City Council Minutes 06-27-2011 WorkshopMINUTES
SPECIAL WORI {SHOP — MONTICELLO CITY COUNCIL
Monday, June 27, 2011— 6:00 p.m.
Present: Clint Herbst, Lloyd Hilgart, Tom Perrault, Glen Posusta, Brian Stumpf
Absent: None
1. Call to Order
Mayor Herbst called the workshop to order at 6:09 p.m.
2. 2010 Audit Report
Tom Kelly led off discussion of the preparation of the 2010 Audit Report. He introduced
Angie McIntire, Assistant Finance Director. He then turned the meeting over to Jim
Eichten of MMKR, the city's audit firm. Jim explained which documents were provided
by the City and began the presentation with the Management Report. He explained that
the State of MN requires that the annual financial report be audited by an audit firm, who
issues an opinion on the audit report through the Management Report. The scope and
timing of the audit was done within the parameters required by MN Statutes.
The results of the audit from MMKR are listed under Audit Opinions and Findings.
• Unqualified opinion on the City's annual financial statements for 2010.
• One matter with City's internal control that MMKR found to be a material
weakness and that was due to adjustments that had not been recorded properly.
That was partially due to the changeover in staff. Jim Eichten indicated that he
was not particularly concerned as they have now had a chance to work with the
new staff and do not feel this would be of further concern.
• Two findings based on compliance with MN laws and regulations:
• Investment in a mutual fund that was not rated according to MN
requirements.
• Labor claims for MCC and liquor payroll did not have appropriate
signature declarations. These were the employees that check in and out
electronically but no signature is recorded. Tom Kelly mentioned that the
Finance Dept is working on rectifying this to include declarations.
Jim Eichten commented on the section containing Other Recommendations:
• IT Contingency Planning — MMKR recommends that a written contingency plan
be developed to address city procedures in case of an emergency affecting
Information Technology (IT) operations.
• FiberNet billing and cash reconciliation — MMKR recommends better
documentation and internal controls to reduce the risk of fraud or errors.
Jim summarized the section labeled "Ftmding Cities in Minnesota" and noted the
significant legislative activity that took place in the year 2010. He pointed out some
items of concern for the state outlook and importance of internal controls, especially in
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situations where there may be staff cutbacks. Tom Kelly commented on the importance
of protecting job processes and segregation of duties. Glen Posusta asked about the
process for accounting for missing inventory at the Liquor Store. Tom Kelly explained
that the annual inventory is reviewed to verify that losses such as breakage, etc is
accounted for. Jim explained that the processes for adjustments are important in areas
such as FiberNet and utility billing and require segregation of duties.
Jim discussed the pages on Property Taxes, explaining that market values have been
declining since 2009, thus affecting the tax capacity. In reviewing the Governmental
Funds Overview, Jim noted that a significant amount of revenue is generated from
property taxes and special assessments. Fund expenditures tend to be quite a bit higher
for debt service compared to state -wide averages.
Under Financial Trends and Analysis, Jim noted that the General Fund had a decline in
fund balance due to transfers. Revenues were above average and expenditures were
pretty much in balance with the budget. Jim noted that the City maintained a fund
balance in keeping with their policy. Jim explained that the City had done a good job of
following up on charges and collected quite a bit more than budgeted under Charges for
Services. He noted that the actual property taxes collected were less than budgeted, due
to non - payment of taxes. Under General Fund Expenditures, the total expenditures were
under budget by $58,000, which demonstrates good fiscal control. Under the Enterprise
Funds, Jim pointed out significant changes in revenues and expenditures for Liquor,
Water, Sewer and FiberNet funds. Under the Statement of Activities, Jim pointed out the
overall change in net assets, which was a change for the positive.
Tom Kelly commented that he is pleased that the findings were reduced; however there
were repeat findings which he will be working on correcting before the next audit.
3. Adjournment
The workshop ended at 6:50 p.m.
Recorder: Catherine M. Shuman �{1
Approved: July 11, 2011
Attest: Q�9 (<)u , _ Q '/
y ninistrator
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