as part of the audit, to form judgments on transactions that come up during an audit were in compliance with state laws and regulations. Committee Member Moser questioned if an opinion or findings would be expressed after the audit. Mr. Pederson responded an opinion would be expressed, but the firm does not provide an opinion on internal controls. It will provide an opinion on management comments and findings. Mr. Pederson informed the Committee that the firm is required to report any instances of non - compliance during an audit. Chairman Engelken questioned if the water loss during water main breaks would be tested. Mr. Pederson responded the firm would audit water consumption in utility billings and perform an analytical type of review. Page 1 of 2 August 15, 2011, Fiscal Affairs Committee Minutes Chairman Engelken also questioned if the firm performed an audit on coding of property /sales taxes from the State Comptroller's Office. Mr. Pederson responded the firm relies on what is received from the State and assumes the records are correct. Committee Member Moser moved to approve the engagement letters from Null - Lairson for the City of La Porte and the La Porte Area Water Authority. Committee Member Leonard seconded. MOTION PASSED. Ayes: Chairman Engelken, Committee Members Moser and Leonard Nays: None The Committee directed Finance Director Michael Dolby and Mr. Pederson that the scope of work for the La Porte Development Corporation is to include an audit of every transaction, not just a random sampling, for the last two years. 3. Discuss audit for Fiscal Year 2011 — M. Dolby Finance Director Michael Dolby discussed the audit for Fiscal Year 2011 and reported on GASB 54 reporting standards. Mr. Dolby reviewed the new classifications: non - spendable, restricted, committed, assigned, and unassigned. Mr. Dolby also presented a sample resolution to the committee for recommendation to the full City Council. Chairman Engelken directed Mr. Dolby to bring the resolution back to the August 22, 2011, Fiscal Affairs Meeting for further discussion before making a recommendation to the full City Council. 4. Administrative Reports — R. Bottoms There was no administrative report. 5. Committee Comments — Matters appearing on agenda; recognition of community members, City employees, and upcoming events; inquiry of staff regarding specific factual information or existing policy. Chairman Engelken provided the Committee with a re -cap to approve engagement letters for the La Porte Development Corporation and to discuss a resolution for GASB 54 and possible action for recommendation to the full City Council in September. Chairman Engelken indicated he would like to have signature lines for all members of the Committee on the engagement letters. 6. Adjourn — There being no further business, Committee Member Moser moved to adjourn the meeting at 5:28 p.m. Respectfully submitted, Patrice Fogarty, City Secretary Passed and approved on the 22n day of August, 2011. Chairman Chuck Engelken Page 2 of 2 August 15, 2011, Fiscal Affairs Committee Minutes } t IF f' August 3, 2011 The Honorable Mayor and Members of the City Council City* of La Porte, Texas 604 W. Fairmont PlcNw - NT La Porte, Texas 77571 We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for La Porte Economic Development Corporation (the "EDC "). We will apply* the agreed -upon procedures which the City of La Poi te's City* Council has specified, listed in the attached schedule, to the expenditures of La Porte Economic Development Corporation for the two year period ended September 30, 2011. This engagement is solely* to assist the City Council in reviewing the EDC's compliance with laws, regulations and policies of the City of La Porte. Our engagement to apply* agreed -upon procedures will be conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants. The sufficiency* of the procedures is solely* the responsibility* of those parties specified in the report. Consequently*, we make no representations regarding the sufficiency* of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose. If, for any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. Because the agreed -upon procedures listed in the attached schedule do not constitute an examination, we will not express an opinion on expenditures of LaPorte Economic Development Corporation. In addition we have no obligation to perform any procedures beyond those listed in the attached schedule. We will submit a report listing the procedures performed and our findings. This report is intended solely* for the use of the City of La Porte, and should not be used by anyone other than these specified parties. Our report will contain a paragraph indicating that we had we performed additional procedures, other matters might have come to our attention that would have been reported to you. You are responsible for EDC's compliance with laws, regulations and policies of the City of La Porte; and for selecting the criteria and determining that such criteria are appropriate for your purposes. You are also responsible for making all management decisions and performing all management functions; for designating an individual with suitable skill, knowledge, and/or experience to oversee this review of expenditures that we provide; and for evaluating the adequacy* and results of those services and accepting responsibility* for them. Tom Pedersen is the engagement partner and is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. We plan to begin our procedures on approximately* September 15, 2011 and, unless unforeseen problems are encountered, the engagement should be completed by December 31, 2011. At the conclusion of our engagement, we will require a representation letter from management that, among other things, will confirm management's responsibility* for the EDC's compliance with laws, regulations, and policies of the City of La Porte. Mayor and Members of City Council City* of La Porte, Texas Page 2 We estimate that our fee for these services to be $5,000. The fee estimate is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessaiv, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Our invoices for these services will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes 90 days or more overdue and will not be resumed until your account balance is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination even if we have not completed our report. You will be obligated to compensate us for all time expended through the date of termination. We appreciate the opportunity* to be of seivice to City of La Porte, Texas and believe this letter accurately* summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy* and return it to us. If the need for additional procedures arises, our engagement with you will need to be revised. It is customaiv for us to enumerate these revisions in an addendum to this letter. Vein truly yours, ULvni Null Lairson, P.C. Texas City*, Texas RESPONSE: This letter correctly* sets forth the understanding of City of La Porte, Texas. Signature: Title: Date: Title: Date: Signature: Title: Date: Signature: Title: Date: Title: Date: Signature: Title: Date: Mayor and Members of City Council City* of La Porte, Texas Page 4 Schedule of Agreed -upon Procedures 1. Review the City of La Porte's procedures and related statutes and ordinances for purchasing goods or services. 2. Compare the amount, payee or vendor, date, and description to the vendor's invoice and canceled checks, as appropriate. 3. Determine that the transaction was properly* authorized and in compliance with budget and legal requirements and established policies and procedures. REQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEM Agenda Date Requested: 8/22/11 Requested By: Michael Dolby Department: Finance Report: Resolution: X Ordinance: Exhibits: Draft Resolution re: GASB 54 Sample Reporting Statement ApprODriation Source of Funds: Account Number: Amount Budgeted: Amount Requested: Budgeted Item: YES NO SUMMARY & RECOMMENDATION At the August 15, 2011 Fiscal Affairs Committee meeting, staff presented a draft resolution that would formally adopt new financial reporting standards promulgated by the Government Accounting Standards Board (GASB) this year. The objective of GASB 54 is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This is a reporting standard only and would not impact normal day -to -day operations of the City. Consideration of the resolution was tabled to allow committee members additional time to review the resolution. Some concern was expressed regarding the statement in Paragraph Three under the heading "Fund Balance Policy." Staff would like guidance and direction on this issue and will be present to answer questions or address concerns regarding the proposed resolution. Action Required by Economic Development Corporation: Provide guidance to staff and recommend this resolution to the City Council for adoption. " for Fiscal Affairs Committee Meeting Agenda e ��II Ro Bot ms, City Manager Da e RESOLUTION NO. A RESOLUTION OF THE CITY OF LA PORTE, TEXAS, ESTABLISING FUND BALANCE POLICIES AS REQUIRED BY GASB 54; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND SETTING AN EFFECTIVE DATE THEREOF WHEREAS, the Governmental Accounting Standards Board (GASB) has adopted Statement Number 54 (GASB 54), Fund Balance Reporting and Govemmental Fund Type Definitions, that is effective in fiscal year 2010 -2011, and WHEREAS, the City of La Porte wishes to comply with GASB 54 as required beginning with the current October 1, 2010 to September 30, 2011 fiscal year; NOW THEREFORE BE IT RESOLVED that the City Council hereby adopts the following policy: FUND BALANCE POLICY Fund balance measures the net financial resources available to finance expenditures of future periods. The City of La Porte's Unassigned General Fund Balance will be maintained to provide the City with sufficient working capital and a margin of safety to address local emergencies without borrowing. The Unassigned General Fund Balance may only be appropriated by resolution of the City Council. Fund Balance of the City may be committed for a specific source by formal action of the City Council. Amendments or modification to the committed fund balance must also be approved by formal action of the City Council. Committed fund balance does not lapse at year -end. The formal action required to commit fund balance shall be by resolution or majority vote. The City Council delegates authority to assign fund balance for a specific purpose to the City Manager of the City of La Porte. For purposes of fund balance classification, expenditures are to be spent from restricted fund balance first and then unrestricted. Expenditures incurred in the unrestricted fund balances shall be reduced first from the committed fund balance, then from the assigned fund balance and lastly, the unassigned fund balance. The City Council recognizes that good fiscal management comprises the foundational support of the entire City. To make that support as effective as possible, the City Council intends to maintain a minimum fund balance of 25 % of the City's general fund annual operating expenditures. If a fund balance drops below 25 %, it shall be recovered at a rate of 1% minimally, each year. This policy should be revisited each year for review. Louis R. Rigby, Mayor Patrice Fogarty, City Secretary Clark Askins, Assistant City Attorney City of La Porte Restatement of Governmental Fund Balances 9/30/2010 Debt Special Capital Total General Service Revenue Project Governmental Fund Fund Funds Funds Funds Inventories 135,162 (1) 135,162 Encumbrances 119,474 39,396 158,870 Animal Control 147,915 2,914 2,914 Judicial Fund 147,180 23,197 23,197 Municipal Court Building Security 49,654 147,915 147,915 Municipal Court Technology Fee 622,692 38,543 38,543 Park Zone 868,063 147,180 147,180 Law enforcement training 712,561 3,406 3,406 Child safety $ 4,526,811 49,654 49,654 Confiscated funds 227,605 227,605 Debt Service 3,117,688 622,692 3,740,380 Designated for Capital Projects 13,084 13,084 Undesignated 11,836,769 3,688,288 20,330,852 35,855,909 Total Fund Balances $ 12,104,489 $ 3,117,688 $ 4,990,790 $ 20,330,852 $ 40,543,819 Non - spendable 135,162 135,162 Restricted 3,117,688 4,526,811 (1) 7,644,499 Committed 20,330,852 20,330,852 Assigned 151,476 7,394 158,870 (2) Unassigned 12,274,436 12,274,436 (3) Total Fund Balances $ 12,561,074 $ 3,117,688 $ 4,534,205 $ 20,330,852 $ 40,543,819 (1) Animal Control 2,914 Judicial Fund 23,197 Municipal Court Building Security 147,915 Municipal Court Technology Fee 38,543 Park Zone 147,180 Law enforcement training 3,406 Child safety 49,654 Confiscated funds 227,605 Section 4B Sales Tax Debt Service Reserve 622,692 Section 4B Sales Tax 1,016,565 Street Maintenance Sales Tax 868,063 Grant Fund 509,024 Hotel Motel Occupancy Tax 712,561 Tax Increment Reinvestment Zone One 157,492 Total $ 4,526,811 (2) Encumbrances General Fund 119,474 Community Investment Fund 32,002 Hotel Motel Occupancy Fund 2,000 Section 4B Sales Tax 5,394 (3) Fund Balances General Fund 11,836,769 General Fund (Designated) 13,084 Community Investment Fund 424,583 $ 12,274,436