Live. - Life - Lincoln Live Life Lincoln. Live - Life Lincoln - Live - Life - Lincoln . Live Life Lipcoln  MINUTES  CITY OF LINCOLN CITY COUNCIL & LINCOLN REDEVELOPMENT SUCCESSOR AGENCY SPECIAL MEETING MINUTES April 15, 2019  1:00PM - 3:00PM -First Floor Conference Room Mayor Joiner called the meeting to order at 1:00PM.  1.  ROLL CALL Councilmembers present: Holly Andreatta  Peter Gilbert Dan Karleskint Alyssa Silhi Paul Joiner  Mayor:  Roll Call: 5 members present, 0 members absent, 0 members excused.  Staff members present:  Jennifer Hanson, Interim City Manager Kristine Mollenkopf, City Attorney Doug Lee, Police Chief Gwen Scanlon, City Clerk  Ray Leftwich, City Engineer/Acting Public' Works Director  Various City employees, consultants and members of the public were also present.  2. 3.  FLAG SALUTE led by Mayor Paul Joiner.  STAFF REPORT  3.A. CAFR. -F Receive/File Audited Financial Statements for Fiscal Year ended June 30, 2018. Jennifer Hanson, Interim City Manager, introduced Justin Williams of Mann, Urrutia, Nelson, CPA's who gave a staff report and powerpoint, made a part of these minutes by mention thereof. Al brief City Council discussion ensued regarding: the year-end financial closing procedures; Joint Legislative Audit Committee (JLAC) corrective actions; new policies and procedures; how long year-end audits take to complete; addressing CAFR audit findings; historical write-off of developer deposits and what can be done to prevent this from happening in the future; creating a policy handbook for Councilmembers and regular reports to Council on financials. Mayor Joiner opened the discussion to the public at 1:40PM a) Larry Whitaker, a Lincoln resident, asked Mr. Williams to rank the City of Lincoln as compared to other cities. Mr. Williams stated he cannot rank the City but stated that Lincoln did receive a clean opinion which is the most important audit factor. Mr. Williams also stated the City of Lincoln seems to be prioritizing resolution of their material weaknesses to hopefully make findings Mayor Joiner closed the public discussion at 1:41PM and noted that the CAFR was received and 3.B. Adopt RESOLUTION 2019-077 authorizing three interfund transfers as follows:(1) $273,065 from General Fund 1001 to Facility Replacement & Maintenance Fund 620, (2) $432,312 from Fund 250 State Grants to Gas Tax Fund 221, and (3): $269,207 from 250 State Grants to TDA Fund 223. Jennifer Hanson, Interim City Manager, gave a staff report and powerpoint, made a part of these minutes by mention thereof. A brief City Council discussion ensued regarding negative balance in Fund 620 and management of thet fund, relinquishment funds and lack ofl legal review of the staff report due tos software being used. Mayor Joiner opened the public discussion at 1:55PM with the following  with the following comments:  disappear in future years.  filed.  comments:  600 Sixth Strect . Lincoln, CA 95648 www.cl.lincoln.ca.ux 916-434-2400    Live Life - Lincoln - Live  Life Lincoln. Live - Life . Lincoin - Live - Life - Lincoln - Live Life Lipcoln  Page 2of2  City Council, Public Finance Authority and Redevelopment Successor Agency Special Meeting Minutes April 15, 2019  a) Richard Pearl, al Lincoln resident, observation on this item and previous total execution breakdown. Need policies written down but many that caused problem are gone and referred to Mayor Joiner closed the public discussion at 1:59PM and called for a motion. Motion to Approve this item by Councimember Gilbert and the motion was seconded by Councimember Karleskint. Ab brief discussion ensued that the agenda had an incorrect number $273,065 and the resolution was correct with $217,850 being transferred in to Fund 620. By the following Vote (Approved): Gilbert - Aye, Karleskint- - Aye, Andreatta = Aye, Silhi- Aye and Joiner - Aye, the item approved was: RESOLUTION 2019-077 authorizing three interfund transfers as follows:(1): $273,065- $217,850 from General Fund 100 to Facility Replacement & Maintenance Fund 620, (2) $432,312 from Fund 250 State Grants to Gas Tax Fund 221, and (3) $269,207 from 250 State Grants to TDAI Fund 223. 3.C. Staff is providing information related to the current positon of the City's General Fund Jennifer Hanson, Interim City Manager, gave a staff report and powerpoint, made a part of these minutes by mention thereof. A lengthy City Council discussion ensued regarding: interfund loan policy; bridge financing alternatives; surplus policy; Lighting & Landscaping and assessment district deficit and escalation factor analysis; using an outside consultant(s) to analyze reserves and determine credit to users; current rate studies; risk tolerance; and tiered water rates. Mayor Joiner opened the discussion to the public at 2:53PM with the following comments: a) Tony Manning, a Lincoln resident and Planning Commisioner, stated reserves should be used for airport interfund loans and asked why the airport couldn't run at a deficit or even b) Ted Jones, LIFT member, stated his concern with accuracy of water rates, reserve Mayor Joiner closed the public discussion at 3:01PM and asked if any action was needed on this item. A brief City Council discussion ensued regarding refunds to rate payers and Council consensus was to bring this item back as an information item to a future Council meeting.  his Lincoln News Messenger Business of Lincoln.  Reserves.  allowed to go into bankruptcy.  amounts and requested refunds to rate payers to re-establish public trust.  4. PUBLIC COMMENT - none.  5. COUNCIL INITIATED BUSINESS -I none.  6. ADJOURNMENT: adjourned by Mayor Joiner at 3:07PM.  Submitted by Gwen Scanlon, City Clerk uenBarl  600 Sixth Street Lincoln, CA 95648 "www.si.limcohn.caux 916-434-2400    SUMMARY OF AUDIT RESULTS  CITY OF LINCOLN  YEAR ENDED JUNE 30,2018  PRESENTER  JUSTIN WILLIAMS, CPA  MANN, URRUTIA, NELSON, CPAS & ASSOCIATES, LLP  MUN CPAS    WHAT IS AN AUDIT?  Purpose of an audit is to provide financial statement users with an independent opinion on whether the financial statements are presented fairly, in all material respects, and in accordance with applicable accounting  standards (GAAP)  Generally accepted auditing standards require the auditor to obtainreasonable assurance that the financial statements are free from material misstatement whether  due to fraud or error.  Management is responsible for the preparation and  presentation of the financial statements.  MUN CPAS    AUDIT PROCESS  Interim Fieldwork - August 2018  Planning - Risk assessment, review of Council minutes, significant agreements, policies & procedures,  management inquiry  Documentation of Financial Processes  Cash receipts Cash disbursements  Payroll  Financial Reporting Te environment Tests of Internal Controls Review of Prior Year findings  Development of internal control recommendations  MUN CPAS    AUDIT PROCESS  Year-End Fieldwork  Ons site last week of October 2018  Significant portion of audit work completed between December  2018 and March 2019  Testing of Year-End Balances and Activity contirmation of balances Cut-off testing  Detail tests of transactions Analytical review  Single Audit - Audit of Federal grants in accordance with the  Uniform Guidance  Preparation of Financial Statements  MUN CPAS    FINANCIAL REPORT  comprenensive Annual Financial Report (CAFR)  Introductory Section  Basic information on the City  Transmittal Letter Financial Section  Independent Auditor's Report  Management's Discussion and Analysis Financial Statements and Related Notes  Statistical Section  Addifional financial, economic, and demographic information  MUN CPAS    AUDIT REPORTING  Reporting Results of the Audit  Audit Opinion- independent Auditor's Report Government Auditing Standards Report  - Single Audit Report  Communication with Those Charged with  Governance  Management Letter  MUN CPAS    AUDIT RESULTS - AUDIT OPINION  independent Auditor's Report  Types of opinions- unmodified, qualified, adverse  or disclaimer.  2018-unmodified opinion  "Clean" audit opinion  MUN CPAS    AUDIT RESULTS = GOVERNMENT  AUDITING STANDARDS  Government Auditing Standards Report  Material weaknesses -2 (3 in prior year) Significant deficiencies -4 (3 in prior year) Compliance exceptions -3 (2 in prior year)  MUN CPAS    AUDIT RESULTS = GOVERNMENT  AUDITING STANDARDS  Material Weaknesses:  Prior period adjustments  Financial close (repeat finding)  MUN CPAS    AUDIT RESULTS  GOVERNMENT  AUDITING STANDARDS  Significant Deficiencies:  Accounting for capital assets (repeat finding)  Grant accounting (repeat finding) Interfund borrowing (repeat finding) Special assessment debt funds  MUN CPAS    AUDIT RESULTS = GOVERNMENT  AUDITING STANDARDS  Compliance  Successor Agency reporting deadline (repeat  finding)  Federal Grant procedures manual  Schedule of Expenditures of Federal Awards  MUN CPAS    AUDIT RESULTS - SINGLE AUDIT  Single Audit Report  Required when an entity expends more than  $750,000 in Federal funds Major programs audited:  Airport improvement Program Highway Planning and Construction  Unmodified/ "Clean" opinion on major programs No material weaknesses or significant deticiencies  over internal controls noted Two compliance exceptions  Federal Grant procedures manual  Schedule of Expenditures of Federal Awards  MUN CPAS    AUDIT RESULTS = SAS 114  Communication with Those Charged with Governance- SAS 114  Accounting Policies  New accounting pronouncement implemented- GASB 75, Accounting and Reporting for OPEB $14.1 million liability  Estimates  Depreciation  Allowance for uncollectible accounts Allowance for notes receivable Estimate for City's post-closure liability  Unfunded pension and OPEB liabilities - GASB 68 and 75  MUN CPAS    AUDIT RESULTS = SAS 114  Communication with Those Charged with Governance-SAS 114 (continued)  Significant Changes in Disclosures OPEB- GASB 75 Footnote 13  Difficulties Encountered in Performing the Audit  Delay of audit completion due to various issues noted as material  weaknesses and significant deficiencies  Audit Adjustments  Approximately 50 related to various audit areas  Passed Audit Adjustments  Interest receivable and payable adjustments  MUN CPAS    AUDIT RESULTS = MANAGEMENT LETTER  Management letter - Recommendations for improvement  Payroll -I indication of review  Cash disbursements = review of positive pay ypload, missing one Cal-Card application and one with no  evidence of review  Cashreceipts = indication of review of cash received at  central cash department  OPEB census data - develop procedures to review  accuracy of census data  Loans receivable- improve review and reconciliation  procedures to detect errors  Accounts receivable- accrual of wastewater charges and reconciliation of accounts receivable module to GL  MUN CPAS    AUDIT RESULTS = MANAGEMENT LETTER  Management letter - Recommendations for improvement  Compensated absences- 6 employees missing from schedule Investments- certain investment holdings not in compliance with  CA Govt Code  Informationt technology- Implement controls to restrict employee Support Services Department Organization- Review department organization to improve financial oversight process  access  Resolution of internal control deficiencies- Monitor correction and  implementation of audit findings  Financial Oversight- Improve financial oversight by providing more detailed financial reports and consider financial training  MUN CPAS    AUDIT RESULTS- SUMMARY  Unmodified Opinion on Financial Statements  - 2N Material Weaknesses - 45 Significant Deficiencies 3Compliance Exceptions  Management Letter - 12 items noted for  improvement  MUN CPAS    QUESTIONS?  MANN, URRUTIA, NELSON, CPAS & ASSOCIATES, LLP  1760 CREEKSIDE OAKS DR STE 160 SACRAMENTO, CALIFORNIA 95833 T.916.929.0540 F.916.929.0541  MUN CPAS  E. WEMUNCPAS.COM WWW.MUNCPAS.COM    INTERFUND  TRANSFERS  City Council Special Meeting  April 15, 2019    Recommended Budget Transfers  $217,850 from General Fund 100 Capital Replacement Reserves to Facility  Replacement & Maintenance Fund 620  $432,312 from Fund 250 State Grants to Gas Tax Fund 221 $269,207 from 250 State Grants to TDA Fund 223.    Why Are Transfers Being  Recommended?  completion of the 2017-2018 Audited Financial Statements  Review of ending fund balances and identified several recommended adjustments  to make corrections or address deficits    Transfer Policy  City Council Resolution 2018-138, allows the City Manager to make transfers of fund balances only to maintain authorized reserve levels or transfers per a  requirements of an executed loan agreement.  Proposed transfers do not meet either of these requirements and therefore require  City Council approval.  Authorization of the requested transfers will assist in the current annual budgeting  process by providing more accurate beginning fund balances.    General Fund 100 Capital Replacement  Reserves to Fund 620  $217,850 from General Fund 100 Capital Replacement Reserves to Facility  Replacement & Maintenance Fund 620 To eliminate Fund 620 deficit.  The Fund 620 deficit related to an error with accounting of capital assets properly. The Capital Reserve Policy was established by City Council to maintain the ability of  the City to acquire and replace facilities and equipment.  Capital replacement reserve to be applied in combinations with the internal services funds, vehicles and equipment replacement fund and the facility maintenance and  replacement fund.    Fund 250 State Grants to Gas Tax Fund  221  $432,312 from Fund 250 State Grants to Gas Tax Fund 221  Needed to re-classify reserved highway relinquishment funds as streets funding not  state grants.  Once the funds are transferred the specific funds need to be reserved for CIP #354  Lincoln Boulevard).    Fund 250 State Grants to TDA Fund  223  $269,207 from 250 State Grants to TDA Fund 223  Needed to re-classify highway relinquishment funds as streets funding not state  grants  Once the funds are transrerred the specific funds need to be reserved for CIP #353  Auburn Ravine Bridge Replacement).    Fiscal Impact  Reduces State Grants by $(701,519) leaving an ending restricted fund balance of  $193,325  Reduces the General Fund Capital Replacement Reserve balance by $(273,065)  and leaves an ending reserve fund balance of $295,935.    Questions?    General Fund Reserves  Special Meeting  City Council  April 15, 2019    General Fund  Primary source of unrestricted reserves. Reserve Policy Adopted by Resolution in 2013 Potential Impacts to General Fund Reserves  Existing fund deficits  Airport Fund 750-$4.95 - M PFE Fire Fund 242 PFE Drainage Fund 247 Municipal utility refunds    Current Reserves  Operating Reserve - 25% of Annual General Fund Outflow  Catastrophic Reserve - $2 Million  Economic Reserve - $15% of Annual General Fund Expenditures Capital Reserve - Annual Contributions of $300,000 OPEB - Self Restricted for Future Liabilities PERS - Self Restricted for Future Liabilities  Projected ending General Fund reserve balance for 6/30/19 is approximately 70% of  annual expenditures.  Eliminate the OPEB and PERS reserves, the remaining total reserve is reduced to 55%.    Impact of Airport Debt on General Fund  Reserves  $4.95 of cash borrowing  Would rreduce reserve balance to 30%    6/30/19  Potential Airport Adjustment  6/30/19 Projected Revised Ending Fund Balance  Projected Ending Interfund Loan  General Fund Reserve Analysis 100 Spendable Reserves  Fund Balance $  1,554,711.00 $ 4,674,039.00 $ 2,000,000.00 $ 2,356,063.00 $351,150.00  $ 1,554,711.00  Operating Reserve  $ 4,674,039.00)  $  Catastrophic Reserve Economic Reserve Capital Replacement OPEB Reserve PERS UAL  $ 2,000,000.00  $ (275,961.00)  2,080,102.00 351,150.00 2,094,818.0  $  $ 2,094,818.00 $ 678,711.00 $ 393,785.00  $  678,711.00 393,785.00  Designated Reserves  $  $ 14,103,277.00 $ 4,950,000.00)  9,153,277.    Government Finance Officers  Association (GFOA)  Recommends General Fund Reserve targets between 15%-3 35% of annual expenditures depending on the risk, stability, and needs of the individual Community  City of Lincoln is considered a moderate risk Should maintain 26% to 35% General Fund Reserve    Review of Actual Expenditures  32 months of expenditures  Identified the months of May 2018, June 2018, and July 2018 as the three consecutive months with the highest expenditures totaling $5.4 million.  Minimum reserve of 27%  Should also take into account bridge financing for capital projects    Next Steps  Prepare reserve analysis for other funds.  Enterprise reserve policy set through rate establishment  Need to establish reserve policies for funds that do not have them  Implement surplus component of budget policy    Questions?