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HomeMy WebLinkAbout1984-04-05 - City Commission Workshop Meeting MinutesMAIL REPLY TO: P.O. BOX 25010 TAMARAC. FLORIDA 33320 5811 NORTHWEST 88TH AVENUE 0 TAMARAC, FLORIDA 33321 TELEPHONE (305) 722-5900 March 30, 1984 NOTICE OF WORKSHOP MEETING CITY COUNCIL OF TAMARAC, FLORIDA There will be a Workshop Meeting of the City Council to be held on Thursday, April 5, 1984 at 10:00 A.M. in the Council Chambers of City Hall, 5811 N. W. 88th Avenue, Tamarac, Florida. The purpose of this Workshop is to interview the seven (7) Certified Public Accounting firms which expressed interest in auditing City financial records and utility fund budget for Fiscal Year 1983/84 and possibly for additional years, and subsequently to select and rank the top three firms for contract negotiations. The firms are: Alexander Grant & Company 10:15 Peat, Marwick, Mitchell & Co. 10:30 Grau, Urrechaga, Janus & Garcia, P.A.10:45 Deloitte Haskins & Sells 11:00 Main Hurdman 11:15 Touche Ross & Co. 11:30 Fox & Company 11:45 The public is invited to attend. Pursuant tOSectioh 286.0105, Florida Statutes ff a person decides to appeal any decision made by tho City Council with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings and for such purpose, he may need to ensure that a verbatim record includes the testimony and evidence upon which the appeal is to be based. /lc Carol A. Evans Assistant City Clerk PCUCY OF NlJN-AI5CP1XU ATMN ON BASIS OF RVMICAFM SPATpS AN BWAL OFPORTI= IIOUNM � � r CITY OF TAMARAC, FLORIDA CITY COUNCIL WORKSHOP MEETING APRIL 5, 1984 Tape CALL TO ORDER: Mayor Kravitz called the Workshop Meeting to 1 order at 10:OO A.M. on Thursday, April 5, 1984 in the Council Chambers in City Hall. ROLL CALL: PRESENT: Mayor Philip B. Kravitz Vice Mayor Sydney M. Stein Councilman John J. Dunne Councilman Raymond J. Munitz Councilman Jack Stelzer ALSO PRESENT: Jon M. Henning, City Attorney Roslyn Brauner, Secretary Mayor Kravitz read the Notice of the Workshop Meeting into the record,stating that the purpose of this Workshop is to interview seven (7) Certified Public Accounting firms and select and rank the top three firms for contract negotiations. City Attorney Jon Henning stated that Council is here today for the purpose of competitive negotiations for determination of an auditor for the Fiscal Year 1983/84. He said the procedures are set out in Florida Statutes Chapter 287, and in essence, while the Councilmembers may be familiar with bid procedures when a commodity is purchased and prices are of significant importance, the procedure is different when dealing with professional services such as accountants or engineers,as the City is looking for qualifications. He said Council will be interviewing and questioning the prospective auditors; and some time after the meeting, the members of Council will be asked to rank the prospective auditors in order of preference, and submit the recommendation to the City Manager; and she will then establish the votes. There will be a second meeting, at which time, the first choice will be called back to Council and at that time, fees and specifics will be negotiated. He said if an agreement can be reached with the first choice, that would be the end of the procedure. If an agreement cannot be reached with the first choice as to fees and arrangements, Council will go on with the second choice, and on down the list. Mr. Henning said today's meeting will not be for the discussion of fees. It will be merely to introduce the firms to the Council, for ranking and voting purposes for a subsequent meeting. He explained the ranking is not for the actual choice, but for which firms Council would like to discuss the fees at the next meeting. Mayor Kravitz asked whether Council is to make three recommendations to the City Manager; and Mr. Henning said he believes it is. three. C/M Munitz said he has before him, communications from the F.I.C.P.A. one of which is dated December 10, 1979 covering local government audits, one dated October 15, 1982 which gives further detail and explanation, and the latest one which is dated June 11, 1983. He said Mr. Henning has summarized_ the details of the communications, and the procedures are spelled out very specifically and should be simple for the Council to follow. Mr. Charles Dolci, representing Alexander Grant & Company, stated that he is the partner in charge of the Fort Lauderdale office. He said that Alexander Grant & Company is the tenth largest firm in the United States and have approximately sixty-four offices throughout the country. There is also an international firm and presently -1- 4/5/84 /rb Alexander Grant & Company has two thousand employees. He said the South Florida office is rather large and has over fifty professional people -The firm has a very substantial practice in the municipal field. Mr. Dolci said the firm has-been. serving the City of Tamarac for a long period of time and would like to continue. Mr. Burt Emmer, partner with Alexander Grant & Co. of the Fort Lauderdale office, said he has dealt with the City in the past. He said his firm is the most experienced one in the State of Florida, and the Broward County area, in the field of governmental auditing, accounting and finance. He said the proposal submitted to the City lists the present and past clients of the firm. He said Alexander Grant & Co. are familiar with the City of Tamarac as a result of the work done for the City. In addition to performing audits, the firm has helped the City in other areas. For example, when Tamarac Utilities was acquired and the bond issue was floated, Alexander Grant & Co. worked extensively on the prepara- tion of the financial data required for the offering document. He said hisfirm has a great deal of experience in dealing with municipal utilities, mainly from experience at the City of Sunrise. Most of the other Cities also operate municipal utilities: and extensive work has been done by Alexander Grant & Co. in connection with bond offerings. In addition, the firm helped the City of Tamarac to acquire the Certificate of Conformance from the Municipal Finance Officers Association, which is an important award for the City to receive as only about five hundred governments in the entire country have that; and it means the City of Tamarac has put together a comprehensive annual financial report that meets high standards. Mr. Emmer explained,when rating agencies are approached in connection with a bond issue, the fact that the City received this Certificate will be considered, and it will be evaluated to arrive at a rating_; which will translate. a_nto what the City's potential in eyes costs may be on a bond issue. Mr. Emmer said his firm has also helped the City in selecting the data processing system which was installed; and to the best of his knowledge as well as indications from the City staff, the City is pleased with the system. Therefore, he feels Alexander Grant & Co. has provided a wide range of services to the City. Mr. Emmer stated he is aware that there has been a considerable amount of discussion on internal control in the City and the extent to which Alexander Grant has reviewed the internal controls in Tamarac. He said he would like to propose in future audits they do,--t,hey _take a_ specific department which would be agreed upon, and do an in-depth internal control review of the operating department itself. He said this would be well beyond what would be the minimum required to do a financial audit. For example, if Alexander Grant were going into the Police Department, they would go into all the procedures in connection with the control of assets, the management of supplies, the control of time accountability, and things of that nature, and the segregation of duties and responsibilities in the Police Department. This could be done economically whereby each year a different department would be selected, although the same department could be done two years in a row; and it would be up to the City to decide which department should be reviewed. C/M Munitz stated that he has discussed with Mr. Emmer his concern about the internal control review, and the feasibility of not having an internal control review but rather to have an internal control audit with an opinion. C/M Munitz further stated that under the guidelines of the F.I.C.P.A., as a municipal auditor, there are certain, considerations that must be given to internal controls. The areas are specifically opm 4/6/84 /rb L identified, and the Councilmembers are aware that if they see anything in the evaluation of an internal control which is necessary for a certified audit, it would automatically trigger a portion of the scope program to the extent that Alexander Grant & Co., as experienced accountants would automatically change, add or delete portions of the audit program in order to cover those areas of internal control that the firm feels in their evaluation, would be necessary. C/M Munitz asked Mr. Emmer whether, as a result of the internal control review done by Alexander Grant & Co., changes were made in the audit program. Mr. Emmer said he can explain by providing an example. In the area of the shop parts inventory, which normally would not be considered a material area in terms of a financial audit and would not be treated as a merchandise or supplies inventory, because of what the auditors saw happening, they did a full inventory observation and price test, and full set of inventory procedures in connection with that. Mr. Emmer mentioned the inventory is approximately $30,000.00. He said Alexander Grant & Co. also did special procedures in connection with the gasoline inventory; and there also, it was not material, but Alexander Grant did not feel the controls were the best and extended procedures into those areas. Mr. Emmer said in the Public Works area, where the City had some difficulty, he did take a look at some supplies; and did also some special procedures such as a full payroll payoff as a separate assignment and therefore, a procedure like that would not be repeated in the year-end audit. C/M Munitz read a sentence from Auditing and Reporting on Local Governments in Florida prepared by the F.I.C.P.A. under Internal Control Considerations, as follows: " As auditors, we are familiar with the second standard of field work which states that a proper study in the evaluation of internal controls is to be made as a basis for reliance and for structuring audit procedures". C/M Munitz said that sentence spells out clearly the responsibility of the auditor with regard to internal control. He asked Mr. Emmer what his opinion would be.regarding an internal control audit with an opinion as opposed to the internal control made by Alexander Grant & Co., without taking fees into consideration. Mr. Emmer said based upon his knowledge and what lie has seen in the City, he would not recommend having a full scope internal audit report with a report on internal control. He said he feels the circumstances under which those are done are usually extraordinary. He said he has been in the municipal area for twenty years and does not know of one case in a Florida government where a separate report on internal.contr-ol._..has_...been performed. He said he does not now of anyw ere it has been performed in the private sector either. He said it is in the literature, but is very seldom done and usually other techniques are utilized which are a little more cost effective to solve any problems. Mr. Emmer said he would not recommend it because the cost would be tremendous. C/M Munitz asked Mr. Emmer whether he would feel comfortable insofar as fulfilling the audit program obligation insofar as internal control is concerned; and Mr. Emmer said he would, in order to attest to the financial statements. -3- 4/5/84 /rb L/ Mr. Keith Cobb, representing Peat, Marwick, -Mitchell & Co_., said he is the managing partner of the Fort Lauderdale office of the firm. He said his firm has submitted a proposal and is interested in serving the City of Tamarac. Mr. Cobb said his firm has previously addressed the Council and are pleased to return. Mr. Cobb said, as presented in the firm's proposal, they have a great deal of experience in municipal and governmental accounting, both in Florida and nationwide. The local office audits six municipalities and have done so for a long time. The City of Fort Lauderdale has been a client of Peat, Marwick, Mitchell & Co. for twelve years. He said his firm has never lost a client in the public sector. In addition to the six municipal clients, they serve the South Water Management District -and the School Board of Broward County and have been doing so for a number of years. Mr. Cobb said in the proposal, the firm has provided the City with the names of the Mayors, City Managers and Finance Directors so that the City of Tamarac can contact them. Mr. Cobb further stated that his firm is well regarded in the field and are on the leading edge of governmental accounting. He said he serves as the engagement partner to the municipalities and has 21 years of experience with Peat, Marwick, Mitchell & Co. and has been doing governmental audits most of those years. He said he has been the engagement partner on the City of Fort Lauderdale account for a number of years, the School Board for eight years, and he serves the City of Coral Springs, the City of Wilton Manors, the City of Davie, the City of Dania and City of Highland Beach. He said the firm is always present when their engagement is reviewed by the City Commission, and he personally delivers the reports and the management letters. He said he is before City Councils at least sixteen times a year. Mr. Cobb said the main thing Peat, Marwick, Mitchell & Co. can offer the City of Tamarac is experience in dealing with municipalities such as Tamarac. He said his firm understands that marketplace and the service that is required and have a number of people in their office that are very qualified. Three of their managers and at least six of their seniors have been trained specifically in governmental accounting. C/M Munitz asked Mr. Cobb whether any of the Finance Directors of the municipalities his firm audits, ever received a Certificate from the Municipal Finance Officers Association. Mr. Cobb said two of them have received the ".-Certificate.- the City of Coral Springs and the City of Fort Lauderdale. He said seventy-three of their clients received the Certificate throughout the Country as well. - C/M Munitz asked Mr. Cobb his opinion on internal controls as outlined in the manual prepared by the F.I.C.P.A. as concerns auditing and reporting in local governments in Florida. Mr. Cobb said his firm routinely makes an -evaluation of an internal control of an organization at the outset of an engagement; and that is how the scope of the work is determined. The procedures are evaluated in a number of areas, such as payroll, purchasing, capital outlay, cash disbursements, cash receipts, etc. Mr. Cobb said based upon that evaluation, a determination will be made as to the scope of the work necessary for auditing procedures. He said as a result of this internal control evaluation, a management letter would be written to outline for the municipality, any material weaknesses found. The firm would also recommend other procedures to improve the efficiency of the operations and accounting procedures. The letter would be reviewed with the administration before it is issued, so it will be understood what will follow before the letter is issued. Mr. Cobb said this is a sophisticated procedure and the firm has trained people to do this for municipalities. -4- 4/5/84 /rb C/M Stelzer asked Mr. Cobb whether a question has ever been raised at the City of Fort Lauderdale as to a different approach to the accounting of the City and possibly bringing in another accountant; and Mr. Cobb said it has. He said this has come up two or three times but they have never gone out for proposals to conduct hearings, such as the one taking place here today. However, the question comes up every two or three years and the Finance Director and the City Manager at Fort Lauderdale prepare a memorandum setting forth the reasons they feel they should go out for proposals or continue with the existing firm. He said over a period of twelve or thirteen years they have been servicing the City of Fort Lauderdale, engagement partners have been changed three times, as well as five engagement managers. The firm has never had the same senior accountant on the engagement twice. This has been done to satisfy the City Commission that a new approach is being brought in. Mayor Kravitz asked Mr. Cobb whether internal controls are done by his firm as part of their audit; and Mr. Cobb said they are - He stated that some of the larger cities have an Internal Audit Department and their work is evaluated by his firm. In those cases, Peat,Marwick, Mitchell & Co. might go into internal controls to a lesser extent than they would with the smaller cities who do not have that capability. Mayor Kravitz asked Mr. Cobb whether any of the cities his firm works with at the present time have an audit committee within the City. Mr. Cobb said none of them do. However, the South Florida Water Management District, one of their clients, does have one. He said this was just started this year and his firm helped them organize their procedures. Mayor Kravitz asked Mr. Cobb whether he sees a problem when coming into a city to do the first audit; and Mr. Cobb said he does not since there is similarity in governments today as compared to ten years ago. He said in a new engagement, there is some start-up time involved which his firm would absorb in the first year for which the City would not be charged. He mentioned that his firm has never lost a government client. Mayor Kravitz asked whether the financial report is followed by a recommendation at a future date; and Mr. Cobb said in some cases this is done, but in some cases it is not. He said the State requires an annual report, and in this, report the management letter recommendations that have not been implemented by the municipality, are outlined. He said for example, the City of Dania requested the firm to make a special review in six months, to see that the recommendations made have been implemented. He said a different approach is taken at the City of Coral Springs where a quarterly review is done, more limited in scope, to review their set of comprehensive annual financial statements. He said he would recommend a similar procedure to the City of Tamarac. C/M Munitz asked Mr. Cobb whether his firm has ever been asked to prepare an internal control audit with an opinion in any of the municipal audits. Mr. Cobb said .'-it has been done on a number of occasions, but not locally since -none of the firm's clients had a significant problem. C/M Munitz asked Mr. Cobb his opinion of an internal control review as opposed to an internal control audit with an opinion. Mr. Cobb said the City should be able to get enough satisfaction from a routine internal control review which is a part of the City's annual audit. He said the auditors are required to report material weaknesses in internal controls to comply with the standards of the American Institution of Professional Standards. Mr. Cobb,said he feels an in-depth audit would not be warranted unless there are some fraud allegations within the City. -5- 4/5/84 Mr. Tony Grau of Grau, Urrecha a Janus & Garcia P.A. stated he is one of the partners in the firm. He said they are a medium size firm and are not a national one. They have four offices and the closest office to Tamarac is the Pompano Beach office. Their other offices are in Miami, Boca Raton and West Palm Beach. There are fifty employees in the four offices and the Pompano Beach office has ten employees. Mr. Grau said his firm can provide the City of Tamarac with personalized service,and is experienced in municipal work as well as grant work. He said since the firm is medium sized, their fee structure is much lower than that of a national firm. Mr. Grau said he has reviewed the financial statement of the City of Tamarac and noted the City received the Certificate of Conformance. However, he feels there are a few areas that could be improved. Mayor Kravitz said he has noted in the brochure, that at the present time Mr. Grau's firm is servicing the City of Sweetwater as well as the Town of Hypoluxo and he would like to know whether those are the only two municipalities the firm is servicing at the present time. Mr. Grau said those are the only two serviced. Mayor Kravitz asked how long the firm is.servicing these two municipalities; and Mr. Grau said they have been servicing the Town of Hypoluxo for approximately five years, and the City of Sweetwater, three or four years. Mayor Kravitz said the proposal indicates there are forty people on the professional staff and fifteen of those are Certified Public Accountants. The Mayor said the proposal specifies there are Tape fourteen Senior Assistants, and only one of those is a Certified 2 Public Accountant and he would like to know whether that is correct. Mr. Grau said the Seniors are certified and the Assistants are in the process 'of becoming certified. C/M Munitz asked Mr. Grau whether the Finance Director of either of the two Cities his firm services, ever received the Certificate of Conformance. Mr. Grau said they did not want to incur the expense involved in obtaining the Certificate. C/M Munitz asked Mr. Grau for his opinion of an internal audit department within the City; and Mr. Grau said he feels it is a good idea as it would improve the internal controls of the City and would assist in the preparation of the year-end audit, and would also reduce the audit fee. C/M Munitz asked whether either of the two Cities serviced have a City audit committee; and Mr. Grau said. they do not. He said his firm has proposed it, but nothing was done about it. He said his firm does recommend a.City have an audit committee. C/M Munitz asked Mr. Grau whether he would like to comment on the auditing.and reporting of local governments in Florida, as outlined by the F.I.C.P.A. under the internal control considerations. Mr. Grau said that internal controls are done to determine improve- ments in the system and to evaluate a City's audit testing of the records. If it is determined there are good internal controls, the amount of testing can be reduced. If there are poor internal controls, the amount of testing should be increased. Mr. Ed Torgas said he would be the consulting partner of this engagement, if his firm is chosen to be the City's auditors. He said as far as the qualifications of the.firm is concerned, their approach is different from that of a larger firm, as the firm would be more involved in the day-to-day operations of the City. -6- 4/5/84 /rb Mr. Torgas said he feels his firm will serve the City of Tamarac well and deliver to the City the best quality product.-- _ Mr. Howard Kershaw, representing Deloitte, Haskins & Sells, stated he would be the engagement partner if his firm is selected as the auditors for the City of Tamarac. He said he is the supervising partner of the Dade County Aviation Department, which is the Miami International Airport. He said he is also the supervising partner of the Dade County School Board, which is the largest school district in the State and the fourth largest in the nation. Mr. Kershaw said his associate is Mr. Hugh Cooper, who would be the audit manager on the engagement for the City of Tamarac. Mr. Cooper is the audit manager for the City of Hollywood, and has been associated with that account in a supervisory capacity for approximately five or six years and therefore, has a great deal of experience in municipal, accounting. Mr. Kershaw stated when his firm irs. engaged as the auditors, they act as the business advisors, as_,the firm feels Cities and Counties are businesses and should be run that way. Mayor Kravitz said he is aware that the firm of Deloitte, Haskins and Sells are the auditors for General Motors and other reputable firms. However, he would like to know whether there are any municipalities in addition to the City of Hollywood, that the firm services. Mr. Kershaw stated his firm does work for the City of Miami Department of Off -Street Parking. The Mayor said that is not actually the City and he would like to know whether there are other Cities serviced by the firm. Mr. Kershaw said the City of Boca Raton is a consulting client of his firm although the firm does not do the audit for them. Mayor Kravitz asked whether the firm has the proper staff in the South Florida office to handle the account of the City of Tamarac. Mr. Kershaw said they do. They have offices in Fort Lauderdale and Miami. He explained that the Fort Lauderdale office is an affiliate of the Miami office, and Palm Beach, Fort Lauderdale, Orlando and Tampa all report to the Miami office; and within that group, there are over three hundred professionals. Mayor Kravitz asked whether the City of Hollywood has the Certificate of Conformance; and Mr. Kershaw said they have had the Certificate continuously since 1975 and in fact received the first Certificate in 1957. He said his firm has serviced the City of Hollywood for over eleven years. Mayor Kravitz asked whether municipal accounting in South Florida is a new endeavor for the firm; and Mr. Kershaw said it is not. He said his firm has hired a management consulting firm and one of the things that came out of the study was that the firm has strength in municipal accounting. Therefore, a lot of resources are being poured into the government industry. C/M Stelzer said the proposal indicates the firm has a grants and information service and he would like to know whether that is part of the firm's regular service. Mr. Kershaw said it is part of the package. C/M Munitz referred to the auditing and reporting on local governments in Florida, as outlined by the F.I.C.P.A. He asked Mr. Kershaw whether he has ever been called upon to conduct an internal control audit with an opinion, as opposed to an internal control evaluation, which is a necessary part of the customary audit procedure. Mr. Kershaw said he has not. -7- 4/5/84 /rb L C/M Munitz asked Mr. Kershaw for his opinion on an internal audit department within a City itself. Mr. Kershaw said it is his firm's opinion that internal audit departments are good anywhere. However, it i-s_ a_cost benefit auestion which - the client must decide. Fie said the firm has seen this done more in the corporate area but is beginning to see it in the municipal area.as well. C/M Munitz asked whether the City of Hollywood has a Citv audit committee; and Mr. Kershaw said they do not. C/M Munitz asked whether Mr. Kershaw sees any problems in the startup of the audit for a new auditor. Mr. Kershaw said the first thing they do is to emphasize planning when taking over a new account, and he sees no problem. C/M Stelzer said the proposal indicates the firm has a Washington office and he would like to know whether that office would keep a client advised on available grants, as part of the service. Mr. Kershaw said the service is available, if a client wants to take advantage of it. A request can be made regarding available grants in a certain area and the firm would research this. However, the firm would not take the place of a full time grants person. ****** Mr. John Groh, representing Main Hurdman, said he is a partner in the firm. He said it is the intent of his firm to keep the partner/staff ratio rather low. The result of that is it gives the firm the opportunity to involve a partner very extensively in all audit engagements. Mr. Groh stated his .firm's practice is made up of companies, enterprises and municipalities that are not necessarily the Fortune 500 size and the firm is accustomed to working with that size entity. He said his firm has a good reputation within the industry and and there has been little -or no litigation against the firm in past years. Mr. Groh said his firm has the necessary expertise to service the City of Tamarac. There are people associated with the firm who have extensive experience with municipal governments. He said at the present time, the firm has approximately three hundred and fifty municipal clients, and over one hundred utility clients to whom consulting or other types of service are provided. Mr. Groh stated there are eleven partners in their Fort Lauderdale office, as well as six managers, five supervisors and thirty-five seniors and assistants. He said the firm is large and has the resources to do the job for the City of Tamarac. Mayor Kravitz said he is well acquainted with Mr. Groh's firm, and there is no question about the number of their offices and the type of work they do. However, the City is concerned about what the firm can do for Tamarac. The Mayor said he notes that Page 8 of the proposal indicates the firm does the work for the City of Hollywood; and he would like to know whether they are still servicing the City of Hollywood. Mr. Groh stated the work done there was on rate regulated industries which was a one time engagement. It could be repeated but it is not an annual type engagement. Mayor Kravitz asked whici.'dities in South Florida are presently being serviced by the firm of Main Hurdman; and Mr. Groh said presently the firm is not servicing any :cities. Mayor Kravitz inquired whether the firm has the staff to service a municipality; and Mr. Groh said the staff has the experience as a number of cities have been serviced by the firm throughout the years. He said, in fact, at one time the firm did some work for the City of Tamarac some years ago. _8_ 4/5/84 /rb Mayor Kravitz asked whether it is a new endeavor for Main Hurdman to service municipalities in this area; and Mr. Groh said it is not. He said he has worked with the City of Lauderhill for a number of years as an engagement partner and also at the City of Hialeah and City of Pembroke Pines. Mayor Kravitz asked whether those cities are presently clients of Main Hurdman; and Mr. Groh said they are not. C/M Munitz said Page 7 addresses the single entity audit concept and refers to the C.P.A. letter dated March 12, in which it is stated the single audit legislation introduced an H.R. Bill 4821, which is the bill to establish uniform audit requirements for state and local governments receiving federal financial assistance. C/M Munitz asked whether Mr. Groh knows what has happened to that bill; and Mr. Groh said he does not. He said he checked on it a month or so ago and at that time it was still pending. C/M Munitz mentioned that the F.T.C.P.A. put out a report on auditing and reporting of local governments in Florida. He asked Mr. Groh to comment on internal control procedures in connection with the scope of his firm's audit. Mr. Groh said the procedures would have to be structured in relation to the City's particular system. However, the firm would attempt to review several selected typical transactions to see how the flow goes,so the checks and balances can be understood, and recommendations made. C/M Munitz asked Mr. Groh whether he has ever been called upon to conduct an internal control audit with an opinion, as opposed to an internal control evaluation; and Mr. Groh said he has not. C/M Munitz asked Mr. Groh whether he could envision a situation where he would recommend an internal control audit with an opinion rather than just an evaluation. Mr. Groh said he could not, if he found the audit was satisfactory. C/M Munitz asked Mr. Groh for his opinion regarding an internal control. audit department within the City; and Mr. Groh said he feels it could be beneficial. He said he thinks the City would be better off to spend its funds for that type of approach than to pay an auditing firm to do the internal control audit. C/M Munitz asked whether any of the municipalities audited by Mr. Groh's firm, have a City audit committee; and Mr. Groh said they do not. Tape Mr. Gerald Sims representing Touche Ross & Co., stated he is 3 the audit manager of the firm, and has dealt with the public sector for the past seven to nine years. He said the firm is a national one, and audits over two hundred cities and counties throughout the United States. He said they are a domin,antfirm in Florida in the public sector and the firm represents ten to twelve major cities and counties in Florida. Among them is the City and County of Jacksonville, the Manatee County, City of Sarasota and Orange County. Mr. Sims said that his firm provides auditing and consulting services to the City of Hialeah, City of -Miami Beach, City of South Miami, City of West Miami, and City of North Bay Village. Services are also provided to the Sheriff's Department of Broward County. Mr. Sims said he would encourage the City of Tamarac to contact the personal references indicated in the proposal. He said his firm has a twelve person consulting department and has done work on operations improvement, personnel studies and cash management.The firm also did a.revenue enhancement study for the City of Hialeah. Mr.Sims said he is happy to hear the City of Tamarac received the Certificate of Conformance, which indicates the quality of -9- 4/5/84 irr the City's internal Financial Department. He said his firm reviews the input of the Finance Department as to their involve- ment in the preparation of schedules and financial statements, all of which is designed to reduce audit costs. Mr. Sims said his firm likes to use the City's personnel wherever possible, including the use of the internal audit department. He said in the City of Miami Beach, the City's internal audit department was used to assist the auditors under the firm's direction, and to provide them with some internal training. He said this procedure was beneficial to both Touche Ross and the City. Mr. Sims stated his firm is totally independent with regard to any one in the City of Tamarac and there is no relationship with any one in the adminstration or the elected officials. Therefore, Touche Ross feels this offers the firm an advantage to serve as independent auditors and financial consultants to the City. Mayor Kravitz said the proposal indicates the firm does work with the Sheriff's office, several different counties, and with different clubs. He asked Mr. Sims which cities the firm actually services. Mr. Sims said he is presently the audit manager for the City of Miami Beach, City of Hialeah, City of North Bay Village, City of South Miami and the City of West Miami. He said he is also the audit manager for the Broward Sheriff's Department. Mayor Kravitz asked how long the firm has been servicing those municipalities. Mr. Sims said the firm is starting its third year at the City of Miami Beach; City of Hialeah beginning the fourth year; City of West Miami for approximately fifteen years; City of South Miami for seven years; and City of North Bay Village beginning the fifth year. Mayor Kravitz said page 15 of the proposal mentions internal controls and their evaluation. One paragraph states Touche Ross & Co. feel that internal controlsand related policies and procedures, whether good or bad, affect the audit. He asked Mr. Sims whether internal controls are reviewed in a customary audit of a municipality. Mr. Sims said internal controls are reviewed in an audit. He said the first thing the firm does is to obtain an understanding of the City's system and identify which of the internal controls are in place. Those controls are evaluated in terms of their affect on the financial statements both in terms of the quantified amounts and the ending balances. It is then determined whether in a particular area it is more efficient to totally validate the account, such as property taxes, which can be confirmed very easily. In the areas of expenditures and other types of revenues, internal controls are evaluated and tested to determine whether in fact, they are operating as reported. He said based upon this, the firm can determine how much year-end work must be done, whether the controls are operating, whether they are sufficient and whether or not they can be relied upon. He said this is a key factor in audit efficiency. Mayor Kravitz asked Mr. Sims whether a follow-up supplemental report is made to the municipalities after the audit is submitted and recommendations given. Mr. Sims stated that the firm's approach on the findings on internal controls is twofold. The firm likes to do preliminary work before the end of the year. At that time, the first thing that is done is to take last year's control comments and review them with management to determine what the current status is. This tells the auditors if the City has taken any action on these, and whether there are any potential audit problem areas. -10- 4/5/84 /rb V/M Stein asked Mr. Sims whether he would recommend the City have an internal control committee to assist the auditors in the year-end audit; and Mr. Sims said there were many occasions when an audit committee was recommended, to provide the auditors with a liaison and an independent entity with whom to discuss audit problems. The day-to-day audit is conducted with the management of the City, but the firm likes to have an outside audit committee. V/M Stein asked whether any of the cities the firm services have such a committee; and Mr. Sims said the City of Miami Beach has one. C/M Stelzer asked whether the firm of Touche Ross also services the City of Miami; and Mr. Sims said his firm did audit work for the City of Miami as well as consulting work in the past but at the present time the firm does not service the City of Miami. C/M Munitz asked whether any of the cities the firm audits have an internal control audit department from within the City itself. Mr. Sims said the City of Miami Beach has a very large internal control audit department and that department reports directly to the Council, and not to the City Manager. The Touche Ross Co. has a heavy involvement with the internal audit department in that the firm sits down with the head of that -department every year to go over the audit schedule and tha firm offers some recommendations on areas to be looked into. The firm goes through this procedure in order to determine the areas being covered to cycle the testing and permit the internal audit department to i review an area. The. auditors in turn will review the internal audit .findings. Mr. Sims said the internal audit department has improved significantly at the City of Miami Beach over the past three years and the firm now relies quite heavily on the areas in which they do an audit. The firm looks at their papers but accepts most of their findings because the relationship -is now of long standing. C/M Munitz said page 25 of the proposal lists five different cities,and he asked Mr. Sims whether he can recall the names of the previous accountants of these cities. Mr. Sims said Alexander Grant & Co. were the auditors for the City of Miami Beach. The City of North Bay Village had a small C.P.A. firm, the name of whom Mr. Sims said he could not recall. The City of Hialeah used the auditing firm of Peat, Marwick, Mitchell & Co. As for the City of West Miami, Mr. Sims said his firm has been their auditors for so long that he does not know whether there was a previous auditing firm. He said the. City of South Miami used a small local C.F.A. firm. C/M Munitz asked Mr. Sims whether he can foresee any particular problems as a new auditor regarding the first audit... Mr. Sims said any time his firm took over an account from one of the national firms, there was very little problem, particularly with those cities who had a Certificate of Conformance. There were some significant reporting changes on those cities who had been audited by smaller independent C.P.A. firms that might not have been up to date at that particular time, although there were not necessarily auditing problems. C/M Munitz asked Mr. Sams whether he has ever been asked to conduct an internal control audit with an opinion as opposed to an internal control evaluation. Mr. Sims said the firm has never been asked to do that, although the evaluation -is done as part oftheir regular audit. -11- 4/5/84 /rb F---:] �7 Mr. Barry Waite, partner in the firm of Fox & Company, said he is pleased to be before Council today to make a presentation, and feels it would be appropriate for Mr. A. L. Patrick LaSalle, the firm's manager, to offer part of the presentation. Mr. LaSalle said the firm started as Elmer Fox & Co. back in 1918 in Wichita, Kansas and has now grown to the point of being one of the largest firms in the world. He said the firm has approximately sixty offices throughout the United States and substantially more throughout the world. There are 1,600 employees supervised by 260 partners, and the firm is very strong in accounting and auditing and also does tax work and consulting. __He.said the firm is strong in the municipal area. Mr. LaSalle stated if his firm is chosen to do the audit for the City of Tamarac, they would initially come in to the City to meet with the people in the Finance Department to study the City's system. He said the engagement would be conducted in five phases; the planning phase, the review and evaluation of internal control phase, the test of compliance with controls phase, standard test of account balances phase, and the review phase. Mr. LaSalle said the planning phase would be done in connection with the people in the Finance Department to review the system and documents of the City to be sure the firm has an understanding before beginning work. After that, the firm reviews and evaluates the internal controls and the computer applications to be sure the controls are. t_ adequate. The strong and weak controls will be identified, and then the controls will be tested to determine whether they are function- ing in t he_manner in which they were described. He said based upon these tests, the balance of the audit plan would be -designe—whic�i - - would involve standard tests of account balances, some of which would be done before the end of the year and some after the end of the year, depending upon the strength of the City's system. Mr. LaSalle said in addition to the standard tests, the firm does analytical reviews, to determine whether the financial statements make sense. He said the review phase would heavily involve Mr. Barry Waite, who is the firm's expert in municipal accounting and he would do the final review and work papers. Mr. LaSalle stated that throughout the procedure, a management letter would be generated to pinpoint the problems and the high spots. Mr. Barry Waite stated the firm's office is located in the Savings of America. Building on North Federal Highway in Fort Lauderdale and that office serves Dade, Broward and Monroe Counties. The office is close to the City of Tamarac, and there are approxi- mately twenty employees in the office, the majority of whom are Certified Public Accountants. A few of the employees have computer capabilities as they have backgrounds in computer systems, and can offer the City recommendations to update the accounting system in the computer area. Mr. Waite said Mr. LaSalle would be the manager on the audit if the firm is engaged. Mr. Richard Jagusztyn would be the audit supervisor and Maurene Fengler would be the senior accountant. He said these three individuals have a significant amount of governmental experience. Mr. Jagusztyn has worked with municipalities for four years and Ms. Fengler for four or five years. Mr. Waite said at the present time the firm is doing the audit for Pompano Beach on a three-year contract. The firm has handled the City of Pompano Beach for fourteen years. Prior to that, the firm audited the City of Fort Lauderdale for fifteen years and two of those fifteen years he personally worked on the audit. He said the firm has also serviced the City of Golden Beach, the City of Dania and the City of Deerfield Beach. In addition, auditing and services have been performed fob Emergency Medical Services District, South Florida Employment and Training, City of Dania local Public Works grants, Broward County Housing Authority and Broward County Planning Council. -12-- 4/5/84 /rb �. J Mr. Waite said as far as local references are concerned, the City can check with the Finance Director of the City of Pompano Beach, the Finance Director of the City of Fort Lauderdale and Mr. Richard Marant, City Manager of Dania. Mayor Kravitz said the Council is well acquainted with the reputation of the firm, but is more concerned with the municipalities the firm services. The Mayor asked whether the firm is servicing the City of Fort Lauderdale at this time. Mr. Waite said the City of Fort Lauderdale was a client of the firm approximately seven yearst and they are not being serviced at this time. Mayor Kravitz asked whether the firm is servicing any cities at the present time in addition to the City of Pompano Beach; and Mr. Waite said the firm does not service any other cities at this time. Mayor Kravitz asked whether the firm goes into internal controls in the audit for the City of Pompano Beach. Mr. Waite explained that the firm does interim audits during the summer months and reports are presented to the City on the controls in effect in the departments audited. Those audits are done on a surprise basis. Departments will be selected by the firm and a review will be made of the controls and revenues, and a report will be presented to the Commission. When the regular audit is done, internal control tests are done on cash investments. Mayor Kravitz asked what is done if a problem is found in one of the departments; and Mr. Waite said if the firm feels it is something that is not creating a financial problem and can be corrected sub- sequent to the audit, the firm will report it in their management letter. Mayor Kravitz asked whether the firm decides whether the problem should be reviewed further; and Mr. Waite said if the firm finds small items which are not significant, it will be brought to the attention of the Finance Department, and minute details will not be included in the financial report. Mayor Kravitz asked whether that would be followed up in a subsequent report; and Mr. Waite said it would. C/M Munitz said the proposal refers to public works grants or audits in connection with grants. He asked for further specifics. Mr. Waite said these grants are generally from the Department of Housing and urban Development, Block Grants, and grants *7hich would require an audit every two years. C/M Munitz asked whether the firm plays any part in obtaining the grants; and Mr. Waite said generally not. He said the City's finance departments generally do that, although the firm.can help them if they require assistance. C/M Munitz asked whether the City of Pompano Beach or any other cities the firm has audited in the past, have their own internal control audit department. Mr. Waite said at the present time, the City of Pompano Beach has an open position for an internal auditor, who would report to the City Commission and the City Manager. The position was created at the recommendation of Fox & Company approximately two years ago. C/M Munitz asked whether the firm recommends to a City such as Tamarac, that it might be a good thing to investigate. Mr. Waite said the firm feels it warrants consideration. C/M Munitz asked whether the City of Pompano Beach or other cities the firm has audited, have a City audit committee; and Mr. Waite said at the present time none of them do as most comments come to the City Commission through the civic associations. _13_ 4/5/84 /rb C/M Dunne asked what the involvement would be of the firm in connection with the City's two bond issues. Mr. Waite said the firm has recently completed the work.on bond issues for the City of Pompano Beach. One was for $18,000,000.00 for the water works system and another for $7,900,000.00 for the public improvement complex where public safety will be housed for Fire and Police. In those bond issues, the firm of Fox & Company worked with legal counsel and underwriters to put together the prospectus to meet the financial statement requirements. Mayor Kravitz explained that the Council will take no action today, but there can be discussion. C/M Munitz said to summarize,although Council will not rate the auditinc firms at this time, consideration should be given to the auditing firms' .current.exDeri.ence with municloalities, the internal control testing and evaluations of internal controls, as well as the part the; auditing firm could play as far as the bond issues are concerned. He said Council has heard opinions from some of the auditing firms that an internal control auditor would be a good idea and several suggested. the auditor 'report directly to the the Council. One auditor mentioned reporting to the City Manager. C/M Munitz said the Council has also heard comments on a City audit committee and one of the auditors had a recommendation which was.basically the same as C/M Stel.zer's opinion, as well as his own, on a citizens and advisory committee on audit and budget for the Tamarac Presidents Council some years ago. C/M Munitz said there was a discussion on the problems of a new auditor and also the startup time for a new auditor. The recommendation followup was discussed. One of the applicants mentioned the firm has no relationship with any of the elected officials ana on that basis, he feels the Mayor should make a public statement as to whether he has a personal relationship with any one at the firm of Peat, Marwick, Mitchell & Co. Mayor Kravitz said he has no relationship with any of the seven candidates. He said he knows all the firms and has dealt with them as an accountant, but there is nothing personal involved. C/M Munitz said the representative of.Touche Koss & Co. mentioned the predecessors and those are practically all the City'.s other applicants. He said the M.F.O.A. Finance Director Certification has been an interesting aspect of the discussions.He said C/M Stelzer asked a question about grants information, of only one,or the applicants. C/M Munitz said he will be setting up some questions when the Council rates three of the applicants for further interviews and he feels today's workshop has been a beneficial one to the Council and the City. Mayor Kravitz asked whether -there is any input from the public. Vickie Beech, resident, said she feels the question asked of Mayor Kravitz should be directed to the rest of the Council as well, to determine whether any of them have contact with the auditing firms. She said she feels it is time for a change as there has been a cloud over the City, particularly with the finance and accounting procedures and she feels the Council should seriously consider a change in. this area. There was no further response from the public. C/M Dunne said all the applicants mentioned the Certificate of Conformance and he would like some clarification of that as relates to the problems experienced by the City the past year. -14- 4/5/84 /rb Mayor Kravitz explained that the Certificate of Conformance has nothing to do with the problem referred to by Ms. Beech. Vice Mayor Stein stated for the record that he has no connecti,on,with anyone associated with the auditing firms interviewed today. All the Councilmembers stated for the record they have no connection with any of the applicants V/M Stein said in defense of the present auditors, he does not know how restricted they were in the previous audits. He said the firm has an excellent reputation and he has checked their credentials. The Vice Mayor said he feels the Council should not automatically rule out the previous auditing firm because of something that happened, since he is not certain it happened because of the auditing firm or because there were limitations in the scope to which they were restricted. V/M Stein said he has spoken to Mr. Emmer about the situation, and he has learned the audits of Alexander Grant & Co. were very limited in scope and therefore, they were not able to check some of the items. The Vice Mayor said it is his feeling that all the applicants interviewed today should be regarded in light of their reputation as a firm and their ability.to perform, and not what has occurred previously since the Council does not really know why those things happened. C/M Munitz said he.would explain that a Certificate of Conformance has nothing to do with an audit, and is based upon the ability and function of the Finance Director. The Certificate is given to the Finance Department and does not indicate the audit is more effective. C/M Munitz said he would like to address the statement made by Ms. Beech to the effect that it is "time for a change". He said if a change is necessary, it should always be made; but to make a change for the sake of making a change and not improving the situation is not constructive. He said -.-although. the City should consider the various auditing firms, there is some regulation insofar as a repetition of audits; and whether that should affect the City is another factor. However, while the slogan, "time for a change" has become a favorite quotation in the City of Tamarac, whether, or not it applies to the selection of the auditor, he feels requires much further investigation, as pointed out by V/M Stein. C/M Munitz said it may very well be that a change should be made, but certainly that: slogan would not be the reason to make the change.. C/M Stelzer said he would like to find out more about the "financial cloud" to which Vickie Beech is referring, since he does not know of any.""Cinancial cloud" that has come over the work done by Alexander Grant & Co. Ms. Beech said over the:_1-a"st few years there have been articles in the newspapers about the Public Works Department. C/M Stelzer said that is not within the scope of an auditor since -they — - have no way of knowing if something is being done: -,-outside eCity by employees of the City. -- Ms. Beech inquired about internal controls; and C/M Stelzer said the auditors were not engaged to do a deep internal control. They only check the controls. He said he knows of no financial cloud,. over Alexander Grant & Company's audit. Mrs. Melanie Reynolds, resident, said one of the applicants stated the Certificate of Conformance costs so much that one of their clients did not go after it. She said she thought Mr. Emmer presented the City with that Certificate and she did not know the City had to go after it, and she would like to know whether it costs a great deal to secure this Certificate. -15- 4/5/84 /rb Mayor Kravitz explained that the City pays for the work necessary in order to conform with the requirements to obtain the Certificate, but payment is not made for the actual Certificate. The Mayor further explained that some of the municipalities do not want that type of audit. Mr. Moni Avidon, resident, said that he noticed when C/M Munitz addressed the various auditors, he inquired about internal controls. Mr. Avidon said he feels very strongly about internal controls. He said he has read the proposals prior to today"s meeting and he looked for those auditing firms who are strong in internal controls. He said he feels the Council should look into the firms who stress compliance with Charter and Code in general. Mr. Ben Lieber, resident, said he feels the City is fortunate to have three Certified Public Accountants on the Council who are capable of making the selection. He said he has dealt with every one of the firms represented today and knows they are very competent. He said he would like to mention that in obtaining auditing services, the City would get what they pay for. If the City wants to get down to the nitty gritty, all they have to do is pay for it. Mayor Kravitz said fees are not being discussed today. They will be discussed after the three firms are selected for further interviews. Tape C/M Stelzer said with regard to internal controls, sometimes it 4 costs more to obtain a good, efficient internal control, than would be lost in ten years by not having that control. He said for example, none of the department stores have internal controls and they take their inventories based upon their sales. He said the City could have the accountants at City Hall day and night checking to see that nobody does anything wrong and it would cost the City a tremendous amount. C/M Stelzer said the auditors know the internal controls will be audited in the same manner as the income taxesare:audited. Ile commented that the government does not audit every single income tax return; and similarly if the City wishes to pay for good internal controls to save 1000, enormous amounts of money would have to be spent for those controls. Mr. Hy Fox, resident, said C/M Stelzer mentioned it would cost more to protect the City, than it would if the City were not protected. He said possibly the $60,000.00 the City lost would have been saved if the City had spent an additional $5,000.00 per year. That would have given the City twelve years of controls, at $5,000.00 per year. He said that was only one of the items that was uncovered,and nobody knows how much more was not uncovered, because an internal control audit was never done. The meeting was adjourned at 12:25 P.M. N �C ASSISTA CLERK T This public document was promulgated at a cost of $153.28or $4.25 per copy to inform the general public and public officers and employees about recent opinions.and considerations by the Council of the City of Tamarac. -16- 4/5/84 /rb 1