City Council Minutes 07-08-2013 SpecialMINUTES
SPECIAL MEETING — MONTICELLO CITY COUNCIL
Monday, July 8, 2013 — 6:00 p.m.
Mississippi Room, Monticello Community Center
Present: Clint Herbst, Lloyd Hilgart, Tom Perrault, Glen Posusta, Brian Stumpf
Absent: None
Other: Wayne Oberg, Jeff O'Neill, Jim Eichten (MMKR audit firm), Angela Schumann,
Tim Hennagir (Monticello Times)
1. Call to Order
Mayor Herbst called the special meeting to order at 6:01 p.m.
2. Purpose of Workshop: Review of 2012 Annual Audit
Jeff O'Neill introduced the purpose of the meeting for a review of the annual audit and
turned it over to Wayne Oberg. Wayne Oberg provided a presentation of the 2012
Financial Report. Wayne Oberg noted that he looks at clarity and transparency in
producing an annual report. Some of the "firsts" that he has experienced as finance
director include a bond default; combined debt service fund; interfund loans in the
magnitude of $6 million and no real mechanism for repayment; inactive funds with small
balances, which he has since closed out; separate impact funds for water and sanitary
sewer, which could be merged with the operating funds for water and sewer; investments
horizon; and a significant prior period adjustment.
Wayne Oberg discussed the issues with a combined debt service fund: when a debt issue
is concluded you would normally close the debt service fund and any balances are
available for other uses. With a combined debt fund, it is not as clear as to what happens.
Lloyd Hilgart asked where the surplus funds would go if you closed out a debt service
fund. Wayne Oberg explained that the funds could go to the general fund or possibly a
capital project fund that may need some additional sources of revenue. He indicated that
he had moved balances from closed funds into the general fund rather than leave them in
the combined fund.
Clint Herbst asked if there could be any clarification added to the bond default. The city
intends to put money toward the bond debt so it is not truly a default. Wayne Oberg
explained that is addressed in the annual financial report (P.49) as a proposed settlement
after the 2012 year end. Jim Eichten explained that he will provide some information on
that during his report also.
Brian Stumpf asked if interfund loans would be similar to taking money from reserves
and then paying the money back later. Wayne Oberg said that would be comparable if
your reserves were below recommended levels of 35% to 50 %. Glen Posusta stated that
the city's reserves are close to 50% so the city should not have to build them up further.
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Wayne Oberg agreed that the reserves are in the range they should be and noted that it is
better to have them at the high end of the range since the city depends on the tax levy for
80% of their annual revenues.
Wayne Oberg talked briefly about the investments that the city holds. A significant
amount of the investments are out for longer than 10 years. He previously dealt with
investment policies that limited investments to less than 10 years. His concern is an
inflated investment value when they are extended out that far. Lloyd Hilgart gave an
example of a long term investment and asked Wayne Oberg if the city would get their
investment back. Wayne Oberg explained that the par value is guaranteed so the city
would get back their investment regardless of the tern. Lloyd Hilgart asked about the
two investments that Wayne Oberg sold in April. Wayne Oberg noted those were sold at
a profit and he disposed of two investments that were very long term (25 years).
Wayne Oberg discussed the prior period adjustment that did not get stated in the 2011
financial statements. He explained the liabilities were overstated due to developer
escrows that were expensed but not recorded. This is normally done when a project is
closed out, but was overlooked. Wayne Oberg noted that after the adjustment was made,
the balances on the city books were actually improved. However, the city is responsible
for making sure that the developer deposits are correctly allocated for expenses incurred.
Jim Eichten explained that this discovery was made when the Assistant Finance Director
was concerned about some of the large deposit balances on the books and did some
research which led to the discovery of the misstated developer deposits.
Jim Eichten then presented some information on his audit opinions and findings. Jim
Eichten stated that he gave an unqualified or "clean" opinion on the city's financial
statements. Jim Eichten noted that he did make three findings: the prior period
adjustment, allowable investments which were exceeded in several certificates of deposit
(CD's), and contracts which were missing the subcontractor language required by law.
Wayne Oberg explained that the value of the CD's increased at the end of the year which
pushed them above the $250,000 limit. Jim Eichten discussed the requirements for the
subcontractor language and noted that this was missing in some of the projects that were
audited. Wayne Oberg noted that the city has some new procedures in place to check for
this when a contract is put in place.
Jim Eichten talked about an issue with signed declarations on payroll transactions,
especially with the community center where they use an electronic check - in/out system.
The finance department is working on a procedure to address that since it is required by
state law. Glen Posusta asked what the implications are for non compliance and Jim
Eichten said there isn't really anything other than a finding in the audit.
Jim Eichten noted some general conclusions about the financial statements in the audit
report and will make some comments at the regular meeting to follow this workshop. Jim
Eichten pointed out the levels of debt service that the city carries. Wayne Oberg added
that one area of concern is the large amount of delinquent special assessments. Without
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those payments to support the debt service, that will need to be made up somewhere else
in the tax levy.
3. Adiourn
TOM PERRAULT MOVED TO ADJOURN THE SPECIAL MEETING AT 6:56 P.M.
LLOYD HILGART SECONDED THE MOTION. MOTION CARRIED 5 -0.
Recorder: Catherine M. Shuman
Approved: July 22, 2013
Attest:
C' r istrator
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