HomeMy WebLinkAbout1998 05-11 City Council Special Meeting PacketAGENDA
MAPLEWOOD CITY COUNCIL
SPECIAL MEETING
6:30 P.M., Monday, May 11, 1998
Maplewood Room, Municipal Building
Meeting No. 98 -09
A. CALL TO ORDER
B. PLEDGE OF ALLEGIANCE
C. ROLL CALL
D. APPROVAL OF MINUTES
E. APPROVAL OF AGENDA
F. PRESENTATIONS
G. CONSENT AGENDA
H. PUBLIC HEARINGS
I. AWARD OF BIDS
J. UNFINISHED BUSINESS
K. NEW BUSINESS
1. Annual Financial Report and Audit for 1997
L. VISITOR PRESENTATIONS
M. COUNCIL PRESENTATIONS
N. ADMINISTRATIVE PRESENTATIONS
0. ADJOURNMENT
AGENDA NO. � 1
.Aotion by Council;
Endorsers �.
AGENDA REPORT M0aifie`L'.----
Pei eeted
Date
TO: City Council
FROM: Finance Director /W44�x/��
RE: INFORMATION FOR MEETING WITH AUDITORS
DATE: April 29,1998
At 6:30 p.m. on Monday, May 11 there is a special Council meeting to review the
annual financial report and audit reports. Please bring to the meeting your copy
of the 1997 Annual Financial Report.
Three additional reports will also be reviewed at the meeting:
1. Management letter.
2. Legal compliance audit report letter.
3. Auditors' communication letter.
Copies of these reports are attached.
P AF1 NANCEIWPIAGNIAUDITMTG.WPD
A140 Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Honorable Mayor and Members of the City Council
City of Maplewood, Minnesota:
Ii
We have audited the general purpose financial statements of the City of Maplewood, Minnesota
(the City) for the year ended December 31, 1997, and have issued our report thereon dated
March 20, 1998. In planning and performing our audit of the financial statements of the City we
considered its internal control structure in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to provide assurance on
the internal control structure.
During our audit we noted certain matters involving the internal control structure and other
operational matters that are presented for your consideration. These comments and
recommendations, all of which have been discussed with the appropriate members of
management, are intended to improve the internal control structure or result in other operating
efficiencies and are included as an Exhibit.
This report is intended solely for the information and use of the mayor, members of the City
Council, and management.
We would like to take this opportunity to express our appreciation for the cooperation and
assistance provided to us during the audit. If you have any questions concerning the matters
discussed in this letter or wish to discuss any other phase of our audit, we would be pleased to do
so at your convenience.
March 20, 1998
Member Firm of KPMG International
Exhibit
CITY OF MAPLEWOOD
Comments and Recommendations
Community Center Sales
The Community Center uses a software system, RecWare, to track annual memberships, banquet
and .conference facility reservations, and program fees. The Community Center uses a ticket
software system entitled, Ticketmaker, to issue and track theater tickets. The Community Center
also records the cash receipt for these sales in the cash register system. The Community Center
does not consistently reconcile the sales from the RecWare and Ticketmaker systems to the sales
from the cash register system. As a result, the Community Center may not detect errors and
misappropriations on a timely basis.
We recommend the Community Center reconcile the sales from RecWare and Ticketmaker
systems to the sales from the cash register system on a regular and timely basis. The individual
who reconciles the information should not have access to the systems and should not have access
to the cash. In addition, the finance department should review the reconciliations. This will help
detect errors and help minimize the opportunity for misappropriation.
Community Center - Membership Billing
The membership software system RecWare, provides a listing of memberships to be billed. The
Community Center manually inputs this listing into a word perfect file, which is provided to the
finance department for the ACH collection process.
We recommend the Community Center consider the costs and benefits of programming the
RecWare system to automatically create an ACH collection file. This will help reduce the time
needed to prepare the file and help prevent billing errors. We also recommend the finance
department reconcile the RecWare membership information to the payments (i.e. check, credit
card, and ACH payments) to ensure all memberships are billed and paid.
Exhibit, Continued
CITY OF MAPLEWOOD
Comments and Recommendations
Community Center Concession Inventory
The Community Center secures excess concessions inventory in a storage room and limits access
to the storage room. The inventory levels are monitored by the night building supervisor,
however, the inventory transactions are not recorded on an inventory system. The Communit
Center plans to use the inventory module of the cash register system to record and monitor
inventory transactions.
We recommend the Community Center use the inventory module of the cash register system or
another computerized inventory system inventory system to record inventory transactions. The
inventory system should track inventory transactions by product and provide information to
enable the Community Center to analyze products sales, product reorder points, products
obsolescence. We recommend the Community Center establish access controls over the
.inventory system and the concessions inventory. We also recommend the Community Center
perform periodic physical counts of the concessions inventory, compare the physical count to the
inventory system balance, and investigate any differences.
Community Center Daily Admission/Concession Sales
The admission/concession area of the Community Center processes fees for daily admission and
sells concessions. Although there are generally two or more employees working in the
admission and concession counters, the potential exists for an employee to charge a customer for
admission or concessions and not record the sale on the cash register system. This creates the
potential for errors and misappropriations to occur and not be detected.
The Community Center is aware that controls over the admission/concession area need to be
improved and is in the process of evaluating alternatives. One alternative is installing security
cameras, however, the Community Center determined that the cost of security cameras
outweighs the benefit.
We recommend the Community Center evaluate the costs and benefits of alternative controls.
One alternative the Community Center should evaluate is requiring employees to enter every sale
into the cash register system, requiring employees to give every customer the cash register
receipt, and offering the customer a gift/incentive for reporting instances when they do not
receive a receipt. The Community Center should establish controls over the gift/incentive
program, so the Community Center can monitor the level of gifts /incentives and the employees
who do not issue receipts. This will help minimize the opportunity for misappropriation.
Exhibit, Continued
CITY OF MAPLEWOOD
Comments and Recommendations
Segregation of Duties
Proper segregation of duties is a key control in detecting errors and in preventing
misappropriation of assets. During our review of internal controls we noted that the accountant
initiates electronic collections and payments, has access to enter transactions into the accounting
system, and completes the bank reconciliation. Typically these responsibilities are segregated.
We recommend the finance department consider segregating these responsibilities. If segregating
these duties is not cost beneficial, the finance department should consider establishing other
controls, such as, requiring two individuals to approve electronic transfers over a certain amount,
having the bank limit electronic collections and transfers to certain bank accounts, or having
another individual reconcile a sample of the electronic collections and payments from the bank
statements to the general ledger each month.
Public Improvement Projects
The City has seven public improvement projects that have been complete for 7 to 11 years. The
City has not closed the projects because the City's final obligations have not been determined or
paid. Ramsey County and the State of Minnesota coordinated the construction for these ro'ects
p J
and therefore need to provide the City the final project cost information.
We recommend the public works department work with Ramsey County and the State of
Minnesota to determine the amount of the City's final obligations for these projects and close out
the related funds. This will allow the City to pay its obligation and utilize any excess funds for
other purposes.
AMUPeat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
To the Honorable Mayor and
Members of the City Council
City of Maplewood, Minnesota:
We have audited the general - purpose financial statements of the City of Maplewood, Minnesota (the
City), as of and for the year ended December 31, 1997, and have issued our report thereon dated
March 20, 1998.
We conducted our audit in accordance with generally accepted auditing standards and the provisions of
the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Legal
Compliance Task Force pursuant to Minn. Stat. Sec. 6.65. Accordingly, the audit included such tests of
the accounting records and such other auditing procedures as we considered necessary in the
circumstances.
The Minnesota Legal Compliance Audit Guide for Local Government covers five main categories of
compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public
indebtedness, and claims and disbursements. Our study included all of the listed categories.
The results of our tests indicate that for the items tested, the City complied with the material terms and
conditions of applicable legal provisions, except as described in the Schedule of Finding on Legal
Compliance. Further, for the items not tested, based on our audit and the procedures referred to above,
nothing came to our attention to indicate that the City had not complied with such legal provisions.
This report is intended solely for the use of the City and should not be used for any other purpose. This
restriction is not intended to limit the distribution of this report, which is a matter of public record.
March 20, 1998
NINE Member Firm of KPMG International
CITY OF MAPLEWOOD, MINNESOTA
Schedule of Finding on Minnesota Legal Compliance
Year ended December 31, 1997
Finding
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Section 1823(e) states
that a security agreement, including a pledge of collateral for a deposit, is not valid against the FDIC unless it
satisfies the following requirements:
a. It must be in writing.
b. It must be executed contemporaneously with the acquisition of the asset'by the depository.
c. It must be approved by the depository institution's board of directors or loan committee, and that approval
must be reflected in the minutes of the board.
d. It must an official record of the depository institution since it was executed.
The City did not have a perfected security interest in collateral pledged by Premier Bank as of December 31,
1997, because the Bank's board of directors did not approve the collateral nor was this indicated in the Bank's
official record, therefore, the City did not have sufficient collateral pledged to cover the uninsured deposits, as
required by Minnesota Statutes Sec. I I8A.03, Subd. 1.
Recommendation
We recommend the City obtain a perfected security interest in collateral pledged by Premier Bank.
Management's Response
The City will request such an action from Premier Bank.
1 � �I ��� i I ��'�
I +I
eat Marwic
LLP
4200 Norwest Center Telephone 612 305 5000
90 South Seventh Street
Minneapolis, MN 55402
The Honorable Mayor and Members of the City Council
City of Maplewood, Minnesota:
1�
1897.1997
Telefax 612 305 5039
March 20, 1998
We have audited the general purpose financial statements of the City of Maplewood, Minnesota
(the City) for the year ended December 31, 1997 and have issued our report thereon dated March
20, 1998. Under generally accepted auditing standards we are providing you with the attached
information related to the conduct of our audit.
. OUR RESPONSIBILITY UNDER
GENERALLY ACCEPTED AUDITING STANDARDS
Our responsibility under generally accepted auditing standards is to express an opinion on the
financial statements of the City based on our audit. In carrying out this responsibility, we
assessed the risk that the general purpose financial statements may contain a material
misstatement, either intentional or unintentional, and designed and conducted our audit to
provide reasonable, not absolute, assurance of detecting misstatements that are material to the
general purpose financial statements. In addition, we considered the internal control structure of
the City to gain a basic understanding of the internal control policies and procedures in order to
design an effective and efficient audit approach, not for the purpose of providing assurance on
the internat coffrol re. Fu ermore, our audit, - including the limited inquiries we made in
connection with the Year 2000 issue, was not designed to, and does not, provide any assurance
that a Year 2000 issue which may exist will be identified, on the adequacy of the City's
remediation plans related to Year 2000 financial or operational issues, or on whether the City is
or will become Year 2000 compliant. Year 2000 compliance is the responsibility of
management.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by the City are described in the notes to the financial
statements. As discussed in notes to the financial statements the City changed its method of
accounting for deferred compensation plans to adopt the provisions of Governmental Accounting
Standards Board Statement No. 32, Accounting and Financial Reporting for Internal Revenue
Code Section 457: Deferred Compensation Plans. There were no other significant changes in
accounting policies during 1997.
Member Firm of
KPMG International
2
Peat Marwick LLP
MANAGEMENT JUDGMENTS AND ACCOUNTING ESTIMATES
Accounting estimates are an integral part of the general purpose financial statements prepared by
management and are based upon management's current judgments. Certain accounting estimates
are particularly sensitive because of their significance to the general purpose financial statements
and because of the possibility that future events affecting them may differ markedly from
management's current judgments. We evaluated the key factors and assumptions used to
ascertain that they are reasonable in relation to the general purpose financial statements of the
City taken as a whole.
SIGNIFICANT AUDIT ADJUSTMENTS
We proposed no corrections to the general purpose financial statements that in the aggregate
could, in our judgment, have a significant effect on the City's financial reporting process.
DISAGREEMENTS /CONSULTATIONS
There were no disagreements with management on financial accounting and reporting matters
that, if not satisfactorily resolved, would have caused a modification of our report on the City's
1997 general purpose financial statements.
To the best of our knowledge management has not consulted with or obtained opinions, written
or oral, from other independent accountants during the past year that were subject to the
requirements of Statement of Auditing Standards No. 50, Reports on the Application of
Accounting Principles.
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City's auditors.
However, these discussions occurred in the normal course of our professional relationship and
our responses were not a condition to our retention.
We encountered no difficulties in dealing with management in performing our audit.
This information is intended solely for the use of the board of directors and should not be used
for any other purpose.
Very truly yours,
ffxw,�f allay /z �O