The City of  Flatonia  TEXAS  CITY OF FLATONIA SPECIAL CITY COUNCIL MEETING Council Chambers/City Hall 125 E. South Main, Flatonia, Texas May 9, 2023, AT 6:00 pm  AGENDA  Opening Agenda  Call to Order Invocation & Pledge  Other Business- Election  Canvassing and Officially declaring the results of the May 6, 2023, City ofl Flatonia election.  Swearing in of the new city council members elected on May 6, 2023.  Discussion  Discuss the status of the 2020 Audit.  Deliberation Agenda DA5.1.2023.1 DA5.1.2023.2 DA5.1.2023.3  Consider and take appropriate action on appointing new council members to Consider and take appropriate action on nominating ai new Mayor Pro Tern. Consider and take appropriate action on FY2 2020 audit as presented by. Jamie  replace the vacated chairs.  Notz of Goldman, Hunt and Notz, LLC.    Adjournment  I,t the undersigned authority dol hereby certify that thel Notice ofMeeting was posted ont thel bulletin board outside the front door ofthe City Hall ofthe City ofE Flatonia, Texas, aj place convenient and readily accessible to the general public at all times and said Notice was posted on the following date and time May 5, 2023, by 5:00 p.m. and remained sO posted continuously for at least 72  hours preceding the scheduled time ofs said meeting.  Tamela Louvier, City Secretary, City of Flatonia  NOTICE OF ASSISTANCE ATTHEI PUBLIC MEETING  EXECUTIVE SESSION STATEMENT The City Council reserves the right to adjourn into  The Flatonia City Hall is wheelchair accessible. executive session at any time during the course of this Access to the building is available at the primary meeting to discuss any of the matters listed above, as entrance facing Main Street. Persons with disabilities authorized by the Texas Government Code, Section who plan to attend this meeting and who may need 551.071 (Consultations with Attorney), 551.072 auxiliary aids or services such as interpreters for (Deliberations about Real Property), 551.073 persons who are deaf or hearing impaired, readers, or (Deliberations Regarding Gifts and Donations), 551.074 large print arer requested to contact the City Secretary's (Personnel Matters), 551.076 (Deliberations Regarding Office at 361-865-3548 or by FAX: 361-865-2817at Security Devices or Security Audits), 551.086 (Certain least two working days prior to the meeting sO that Publicl Power Otilities: Competitivel Matters)a and 551.087  appropriate arrangements can be made.  (Deliberation Regarding Economic Development  Negotiations).  Agenda Removal Notice  This Public Notice was: removed from the official posting board at the Flatonia City Hall on the following date and time:  By:  Tamela Louvier, City Secretary, City of Flatonia    CITY OF FLATONIA Agenda Summary Form  Agenda #  Title:  DA5.1.2023.1 Consider and take appropriate action on appointing new City Council  members to replace the vacated chairs.  Summary: the vacated chairs.  Consider and take appropriate action on appointing new City Council members to replace  Option(s):  Imove to approve the appointment of new City Council members to replace the Ifyou are opposed to not 2nd or make any motion. If a motion is not made, the  vacated chairs. item is dead.  Kocian:  Eversole:  Sears: Mayor Geesaman  Seale:  Mayor Pro Tem Steinhauser:  "Negative" motions are generally not permitted. To dispose ofa a business item, the motion should be phrased as a positive action to take, and then, if the group desires not to take this action, the motion should be voted down. The exception to this rule is when a governing body is asked to take action on a request and wishes to create a record as to why the denial is justified.    CITY OF FLATONIA Agenda Summary Form  Agenda #  Title: Tem.  DA5.1.2023.2 Consider and take appropriate action on nominating a new Mayor Pro  Summary:  Consider and take appropriate action on nominating a new. Mayor Pro Tem.  Option(s):  Imove to approve the appointment of the new Mayor Pro Tem.  If you are opposed to not 2nd or make any motion. Ifa motion is not made, the  item is dead.  Kocian:  Eversole:  Sears: Mayor Geesaman  Seale:  Mayor Pro Tem Steinhauser:  "Negative" motions are generally not permitted. To dispose of a business item, the motion should be phrased as a positive action to take, and then, if the group desires not to take this action, the motion should be voted down. The exception to this rule is when a governing body is asked to take action ona request and wishes to create a record as to why the denial is justified.    CITY OF FLATONIA Agenda Summary Form  Agenda #  Title:  DA5.1.2023.3 Consider and take appropriate action on FY 2020 audit as presented by  Jamie Notz of Goldman, Hunt and Notz, LLC.  Summary:  Consider and take appropriate action on FY 2020 audit as presented by Jamie Notz of  Goldman, Hunt and Notz, LLC.  Option(s):  Imove to approve the FY 2020 audit as presented by Jamie Notz of Goldman, I If you are opposed to not 2nd or make any motion. If a motion is not made, the  Hunt and Notz, LLC. item is dead.  Kocian:  Eversole:  Sears: Mayor Geesaman  Seale:  Mayor Pro Tem Steinhauser:  "Negative" motions are generally not permitted. To dispose of a business item, the motion should be phrased as a positive action to take, and then, if the group desires not to take this action, the motion should be voted down. The exception to this rule is when a governing body is asked to take action ona request and wishes to create a record as to why the denial is justified.    Goldman, Blunt & 2Notz, L.L..  Certified Public Accountants  DONALD G. GOLDMAN, CPA D. DALE HUNT, CPA JAMIE K. NOTZ, CPA, CVA" "CERTIFIED VALUATION. ANALYST  MEMBERS OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS  KEITH H. cox, CPA, CISA' STEPHANIE S. KOCH, CPA  CERTIFIED INFORMATION SYSTEMS AUDITOR  May 9, 2023 Tot the City Council City of Flatonia, Texas P.O. Box 329 Flatonia, Texas 78941  We have audited the financial statements of the governmental, adtities, the businessiype activities, each major fund, and the aggregate remaining fund information of the Cityo Flatonia, Texas (thechy) for the year ended September 30, 2020. Professional standards require nat we provide you with infommation about our responsibilities under generally accepted auditing standats/and, if applicable, GovernmentAnditing, Standards and the Uniform Guidance), as well as certain informatibelated to the plagned scope and timng of our audit. We have communicated such information in our letter to ybadated November 11, 2020. Professional standards  also require that we communicate to you thet following Iinformal@rrelafeges. our audit.  Significant Audit Matters  Qualitative Aspects of Accounting Practices  Management is responsible for the selectionand usess appropriate. acçounting policies. The significant accounting policies used by the City are describedyin Note he. finandAjatatements. No new accounting policies were adopted and the.application of existing polises Was ataçhanged during the fiscal year ended September 30, 2020. We ngleapo-transactions enterèdnt byt the City.guring the year for which there is a lack of authoritative guidance ponsensus All significat transactions have been recognized in the financial Accounting estimates àrlan integral partsithe financial"s Setements prepared by management and are based on management's knowledgéang. experefaataupast. andcurent events and assumptions about future events. and Decauseglensabiy thatuture events affécting,them may differ significantly from those expected. The Magagement's estimate othe allowance for doubtful accounts is based on an analysis of collectability of indivdital accounts. We eveluated thekey factors and assumptions used to develop the allowance for doubtiulaecounts in determiing that it is reasonable in relation to the financial statements taken as a Managemenihatimate of the depreciation expense and accumulated depreciation relative to capital assets is basedenthe usefut ves of assets in service, whiçh are determined from experience with similar assets, vendor stacner and warranties, and intended use, among others. All assets are depreciated using the straight-ihe ethod where the cost (or fair market value when donated) of the assets are expensed evenly over their useful lives. We evaluated the key factors and assumptions used to develop the depreciation expense and accumulated depreciation relative to capital assets in determining that it is  statements ini the properAepod.  Certain accounting estimates . parugularly  because of their significance to the financial statements  most sensitys  ecting govemmental activities, the business-type activities, each major fund, and  the aggrégaté remaining c information's financial statements were:  whole.  reasonable in relation to thet financial statements taken as a whole.  TELEPHONE (361) 573-2471 FACSIMILE (361) 575-0444  5606 NORTH NAVARRO STREET, SUITE 309 VICTORIA, TEXAS 77904-1770  EMAIL: ghnotiso.net    City Council City of Flatonia, Texas  May 9, 2023 Page2 2  There are numerous assumptions related to the actuarial valuation used to calçulate pension plan fiduciary net position (the value of assets available to pay pension benefits) and the total other post- employment benefits (OPEB) liability. Many of these assumptions are supported by. census data of employees. Management should be aware of and able to support the discount rate which has an impact on the projected benefit payments expected to be paid from the available employer fiduciary net position. We evaluated the key factors and assumptions used to develop the pension plan fiduciary net position and the total OPEB liability in determining thati iti is reasonable in relation to the financial statements taken  as a whole.  Thet financial statement disclosures are neutral, consistent, and clear.  Difficulties Encountered in Performing the Audit  The completion of our audit was significantly delayed as a result of materialtuppover in the City's staff at various points during the audit engagement, as well as the City having prolongedpertous where financial administrative positions were not filled with personnel with sufficient expertise in açebunting oproperly maintain City records. As a result of these issues, we were presented with several sets of finapcial recoraswhich were incomplete, and once complete financial records were made available, managementias not able to previde sufficient appropriate audit evidence for all areas of the engagement. Furthermorgcasthel length of time topeform the engagement was extended while waiting for management to locate recordeand/or identify errors in thetaçprds, management was not able to provide detailed insight into the activity oftresfiscal year under audit, as theywre not employed by the City during the period under audit, and contacisiwtapreviois members of managemenlilwere no longer Professional standards require us to accumgtatenal known and keagisstatements: identified during the audit, other than those that are clearly trivial, andh copmunicate them tothe appropriate level of management. Management has reviewed and accepted ce has agreed to correct all such misstatements. The first attached fourteen-page, scheduieefers to themisstatements as a result of audit procedures that will be corrected by management, The MPENECNACePaye schedule summarizes uncorrected misstatements of the fpancial statements., Management.hes determined that their effects are For purposes of this feten a disagreenent. with management is a financial accounting, reporting, or auditing matter, whether or not resoved to ousatisfaçtion, that could be significant to the financial statements or the auditor's report. We are pleastos PMAPNAeE arose during the course of our audit. We have equested certain representations from management that are included in the management Ins some castmanagement mayJecide to consult with other accountants about auditing and accounting matters, similar to obtalging a "second gpnion" on certain situations. Ifa consultation involves application of an accounting principento the City'sliancial statements or a determination of the type of auditor's opinion that may be expressed on thoshstatementsy your professional standards require the consulting accountant to check with us to determine that the consultanthas all the relevant facts. To our knowledge, there were no such consultations We generally discuss a variety of matters, inclding the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. During the audit of the fiscal year  available.  -  Corrected. and Uncorrected Misstatements  immaterial, both individually; abrheaggregate, tot Gefinancial statements as a whole.  Disagreements with Management  Mengemgecngons represéation letter dated" Mayg, 2023  Managevient Consultations withOther Independent Accountants  with other accountants. Other. Audit Findings or Issues  ended September 30, 2020 we discussed the following matters with management:    City Council City of Flatonia, Texas  May 9, 2023 Page 3  Due in part to thei issues noted int the Difficulties Encountered in Performing the Audit we were not able to obtain sufficient appropriate audit evidence around accounts payable balances, accrued payroll balances, and grant activity in order to issue an unmodified opinion on the opinion units impacted by these areas. The issues and the areas impacted have been communicated to management, and management is in agreement with our findings  and conclusions regarding these opinionunits.  The result oft those discussions was nota a condition to our retention.  Other Matters  We applied certain limited procedures to Management's Discussion and Analysis, Budgetary Comparison Schedule, Required Supplementary Pension Information, and Required Total OREB Liability Information, which are required supplementary information (RSI) that supplements the basic finanglars statements. Our procedures consisted of inquiries of management regarding the methods of preparingthe information and comparing the information for consistency with management's responses to our inqurésne.basic financial statements, and other knowledge we obtained during our audit of the basic financial statementsy We did not audit the RSI and do We were not engaged to report on combining statements, whiçhaecompany, the finanglkstatements but are not RSI. Suchi information has not been subjected to the auditingpggedures applied in the agtibof the basic financial statements, and accordingly, we do note express an opiniop.drptovide any assurance on it. This information is intended solely for the information and usepf the.CpCouncil and management of the City and is noti intended tol be, and should not! be, used by anyone othenthanthese specified parties.  not express an opinion or provide any assurance on the RSI.  Restriction on Use Very truly yours,  Goldman, Hunt & Notz, L.L.P. Attachments    Goldman, Blunt & Notz, L.L.P.  Certified Public Accountants  DONALD G. GOLDMAN, CPA D. DALE HUNT, CPA JAMIE K. NOTZ, CPA, CVA- CERTIFIED VALUATION ANALYST  MEMBERS OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS  KEITH H. cox, CPA, CISA' STEPHANIE S. KOCH, CPA  'CERTIFI EDI INFORMATION SYSTEMS AUDITOR  To City Council and Sonya Bishop City of Flatonia, Texas P.O. Box 329 Flatonia, Texas 78941  In planning and performing our audit of the financial statements of thel@gyémmentel activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Ciypf Flatonia, Texas (the City) as of and for the year ended September 30, 2020, in accordangéith: auditing standards generaily accepted in the United States of America, we considered the City's internakeotrol over financial repading (internal control) as al basis for designing audit procedures that are appropriate tspfircumstances for the purpose of expressing our opinions on the financial statements, but nott for the purposesor expressing an opinion on thecfectiveness of the City's internal control. Accordingly, we do not express anvepion ont the effectiveness oft the Ciypternal control. Our consideration of internal control was for the limited purpose.d descrled'in the preceding paragraph and was not designed to identify all deficiencies in internal control thatentige be material weaknesses or significant deficiencies and therefore material weaknessisgr significant defidencies may exist that were not identified. In addition, because of inherent limitations inl henaeontrol, includinghe possibility of management override of controls, misstatements due to error or frauchapyaenand not be lected by such controls. However, as discussed below, we identified certain deficienciesin interualeontrol that weleonsider to be material weaknesses A deficiency in internal controlettw.ben the desigh oroppration bfcontrol does not allow management or employees, in the normal course eforming therassigned functions, to prevent, or detect and correct, misstatements on at timelydbasis. Amateral weakness, deficiency, or a combination of deficiencies In internal control, such that therereasonable, possbility that aaterial misstatement of the entity's financial statements will not be prevented," oo detected and coécted, on a tdely basis. We consider the following deficiencies in  and other deficiencies that we consider to be sigritfcant deficlen  internal control to be materdiweaknessis CTSATATSES fenion Procedure  During  fthe audish City was unable torprovide us with sufficient appropriate audit evidence  for méter al transacipthat ocgurred during the period under audit. The inability of the City to produce cumentation suggests proçedures around retaining documentation to support transactions are di inconsistently. Tdinconsistercy couid potentially prevent the City from being able to effectively montgntransaction activityensure thaltransactions are properly recorded and are not fraudulent or erronedusin nature. Conseduently, the City's inconsistent documentation retention procedures are To remedy thecantrol deficlency related to documentation retention, the City would need to ensure that filing proceduresar 9 systé are in place to ensure that all material transactions of the City are properly substantiated with approppate supporting documentation that conveys thejpurpose of the transaction and other keyi Inlormationgéssaryl to ensure that the treatment of the transadtion is appropriate.  consideredfo be ac control defg èncy.  TELEPHONE (361) 573-2471 FACSIMILE (361) 575-0444  5606 NORTH NAVARRO STREET. SUITE 309 VICTORIA, TEXAS 77904-1770  EMAIL: ghnetlad.net    City Council and Sonya Bishop City of Flatonia, Texas  Page2  Prolonged Vacancyin Critical Administrative Role Without Sufficient Coverage of KeyFunctions During the course of the year under audit, a key administrative role was vacant for a prolonged period of time. Due to limited resources, al lack of cross training and a lack of segregation of duties (see below), the City was nota able to effectively cover key functions of this administrative role, and as a consequence, financial records were not maintained in a consistent or timely manner, leaving material opportunity for To correct this control deficiency, the City would need to ensure that sufficient cross training and staff are inp place to ensure that all major administrative and financial accounting functions are sufficiently covered Due to its limited resources, the City does not have sufficient staff aseparate the performance of key business functions in such a way that results in oversight of tbesuproceises by personnel with the necessary skilis and competencies to identify errors or potential traud. Whilee provide a very limited degree of oversight over these processes as part of theDegformance of audit, we cannot be considered part of the City's internal controls. Conseqyentsy the inability of theciy to establish the To remedy the control deficiency related to the segredtond of duties, the City would needtoensure that sufficient personnel are in place and that they have approprtatgnwedge and tools tabe able to effectively separate key steps of high risk procedures, provider ficient oversight to assist with the identification of errors or possible fraud. We understand tt thispay not be feasible due to the limited Due to limited resources, a lack of cross trainingalack of segregation of duties, and a prolonged vacancy in a key administrative role durirgthe perigapunder audt apd beyond (see above), the supervision and monitoring of key financial acépunting unatons.is nocahsidered to be consistent in nature. Without approprigistaneyson and'y onito toR geyionsunglace, the City is at a materially higher risk of ASSAe aue error. Ina addition, the lack of supervision and monitoring creates an,anyronment where there islamaterially higher opportunity for fraud or errors to be Toremedy this contrordeficiency, ity-would needto.ensure that sufficient personnel are in place and that they have the approptate krowle edgerditogls tope able to effectively supervise and monitor the work of emploxees involegMitpthe City's financlDccounting administration. This can be achieved As significo deficiency is yeficiency.ona combination of deficiencies, in internal control that is less severe than amater weakness, yeti impetante enoughto merit attention by those charged with governance. We consider the We havédlafted the annual ancial statements and related note disclosures of the City at the City's request. Thiswas done becuse, due to its limited resources, the City's internal personnel did not possess all of"ebskills andompetencies necessary to prepare its own annual financial statements in accordance with ghghpgchnical pronouncements and requirements of generally accepted accounting principles. Howeverw Mégannot be considered part of the City's internal controls - specifically, we cannot be a part of the financial reporting internal control that addresses the preparation of accurate annual financial statements and related note disclosures. Consequently, the inability of the City to prepare its pwn financial statements and related note disclosures is considered to be a control deficiency. The fact fhat we prepare the financial statements may give users more confidence that the financial statements  potential misstatements of the City's financial records. int the event ofs staff turnover, and position vacancies.  Lack of Segregation of Duties  appropriate segregation of duties is considered to be açocp deficiency.  size and resources oft the City. LackofConsistent: Supervisionand Monitontg  committed by City erployees.  both throughin nareased oversigh from management andi from governance. followingefciencies in Internalcontrol tobasignificant deficiencies: Lacko OCOetrols over Annual hancial Reporting  are correct; however, itdoes not eliminate the control deficiency.    City Council and Sonya Bishop City of Flatonia, Texas  Page3  To remedy the control deficiency related to the preparation of the annual financial statements, the City would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools (i.e., current accounting literature, current disclosure checklist, etc.) to be an effective element oft thei internal control process over financial reporting. We understand that this is not feasible because of the City's size and limited resources. Management may make a conscious decision to accept the degree This communication is intended solely for thei information and use of management, City Council, and others within the City, andi is not intended to be, and should not be, used by anyone other than these specified parties.  ofr riski int this control deficiency because of cost or other considerations.  Goldman, Hunt & Notz, L.L.P. May 9, 2023