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HomeMy WebLinkAbout1984-05-21 - City Commission Special Meeting Minutes5811 NORTHWE�iT 88TH AVENUE TAMARAC, FLORIDA 33321 TELEPHONE (305) 722-5900 May 16, 1984 NOTICE OF SPECIAL MEETING CITY COUNCIL OF TAMARAC, FLORIDA There will be a Special Meeting of the City Council on Monday, May 21, 1984 at 1:00 P.M., in the Council Chambers of City Hall, 581.1 N.W. 88 Avenue, Tamarac. The purpose of the meeting is City Auditor selection process: 1) Final Interviews with: a) Touche Ross & Co. b) Feat, Marwick, Mitchell & Co. c) Alexander Grant & Company 2) Ranking decisions 3) Negotiations The Public is encouraged to attend. Carol A. Evans Assistant City Clerk Pursuant to Section 286.0105, Florida Statutes If a person decides to appeal any decision made by the city Council with respoci., to any inatter considered at such meeting or hearing, he wili nr:.4,xJ a rc,,ord of the proceedings and for such purpose, he r;,uy need to ensure that a verbatim record includes the testimony and evidence upon which the appeal is to be based. P= Y OF NXI-DISCRDmPMUN ON USLS OF HANDICAPM 9=5 AN Eq & CP'WKftNM PIV1.L M CITY OF TAMARAC, FLORIDA SPECIAL CITY COUNCIL MEETING May 21, 1984 Tape CALL TO ORDER: Mayor Kravitz called the meeting to order on 1 Monday, May 21, 1984 at 1:00 P.M. in the Council Chambers of City Hall. ROLL CALL: PRESENT: Mayor Philip B. Kravitz Vice Mayor Sydney M. Stein Councilman Jack Stelzer Councilman Raymond J. Munitz ABSENT AND EXCUSED: Councilman John J. Dunne ALSO PRESENT: Laura Z. Stuurmans, City Manager Patricia Marcurio, Secretary Mayor Kravitz read the call of the meeting into the record which stated that the purpose of the meeting is City Auditor selection process. He said these are final interviews with: a) Touche Ross & Co. b) Peat, Marwick, Mitchell & Co. c) Alexander Grant & Co. C/M Munitz said there are 4 areas of concern which he intends to refer to each of the 3 applicants: 1. the experience on municipal audits that the employees of each firm has and the experience they have as far as their own employees expenses. 2. there has been some publicity on a single audit requirement which is before the Congress. He questioned whether Tamarac would come under this requirement. 3. what effect, if any, would a change of auditor have with regard to the City's bond issue. 4. fees City Manager Stuurmans said she brought copies of the Florida Statute regarding negotiations with auditors for reference purposes. She said the agenda speaks for procedure that Council will employ today. First, the firms will be interviewed by Council; second, a final ranking decision will be made and; third, after the ranking has been made pursuant to the Statute, Council will negotiate with the first one and failing to reach a conclusion with the first one, Council could proceed to the second and, if necessary, the third. She said Council would still have the option,under this particular Statute, to go back to speak to any of the previous ones that were negotiated with. She requested permission to be excused because she is working on the grant problem at this time. V/M Stein said that Council has already completed the first step of ranking the auditing firms. a) Touche Ross & Co. - Steven Cohen, Partner and Jerry Simms, Manager of Touche Ross & Co. introduced themselves to Council. Mr. Cohen said the NFOA, the governing body for Finance Officers for which Tamarac received a Certificate of Conformance, asked his company 2 years ago to write their bible for accounting firms to use in the evaluation of internal control. He said the Institute of Internal Auditors have consistently asked them to write a book called Computer Auditing Control and this is the third update of this pub- lication. He said when they are engaged they look at the prior firm's reports, at questions by the City Manager, Finance Director, and Council and find concerns of the past. He said the internal controls are critical to establishing the audit program. He said he is part of the firm's national resource program with the public sector and is consulting partner to Orange County and to the City and County of Jacksonville. - 1 - 5/21/84 /pm C/M Munitz asked Mr. Cohen for an idea as to the experience of his firm with municipal audits and Mr. Cohen said he is a Partner with the firm of 20 years experience, 13 years in the public sector and he is the firm's resource. He said they are currently the auditors to 6 municipalities and Mr. Simms has 20 years of ex- perience with 15 in the public sector. He said the Consulting Partner they have is Ivan Blum who has 13 years experience, 10 in the public sector. He said the audit supervisors are all experienced in public sector work and they do not put inexper- ienced people on an engagement, especially in the first year. C/M Munitz asked about the accountants under the supervisors and Mr. Cohen said Mark Wilson is the audit supervisor for 4 munici- palities, Russell Brown handles 2 municipalities and past that level it would depend on when the scheduling comes up but they have at least 10 people at the senior/junior level that are experienced with public sector auditing. Mr. Simms said they have a training session that takes place in the summer months in the public sector area and all their people handling munici- palities go to that training session. C/M Munitz asked --about the single audit requirements of the Federal government and whether this would affect Tamarac and Mr. Cohen said this concept is under the direction of the Office of Manage- ment and Budget which is a Division of the Executive Office of the President. He said in 1978 he worked for the Executive Office of the President and one of the things he did while in that office was to develop the single audit guidelines. He said the purpose was to prevent several auditors from entering a public sector as well as universities and non-profit organizations. He said, basically, this provides that the Federal government will accept one audit from an independent or State auditor provided that their audit approach is designed to deal with all the ramifications of Federal grants and programs. He said, in addition, they want the auditor to look at the financial management system to make sure they had a system that adequately captured the cost and expenditures of all programs in a comprehensive manner. He said they want the auditor to look at the compliance side of all grant programs and internal control and evaluate that in their audit report so that the audit report now has a financial statement which has an opinion, an auditor's letter and is adequate to control the recording of revenue and disbursement information. C/M Munitz asked how different this is from the way it was and Mr. Cohen said in the past an auditor would only audit the City's accounts and if there were off-line situations, such as grants that came from the Federal government directly to a contractor for the Water and Sewer Program, these were not audited. He said this prevented any other government unit from imposing a greater audit requirement. C/M Munitz asked if there were any limits or controls as to population, amount of budget, etc. and would this apply to Tamarac and Mr. Cohen said if Tamarac were not receiving any Federal funds directly or indirectly, it would not apply. C/M Munitz asked if Mr. Cohen has ever. encountered a situation as a successor auditor when a bond issue prevailed dating back 2 to 5 years. Mr. Cohen said this is not unique. Mr. Cohen said it is commonplace for firms to place reliance on other firms' work,and the bond counsel sets the scope for what is included in the offering document and the underwriter. He said a standard comfort letter would cover this. C/M Munitz asked if Mr. Cohen would give the guidelines generally set with the firm's employees for expense approval and Mr. Cohen said it is determined by the scope of the audit, which is not a unilateral decision. He said it is a decision reached with the City Manager, the Finance Director and, sometimes, with an audit committee. - 2 - 5/21/84 /pm Mayor Kravitz referred to Page 18 of the Expression of Interest booklet, related to government experience and he questioned if Mr. Cohen's firm is currently auditing the Cities of Miami Beach, Hialeah, South Miami, North Bay Village, West Miami, Or-ange- C(Dunty and Jacksonville. Mr. Cohen said they are currently auditing these aforementioned municipalities. V/M Stein asked if it is normal to charge municipalities based upon an hourly or flat rate for the year and Mr.Cohen said their intention is to negotiate a fee since there are sometimes hourly fees with an upside cap and sometimes there are flat fees. V/M Stein asked if their firm would be willing to audit one depart- ment per year at no additional cost and give Council a full report. Mr. Cohen said with an internal control report, they can give negative assurance but without a complete audit of the department there is no way to give positive assurance. V/M Stein asked what their anticipated maximum fee would be to the City for a one year audit and Mr. Cohen said $17,800, and he would be willing to state for the record that for at least a 3 year period they would limit those increases to CPI -type increases. He said that would limit it to approximately 4% per year. Mayor Kravitz asked if this price would include the follow-up report at the end of 6 months and Mr. Cohen said yes. Tape C/M Munitz asked the standard billing rates and Mr. Cohen said it 2 varies by person since their staff engagement for an audit averages $54 per hour across the board. Mayor Kravitz thanked Messrs. Cohen and Simms for their input. b) Peat, Marwick, Mitchell & Co. - Chris Davell, Senior Manager with Peat, Marwick, Mitchell & Co. introduced himself to Council. C/M Munitz asked Mr. Davell how they go about internal control auditing and Mr. Davell said they first spend a significant amount of time evaluating the internal control) secondly, they document the system of the City, revenues, receipts, purchases, etc. and; thirdly, they analyze the City's different sources of revenues, expenses and disbursements and they thoroughly document the system of internal control. Mr. Davell said they use a system called CDOC which is documenting a system basically emphasizing control points and the documents that will give rise to information in the financial statements. He said they test the controls to see if they can be relied upon. C/M Munitz asked if this were limited to financial items or also procedural and Mr. Davell said it is procedural as far as they generally relate to the accounting system but not directly in the flow of a cash receipt or disbursement. Mr. Davell said one of the by-products of their analysis of the internal controls is the Management Letter which does address material weaknesses as well as other areas that might be improved. He said this is not specifically control oriented but is also for improving operations and increasing revenue. V/M Stein asked if his firm would do an internal review of a specific department if requested to do so and Mr. Davell said they could do that but this would not be part of the overall audit. He said it could be in the normal fee estimate if this is what Council wishes. C/M Munitz asked about the experience of the accountants to be used in the audit and Mr. Davell said in -charge auditors would be taken from the 8 in their office that are experienced in municipal accounts. C/M Munitz asked Mr. Davell if they have experienced any problems as a successor auditor when a bond issue is involved and Mr. Davell said he has personally not had experience when there has been a predecessor auditor but Keith Cobb has. He said generally the bond counsel and the underwriters make the determination of what is required. C/M Munitz asked Mr. Davell about the single audit requirement from the Federal government and Mr. Davell said for a City that has a significant amount of grants or other sources of revenue other than the normal governmental property taxes, etc., it has its merits. - 3 - 5/21/84 /pm Mr. Davell said there is a threshold beyond which the single audit is not cost beneficial. Mayor Kravitz said he noted in the proposal of Peat, Marwick, Mitchell & Co., that there were only 2 cities audited by them and Mr. Davell said as a Manager, that is correct, however, as a firm, they audit 6 cities. Mayor Kravitz asked what the function would be of the CPA firm in pre- paring the official statements and Mr. Davell said this varies but on the average, it is reviewing the document, suggesting wording, meeting with bond counsel and underwriters in early and development stages of the document to determine what should be included. Mayor Kravitz asked if they are still auditing the Cities of Fort Lauderdale, Coral Springs, Wilton Manors, Dania, Davie, and Highland Beach. Mr. Davell said yes. V/M Stein said according to the Letter of Engagement, they will be billed as work progresses. He said Tamarac usually enters into an agreement with a maximum fee for the year and he asked if Mr. Davell could give the figure for this. Mr. Davell said the fee would be $27,500 without the single department control check. He said their typical increases are no more than standard rate changes or cost of living increases. He said the average hourly billing would be approximately $50 per hour. C/M Munitz asked if the 6 month follow-up report is included in the total price and Mr. Davell said yes. Mayor Kravitz thanked Mr. Davell for his input. c) Alexander Grant & Co. - Burt Emmer', Partner of Alexander Grant & Co. was asked by C/M Munitz if, based on the evaluation of internal control procedures, his attitude concerning internal control evaluations prior to setting up auditing procedures has been changed. Mr. Emmer said they are required to do an evalu- ation and study of internal control and this will be done but there will not be a separate report under a normal type of financial audit engagement. He said in their Engagement Letter they have indicated that they would extend that to one operating department to actually view the internal control there. He said that department would be selected by the City. C/M Munitz asked if anything has happened, as a result of the internal control evaluation, to change their procedures of internal control prior to the audit. Mr. Emmer said the one area where work was done as a result of that was in the Public Works Department because of inventory problems. Mr. Emmer said there were no other significant areas that have come up in the past where the procedures were extended or modified. C/M Stelzer asked how far they check in the Building Department concerning building permit fees charged, etc. Mr. Emmer, said as a part of their audit program they take a sample of building permits and look back to the original documentation and track it to its full collection. He said this is done on a sample basis. V/M Stein asked if there is any additional type of audit Mr. Emmer would recommend to prevent the problem that occurred in Public Works. Mr. Emmer.. said there was a great deal of collusion involved in the problems in the Public Works Department which made it difficult for control. He said there are certain things that they recommended in terms of tighter controls which would give the City more accountability. C/M Munitz asked if Mr. Emmer did a follow-up to see if his recommendations were followed to correct any problems. Mr. Emmer:- said they rendered a written report to the Council as to what, if anything, had been done in connection with their recommendations. He said in their year-end Management Letter there is always a section which says "Responses to Prior Year's Recommendations" in which they state whether anything has been done to correct problems. C/M Munitz asked the experience of the workers for Alexander Grant that would be doing the audit and Mr. Emmer; said Kenneth Meuser is one of their best Senior Accountants who has a great deal of experience in this field. He was the in -charge auditor last year for Tamarac. - 4 - 5/21/84 /pm Mr. Emmer said Mr. Meuser is experienced in auditing the Cities of Tamarac, Sunrise, Lighthouse Point and Hialeah Gardens. C/M Munitz asked if there is normally a problem with a successor auditing firm handling a bond issue and Mr. Emmer said there is always some additional work involved. Mr. Emmer:, said from the investment community's prospective, a question arises when there is a change of auditor. C/M Munitz asked Mr. Emmer's opinion of the single audit requirement and Mr. Emmer r said it has absolutely no applicability to Tamarac. C/M Stelzer asked how much the City must receive in Federal funds before it is required and Mr. Emmer, said the City would have to receive over $100,000 but this only comes into play when there is multiple funding sources. He said Alexander Grant & Co. has done the Federal revenue sharing audit every year on every City whereas many auditors wait until every third year. C/M Munitz said there have been some problems in the past on a pre -report conference and he questioned why. Mr. Emmer, said they have always had pre -report conference's with the staff as well as the Mayor, City Manager and the Finance Director. Mr. Emmer, . said these are called Exit conferences and there was one in December and the Mayor wanted to have weekly informal progress meetings. Mr. Emmer- said he suggested that unless there is something important to be discussed weekly, he would suggest these meetings be stopped. C/M Munitz asked if the City is due for a 6 month follow-up and Mr. Emmer. said yes, they will review the recommendations contained in their Management Letter, render a written report to Council indicating what their recommendations are, and what the response of the staff is if, for any reason, the recommendation is not moving along. 'ape V/M Stein asked if a single audit report were required, would this 3 be done at the same basic fee or require an additional cost. Mr. Emmer said it would be an additional cost. V/M Stein asked what the anticipated fee for the 1984 audit would be and Mr. Emmer• said he would have to render this in writing (See Attachment 1). Mr. Emmer, read this letter into the record stating their fee would be $28,000. He said this was the fee for the past 3 years. C/M Stelzer asked what extra things would have to be done for a single audit that are not done now. He said they would have to review EEO compliance as well as many other areas and a separate report would have to be prepared on the grants themselves. He said he has seen single audit reports run from $2,500 to $75,000 depending upon the nature of the grant. Mayor Kravitz thanked Mr. Emmer:. for his input to Council. C/M Stelzer questioned Mr. Emmer as to the source that stipulated that the fee must be submitted in writing. Mr. Emmer said it was from Chapter 473 Florida. Rules of the Board of Accountants. V/M Stein said Touche Ross is the first ranked firm as well as the lowest bidder by $10,000 with a maximum price that included the single audit concept. He said he feels a new set of auditors would be good for the City and he recommended acceptance of Touche Ross as the City's choice. Mayor Kravitz noted that the average hourly rate for Touche Ross accountants is $54 totalling a maximum quoted price of $17,800; however, Peat, Marwick, Mitchell & Co., working at a lower rate of approximately $50 per hour totalled $27,500. He questioned how they could do this for.that amount. C/M Munitz said they are only estimating the amount of hours they will need and he was warned that they might be less expensive than the other 2 ranked firms. He said rather than being impressed with the amount of $17,800, however, he is disturbed by it. He said he does not understand how they can do a proper job for this amount and C/M Stelzer concurred. V/M Stein said he does not understand how Council can ignore the saving of almost $10,000 since this price was quoted from the top ranked firm. 5 - 5/21/84 /pm C/M Munitz said he had a question of Touche Ross concerning the prereport conference and Mayor Kravitz requested the secretary call Mr. Cohen of Touch Ross into the Chambers. C/M Munitz questioned Mr. Cohen about the prereport conference and Mr. Cohen said normal procedure dictates 2 exit conferences, first, for recommendations from the Management Letter, which takes place with the City Manager and the Finance Director. He said the second conference takes place near the conclusion of the fin- ancial segments with the Council and before they publish anything. V/M Stein MOVED that in consideration of the fact that Touche Ross & Co. was one of the 3 top ranked companies and that all 3 companies have agreed to do substantially the same type of audit, and Touche Ross was the lowest bidder, they should be engaged as the City's auditors for the year starting September, 1984. He said this should be subject to approval of a formal contract enumerating the amounts as quoted. SECONDED by C/M Munitz. (the total amount quoted was $17 800, the inclusion of a one - departmental audit at.Council's discretion at no additional cost, cost increases for a 3-year period,only to CPI type increases of approximately 4% per year and a follow-up report at the end of 6 months.) VOTE: C/M Munitz Aye C/M Stelzer Nay V/M Stein Aye Mayor Kravitz Nay Mayor Kravitz said he voted Nay so that this item could be brought up at a meeting when all 5 Council people are present. V/M Stein said this would be unfair since C/M Dunne has not been present to review the 3 companies and he MOVED to reconsider the original Motion, SECONDED by C/M Munitz. VOTE: ALL VOTED AYE V/M Stein MOVED APPROVAL of the original MOTION, SECONDED by C/M Munitz. VOTE: ALL VOTED AYE Mayor Kravitz told Mr. Cohen that, based upon receipt of a Letter of Engagement including all of the items stipulated to today, Council has approved awarding Touche Ross & Co. the audit for 1984. The meeting was adjourned at 3:10 P.M. MAYOR ATTEST: ASSISTANT CITY CLERK This public document was promulgated at $ PZ, v/ per copy to inform the general and employees about recent opinions and Council of the City of Tamarac. - 6 - a cost of $ 7..Z. 60 or public and public officers considerations by the 5/21/84 /pm CITY OF TAMARAC APP (o VED AT MEETING OF � 8 %�42 ATTACHMENT 1 Special City Council Muting May 21, 1984