05-13-2019 Council Packet - Laserfiche WebLink

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MINUTES OF THE ORONO CITY COUNCIL MEETEING Monday, April 22, 2019 7:00 o’clock p.m. _____________________________________________________________________________________ Crosby moved, Seals seconded, to approve the Consent Agenda as submitted, with the above-noted revisions to the Resolution for Item No. 11. VOTE: Ayes 4, Nays 0. PUBLIC COMMENTS None PRESENTATION 14. 2017 AUDIT Michele Hoffman, Clifton, Larson and Allen, provided a summary of the City’s 2017 audit results. Minnesota Statutes require that the City have an annual audit performed by a certified public accountant or the State Auditor. The audit was issued a couple of months ago. It should be noted that the audit provides reasonable but not absolute assurance since the audit does not test every single transaction. There were no major accounting policies adopted in 2017. The audit provides significant accounting estimates, such as the useful life of capital assets, valuation of investments, post-employment benefits, net pension liability, and related deferred outflows and deferred inflows. Full cooperation was received from management. Following review of the City’s financials, Clifton, Larson is able to issue an unmodified or clean opinion on the City’s financial statements. There were some exceptions to internal controls noted, such as preparation of financial statements. Audit requirements require that be noted in the internal control letter. Internal controls are regulated by a lot of complicated accounting rules and it is not unusual for cities to rely on their auditors for segregation of some duties. The audit looked at the City’s controls over financial transactions that flow through the City. Good accounting practices state that no one employee should control a transaction from start to finish. Orono did have some areas where only one employee was responsible for that task, but the audit did not find anything concerning. Overall segregation of duties can be difficult when there is a smaller staff, which is fairly common in smaller cities. The audit also looked at journal entries. There was one material adjustment that was required which related to a debt service payment that was reported in the incorrect fund. The check signer review has also come up in the past. In certain situations, the actual invoices are not always being reviewed by the check signer and that area could be strengthened as well. There were no exceptions noted in regard to Minnesota legal compliance. The audit tested approximately ten different items, such as bids and quotes, and if there were any items that were not in compliance, those would be noted. As it relates to the General Fund, the unassigned fund balance, for the last couple of years it has been steadily increasing to just under $4.5 million in 2017. That number represents approximately 58 percent of the City’s General Fund expenditures. Hoffman noted that number typically should be kept at around 40 to 50 percent of expenditures, which amounts to approximately six months of expenses. City policy says around 45 percent and Orono did have some excess unassigned fund balances in 2017. With regard to the General Fund – Revenue, that has also remained fairly steady showing a slight increase each year. Public services, consisting of various police contracts, accounts for the second largest portion of that revenue, with property taxes being the largest. Other sources of revenues include licenses and