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Minutes for the Finance Committee meeting on June 23, 2005.
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Finance & Administration Committee Minutes
Thursday, June 23, 2005
4:00 p.m. - City Council Conference Room - Huntington Building
Members Present: Alec Farmer, Darrel Dover, Jim Hargis, John Street, Harold Perrin, and Ann Williams who arrived at 4:20 p.m. Others present were: Mayor Doug Formon, City Clerk Donna Jackson, staff, and media.
MINUTES
Councilman Perrin moved, seconded by Councilman Dover for the approval of the minutes for June 7, 2005 as provided. All voted aye, with the exception of Councilwoman Williams who had not arrived. Copies were provided to all in attendance.
Councilman Perrin questioned if Mr. Allen Young, Information Systems Director had provided an update regarding Springbrook Financial Software. Mr. Young stated he was prepared to provide an update during the course of the Finance Committee meeting.
Councilman Perrin questioned if Mayor Formon had a recommendation regarding the direct deposit payroll. Mayor Formon responded saying he had no recommendation at this time.
ORDINANCES & RESOLUTIONS
Ordinance - Fire Safety Prevention Grant: Councilman Perrin moved, seconded by Councilman Street to recommend an ordinance to amend the 2005 budget for inclusion of a 2004 Fire Safety & Prevention Grant to the full council. Mr. Paul Copeland, Director of Economic/Community Development, explained this particular grant had been applied for by former Fire Chief, Butch Herring. The grant would be used to purchase the following training equipment: a smoke trailer simulated 911 call center, and “Smoky the Fire Robot”. He explained the sum of $50,287 would be added to grant expenditures, and the awarded amount of $35,201 would be added to grant revenues, while the remaining $15,086 would be provided by the Un-appropriated Sales Tax balance. Several committee members questioned why a balance existed in the Un-appropriated Sales Tax, because it was to be zeroed out; however Mr. Flowers, Finance Director stated there was a current balance of $300,000 due to the sales tax being up. All voted aye with the exception of Councilwoman Williams who had yet not arrived.
Ordinance - Justice Assistance Grant (JAG): Councilman Dover moved, seconded by Councilman Street to recommend an ordinance to amend the 2005 budget for inclusion of a 2004 Edward Byrne Justice Assistance Grant to the full council. Mr. Copeland explained this grant had also been applied for earlier in 2004 and just now being awarded. It was explained this was the old LLEBG grant, and usually comes out after the budgeting time frame. The grant would be used to purchase the following: a hostage negotiation video phone, taser devices, and high-speed scanning equipment. Mr. Copeland explained the total of the grant, $45,991.00 would be added to grant expenditures, and $41,810.00 would be added to grant revenues while the remaining $4,181.00 would be provide by Un-appropriated Sales Tax, being a 90/10 matching grant. All voted aye, with the exception of Councilwoman Williams who had not arrived.
Ordinance - Homeland Security Assistance to Firefighters Grant: Councilman Perrin moved, seconded by Councilman Dover to recommend an ordinance to amend the 2005 budget for inclusion of a 2004 Assistance to Firefighters Grant to the full council. The original ordinance called for the total grant amount of $223,000 be added to grant expenditures and the awarded amount of $156,100 be added to grant revenues with the $66,900 to come from Capital Improvements, however it was determined that portable radios would not fit the description of Capital Improvement under Arkansas State Law. It was explained if the grant is awarded and the decision is made to change the type of radios purchased, then an amendment would have to be submitted and approved. The decision was made to amend the ordinance by taking the $66,900 from Un-appropriated Sales Tax rather than Capital Improvements. Discussion was also held regarding the amendment of the ordinance pertaining to Capital Improvements to include the possibility of a lease/purchase agreement. All voted aye.
Ordinance - Outside Agency Reporting Requirements: Councilman Perrin moved, seconded by Councilman Hargis to recommend to the full council an ordinance establishing requirements for outside agency applications of funding through City Council appropriations and reporting requirements. The ordinance required the following information in addition to any other required financial reporting: Dollar amount of request, Goals, and proposed use of funds. The ordinance also requires the report to be filed in duplicate with the City Clerk annually, no later than July 31st. Failure to submit reports by the July 31st deadline would result in a hold being placed on further appropriation disbursements. All voted aye.
Resolution - Reimbursement for Professional Services and Drainage Easement Acquisition for Ditch 26 (Viney Slough Ditch) to the Poinsett Watershed District: Councilman Dover moved, seconded by Councilman Hargis to recommend to the full council a resolution for reimbursement of $21,715 to the Poinsett Watershed District. Mr. Wadley explained a hold had been placed on the reimbursement because additional bills kept coming in, but according to Attorney Charles Frierson the $21,715 should cover the cost. Breakdown of the total was as follows: $3,450 for permanent easement, $15,450 for temporary easement, $1,575 for crop damage, $100.00 for Circuit Court filing fees, $240 for title fees, and $900.00 for appraisal fees. All voted aye.
Resolution (Revised) for 2003 Audit: Mr. Flowers explained the City of Jonesboro is required to document their review of the annual Legislative Audit by resolution, but the original resolution did not address particular audit disclosure issues. The two issues were: 1. The financial statements did not disclose certain information concerning the credit risk associated with the city’s deposits and investments. 2. Corrections regarding the maintenance and monitoring functions at the City’s closed Class IV landfill site. It was reported maintenance and monitoring functions should be preformed for a period of 30 years when, in fact, the appropriate period is 2 years. Regarding unofficial findings by the Legislative Audit, Mr. Flowers stated regarding segregation of duties that the lack thereof is a weakness in the city, and read from a 1999 letter addressed to Mayor Brodell which stated due to a lack of complete segregation of duties auditors must increase the amount of substantial testing they perform in order to be satisfied with the presentation of financial statements. The letter further stated the economic factor of employing additional personnel must be weighed against the risk a government entity is willing to accept. Mr. Flowers stated a government entity does not want the same individual collecting, receipting, and depositing the money, but because Jonesboro has a limited staff size they are forced to do so. Councilman Farmer questioned what the process was for collecting money for building permits. Ms. Becky Sharp, City Collector responded saying the deposit is brought over daily just before noon. Another unofficial finding was the property deeds not being properly filed and lack of security and control of electronic records. Mr. Alan Young, Information Systems Director stated this was the first time they had ever been audited and everything had been corrected with the exception of one issue which he had not had the time to work on. Councilman Perrin moved, seconded by Councilman Street to recommend the resolution to the full council for consideration. All voted aye.
Ordinance - Transferring Capital Improvement Funds to Fixed Asset Account: It was explained any equipment over $225,000 should be considered for a lease/purchase option, and the ordinance needed to reflect that option. Discussion was held regarding whether to list all the possible Capital Equipment or to have the wording reflect the amount not to exceed 25% of the 2004 one-half cent sales tax or $1,440,835. It was determined that the equipment must meet the criteria every year in order to be considered a Capital Improvement. Mr. Flowers was asked to get with City Attorney Crego for a definition of a lease/purchase with regard to Capital Improvements.
FINANCE
Principal Financial Group - Non-Uniform Pension Plan for the Fund Selection Service Agreement: Councilman Perrin moved, seconded by Councilman Dover to recommend to the full council the Fund Selection Service Agreement with Principal Financial Group for the Non-Uniform Pension Plan. The cost for the additional service was $3,600.00. All voted aye. Discussion followed regarding the level of investment to recommend with Councilman Hargis suggesting a 70/30 investment. He stated because we are going from a low interest rate environment to a change that would bond investments weaker. It was decided a 60/40 moderate investment would be better due to the NASDAQ and consideration of the average age of Jonesboro employees. It was explained the city has the option of changing the recommendation. Councilman Perrin moved, seconded by Councilman Dover to recommend a 60/40 moderate equity investment for the Non-Uniform Pension Plan. All voted aye.
Utility Franchise Fee Update: Ms. Sharp reported she had sent out 175 letters to other telephone companies, but has only received 50 responses back. She reported the figures for 2004 and 2005 for both local and long distance totaled over 14 million dollars. Councilman Farmer explained 2% of 14 million equals $280,000 in revenue for the City of Jonesboro. Councilman Perrin questioned where Ms. Sharp had gotten her list, and was told the list came from the City of Little Rock. Councilman Farmer provided a copy of the June edition of the Arkansas Business Publication, stating it contained the Arkansas Businesses for telecommunication companies and suggested using it as a cross reference. Mr. Flowers was asked to report back to the committee regarding this matter at the next committee meeting. Mr. Wadley reported on July 7, 2005 at 10:00 a.m. they would be meetings with SBC and Centerpoint. Discussion followed on the best approach for implementing the increased fee, incrementally or all at once, and for negotiation purposes it was recommended negotiating both ways. Committee members were interested in the effect it would have on the consumer as well as the City of Jonesboro. It was highly recommended having legal representation at all utility company meetings because it stood to reason the utility companies would have their legal representatives present and would be pushing for a long term agreement.
Department of Finance and Administration - Listing of Jonesboro Sales Tax Remitting Entities: Ms. Sharp reported she had received the listings in hard copy format consisting of over 6,000 businesses. Councilman Perrin explained the information could be downloaded for comparison against Jonesboro businesses that are currently paying a franchise fee. Ms. Sharp was asked to report back to the Finance Committee on the progress made.
APERMA/AML Property Insurance Update: Purchasing Agent, Steve Kent was not available to report on this matter. Mr. Flowers, Finance Director stated Mr. Kent had to leave early due to a payroll crisis. Concern was expressed for getting the “apples to apples” comparison between APERMA and the Arkansas Municipal League before the budget process begins. Mr. Flowers was asked to make this a priority and schedule a meeting with the two companies, even if it is with the Mayor and himself so a recommendation can be made to the Finance Committee.
2005 State Acts Affecting Purchasing: Again, Mr. Flowers reported for Purchasing Agent, Steve Kent stating the formal bid limit was raised from $10,000.00 to $20,000.00, but the purchasing manual would have to be amended by the City Council; Internet auctions; Building projects in access of $2,000,000,000 can be negotiated instead of bid; Professional Services can be negotiated by 2/3 vote of the council. Mr. Flowers reported Mr. Kent had spoken to the City Attorney regarding the 2005 Acts and he would instruct Mr. Kent to email his report to committee members. Questions were raised regarding the requirements for GASB-34. Mr. Flowers stated in some instances bond issues could be refused if GAP (General Accounting Principals) are not followed, but as long as the Legislative Audit is auditing Jonesboro under a regulatory basis of accounting he recommended staying with Arkansas Legislative Audit. He stated if however, the decision is made to go to an outside accounting firm then Jonesboro should go to GAP. Mr. Flowers stated GASB-34 was disappointing in that it was to simplify the accounting process, but instead it complicated it.
MAYOR’S OFFICE
Human Resources - RFP for Additional Life Insurance: Ms. Hackney explained she had the RFP ready for additional life insurance until she realized it was only needed for non-uniform employees with five years of service, as well as a guaranteed issuance once an employee has five years vested. Councilman Farmer questioned if the option could not be offered to allow the employee to pay for the additional life insurance until they have five years of service, when at that time the City would take over payment. She responded saying if the decision is made to offer such an option, it would allow for non-uniform employees who are not vested in the retirement plan qualifying for $50,000 and uniform employees receiving less. The decision was made to send out for new RFP’s.
Job Description - Fire & Police Mechanic: Ms. Hackney explained she was still working out the details of the Fire and Police Mechanic positions.
Direct Deposit: Ms. Hackney reported she has spoken with Springbrook about direct deposits and they were sure it could be done, however they were currently trying to do a parallel payroll and had not had time to work on it yet.
INFORMATION SYSTEMS
Mr. Alan Young provided a Springbrook Implementation Progress Module stating the progress for each module is rated on a scale of zero to three. He stated the report will show while everything is not live yet, they have made a lot of progress. The report also included an implementation schedule for Springbrook. Mr. Young stated they were currently working on a parallel payroll for last pay period in order to work out the kinks, and would be available for the first live payroll next week.
ECONOMIC AND COMMUNITY DEVELOPMENT
CDBG Projects: Mr. Paul Copeland, Economic/Community Development Director provided an overview of CDBG projects stating they were near completion on Parker Park and Phase I of Sewer Improvements at Patrick. He explained they would not issue finals on the Phase I Sewer Improvements until clean up had been completed. Councilman Dover raised questions regarding the concession stand at Allen Park since the agreement with the Tennis Association fell through. Mr. Copeland explained Mayor Formon had instructed Mr. Wilkie that he would have to stay within the budgeted amount of $120,000 for the concession stand or have the Tennis Association provide the rest of the funding. Questions were raised regarding the clean up of Allen Park, and it was explained that the street department was currently doing the grading, and Meadows Construction was scheduled to come next week. Discussion was held regarding improvements to Race Street and its inclusion in the 2006 budget for the purpose of improving the appearance of Allen Park. Mr. Copeland explained everything must be completed at Allen Park by August 15th, 2005 (does not include the concession stand).
HUD Audit: Mr. Copeland explained the HUD auditing is to be done every three years, and were scheduled to come in 2004, but for reasons unknown did not come until this year to audit for 2003. The following audit findings and corrective actions were provided:
1. Need to Improve Project/Activity Records and CDBG National Objective Recordkeeping Requirements of Regulations 24 CFR 570.200(a)(2) and 24 CFR 570.506. CDBG National Objective documentation is not being maintained in project files by the City as to how eligibility is determined regarding activities meeting National Objectives and had delineated by the recordkeeping requirements at 24 CFR 570.506. The Project files that were reviewed did not contain the required documentation set out by the Regulations, such as eligibility of the activity meeting National Objective; status of the project/activity; or boundaries of the service area and income characteristics of residents of the area, if a low/mod area benefit activity. This is a repeat finding from the 2001 Monitoring Report. Failure to document eligibility of CDBG-funded activities could result in the funding of ineligible activities, which could lead to sanctions being imposed upon the City and recapture of Federal funds. The City must document each project file with evidence of a National Objective being met, how it is met, and the required documentation as to the boundaries of the service area. The files must also include income characteristics of area residents for low-mod area. Mr. Copeland stated this was a previous 2001 finding, however corrective action could not be found.
2. Need to Develop a Written Agreement Between the City and the Sub-recipient. There were no written agreements between the City and outside sub-recipients, as described in 24 CFR 570.503. The City must develop and execute a sub-recipient agreement in accordance with Regulations 24 CFR 570.503 and 24 CFR 85.40. The system developed should provide for agreements with all future sub-recipients. Mr. Copeland explained this was another 2001 finding and the main concern was with the Foundation of Arts whereby $25,000.00 was appropriated in 2005. He stated there needs to be some form of agreement with the subrecipient.
3. Need to Document and Maintain the Required Records and Data in Each Project File. The information in the required reports by HUD from the City were not available in the project files to determine the grantee accurately portrayed the activities undertaken, and if the actions taken to further the fair housing are documented. It was also noted that the grantee’s record keeping and reporting requirements was not met as required by 24 CFR 570.503(b)(2). HUD performed a limited review of the Civil Rights program related requirements in the City’s CDBG program. We concluded that the City was not maintaining proper data information on each project as required at 24 CFR 570.506(a)(b) and also that the recordkeeping and reporting requirements for Community Outreach was not met. Finally, the grantee did not have a copy of the Analysis of Impediments on file.
4. Need to Develop Written Procurement Guidelines for Solicitation of Bid, Contractor Selection, and Awarding Contracts. There were no written procurement policies and procedures governing the performance and administration of contracts for the solicitation of goods and services to be procured through the City’s CDBG program. The City’s files and records related to its procurement transactions for Improvements at Allen Park, and University Lion’s Park, which included sidewalks and playground equipment procurement activities, does not comply with 24 CFR Part 85.36 of the federal regulations. There were instances where the scope of services, number of playground equipment, and improvements to be procured at the same site varied from contract-to-contract. This has resulted in the City’s selection committee awarding contracts to contractors that are not consistent with the stated procurement regulations. Because the City did not follow procurement standards, the costs incurred are questionable with regard to meeting cost standards because all contractors did not bid on the same product, making it impossible to reasonably determine the best price and quality product in awarding the contract. Basically, when the City is procuring the design and construction of a park, this activity should be done in two phases. The project design phase is one phase wherein a contractor is hired to design a product according to the City’s specifications and instructions. The second phase is the actual construction of the project, which should be bid in a manner that allows all contractors to bid on the same project. The City is also required to prepare a “Cost Estimate and Specifications,” detailing the Scope of services to be provided prior to solicitation of RFP’s or bids.
The City’s Community Development Staff has successfully administered the CDBG program and the completion of approved activities and expenditure of funds has been timely.
The City’s Citizen Participation Plan and supporting documentation revealed that the City’s efforts are marginally satisfactory and meet the requirements of 24 CFR 91.105(b).
The City’s records for documenting the administration of the CDBG program was adequate and basically in compliance with program requirements. We noted that the City has written procedures governing the maintenance of accounting records. No loans nor program income were generated by the City’s CDBG program activities. There were no exceptions noted.
The following Required Corrective Actions were recommended:
1) Develop written procurement procedures that meet the standards of 24 CFR 85.36. The standards should include provisions for the procurement of professional services as well as construction activities that lend themselves to competitive bidding.
2) Ensure that all future procurement of goods and services are done in a manner that follows your designed system. We ask that you design your system and advise us of what the system is and when it is implemented.
3) There should be no further procurement done under the existing system, but any projects that are in process should be delayed until your system can be changed to meet the requirements. This will mitigate the possibility of any further questionable costs. The Parks and Recreation Department will reimburse the CDBG program the difference between the lowest bid (quote) and the accepted bid (quote).
4) The City must submit a description of how it will select projects that comply with the stated CDBG National Objective requirements and how records will be maintained to document this standard.
5) The City must develop, implement and submit an agreement in accordance with Regulations 24 CFR 570.503 and 24 CFR 85.40 for approval by our department.
6) The grantee is required to maintain project records and data documentation in accordance with 24 CFR 85 and CFR 570.506(a)(b). The City must establish and maintain sufficient records to enable HUD to determine whether the grantee has met the requirements at 24 CFR 570.506. The City is requested to submit a written plan for approval to our department.
Dr. Copeland provided action being taken to address the findings, stating the City Council had already adopted a resolution authorizing the Citizen Participation Plan at their first meeting in June. He explained they have ordered copies of the Federal Service Procurement Plan and issued an immediate hold on all parks projects in terms of procurement solicitation. Dr. Copeland explained as result of the audit the City of Jonesboro was required to reimburse to CDBG the projects that were let, that did not meet the federal procurement standards in a total amount of $9,932.89. He further warned Jonesboro could have been required to pay all the money back which would have been as much as $400,000.00.
Line-Item Transfer of Funds- MPO : Councilman Perrin moved, seconded by Councilman Hargis for a line-item transfer of $15,000.00 for a printer, scanner, and map caddy for MPO as well as advertising. Dr. Copeland explained they wanted to transfer $12,500 from Professional Services, and $1,000 from Insurance to the MPO Fixed Assets; and $2,000.00 from Miscellaneous to Advertising. All voted aye.
HUD Technical Assistance: Dr. Copeland reported Jonesboro would be receiving approximately $12,000.00 in technical assistance from HUD through an Atlanta based company who will be here the third week of July. They will be writing the Exhibit One portion of the Continuing grant application and Home program.
OTHER BUSINESS
Vermeer Grinder: Councilman Perrin moved, seconded by Councilman Hargis to accept staff recommendation and refer to the full council an ordinance to waive competitive bidding for a rebuilt clutch from Vermeer Sales & Service, Inc. for $11,000.00. All voted aye.
Raising the purchase limit of repairs: Councilman Dover moved, seconded by Councilman Perrin to accept staff recommendation and recommend an ordinance to amend the purchasing policy to raise the purchase limit for repair parts only, from $250.00 to $2,000.00. It was explained department heads would still be required to get phone and fax quotes. ( NOTE: Mr. Royce Leonard, Sanitation Supervisor stated Purchasing Agent, Steve Kent wished to raise the purchasing limit from $10,000 to $20,000 for Administration, however committee members made it clear they were not ready to do so at this time). All voted aye.
Pumper Truck: Councilman Perrin moved, seconded by Councilman Dover to accept staff recommendation and recommend to the full council the low bid meeting specifications of a Pierce Pumper Truck for the amount of $366,102.00. Since the bid was good for thirty days from June 18, 2005, the decision was made to have the City Attorney issue an opinion regarding lease/purchase agreements pertaining to Capital Improvements, prior to deciding where the additional funding of $66,000.00 would come from. Only $300,000 had been appropriated for the pumper truck. All voted aye.
ADJOURNMENT
With no further business, Councilman Dover moved, seconded by Councilman Hargis to adjourn the meeting. All voted aye.