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HomeMy WebLinkAboutMinutes - Audit Investment and Finance Committee 01/22/2019C��. IV MINUTES REGULAR MEETING OF THE PALM DESERT AUDIT, INVESTMENT & FINANCE COMMITTEE Tuesday, January 22, 2019 CALL TO ORDER Chairman Leo called the meeting to order at 10:01 a.m. ROLL CALL Present: Lauri Aylaian, City Manager Russell Campbell, Community Member Robert Hargreaves, City Attorney Janet Moore, Finance Director Gina Nestande, Mayor Pro-Tempore Susan Marie Weber, Mayor Robert Leo, Chair Absent: Brian Holcombe, Community Member Also Present: Jared Burns, Desert Willow Golf Resort Jose Luis Espinoza, Assistant Finance Director Kirk Hamblin, Lance, Soll & Lunghard, LLP Anthony Hernandez, Senior Financial Analyst Thomas Metz, Deputy City Treasurer Niamh Ortega, Recording Secretary Cindy Garcia, Office Specialist I Derek White, Desert Willow Golf Resort ORAL COMMUNICATIONS None. APPROVAL OF MINUTES A. MINUTES OF THE MEETING OF NOVEMBER 27, 2018 MOTION was made by Member Hargreaves to approve the Minutes of the regular meeting of the Palm Desert Audit, Investment and Finance Committee held on November 27, 2018. Motion was seconded by Campbell carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. INVESTMENT & FINANCE COMMITTEE MINUTES JANUARY 22, 2019 V. NEW BUSINESS A. CITY OF PALM DESERT AUDITED FINANCIAL REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Mr. Luis Espinoza stated that Mr. Richard Kikuchi, partner at Lance, Soil & Lunghard, LLP, was unable to attend the meeting and introduced Mr. Kirk Hamblin as the senior auditor attending in his absence. Mr. Hamblin reported that the firm was engaged to do a financial statement audit for the City of Palm Desert. The audit involved interim fieldwork in late June 2018, and approximately two weeks of additional fieldwork after books closed in September 2018. The result of the audit is the Comprehensive Annual Financial Report (CAFR). The auditors' opinion was issued and included in the opening pages of the CAFR. The conclusion of this audit was a clean, or unmodified, opinion, which meant there were no findings. Mr. Hamblin reported that City staff was well prepared and organized, resulting in a smooth audit process. This is the second year performing the audit. The first year of any audit takes substantially more labor, and this year the auditors were more in tune with the City's policies, procedures and operations. Mr. Hamblin continued that a letter relative to internal controls was also issued which discloses any internal deficiencies or issues with internal controls. He also pointed out one of the main differences from last year's audit is GASB's new pronouncements for OPEB liability. This information can be found on Page 94 of the CAFR. Chairman Robert Leo thanked Mr. Hamblin for his report. Member Lauri Aylaian asked if Mr. Espinoza had anything he wished to present relative to the CAFR. Mr. Espinoza responded that the auditors typically present since it is an independent audit and they are responsible for issuing an independent opinion. He offered a further explanation on the difference between a clean and modified opinion, stating the City has always received a clean opinion. Mr. Espinoza provided additional information relative to various sections of the CAFR. He explained various accounting processes and highlighted the differences in accounting practices for governmental and non -governmental agencies. Page 17, Statement of Net Position, presents the fund financials in a manner that is easier to understand as a result of GASB 34. Mr. Espinoza provided a brief overview of key notes to the financial statements that he believed would help the Committee better navigate and understand the report as a whole. Note 1 addresses accounting policies and procedures. Note 2 is the cash note which explains where the money is invested and what is available. Note 5 is the fixed asset note, which also includes values for right of ways. Page 65 is the pension note, and describes the City's liability. Mr. Espinoza explained how the discount rate directly affects the assumptions in this note. Note 12 is the OPEB note, which the GASB standard now asks the 4 INVESTMENT & FINANCE COMMITTEE MINUTES JANUARY 22, 2019 City to record the liability, which is $4.1 million. He encouraged the Committee to continue to review the report, and stated that while the notes are quite detailed, he is available to answer any questions members may have. Member Janet Moore highlighted the information on Page 70 that shows the allocations resulting from the General Fund Reserve Policy. Although the funds are committed, Council can take action to change the commitment. If they are assigned, the City Manager can then take action to change them. Member Gina Nestande asked if the action of committing the funds would prevent the State from being able to take them from the City. Member Moore responded that the reserve policy serves to identify to the public that the City has funds reserved for future and/or unexpected needs. Chairman Leo asked what constituted Other Governmental Funds. Mr. Espinoza responded that funds are either categorized as a major fund or grouped with others to be considered other governmental funds. Mr. Hamblin added that the General Fund is always categorized as a major fund, as are some special funds if they are above a certain percentage of the City's revenue. If they are smaller funds that don't need to be noted individually, like a small grant fund, they would be grouped with other smaller funds as Other Governmental Funds. Pages 36 and 37 provides some information on the major funds and percentages. Mr. Espinoza furthered that Fire tax is below the percentage calculation and would not be considered a major fund, but staff has the option and chooses to present it as such because of its interest to the public. The Aquatic Center Fund was reviewed as an example of a special revenue fund. Page 119 shows the balance sheet of the aquatic center. When the fund was created and established, it was determined that anything coming into the fund should be kept in the same fund. Chairman Leo asked where the facilities for the aquatic center are recorded, and Mr. Espinoza responded that the information is included on Page 59, Note 5 on capital assets. Mr. Espinoza reported that it is difficult to compare Palm Desert's CAFR to other cities because City staff includes more information than required. There are times when the auditors will communicate that certain information does not need to be included, but Mr. Espinoza prefers to include it in the interest of transparency. MOTION was made by Member Campbell to recommend that the City Council receive and file the City of Palm Desert audited financial reports for the fiscal year ended June 30, 2018. Motion was seconded by Hargreaves carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. 3 INVESTMENT & FINANCE COMMITTEE MINUTES JANUARY 22, 2019 B. PALM DESERT RECREATIONAL FACILITIES CORPORATION AUDITED FINANCIAL REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Member Moore pointed out that the PDRFC is the food and beverage operations only at Desert Willow. MOTION was made by Member Campbell to recommend that the City Council receive and file the Palm Desert Recreational Facilities Corporation audited financial reports for the fiscal year ended June 30, 2018. Motion was seconded by Hargreaves carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. C. INDEPENDENT ACCOUNTANT'S REPORTS FOR THE AGREED -UPON PROCEDURES PERFORMED ON THE MEASURE A TRANSPORTATION FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Mr. Espinoza reported that the Riverside County Transportation Commission hires their own auditors to come to the City and review the procedures. It is not a full audit; rather, it is a review of procedures. There were no findings. MOTION was made by Member Campbell to recommend that the City Council receive and file the Independent Accountants' Report on agreed -upon procedures performed on the Measure A Transportation Fund for the fiscal year ended June 30, 2018. Motion was seconded by Hargreaves carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. D. REPORT ON CITY INVESTMENT SCHEDULE AND SUMMARY OF CASH THROUGH DECEMBER 2018 Mr. Thomas Metz provided a summary of the report. Member Moore pointed out that this report is just a snapshot of a point in time, and should not be used to calculate the difference from one month to the next, or used to project earnings for the year. MOTION was made by Member Campbell to recommend that the City Council receive and file the City Investment Schedule and Summary of Cash Report through December 2018. Motion was seconded by Member Hargreaves and carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. E. STATEMENTS FOR LOCAL AGENCY INVESTMENT POOL ACCOUNTS THROUGH DECEMBER 2018 Mr. Metz reported no change to LAIF or County accounts. A draw was made on the CAMP account to cover payments to the Sherriff's department. 4 INVESTMENT & FINANCE COMMITTEE MINUTES JANUARY 22, 2019 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 December 2018. Motion was seconded by Member Aylaian and carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. F. FINANCIAL REPORT FOR CITY OF PALM DESERT THROUGH DECEMBER 2018 Member Moore provided an overview of the report. She pointed out that the first report is based on prior year to budget, and the last report is a straight-line budget, which is the annual budget divided by 12 to get monthly figures. As Mr. Metz mentioned, the Sheriff department caught up on their billing so the City paid $5.6 million for police services since the last report. MOTION was made by Member Moore to receive and file the financial report for the City of Palm Desert through December 2018. Motion was seconded by Member Aylaian and carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. G. FINANCIAL REPORT FOR PARKVIEW PROFESSIONAL OFFICE BUILDINGS THROUGH DECEMBER 2018 Mr. Anthony Hernandez provided a brief summary of the report. MOTION was made by Member Campbell to receive and file the financial report for the Parkview professional office buildings through December 2018. Motion was seconded by Member Moore and carried by a 7-0 vote, with Aylaian, Campbell, Hargreaves, Moore, Nestande, Weber and Leo voting AYE; Holcombe ABSENT. H. FINANCIAL REPORT FOR DESERT WILLOW GOLF RESORT THROUGH DECEMBER 2018 Mr. Derek White reported that both November and December had record - breaking revenues for green fees and food and beverage. The year-to-date budget is on track with $3.9 million. Operating expenses were $1.566 million to a budget of $1.613 million. He finished that EBITDA was well ahead of budget and looking forward to a successful January 2019. Member Hargreaves asked what was causing the high revenues. Mr. White responded that there are a number of things including good weather, strong economy, great customer service and a favorable Canadian exchange rate. Member Aylaian asked what types of expenses are included in the general and administrative expense category. Mr. White responded that the biggest expenses would be credit card fees, legal costs, payroll processing fees, dues, 6 INVESTMENT & FINANCE COMMITTEE MINUTES JANUARY 22, 2019 subscriptions, licenses, and anything that is beneficial to the entire property that does not fall into a specific category. MOTION was made by Member Campbell to recei report for the Desert Willow Golf Resort through Dece seconded by Member Aylaian and carried by a 7-0 vote, Hargreaves, Moore, Nestande, Weber and Leo voting AYE, VI. CONTINUED BUSINESS None. VII. OLD BUSINESS None. VIII. INFORMATIONAL ITEMS A. COMMITTEE MEMBER COMMENTS ve and file the financial mber 2018. Motion was with Aylaian, Campbell, • Holcombe ABSENT. Mr. Russell Campbell asked if the committee to review the meeting schedule had been established following the discussion at the last meeting. Member Aylaian responded that the City Council as a whole had expressed interest in reviewing the schedules, structure and purpose for all City committees and commissions. It is part of a larger discussion that City staff will examine this year. Member Weber added that Committee members could contact her or any member of Council or staff and express their position on the schedule and duties, and it would be taken into consideration. B. REQUEST TO ADD POTENTIAL ITEMS TO UPCOMING AGENDA Member Moore stated that Mr. Stephen Aryan would attend the March 2019 meeting to provide a presentation on the City's efforts on cost recovery for emergency services. She added that Mr. Ryan Stendell or Mr. Eric Ceja would attend the May 2019 meeting and present the latest information on cannabis regulation, dispensaries, and the City's position. IX. ADJOURNMENT By Minute Motion duly made and seconded, the Committee meeting was adjourned at 10:50 a.m. to the next regular meeting of March 26, 2019. Niamh Ortega, Recording retary