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HomeMy WebLinkAbout2008-04-10 - Council Minutes - Part 2CITY OF CORCORAN CITY COUNCIL WORKSHOP MEETING APRIL 10, 2008 The Corcoran City Council met on April 10, 2008, at city hall in Corcoran, Minnesota. Present were Mayor Guenthner, Councilor Grabowski, Councilor Hudok, Councilor Jacobs, and Councilor Thomas. Others present for the meeting included Interim Administrator Bodem. Mayor Guenthner called the meeting to order at 6:00 p.m. APPROVAL OF AGENDA MOTION made by Thomas, seconded by Grabowski , to approve the agenda as presented. Voting Aye: Guenthner, Grabowski, Hudok, Jacobs and Thomas. (Motion carried 5:0) BUSINESS ABDO Eick & Meyers LLP pre -audit review Steve McDonald, Managing Partner, presented the council with the year ending of December 31, 2007 Management Letter. He explained the process of the field work and reported that it has been completed. He reported that they are at the final stage which is drafting of the financial reports. There was some discussion about the uniqueness of this audit because the principally responsible person had departed from the city. Mr. McDonald explained that during their audit they reviewed procedures over transaction cycles that were related to cash disbursements, payroll and receipting and they found that the city has limited documentation of controls and little evidence of where segregation of duties occurs in these transaction cycles. They recommend that the city document accounting controls over its significant transaction cycles and also establish a written strategic plan that considers all elements of internal control beyond the transaction cycles. He explained that in prior years they were requested to draft the audited financial statements and related disclosures as part of their regular audit services. It is management's responsibility to provide for the preparation of the statements and footnotes, and the responsibility of the auditor to determine the fairness of presentation of those statements. The auditors cannot be part of the city's internal control process. They recommend the city utilize a disclosure checklist to ensure all required disclosures are present and reconcile to work papers; agree the Banyon data numbers reported in the financial statements plus applicable accruals; it is the responsibility of management and those charged with governances to make the decision whether to accept the degree of risk associated with this condition because of cost and other considerations. He also explained that during the fieldwork in February 2008, they noted that the city had not completed the bank reconciliations for December 2007. It was recommended that the city establish a policy and implement a monitoring procedure that ensures key control activities are in place regardless of the staffing situation. Mr. McDonald was asked if he felt the financials were being controlled adequately. Mr. Mc Donald answered that they feel most adjustments and the finances were being handled adequately. During the field work the auditor noted that the city also hadn't completed the reconciliation of its developer accounts for 2007. It was recommended that the city Call to Order Roll Call Approval of Agenda Business: ABDO Eick & Meyers LLP pre -audit review Page -1- CITY OF CORCORAN CITY COUNCIL WORKSHOP MEETING APRIL 10, 2008 establish a policy and implement a monitoring procedure that ensures key control activities are in place regardless of the staffing situation. It was also noted that a number of developer escrow accounts had a deficit account balance throughout the year and at year end. In total $51,008 was owed by 8 accounts. Also any service charge for deficit balances was not factored into the amount owed. It was recommended that the city enforce a policy and implement a monitoring procedure that ensures deposits are received in advance of any activity and that work stops prior to an account becoming negative. This policy should also address service charges for any account that does become negative. There was some discussion about the Escrow Funding and the use of the Excel worksheet. The City had prepared very few work papers in advance of the audit field work and did not appear to have any process in place that considered year end closing. The process for year end close is a significant transaction cycle. It should be documented along with the other transaction cycles and should be considered as part of the internal control strategic plan. During the audit, adjustments were needed to correct coding and reclassify amounts to correct funds. It was recommended that management review each journal entry, obtain an understanding of why the entry was necessary and to modify current procedures to ensure that future corrections are not needed. Mr. McDonald explained some of the corrected and uncorrected misstatements. A question was asked on what the next steps are and what action the council needs to take. There was some discussion about that deficit in the escrow funds and where the funding comes from to clear the deficits. Currently the deficits are being cleared by borrowing against the positive escrow funds. A concern was raised about the lack of having the city administrator in attendance at the exit meeting. This lead into a discussion about why an administrator isn't in attendance during an exit meeting. The importance of setting procedures and policies was discussed. There was some discussion about the city engaging services from a qualified party in preparation of financial statements. Staff was directed to get some suggestions of consulting firms to prepare financial statements. Mr. McDonald reviewed the amounts that are restricted and are not available for use. There was some discussion about the deadline and what happens if the audit isn't approved before the deadline. Mr. McDonald explained that they will work with the State Auditor's Office and get an approved extension. Adi ournment MOTION made by Thomas, seconded by Jacobs to adjourn at 6:50 p.m. Voting Aye: Guenthner, Grabowski, Hudok, Jacobs and Thomas. Adjournment Page -2- CITY OF CORCORAN CITY COUNCIL WORKSHOP MEETING APRIL 10, 2008 Todd Sodem, Interim City Administrator Page -3-