Loading...
HomeMy WebLinkAboutMinutes - Audit Investment and Finance Committee 09/25/2018 and 11/27/2018CC xlC H -1 MINUTES REGULAR MEETING OF THE PALM DESERT AUDIT, INVESTMENT & FINANCE COMMITTEE Tuesday, September 25, 2018 CALL TO ORDER Chairman Leo called the meeting to order at 10:00 a.m. ROLL CALL Present: Absent: Lauri Aylaian, City Manager Russell Campbell, Community Member Robert Hargreaves, City Attorney Brian Holcombe, Community Member Sabby Jonathan, Mayor Janet Moore, Finance Director Stanley Sperling, Committee Member Susan Marie Weber, Mayor Pro-Tempore Robert Leo, Chair Also'Present: Jared.Burns, Desert Willow Golf Resort Mike Cavanaugh, Hilltop Securities Jose Luis Espinoza, Assistant Finance Director Anthony Hernandez, Senior Financial Analyst Thomas Metz, Deputy City Treasurer Niamh Ortega, Recording Secretary Veronica Tapia, Senior.Management Analyst Jenny Weill, Accountant Derek White, Desert Willow Golf Resort III. ORAL COMMUNICATIONS None. IV. APPROVAL OF MINUTES A. MINUTES OF THE MEETING OF MAY 22. 2018 MOTION was made by Member Sterling to approve the Minutes of the regular meeting of the Palm Desert Audit, Investment and Finance Committee held on May 22, 2018. Motion was seconded by Member Aylaian and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. INVESTMENT & FINANCE COMMITTEE MINUTES SEPTEMBER 25, 2018 V. NEW BUSINESS A. REPORT ON CITY INVESTMENT SCHEDULE AND SUMMARY OF CASH THROUGH AUGUST 2018 Mr. Metz noted that the City liquidity and income are now combined in one portfolio. He reported that,for the month ended August 31, 2018, the City's book value was $273.3 million. The rate of return was approximately 2% and the monthly earnings were approximately $461,000. MOTION was made by Member Holcombe to recommend that the City Council receive and file the City Investment Schedule and Summary of Cash Report for the months of May through August 2018. Motion was seconded by Member Campbell and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. B. STATEMENTS FOR LOCAL AGENCY INVESTMENT POOL ACCOUNT THROUGH AUGUST 2018 =.- Mr. Metz reviewed the activity for the CAMP report and stated the LAIF and County reports were unchanged. MOTION was made by Member Campbell to receive and file the reports for Local Agency Investment Fund (LAIF), California Asset Management Program (CAMP), and Riverside County Investment Pool through August 2018. Motion was seconded by Member Sperling and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. C. FINANCIAL REPORT FOR CITY OF PALM DESERT THROUGH AUGUST 2018 Ms. Moore reported that June's report is essentially final. The only changes remaining are, any adjustments that may be recommended during the course of the audit. The report for August contains limited information, as activities for the months of July and August typically relate to the prior fiscal year. MOTION was made by Member Campbell to receive and file the financial report for the City of Palm Desert through August 2018. Motion was seconded by Member Moore and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. D. FINANCIAL REPORT FOR PARKVIEW PROFESSIONAL OFFICE BUILDINGS THROUGH AUGUST 2018 Mr. Hernandez provided a summary of the revenue and expenses for the Parkview buildings. He noted a correction that will be made to the equipment number for the month of August. The correct figure is $36,000, and results in a positive net income of $44,000. Mr. Hernandez also noted that a new tenant, 2 reC,t;k'tmyestmen ::x.Mn °'heeI20,16'v t'nules 0,9251,9 INVESTMENT & FINANCE COMMITTEE MINUTES SEPTEMBER 25, 2018 Lift to Rise, now occupies the old United Way suite, With United Way relocating to a larger suite. Mayor Jonathan inquired as to the status of the Parkview remodel. Member Aylaian responded that staff was directed to go back out to bid for architectural services. Design is anticipated to begin this year. MOTION was made by Member Hargreaves to receive and file the financial report for the Parkview professional office buildings through August 2018. Motion was seconded by Member Sperling and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. E. FINANCIAL REPORT FOR DESERT WILLOW GOLF RESORT THROUGH AUGUST 2018 Mr. White was happy to report that the fiscal year end resulted in revenue records being broken. He also reported that overall growth was in the double digits, and he could not be more pleased. For the month of August, revenues were slightly under budget, partly due to much higher temperatures compared: to last year. Expenses are over budget, and Mr. White attributed this to timing issues and preparations for the season. He stated that economic indicators remain positive and loyalty card programs are selling faster than last year. . MOTION was made by Member Sperling to receive and file the financial report for the Parkview professional office buildings through August 2018. Motion was seconded by Member Holcombe and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, 'Jonathan, Moore, Sperling, Weber and Leo voting AYE. F. REPORT RELATIVE TO RESERVE POLICY Member Moore provided an overview of the staff report. She summarized that the current policy is to reserve 100% of budget and was adopted in 2008. The policy helped the City navigate the next eight years until it returned to pre - recession revenues. Staff decided to take a new look at the policy both to make sure that the reserves were sufficient, and to ensure that the City was not holding too much in reserves. The staff report outlines the categories reviewed in the study, and Member Moore summarized each one and the recommended reserve. Overall, the study found that a 100% reserve policy is prudent, but not enough based on -what the City has planned in the way of projects and operations. Member Moore reminded the Committee that the reserves are for intended uses; however, Council has the authority to authorize the funds for other uses at any time should it become necessary. 3 tw:?Fi::<S ,,-e',Rv,,',s ,F`1 00251,�.n:)c.K INVESTMENT & FINANCE_ COMMITTEE MINUTES SEPTEMBER 25, 2018 Member Aylaian noted that the staff report included two alternate options for funding the reserves at 50% and 75%. She asked the Committee what level of funding they would recommend, keeping in mind that a higher percentage would mean less money available in the unassigned fund category. Member Holcombe stated that he would recommend the 50% level'for reserves and that the City should be conservative without being restrictive. Member Leo suggested that the Committee be allowed more time to consider Member Aylaian's request. Following discussion, Member Moore noted that the policy would be presented for Council consideration later that week. She stated that it could be postponed until after the Committee has had an opportunity to provide comments or suggestions, and commented that the next regular Committee meeting was scheduled for the end of November 2018. Member Campbell recommended that it not be postponed, but suggested the item could be reviewed by the Committee at a later date following adoption to see how it is working. Chairman Leo added the reserve policy could be a standing agenda item to discuss any changes that may be considered in the future. MOTION was made by Member Sperling to receive and file the report relative to the Reserve Policy. Motion was seconded by Member Campbell and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe,. Jonathan, Moore, Sperling, Weber and Leo voting AYE. G. REPORT RELATIVE TO UNCLAIMED MONIES POLICY Member Moore provided an overview of the report, and noted that the total amount of current unclaimed funds is approximately $6,000. MOTION was made by Member Campbell to receive and file the report relative to the Unclaimed Monies Policy. Motion was seconded by Member Sperling and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. H. REPORT RELATIVE TO UNDERWRITERS FOR POTENTIAL FUTURE DEBT ISSUANCE OR REFUNDINGS Ms. Tapia provided an overview of the report. She explained that six underwriting firms submitted a proposal. A Committee was formed to review the applications and each of them met the minimum qualifications. Therefore, they have all been placed on the list of qualified underwriters for Council acceptance at the next meeting. MOTION was made by Member Campbell to receive and file the report relative to the underwriters for potential future debt issuance or refundings. Motion was seconded by Member Holcombe and carried by a 9-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Moore, Sperling, Weber and Leo voting AYE. 4 i '1,<xriC ii' r dt ?3 ir7x L;: tfn:✓ Sft;?z?I;z 11,30 fitnitee,2 'ISVVin,,,,GeSM' ,'SS.docy INVESTMENT & FINANCE COMMITTEE MINUTES SEPTEMBER 25, 2018 VI. CONTINUED BUSINESS — None. VII. OLD BUSINESS — None. VIII. INFORMATIONAL ITEMS A. COMMITTEE MEMBER COMMENTS Member Jonathan requested a status update on the audit. Mr. Espinoza responded that the auditors were currently onsite conducting fieldwork and testing on the City's books. He expects that the auditors' review will be complete in November and a final report is anticipated from the auditors at the January 2019 meeting. Mayor Jonathan inquired as to the additional work that was discussed by the Committee at the May 2018 meeting. Mr. Espinoza answered that the majority of the work had been completed and an update would be available at the next meeting. B. REQUEST TO ADD POTENTIAL ITEMS TO UPCOMING AGENDA — None. IX. ADJOURNMENT By Minute Motion duly made, seconded and unanimously approved, the meeting was adjourned to the next regular meeting of November 27, 2018. Respectfully submitted, �y_-�-- Niamh Ortega, Record i ng(ocretary »1 MINUTES REGULAR MEETING OF THE PALM DESERT AUDIT, INVESTMENT & FINANCE COMMITTEE Tuesday, November 27,. 2018 CALL TO ORDER Chairman Leo called the meeting to order at 10:00 a.m. ROLL CALL Present: Absent: Lauri Aylaian, City Manager Russell Campbell, Community Member Robert Hargreaves, City Attorney Jan Harnik, Councilmember Brian Holcombe, Community Member Janet Moore, Finance Director Susan Marie Weber, Mayor Pro-Tempore Robert Leo, Chair Also Present: Mitchell Arbaugh, Finance Intern Jared Burns, Desert Willow Golf Resort Jose Luis Espinoza, Assistant Finance Director Christopher Gerry, Management Analyst Kirk Hamblin, Lance, Sol[ & Lunghard, LLP Anthony Hernandez, Senior Financial Analyst Joseph .Jonathan, Resident Richard Kikuchi, Lance, Soll & Lunghard, LLP Thomas Metz, Deputy City Treasurer Miguel Navarrette, Finance Intern Niamh Ortega, Recording Secretary Derek White, Desert Willow Golf Resort III. ORAL COMMUNICATIONS Member Moore informed the Committee that Mr. Stanley Sperling has regretfully resigned from the Committee. At a recent City Council meeting, he expressed his appreciation for the ability to serve the City and the community. Mayor Pro-Tem Weber distributed gift cards to Members Campbell, Holcombe and Leo on behalf of the City Council in appreciation of their service. She stated that their service and knowledge is invaluable to the City, and she truly appreciated their INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 expertise and participation on this Committee. Mayor Pro -Tern Weber asked that Mr. Sperling's gift card be mailed to him. IV. APPROVAL OF MINUTES A. MINUTES OF THE MEETING OF SEPTEMBER 25, 2018 MOTION was made by Member Campbell to approve the Minutes of the regular meeting of the Palm Desert Audit, Investment and Finance Committee held - on September 25, 2018. Motion was seconded by Member Holcombe and carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Holcombe, Moore, Weber and Leo voting AYE. Harnik ABSTAIN. V. NEW BUSINESS A. REPORT ON CITY INVESTMENT -SCHEDULE AND SUMMARY OF CASH THROUGH OCTOBER 2018 Mr. Metz summarized the report, and stated that for the period ended October 31, 2018 the City'.s book value was $269.8 million. The rate of return was approximately 2.2%. MOTION was made by Member Holcombe to recommend that the City Council receive and file the City Investment Schedule and Summary of Cash Report through October 2018. Motion was seconded by Member Campbell and carried by an 8-0 vote, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Moore, Weber and Leo voting AYE. B. STATEMENTS FOR LOCAL AGENCY INVESTMENT POOL ACCOUNTS THROUGH OCTOBER 2018 Mr. Metz summarized the reports. MOTION was made by Member Campbell to receive and file the reports for Local Agency Investment Fund (LAIF), California Asset Management Program (CAMP), and Riverside County Investment Pool through October 2018. Motion was seconded by Member Aylaian and carried by an 8-0 vote, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Moore, Weber and Leo voting AYE. C. FINANCIAL REPORT FOR CITY OF PALM DESERT THROUGH OCTOBER 2018 Member Moore summarized the report, indicating that the City is on target compared with prior year for the month ending October 2018. She reminded the Committee that this is the time of year where- revenues. lag. Additionally, the City is adjusting to cha'lenges with the California Department of Tax and 2 E� :,="n<z;iC¢; = r`fr •".°I `? i'x C:a=%?YwS i t I?� �.,....:.,<'':�t`;w ::s.'C; � ;=IL',"•'? ;'idx ' 3 . 'i%7, :, two INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 Fee Administration (CDTFA), as is every other city. CDTFA changed how the State issues payments for sales tax to cities. As a result, only July and August payments have been received to date. In the past, four payments were issued during a fiscal .year; it,,has been modified to three. A legislative advocate in Sacramento is working on behalf of cities to rectify this issue. Member Moore pointed out,that Palm Desert is in a better position than many other cities, and some cities' payments are lagging by more than just a couple of months. Member Harnik stated that this issue was also addressed at a recent meeting of Riverside County Transportation Commission (RCTC), where they were told the issues of delayed payment were due to a system crash. Member Moore furthered that although this is the last quarter of the year, the City is still awaiting the first quarter payment. Member Moore also noted that the City has not received any payment requests from the Sheriff for the new fiscal year. At the beginning of each fiscal year, the first invoice is usually delayed and the next two or three follow quite quickly. Member Holcombe noted that the Community Development budget exceeds last year's actuals. Member Moore responded that there are two positions filled this year that were vacant last year. Mr. Hernandez added that the straight-line budget gives a slightly clearer picture, and it will work itself out as the year goes on. Member Aylaian asked for additional information regarding the PERS unfunded liability payment. Member Moore answered that this is the required payment which is based on projected payroll. Contingent upon funding availability, the City may make an additional payment in an effort to reduce the overall cost. Last year's payment was $1.7 million, and this year the payment was $2 million. Staff made an additional payment of $1 million towards unfunded post - employment benefits. MOTION was made by Member Harnilc to receive and file the financial report for the City of Palm Desert through October 2018. Motion was seconded by Member Campbell and carried by an 8-0 vote, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Moore, Weber and Leo voting AYE. D. FINANCIAL REPORT FOR PARKVIEW PROFESSIONAL OFFICE BUILDINGS THROUGH OCTOBER 2018 Mr. Hernandez summarized the report, indicating that staff .is- currently negotiating two lease agreements. CVAG is renewing with a 15-year lease, and the Supervisor's office is renewing their lease for an additional 4 years. The office complex currently has a vacancy rate of 11 %. Chairman Leo asked where the Parkview refurbishment project stood, and Member Aylaian responded that it is budgeted as a capital project for this fiscal year. MOTION was made by Member Campbell to receive and file the financial report for the Parkview professional office buildings through October 2018. Motion 3 �'', ,.><.:�C��gdi�'�:'1 iaf7�;;:.a=.:.�'✓�?S±t1?;�11t'. {..xxrz'Ala':.-7�3rt�:?7i`ttt�T:�;:€i�; . '3r';�i.w`.;n:.x INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 was seconded by Member Harnik and carried by an 8-0 vote, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Moore, Weber and Leo voting AYE. E. FINANCIAL REPORT FOR DESERT WILLOW GOLF RESORT THROUGH OCTOBER 2018 Mr. White provided a summary of the monthly report and year to date activity. He reported that the year-to-date actual revenues are $1.95m compared to a budget of $2 million with most of shortfall occurring in the summer months. He was pleased to announce that last year was an all-time record for the month of October and that record was broken this year. Mr. White reported that the brightest spot is the loyalty program, and it is selling really well again this year. The banquet side is a little soft; last year there were four weddings booked for the month of December, and this year there is just one. Mr. White continued that operating expense are slightly over budget but below last year. EBIDTA is ahead of last year's pace. Labor costs are higher this year but the operation is in great shape compared to budget as we move into high season. Member Aylaian asked how F&B performed over the Thanksgiving holiday. Mr. White responded that it went well. Last year the restaurant served 558 covers, and this year it was over 650. He attributed its success in part to fantastic weather. He also shared that the first Dining with the Stars event sold out. The Cigar dinner sold out too, and the second Dining with the Stars was almost sold out. MOTION was made by Member Campbell to receive and file the financial report for the Parkview professional office buildings through October 2018. Motion was seconded by Member Hargreaves and carried by an 8-0 vote, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Moore, Weber and Leo voting AYE. VI. CONTINUED BUSINESS— None. VII. OLD BUSINESS — None. M 4 INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 Vill. INFORMATIONAL ITEMS A. REPORT RELATIVE TO AGREED -UPON PROCEDURES ON CASH HANDLING FOR FAMILY YMCA OF THE DESERT Member Moore introduced Mr. Richard Kikuchi to the Committee. Mr. Kikuchi has attended numerous Committee meetings over the years. Under the current contract, this is the second year of Lance, Soll & Lunghard, LLP performing audit services for the City. At the last meeting he attended, there was some great dialogue regarding controls related to financial reporting: As a result of this discussion, the Committee decided to look closer at two areas; cash handling for YMCA relative to the Palm Desert Aquatic Center, and vendor procedures for the City, PDRFC and YMCA. These areas are reviewed during the regular audit although extensive testing is not usually performed. Mr. Kikuchi introduced Mr. Kirk Hamblin, also of Lance, Soll & Lunghard, LLP. Mr. Hamblin spent a number of hours reviewing the two areas in question and performed a number of tests. He informed the Committee that generally which procedures such as these, the role of the auditor is to first observe the process as it currently operates; review the number of registers, how employees change shifts, how they count and secure the cash. From the observations, it is then the auditor's responsibility to develop a narrative for the procedures. The auditors review the reconciliations and examine the step-by-step process. Following a thorough review, there were no recommendations to change or revise the procedures, and he was comfortable that the current controls are sufficient to ensure that everything continues to run smoothly. Mr. Kikuchi also stated that there was nothing that the auditors felt needed to be changed. The expanded testing further confirms that the aquatic center is operating well. B. REPORT RELATIVE TO THE AGREED -UPON PROCEDURES ON VENDOR PROCEDURES Mr. Kikuchi reminded the Committee of last year's discussion relative to fictitious vendors. He was asked to take a closer look at procedures related to vendors, and this involved many different types of testing that would not have been. conducted in the course of the regular audit for the City, PDRFC and YMCA. It is important to note that under agreed -upon procedures, all discrepancies must be noted even if they are not significant. He summarized that one W9 form could not be located, and two that were undated after. the signature. Another test performed on fictitious vendors was a comparison of the address on the W9 to those employed by each organization. 150 vendors were tested, 50 from the City, 40 from Desert Willow, and 30 each from YMCA and PDRFC. There were no findings, and overall, nothing throughout the testing that would be considered in any way significant. Mr. Kikuchi stated that as auditors, they are only asked to conduct special audits for about a third of the cities where they perform a regular audit, and usually it is the higher -performing cities that request such audits. If it were 5 %'.'�'"<xx�'iCEr�.t'Ifc".iv"?i1':'s:'x'�'7:x'=.::'✓�'S?IY?z?:2x .:CiY� i"tT?=i�:�;�%E? �t;=1Li'T�:iz:� i . _.,�%": �.:7,:zc:,x' INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 something that the Committee wished to continue in the future, LSL would be happy to do so. C. UPDATE ON AUDIT The main project is the financial audit, with the final product being the CAFR that is published every year. That process has been going well, and fieldwork was completed in both the summer and fall. A draft has been prepared and is currently being reviewed. Staff and the auditors anticipate being able to finalize the report in the coming weeks, and will be presented to the Committee to receive and file at the January meeting. The Council will receive' and file after the Committee receives it. Mr. Kikuchi stated that it is a pleasure to work with the Finance staff as they are very knowledgeable, making it easy to work together. Chairman Leo noted that the Committee's next meeting was not until January 22, 2019. He asked if the Committee wanted to meet sooner to review the final report. Member Weber stated that she always felt less meetings were detrimental to a committee such as this, and would recommend adding a meeting in December. Member Harnik cautioned that schedules were already a little hectic given the holidays in the month of December, and it may be better to add a meeting in early January 2019. Member Moore suggested changing the regular meeting to take place in early January. Chairman Leo agreed that this would work, and stated that it would be important to have the auditors attend to present the report. Member Harnik suggested the entire Council may want to review the report, and perhaps a study session could be arranged. Member Aylaian responded that she would address this individually with Council members and determine if a study session was required. Member Moore added that while the Committee has been established, there are no bylaws in effect. Staff is working on drawing up the bylaws based on other committees and cities. She stated that she would prefer that staff members not be committee members, and she does not feel a staff member should vote to approve their own report or recommended action. She furthered that the City Attorney, City Manager and Finance Director are all voting members, and she would like to see that changed. The establishment of bylaws would be an action taken by the City Council. Member Harnik stated she believes that the Audit, Investment & Finance Committee is one of those committees that is best served by permanent members of Council. Member Weber informed the Committee that during her extensive review of various Committee bylaws and appointments, she noted that the mayor can designate or appoint members. Member Moore suggested that one option might be to have a longer rotation than the two years as mayor and mayor pro-tem. Member Weber agreed, and added that it takes some time to familiarize oneself with the subject matter, and has found that visual 0 coam'. rtp':„%t it`;`==.tV??:iftSe:'4 ,,, 127 INVESTMENT & FINANCE COMMITTEE MINUTES NOVEMBER 27, 2018 presentations make a big difference in helping people understand the topics discussed at these meetings. Member Campbell shared that when the topic of meeting schedules was first addressed, he was in favor of switching the schedule from monthly to every other month. Having seen how it works, he feels too much time passes between meetings, and it is more difficult to get back up to speed when the meetings are not as frequent. He stated that he was in favor of changing the schedule back to meet every month. Member Harnik suggested a subcommittee be formed to look at the schedule. D. COMMITTEE MEMBER COMMENTS Member Hargreaves asked if there were any decisions made on agreed -upon procedures for next year. Member Moore responded that it is something that staff would look at and bring to the Committee at a future meeting. E. REQUEST TO ADD POTENTIAL ITEMS TO UPCOMING AGENDA Chairman Leo thanked staff for their work on the regular monthly reports provided to the Committee. He asked that staff also consider preparing additional reports that would be useful to the committee. He continued that the Committee could benefit from learning about a number of topics and plans for the city, and stated that previous presentations relative to the general plan and short-term rentals were very informative. He would like staff to take a look at what types of special reports could be prepared for the Comm.ittee's review. Member Aylaian responded that there were several topics that have generated a great deal of community involvement, most recently the cannabis tax issue. She indicated that this and similar topics could be presented at a future meeting. IX. ADJOURNMENT By motion duly made and seconded, the meeting was adjourned to the next regular meeting of January 22, 2019 or earlier (special meeting date to be determined). Respectfully submitted, Niamh Ortega, Recording cretary 7 iw 3, .ii<n-cr-=:hlfr'i.i? <''271S.v=xcy