Sep 11, 2025 Budget & Finance Commission

[A. CALL MEETING TO ORDER]

[00:00:02]

IS THE MEETING OF THE FINANCE AND BUDGET COMMISSION SEPTEMBER 11TH, 2025.

AND I'D LIKE TO CALL THE MEETING TO ORDER. COULD WE HAVE A ROLL CALL, PLEASE? YES. COMMISSIONER MARIN ABSENT. COMMISSIONER JESTE.

YES. COMMISSIONER ALLEN. ABSENT. COMMISSIONER RAMCHARAN.

YES. COMMISSIONER WOODHAM IS ABSENT. COMMISSIONER SAMPLES.

HERE. AND VICE CHAIR SHERBIN. UM, HERE. THANK YOU.

WOULD YOU LIKE TO STAND AND WE'LL PROCEED WITH THE FLAG SALUTE.

I PLEDGE ALLEGIANCE TO THE FLAG OF THE UNITED STATES OF AMERICA.

AND TO THE REPUBLIC FOR WHICH IT STANDS. ONE NATION UNDER GOD, INDIVISIBLE, WITH LIBERTY AND JUSTICE FOR ALL.

THANK YOU. COULD WE APPROVE THE ORDER OF THE AGENDA?

[D. APPROVE ORDER OF AGENDA]

ARE THERE ANY. MAKE SURE WE CAN CALL ALL IN FAVOR.

OH. PARDON ME. ALL IN FAVOR? AYE. THANK YOU. ALRIGHT, THANK YOU.

ARE THERE ANY BLUE FOLDER ITEMS TONIGHT? YES, WE DO HAVE ONE BLUE FOLDER ITEMS TONIGHT FOR ITEM J.2.

[E. BLUE FOLDER ITEMS - ADDITIONAL BACK UP MATERIALS]

THE DRAFT ANNUAL COMPREHENSIVE FINANCIAL REPORT, THE ACFR.

AND WE JUST NEED A MOTION TO RECEIVE AND FILE.

YES. COULD I HAVE A MOTION, PLEASE, TO RECEIVE AND FILE.

I SECOND. THANK YOU. THE MOTIONS. ALL IN FAVOR? AYE. AYE. THANK YOU. THANK YOU. AND LET'S SEE, WE HAVE THE CONSENT CALENDAR.

[F. CONSENT CALENDAR]

LET'S SEE. SO THERE'S NO. SO THERE'S NO EXCLUDED ITEMS IN THE CONSENT CALENDAR? WELL, IF NONE OF THE COMMISSIONERS WISH TO PULL ANY FOR DISCUSSION, OR IF ANYONE FROM THE PUBLIC DOESN'T WISH TO PULL ANYTHING, THEN WE CAN APPROVE THEM ALL TOGETHER. OKAY. SO IF ANYONE WOULD LIKE TO MAKE A MOTION TO APPROVE THE CONSENT CALENDAR.

MOVE TO APPROVE THE CONSENT CALENDAR AS PROPOSED.

I SECOND. ALL IN FAVOR? AYE. AND JUST FOR THE RECORD, VICE CHAIR, THERE ARE NO ECOMMENTS OR ZOOM ATTENDEES FOR THAT ITEM. THEN ITEM F.1. APPROVAL OF THE AFFIDAVIT OF POSTING.

THAT'S ALREADY DONE. SORRY. SO F.1 WAS PART OF THE CONSENT CALENDAR.

GOTCHA. SO. MOVE TO G. ITEM G, THEN. THE EXCLUDED CALENDAR ITEMS. YOU APPROVED ALL THE ITEMS SO WE CAN MOVE ON TO THE NEXT.

OKAY. AND THEN PUBLIC PARTICIPATION ON NON-AGENDA ITEMS.

[H. PUBLIC PARTICIPATION ON NON-AGENDA ITEMS]

AND THE SECTION IS LIMITED TO 30 SECONDS. PARDON ME.

YES. 30 SECONDS. 30 SECONDS. THAT'S, THE ENTIRE SESSION IS LIMITED TO 30 MINUTES AND EACH SPEAKER WILL BE AFFORDED.

CAN YOU BE THE PERMANENT CHAIR? SORRY, I WASN'T TRYING TO MOVE IT AHEAD QUITE THAT FAST.

AND LET'S SEE, WE HAVE SOME WRITTEN ITEMS HERE.

LET'S SEE. OUR FIRST ITEM IS A NON AGENDA. IT'S FROM MR. WAYNE. CRAIG. CRAIG. CRAIG. I'M SORRY. OH, YES.

OF COURSE. I'M SORRY, MR. WAYNE. SORRY ABOUT.

MY HANDWRITING IS PROBABLY GOTTEN. IT LOOKS LIKE A SEISMOGRAPH NOW. GOT IT. NO. I RECOGNIZE YOU VERY WELL.

VERY WELL. GOOD EVENING COMMISSION. I COME HERE TONIGHT AS A FELLOW REDONDO RESIDENT EXERCISING MY FIRST AMENDMENT RIGHTS.

AND WHAT I'D LIKE TO DO THIS EVENING IS TO TALK ABOUT SOMETHING THAT I LEARNED A FEW WEEKS AGO BASICALLY AT A COMMUNITY MEETING, AND THAT IS THAT THE CITY APPLIED FOR A GRANT.

I KNOW YOU TALKED ABOUT THIS IN YOUR COMMISSION, AS WELL AS OTHER COMMISSIONS LIKE THE PLANNING COMMISSION. WINK, WINK. ABOUT A GUN RANGE THAT WAS, WE WERE APPLYING FOR A GRANT ON. NOW, THE GRANT WAS A $19 MILLION GRANT.

WE WERE SUPPOSED TO. POTENTIALLY GET ALL OF IT PAID FOR.

THERE WERE SOME CONDITIONS WITH THAT, AND I WON'T GO INTO THE DETAILS, BUT IF THOSE WEREN'T MET, WE WOULD HAVE HAD TO COME UP TO 20 OR 30% OF THAT DIFFERENCE ON

[00:05:02]

I THINK WE ALLOCATED $1.3 MILLION TOWARD IT. WE SPENT $200,000 OF IT.

AND I GUESS WHAT I'D LIKE TO SAY TO THE BUDGET AND FINANCE COMMISSION IS THAT I KNOW YOU KNOW THIS MORE THAN I DO.

WE'RE IN A $3.5 MILLION STRUCTURAL DEFICIT RIGHT NOW.

WE HAVE ABOUT $1.1 MILLION OF MONEY THAT'S SITTING SOMEWHERE IN AN ACCOUNT.

I THINK THAT IT WOULD BE A GOOD IDEA FOR THE CITY TO TRANSFER THAT BACK INTO THE GENERAL FUND, PERHAPS TRANSFER IT INTO, I DON'T KNOW SOMETHING LIKE, I KNOW WE HAD A STREET PAVING PROJECT WE WERE TRYING TO DO ON GRANT AVENUE.

MAYBE THAT COULD BE USED TO APPLY TOWARD THAT.

MAYBE IT COULD BE TO MAYBE HOLD IT IN A CONTINGENCY BUDGET SO WE COULD OFFSET SOME OF THE COSTS THAT WE DON'T KNOW.

THAT'S GOING TO HAPPEN AT SOME POINT THIS YEAR DURING OUR CALPERS ANALYSIS.

I UNDERSTAND SAID. THAT COULD BE, YOU KNOW, HUNDREDS OF THOUSANDS OF DOLLARS TO OR JUST LIKE I SAID, USE IT TO PAY DOWN THE DEBT, KEEP IT IN ARREARS.

SO MY RECOMMENDATION TO THIS COMMISSION AND THIS BODY IS THAT WITH THIS OPPORTUNITY, I THINK IT WOULD BE GOOD TO MAYBE WRITE A LETTER TO THE COUNCIL SAYING THAT THIS IS SOMETHING WE SHOULD PROBABLY DO AND NOT PUT MORE MONEY, GOOD MONEY AFTER BAD, BECAUSE I THINK EVEN IN THIS CLIMATE I DON'T THINK THAT APPLYING FOR A GRANT WAS NECESSARILY THE BEST MOVE.

BEING THAT WE HAVE SEEN THE FEDERAL GOVERNMENT DOES TEND TO FUND A LOT OF THINGS ESPECIALLY IN CALIFORNIA.

SO MAYBE THIS IS SOMETHING WE CAN DO GOING FORWARD THAT WOULD MAKE MORE SENSE.

AND THAT'S JUST WHAT I WANTED TO MENTION TO YOU GUYS. YOU HAVE GONE A LITTLE TOO FAST.

OH. I'M SORRY. I TALKED FAST, SO. I HAD TROUBLE, YOU KNOW, TRYING TO FIGURE OUT, WHAT WAS THE $18 MILLION GRANT FOR? WELL, THE 19, IT WAS SUPPOSED TO BE 19 MILLION.

THAT WAS TO GO TOWARD A GUN RANGE, AND IT WAS A FAIRLY LARGE FACILITY.

A LOT OF QUESTIONS ABOUT HOW IT WAS GOING TO BE PAID FOR, YOU KNOW, WHETHER IT WOULD BE FREE OR NOT.

YOU KNOW, I GUESS IS THE MAIN ISSUE. BUT THE CONCERN WE ALL HAD WAS THAT THE LIKELIHOOD OF THE GOVERNMENT PAYING FOR THIS WAS VERY LOW.

AND SO WE'RE IN A BUDGET DEFICIT OR STRUCTURAL DEFICIT RIGHT NOW.

AND I THINK I ACTUALLY HEARD THE REASON I CAME TONIGHT, BECAUSE I'VE HEARD MANY OF YOU SPEAK AT SOME OF THE MEETINGS TALKING ABOUT IT. AND I THINK MAYBE WE NEED TO BE A LITTLE BIT MORE CONSERVATIVE NOW IN THESE, YOU KNOW, THESE NERVOUS TIMES NOW.

THE ECONOMY IS A LITTLE NERVOUS RIGHT NOW, AND I THINK IT WOULD MAKE MORE SENSE FOR THE CITY TO BE A LITTLE BIT MORE CAUTIOUS.

AND LET'S TAKE THAT MONEY, REALLOCATE IT, HELP PAY THE BILLS.

I THINK SOME EXCELLENT COMMENTS. I KNOW THAT A NUMBER OF US ARE ALREADY WEIGHING IN TOGETHER ON, ON SOME POSSIBLE ALTERNATIVES FOR THAT, ESPECIALLY GIVEN THE, THE CURRENT ECONOMIC SITUATION.

SO. EXACTLY. WELL, GREAT. WELL, I JUST WANTED TO MENTION THAT I THINK, AND YOU GUYS ARE DOING A GREAT JOB.

KEEP IT UP. THANK YOU. THANK YOU, THANK YOU FOR YOUR COMMENTS.

WE ALSO HAVE SOME FROM, A QUESTION FROM JIM. IS IT JIM MUELLER? YES. HI, JIM. HI. AND CONGRATULATIONS ON BEING THE NEW CHAIRPERSON.

FILLING IN THIS EVENING FOR ABOUT A HALF HOUR OR SO.

OKAY. SO PLEASE TAKE IT EASY ON ME. OKAY. ALL RIGHT.

WE'LL TAKE IT EASY. OKAY. GOOD EVENING. I'M JIM MUELLER FROM DISTRICT FIVE.

I'M ALWAYS SURPRISED ABOUT THE LOW ATTENDANCE AT THESE MEETINGS, GIVEN THE IMPORTANCE OF FINANCES, ESPECIALLY THIS YEAR, TO THE CITY OF REDONDO, I ASKED MYSELF, WHAT ARE THE WAYS TO ANALYZE THE FINANCES, ESPECIALLY THE INCOME EXPENSE FINANCES OF THE CITY, TO DETERMINE IF THEY ARE RIGHT SIZED.

CITY FINANCES ARE COMPLICATED IN A NUMBER OF BUCKETS THAT CAN CONTAIN REVENUE AND EXPENSES.

IT CAN BE COMPLICATED FOR THE ORDINARY CITIZEN TO UNDERSTAND, AND MAYBE THAT'S WHY VERY FEW PEOPLE ARE HERE.

THERE IS A GENERAL FUND THAT SUPPORTS THE BASE OPERATIONS OF THE CITY.

THEN THERE ARE 16 OTHER FUNDS THAT HAVE THEIR SPECIAL BUDGETS.

I DECIDED TO TAKE A SIMPLE APPROACH TO START WITH.

HOW DOES THE REDONDO GENERAL FUND BUDGET COMPARE WITH COMPARABLE CALIFORNIA CITIES? THERE ARE ABOUT NINE CITIES THAT COMPARE POPULATION WISE, BUT TWO OF THESE ARE CLOSER IN COMPARISON BECAUSE THEY HAVE THEIR OWN POLICE AND FIRE.

SO HOW DO REDONDO BEACH, MONTEBELLO AND MONTEREY PARK GENERAL FUND SPEND ON A PER RESIDENT BASIS IN THE CURRENT BUDGET CYCLE? I'M USING EACH CITY'S FISCAL YEAR 2025-26 BUDGET BOOK AND THE POPULATION FIGURES PRINTED IN THOSE SAME DOCUMENTS.

FIRST THE CONTEXT. OUR PEER SIZES. REDONDO BEACH 71,567 RESIDENTS.

MONTEBELLO 61.930. MONTEREY PARK 59.269. THE GENERAL FUND IS THE BEST PROXY FOR DAY TO DAY SERVICES.

RESIDENTS FEEL, POLICE, FIRE, PARKS, STREETS, AND SO ON.

REDONDO BEACH GENERAL FUND APPROPRIATIONS ARE 123.45 MILLION.

ABOUT 1725 PER RESIDENT. MONTEBELLO GENERAL FUND ARE 83.55 MILLION.

[00:10:07]

ABOUT 1247 PER RESIDENT. SO ON CORE SERVICES, REDONDO BEACH INVESTS MORE PER RESIDENT, ROUGHLY 28% MORE THAN ABOVE MONTEBELLO AND 38% ABOVE MONTEREY PARK.

IN SHORT, REDONDO BEACH IS PER CAPITA. GENERAL FUND SPENDING IS MEANINGFULLY HIGHER THAN TWO VERY SIMILAR LA AREA CITIES.

I'M NOT MAKING ANY VALUE JUDGMENTS ABOUT THIS ON REDONDO SPENDING RIGHT NOW.

BUT I DO RECOMMEND THAT THE COMMISSION JOIN ME IN INVESTIGATING THESE DIFFERENCES.

IN ORDER TO DO THIS. IT WOULD BE GOOD IF THE CITY COULD UPDATE THE COMPREHENSIVE FINANCIAL REPORT ON THE WEBSITE WITH FISCAL YEAR 2023 TO 2024 AND 2024 TO 2025. FINANCIAL INFORMATION.

THANK YOU. GOOD. THANK YOU, JIM, FOR YOUR COMMENTS, AS ALWAYS.

VERY WELL TAKEN BY THE COMMISSION. LET'S SEE, ARE THERE ANY ADDITIONAL? NO, WE DO NOT HAVE ANYONE ON ZOOM, AND THERE ARE NO ECOMMENTS AT THIS TIME.

OH, VERY GOOD. THEN CAN, SHOULD WE PROCEED WITH ITEM I?

[I. ITEMS CONTINUED FROM PREVIOUS AGENDAS]

YES. BUILDING MAINTENANCE REPLACEMENT PLANNING.

STEPHANIE? SO I'LL SAY FOR ITEMS I.1 AND I.2.

THESE ARE BOTH TOPICS THAT THE COMMISSION HAS DISCUSSED AT PRIOR MEETINGS WE DON'T HAVE PRESENTATIONS ON THEM AT THIS TIME.

THESE ARE ITEMS THAT THE COMMISSION HAS ASKED US TO KIND OF RETAIN ON THE AGENDA UNTIL WE ADDRESS THEM SPECIFICALLY.

SORRY, THAT'S JUST I.1. I.2 IS COMMISSIONER JESTE.

THIS WAS TO GIVE YOU AN OPPORTUNITY TO SHARE THE INFORMATION THAT YOU HAD COMMUNICATED TO THE, I BELIEVE, THE DAILY BREEZE AND THE MAYOR. I WOULD RESPECTFULLY ASK THAT WE COULD HAVE OUR AUDITORS GO PRIOR TO THAT DISCUSSION BECAUSE OUR AUDITOR IS HERE. OR WOULD YOU LIKE TO TAKE THE OPPORTUNITY TO HAVE A SHORT DISCUSSION OR TO SHARE WITH THE COMMISSION THE COMMUNICATION THAT YOU SENT TO THE PAPER AND THEN THE DISCUSSION WITH THE MAYOR? SOME OF YOUR CONCERNS. I MIGHT SUGGEST, IF I COULD, THAT PERHAPS WE COULD JUST SWITCH THE MOVE THE AGENDA A LITTLE BIT IF MR..

JESTE. I DON'T HAVE THE LETTER I WROTE TO THE MAYOR WITH ME.

IF YOU HAVE A COPY OF THAT, I CAN. SO I BELIEVE WE HAVE IT.

IT'S IN THE AGENDA. WE CAN PULL IT UP. IT'S JUST WITHIN THAT AGENDA ITEM.

BUT YOU COULD. YEAH, YOU CAN JUST TALK ABOUT IT, TOO. IT WAS IN THE AGENDA PACKET. YEAH.

IF I COULD SUGGEST, SINCE WE'VE GOT ALMOST HALF OF THE COMMISSION ISN'T HERE TONIGHT.

MAYBE IT COULD BE PUSHED OUT TO THE NEXT MEETING WHEN IT COULD BE A VALUE TO ALL THE PEOPLE THAT ARE SITTING HERE IN THE FUTURE.

YEAH, I WAS JUST ABOUT TO GET THERE. I JUST WANTED TO SAY, MY VIEW IS THAT IT'S HIGHLY IRRESPONSIBLE FOR THE CITY COUNCIL AND THE CITY MANAGEMENT TO DIP INTO THE PENSION RESERVES WHEN THERE ARE OPPORTUNITIES FOR SAVING MONEY OR DEFERRING SOME PROJECTS.

SO THAT SHOULD BE THE LAST RESORT, ONLY IN AN EMERGENCY.

AND I JUST DON'T LIKE TO SEE THE CITY TAKING THOSE RESERVES AND STILL GOING AHEAD WITH ALL THE OTHER PROJECTS AS IF BUSINESSES IS BUSINESS AS USUAL IS NOT.

AND WE'RE GOING TO HAVE SOME SERIOUS ISSUES THAT ARE ON THE HORIZON.

SO AS COMMISSIONER SAMPLES SUGGESTED, I THINK IT IS BEST IF WE RESERVE THIS DISCUSSION FOR THE NEXT MEETING OR WHICHEVER MEETING WE HAVE A FULL QUORUM.

YEAH. AND JUST ONE COMMENT BEFORE WE MOVE ON.

ONLY BECAUSE THIS IS MY LAST TIME, AND YOU DON'T HAVE TO LISTEN TO ME AFTER THIS.

THE CITY HAS CONSISTENTLY BEEN VERY LOOSE WITH WHAT THEY CONSIDER RESERVES.

SO WHEN IT'S CONVENIENT, THEY'LL STEAL RESERVES FROM THE PENSION FUND IN ORDER TO PAY FOR OTHER CITY SERVICES.

SEVERAL MONTHS AGO, WE HAD A HUGE DISCUSSION ABOUT WHAT THE THE STANDING RESERVE FUND SHOULD BE IN THE CITY.

ONE OF THE THINGS WE DIDN'T DISCUSS IS SHOULD THERE BE AN OVER UNDER.

SO IS THERE A MINIMUM AND MAX WHERE RATHER THAN VARIOUS DEPARTMENTS HAVING RESERVES, MAYBE THE CITY SHOULD HAVE RESERVE AND IF THEY FOR

[00:15:02]

RIGHT NOW THEY'RE JUST PLAYING WITH RESERVE FUNDS AS IF IT'S A POOL, BUT THEY GIVE IT DIFFERENT NAMES.

SO I AGREE WITH YOU. THERE'S SOMETHING THAT NEEDS TO BE DONE.

THIS IS THE LAST TIME I CAN SAY ANYTHING ABOUT IT, SO I APPRECIATE THE TIME.

BUT PLEASE, WHOEVER'S SITTING IN THIS SEAT, WHOEVER'S SITTING IN THE REST OF THE SEATS, I THINK THAT'S VERY IMPORTANT FOR YOU TO DEAL WITH GOING FORWARD.

THANK YOU COMMISSIONER SAMPLES I'M SURE THAT ALL OF US TAKE YOU VERY SERIOUSLY ON THAT, AND I WILL.

YOUR LEGACY CAN BE PART OF US FOLLOWING UP ON THAT.

OKAY. WITH THAT, I WOULD LIKE TO MOVE THAT WE FILE THIS FOR TONIGHT, CONTINUE IT INTO THE NEXT MEETING SO THAT YOU CAN HAVE A MORE VALUABLE DISCUSSION.

I SECOND THE MOTION. CAN WE HAVE A ROLL CALL? DO WE NEED TO HAVE A ROLL CALL ON THIS? OR JUST.

WE CAN. JUST VOICE VOTE OR? VOICE VOTE, I THINK WOULD BE FINE.

OKAY. SURE. JUST FOR THE RECORD, THERE IS NO PUBLIC PARTICIPATION ON THIS ITEM, SO COMMISSIONER JESTE.

AYE. COMMISSIONER RAMCHARAN. AYE. COMMISSIONER SAMPLES.

AYE. VICE CHAIR SHERBIN. AYE. THANK YOU. LET'S SEE, WE'RE GOING ON TO ITEM

[J. ITEMS FOR DISCUSSION PRIOR TO ACTION]

MS. MEYERS HAS. SO AGAIN, THIS IS ONE OF OUR ITEMS THAT THE COMMISSION HAD ASKED US TO LEAVE ON THE AGENDA UNTIL WE ADDRESS IT.

MR. MUELLER ACTUALLY BROUGHT THIS UP, I BELIEVE, AT THE LAST MEETING, WE HAD SOME INITIAL DISCUSSION ABOUT KIND OF THE HIS CONCERNS THAT HE HAD VOICED TO THE COMMISSION ABOUT PROCUREMENT.

AGAIN, THIS ISN'T AN ITEM THAT WE'RE PREPARED TO PRESENT ON AT THIS POINT.

BUT IT'S ON HERE JUST, YOU KNOW, TO KEEP IT ON THE TOP OF THE COMMISSION'S AGENDA AND WE CAN DISCUSS WHEN BEST TO ADDRESS IT.

VERY GOOD. THEN WE COULD JUST CONTINUE THAT ITEM ON THE FUTURE AGENDAS.

VICE CHAIR, WE DID GET ONE SPEAKER CARD FOR THAT ITEM, SO.

SORRY? WE DID GET ONE SPEAKER CARD FOR THAT ITEM.

OH, OKAY. JUST BEFORE WE MOVE ON. YEAH. COULD WE.

WHO WAS IT? THANK YOU. THANK YOU. SO, OF COURSE.

STEPHANIE KINDLY SENT ME A COPY OF THE PURCHASING PROCEDURES, WHICH I REVIEWED IN CONJUNCTION WITH CHAPTER 2-6 OF THE CODE.

A LOT OF STUFF AND SERVICES ARE PROCURED BY THE CITY.

PROFESSIONAL SERVICES ALONE ACCOUNT FOR 10 TO $12 MILLION, OR ROUGHLY 8 TO 10% OF THE GENERAL FUND BUDGET.

I FOUND THREE AREAS OF CONCERN WITH THE PROCUREMENT SYSTEM.

NUMBER ONE, PROFESSIONAL SERVICES PROCUREMENT.

NUMBER TWO CONTRACT ADMINISTRATION, AND THREE SOLE SOURCING.

FIRST, PROFESSIONAL SERVICES SPECIFIC PROFESSIONS ARE DECLARED TO BE NONCOMPETITIVE IN THE CODE.

ENGINEERS, ARCHITECTS, ACCOUNTANTS, ATTORNEYS, DOCTORS, AND QUOTE, OTHER PROFESSIONAL CLASSES.

THESE ARE EXEMPT FROM COMPETITIVE BIDDING EVEN THOUGH THERE IS PLENTY OF COMPETITION IN THESE AREAS.

THERE SHOULD BE SOME REVIEW OF THESE CONTRACTS, BECAUSE WHAT TENDS TO HAPPEN IS PEOPLE IN THE CITY GET USED TO WORKING WITH A SPECIFIC ENGINEER OR ACCOUNTANT OR LAWYER. LET'S CALL HIM JOE.

AND AS HUMAN NATURE WORKS, JOE PERCEIVES THAT HE'S THE ONE THEY ALWAYS CALL, AND HIS CHARGE RATES TO THE CITY TEND TO CLIMB.

ANOTHER DANGER IS LONG TERM CONTRACTS. THE STAFF LOVES WORKING WITH JOE, SO THE CONTRACT PERIODS GET LONGER AND LONGER, BECAUSE GENERATING A NEW CONTRACT CAN BE A HASSLE.

WHAT HAPPENS THEN IS OTHER PROFESSIONALS, MAYBE WITH NEW IDEAS AND ENERGY, DON'T GET A CHANCE TO WORK WITH THE CITY.

SECOND CONTRACT MANAGEMENT PROCEDURES. JUST BECAUSE THERE'S A SIGNED CONTRACT, IT DOESN'T MEAN PERFORMANCE DOESN'T NEED TO BE MANAGED AND EVALUATED.

THERE SHOULD BE SPECIFIC GOALS AND PERIODIC REVIEWS OR PERFORMANCE SPECIFIED IN THE CONTRACT AND REMEDIES WHEN A CONTRACTOR FALLS BEHIND, ESPECIALLY FOR LONG TERM CONTRACTS. FOR EXAMPLE, THOSE THAT CROSS FISCAL YEARS, I COULDN'T FIND ANY REFERENCE TO CONTRACT MANAGEMENT IN THE CODE OR THE PROCEDURES. AN EXAMPLE OF A LONG TERM CONTRACT IS THE ONE WITH THE ASSOCIATES TO CHOOSE ART FOR ARTESIA BOULEVARD.

THIS IS A TWO YEAR CONTRACT. A LOT CAN CHANGE AND GO WRONG IN TWO YEARS.

I NOTICED SOME CONTRACTS HAVE INCENTIVES FOR GOOD PERFORMANCE, BUT NO PENALTIES FOR DELAYED OR IMPERFECT PERFORMANCE.

THERE NEEDS TO BE OVERSIGHT AND REVIEW OF CONTRACTS AND REMEDIES FOR SCREW UPS AND DELAYS.

FINALLY, SOLE SOURCING IN ANY ORGANIZATION, SOLE SOURCING IS A GIANT LOOPHOLE.

IT'S OFTEN USED TO AVOID THE HASSLE OF DEVELOPING COMPETING SOURCES AND COMPETITIVE BIDDING, AND TENDS TO ENCOURAGE FAVORITISM. PEOPLE DEVELOP THE HABIT OF GOING WITH OLD JOE.

[00:20:03]

THERE'S NO WRITTEN JUSTIFICATION FOR GOING SOLE SOURCE, EVEN THOUGH THE SURVEY IS PRETTY GENERIC AND THERE ARE PLENTY OF COMPETITION IN THAT FIELD. I SUGGEST THE COMMISSION LOOK AT CONTRACTING AND DETERMINE THE COSTS OF THE THREE TYPES OF PROCUREMENT PITFALLS I'VE DESCRIBED.

THANK YOU. THANK YOU, MR. MUELLER. DO WE HAVE ANY OTHER NO OTHER PARTICIPANTS? NO PARTICIPANTS. OKAY. SHALL WE MOVE ON THEN TO THE NEXT ITEM, ITEM J.

MR. CHAIR, PLEASE LET ME JUST ASK A QUESTION.

STEPHANIE. THE ITEMS THAT HE WAS TALKING ABOUT, THE PROCUREMENT CODE, IS THAT IN THE CITY CHARTER OR IS THAT CITY POLICY? SO THE PARTICULAR DOCUMENT THAT HE'S LOOKING AT IS THE CITY ADMINISTRATIVE POLICY.

IT'S ONE OF OUR ADMINISTRATIVE POLICIES AND PROCEDURES.

SO THAT'S ONE THAT STAFF DEVELOPS INTERNALLY CONSISTENT WITH THE MUNICIPAL CODE.

IT'S JUST IN MORE DETAIL THAN THE MUNICIPAL CODE.

AND THE CITY MANAGER SIGNS IT. THE PROVISIONS IN IT ARE TIED DIRECTLY TO THE CITY'S MUNICIPAL CODE.

SO SOMETHING THAT I MENTIONED LAST TIME WHEN WE HAD THIS DISCUSSION IS, YOU KNOW, OUR MUNICIPAL CODE SPECIFICALLY STATES THAT THE CITY IS NOT REQUIRED TO LOOK FOR COMPETITION IN PROFESSIONAL SERVICES.

THAT IS WHAT THE CITY'S MUNICIPAL CODE SAYS. IN PRACTICE, I WILL SAY WE FREQUENTLY AND I MEAN ALMOST AS A STANDARD PRACTICE, DO LOOK FOR COMPETITION. WE LOOK FOR QUOTES.

SO EVEN IF IT'S NOT REQUIRED, WE FREQUENTLY GO BEYOND AND DO THAT.

BUT THIS IS AN ADMINISTRATIVE POLICY AND PROCEDURE, AND IT IS EXACTLY CONSISTENT WITH THE CITY'S MUNICIPAL CODE, WHICH IS WHAT GUIDES OUR PROCUREMENT. SO IT'S NOT A CITY CHARTER ITEM.

THAT MEANS IT DOESN'T HAVE TO BE VOTED ON, UNLIKE SOME OF THE PROVISIONS THAT WE HAD TALKING ABOUT CAPITAL IMPROVEMENT PROGRAMS, THAT WAS CHANGED. THIS IS SOMETHING THAT CAN BE CHANGED BY THE CITY COUNCIL.

I DO BELIEVE IT'S OUR MUNICIPAL CODE VERSUS THE CHARTER.

OKAY, I NEED TO DOUBLE CHECK THAT. THAT'S WHAT I WAS WONDERING ABOUT.

BUT I BELIEVE SO. I BELIEVE IT'S OUR MUNICIPAL CODE.

OKAY. ONCE AGAIN, SINCE THIS IS MY LAST HURRAH, IF THAT POLICY AND ADMINISTRATIVE CODE HASN'T BEEN REVIEWED IN THE LAST THREE YEARS, I STRONGLY SUGGEST THAT THE CITY MANAGER AND CITY STAFF REVIEW THAT CODE FOR CONSISTENCY. AND WHAT WE LIKE TO DO IS BENCHMARK AGAINST ADJOINING CITIES AND SEE IF THAT MATCHES WITH WHAT OTHER CITIES ARE DOING. I WILL SAY THAT WE HAVE A PROCESS ONGOING CURRENTLY LED BY OUR CITY MANAGER'S OFFICE TO REVIEW CONTRACTING GENERALLY, AND IT ADDRESSES MANY OF THE THINGS THAT MR. MUELLER BROUGHT UP LIKE CONTRACT MANAGEMENT, PERFORMANCE MANAGEMENT OBJECTIVES, KIND OF THE FULL LIFE CYCLE OF MANAGEMENT OF A CONTRACT.

SO THAT'S IN PROCESS. AND WE ARE ALSO LOOKING AT UPDATING OUR ADMINISTRATIVE POLICIES AND PROCEDURES.

SO DEFINITELY SOMETHING THAT CITY STAFF IS PAYING ATTENTION TO.

WELL, THINGS LIKE SOLE SOURCE CONTRACTS. LET ME JUST SAY THAT I VERY, FOR THE MOST PART AGREE WITH WHAT MR. MUELLER SAID.

IT'S, BUT AT THE SAME TIME, THERE ARE REASONS SOMETIMES TO DO A SOLE SOURCE IN ORDER TO GET WORK DONE, THAT HAS TO BE DONE, AND WE NEED TO PICK THIS PERSON.

TYPICALLY, MY EXPERIENCES WITH CITIES, A SOLE SOURCE CONTRACT DOESN'T EXTEND MORE THAN A YEAR, AND IT HAS TO BE COMPETITIVELY BID AFTER THAT IN ORDER TO ELIMINATE THE PROBLEM THAT HE'S TALKING ABOUT.

SO I JUST.

BUT FOR WHAT IT'S WORTH. BUT THANK YOU. YEAH.

THANK YOU. COMMISSIONER SAMPLES. AND ALSO OUR FINANCE DIRECTOR, MISS MEYER.

SHALL WE MOVE ON TO THE NEXT ITEM? SO WE HAVE ITEM J.2.

DISCUSSION AND POSSIBLE ACTION REGARDING THE ANNUAL FINANCIAL REPORTS FOR FISCAL YEAR ENDED JUNE 30TH, 2024. AND OUR FINANCE DIRECTOR, MISS MEYER, WANT TO ELABORATE ON THAT? SURE. AND I'LL ASK MR. BOB CALLANAN TO COME UP AS WELL.

YES. THANK YOU FOR WELCOME, MR. CALLANAN. SO PARDON ME.

SO AFTER THAT, AS IT IS. THANK YOU. I'LL JUST GIVE A QUICK INTRODUCTION AND TURN IT OVER TO MR.

[00:25:03]

THIS HAS BEEN A A BIT OF AN EFFORT FOR MY FREQUENTLY SHORT STAFFED TEAM.

I WILL SAY IT'S BEEN A CHALLENGE FOR US GOING THROUGH SOME OF THESE PROCESSES, BUT IT'S SOMETHING THAT WE ARE VERY HAPPY TO HAVE DONE.

AND WE ARE ALSO VERY GRATEFUL FOR THE WORK OF OUR AUDITORS IN APPLYING SUCH A THOROUGH REVIEW TO THE CITY'S PRACTICES AND TO THE CITY'S BOOKS. OUR, YOU KNOW, HIGHEST GOAL IN MANAGING THE CITY'S FINANCES IS TO DO SO TRANSPARENTLY, TO DO SO ACCURATELY, AND TO DO SO ACCORDING TO THE HIGHEST ACCOUNTING PRACTICES.

SO AS YOU'LL NOTE MR. CALLANAN IS GOING TO TALK ABOUT SOME OF THE ISSUES THAT THEY'VE IDENTIFIED AND THAT WE'LL BE WORKING WITH THAT WILL BE WORKING ON MOVING FORWARD. BUT I JUST WANTED TO SAY UP FRONT, YOU KNOW, WE'RE REALLY GRATEFUL FOR THE COLLABORATION WITH CLA, AND WE ARE VERY EXCITED TO BE ABLE TO KIND OF CLEAN SOME THINGS UP AND JUST STRENGTHEN THE CITY'S FINANCIAL MANAGEMENT MOVING FORWARD.

AND WITH THAT, I'LL TURN IT OVER TO. YEAH. THANK YOU.

AND I UNDERSTAND THAT THIS IS THE, OUR PREMIER, PARDON ME.

THE YEAR THAT YOU'VE AUDITED, COMPLETED THE AUDIT ON WAS THE FIRST YEAR THAT YOU'D WORKED WITH THE CITY.

IS THAT CORRECT? THAT IS CORRECT. AGAIN, BOB CALLANAN, I'M A ENGAGEMENT PARTNER THAT SPECIALIZES IN STATE AND LOCAL GOVERNMENT AUDITS.

I'VE BEEN DOING IT FOR OVER 30 YEARS. WONDERFUL.

WE'RE VERY EXCITED TO HEAR WHAT YOU HAVE TO SAY. WELL, I'LL JUST TO ADD ON, IT'S YOU KNOW, FIRST YEARS ARE ALWAYS DIFFICULT JUST FROM AN AUDIT PERSPECTIVE WITH A CHANGE, BECAUSE FROM AN AUDIT PERSPECTIVE, I'M TRYING TO GET AN UNDERSTANDING OF THE CITY'S INTERNAL CONTROL STRUCTURE AND THE MOVING PIECES.

AND THERE'S A LOT OF PRE LEGWORK THAT NEEDS TO HAPPEN.

AND THAT WAS KIND OF EXASPERATED THIS GO ROUND WITH A LOT OF STAFF TURNOVER THAT WAS HAPPENING KIND OF SIMULTANEOUSLY AND DEALING WITH SOME BRAND NEW STAFF THAT DIDN'T KNOW THE HISTORICAL KNOWLEDGE THAT MAY HAVE BEEN HELPFUL FROM AN AUDIT PERSPECTIVE FOR US TO GLEAN.

SO IT HAS BEEN A COLLABORATIVE EFFORT IN GETTING US TO THIS POINT WHERE WE'RE AT, AND I THINK WE'RE ON A STRONG FOOTING TO MOVE FORWARD AND BE MORE TIMELY WITH COMPLETION OF THE AUDIT AND THE FINANCIAL STATEMENTS GOING FORWARD. THAT BEING SAID, I'M HERE TO TO TALK ABOUT THE KIND OF EXIT PRESENTATION WE HAD WITH THE FINANCIAL STATEMENTS AND THE AUDIT IN PARTICULAR. SO IF YOU COULD GO TO THE NEXT SLIDE, IT JUST BRIEF AGENDA.

I'M JUST GOING TO GO THROUGH THE AUDIT SCOPE, AUDIT PROCESS, WHAT OUR AUDIT OPINIONS ARE GOING TO BE ON THIS DRAFT FINANCIAL STATEMENT BEFORE YOU. AND THEN A REQUIRED COMMUNICATIONS THAT I'M SUPPOSED TO GIVE THE COUNCIL REGARDING SIGNIFICANT AREAS OF THE AUDIT AND THEN JUST SOME UPCOMING GASB STANDARDS. I CAN PASS ON THAT.

I'LL GO THROUGH THAT QUICKLY, BUT IF YOU HAVE SOME INTEREST, I'LL BE GLAD TO TRY TO HELP.

I'M STILL TRYING TO LEARN A FEW OF THE VERY NEW ONES MYSELF, TO SEE HOW IT'S GOING TO BE PRACTICALLY APPLIED IN THE GOVERNMENTAL SETTING.

GOOD. AUDIT SCOPE. WE WERE AUDITING THE FINANCIAL STATEMENTS OF THE CITY AND JUST WANTED TO MAKE SURE THAT YOU UNDERSTAND WE'RE NOT DOING A FRAUD AUDIT.

I'M NOT DOING AN INTERNAL CONTROL AUDIT. I'M AUDITING THE CITY'S FINANCIAL STATEMENTS THAT ARE CONTAINED WITHIN THE ANNUAL COMPREHENSIVE FINANCIAL REPORT.

AND SO I JUST WANT TO MAKE SURE IT'S CLEAR THAT, YOU KNOW WHAT AUDITING IS, AND AUDITING IS NOT TESTING 100% OF TRANSACTIONS, BECAUSE I DON'T THINK THERE'S ANY POSSIBLE WAY TO DO THAT.

AND IT'S VERY COST PROHIBITIVE IF WE TRIED. THE HARDEST THING AND THE HIGHEST ONE OF THE HIGHEST RISK IS, IS, WHAT'S NOT IN THE ACCOUNTING SYSTEM THAT SHOULD BE ON THE FINANCIAL STATEMENTS? IS THE HARDEST ASPECT OF AUDITING. AND SO WE DO TAKE A RISK BASED APPROACH, WHICH I'LL GET TO IN A MOMENT.

BUT THE AUDIT SCOPE HERE IS TO GIVE YOU AN OPINION ON THE CITY'S FINANCIAL STATEMENTS THAT ARE IN THE ACT FOR.

WE'RE ALSO, AGAIN, REQUIRED COMMUNICATIONS OF WHAT STANDARD THINGS I HAVE TO TALK ABOUT REGARDING THE AUDIT PROCESS.

WE HAVE A REPORT ON INTERNAL CONTROL AND FINANCIAL REPORTING AND COMPLIANCE.

AGAIN, I TOLD YOU WE WEREN'T AUDITING INTERNAL CONTROLS OR COMPLIANCE, BUT WE DO HAVE A REQUIREMENT TO LOOK AT COMPLIANCE WITH THINGS AND BE AWARE OF ANY NONCOMPLIANCE AND HOW THAT IMPACTS THE FINANCIAL STATEMENT, PREPARATION AND OTHER RISKS AND LIABILITIES, POTENTIAL LIABILITIES AND OTHER IMPACTS THAT MIGHT HAVE ON THE CITY'S FINANCIAL STATEMENT.

JUST A QUICK QUESTION. IF YOU IF YOU COME ACROSS SOMETHING THAT ISN'T NECESSARILY COVERED IN THE SCOPE OF YOUR AUDIT, HOW WOULD THAT, AND I MIGHT BE JUMPING AHEAD A LITTLE BIT, BUT WE'D LIKE TO UNDERSTAND HOW YOU WOULD HANDLE A SUBJECT LIKE THAT FROM, FROM AN INTERNAL CONTROL STANDPOINT. YOU KNOW, LIKE I SAID, MY MY TEAM AND MYSELF HAVE EXPERIENCE WITH A BROAD NUMBER OF ENGAGEMENTS OVER THE YEARS. AND SO IF THERE'S BEST PRACTICE ITEMS, THEN WE USUALLY HAVE DISCUSSIONS AT THE BEGINNING OF THE AUDIT AND AT THE END OF THE AUDIT

[00:30:05]

AND HERE'S WHAT WE'VE SEEN IN OTHER THINGS THAT SEEM TO WORK PRETTY WELL.

SO WE'LL OFFER THAT ADVICE, IF YOU WILL, GOING FORWARD.

NOT TO SAY THEY HAVE TO FOLLOW THAT STUFF. THAT'S A MANAGEMENT DECISION AND ULTIMATELY A CITY COUNCIL DECISION DEPENDING ON COST BENEFIT ANALYSIS AND THINGS OF THAT NATURE.

AND IS THAT MORE OF AN INFORMAL KIND OF DISCUSSION, OR IS IT SOMETHING THAT YOU ACTUALLY DEVELOP SOME WRITTEN SUGGESTIONS? YEAH. IT DEPENDS ON THE LEVEL IF IT'S YEAH, SOME INFORMAL IF I THINK IT'S OF A LITTLE MORE CONCERN THAT, YOU KNOW, IT'S A LEVEL OF PRIORITY. AND SO, IT'S JUST GENERAL OPERATIONS MORE OR LESS THAT'S NOT IMPACTING THE FINANCIAL STATEMENTS DIRECTLY.

IT'S PROBABLY JUST AN ORAL COMMENT. BUT IF I HAVE SOMETHING THAT'S A LITTLE HIGHER THAT I THINK YOU REALLY SHOULD AT LEAST ADDRESS THIS SOMEHOW, THEN I'LL BE IN IN WRITTEN FORM. AND THEN ON THE WRITTEN FORM, THERE'S KIND OF THREE LEVELS, IF YOU WILL. I HAVE A MATERIAL WEAKNESSES, WHICH IS THE HIGHEST LEVEL OF OF COMMENT.

THEN WE HAVE SIGNIFICANT DEFICIENCIES, WHICH IS A LITTLE LESSER.

AND THEN OTHER MATTERS. SO THAT'S KIND OF THE LEVEL.

FROM THE AUDIT REQUIREMENT STANDARD. I HAVE TO REPORT TO COUNCIL ON THE MATERIAL WEAKNESSES AND THE SIGNIFICANT DEFICIENCIES NO MATTER WHAT.

THAT'S JUST PART OF IT. AND WHEN WE COME ACROSS THESE ISSUES DURING THE COURSE OF THE AUDIT, WE BRING THEM UP WITH MANAGEMENT RIGHT AWAY. SO THAT'S AN OPPORTUNITY TO CORRECT IF SOMETHING NEEDS TO BE CORRECTED GET IT CORRECTED RATHER THAN WAITING FOR HERE WHERE WE'RE 14 MONTHS AFTER THE FACT. AND THEN, OH, BY THE WAY, YOU'VE GOT THESE ISSUES TO DEAL WITH THAT COULD HAVE BEEN MAYBE RESOLVED IN 14 MONTHS OR WHENEVER THE EFFORT COMES OUT.

SO THAT'S KIND OF HOW THAT PROCESS WORKS. THANK YOU.

YOU'RE WELCOME. AND THEN LASTLY, WE HAVE A SINGLE AUDIT REPORT, WHICH WE'RE IN THE PROCESS OF DOING.

WE SINGLE AUDIT, IF YOU'RE NOT FAMILIAR WITH IT, IS AUDITING THE FEDERAL GRANT PROGRAMS THAT THE CITY HAS RECEIVED FEDERAL FUNDS FOR.

AND SO IT'S TAKING A LOOK AT WHAT WHAT GRANT PROGRAMS ARE IN PLACE AT THE CITY, SELECTING A COUPLE THAT WE CAN DEEM AS MAJOR PROGRAMS FOR THAT YEAR, AND THEN TESTING COMPLIANCE ON THOSE PROGRAMS WITH THE REQUIREMENTS THAT THE FEDERAL GOVERNMENT PROVIDES AND OR THE GRANT AGREEMENT STATES.

AND SO WE'RE IN THE PROCESS OF THAT. WE HAVE ONE MORE GRANT PROGRAM TO FINISH OFF THERE AND HAVE THAT WRAPPED UP HOPEFULLY BY THE END OF THE MONTH HERE.

SO NEXT SLIDE. AGAIN, THE AUDIT PROCESS, IT'S A RISK BASED APPROACH, AS I SAID, AND AUTOMATICALLY WITH ANY AUDIT THAT OUR FIRM, MY FIRM STARTS WITH IS WE LOOK AT, YOU KNOW, THE POTENTIAL FOR OVERRIDE OF INTERNAL CONTROLS FROM MANAGEMENT STANDPOINT OR STAFF STANDPOINT. THE SECOND BIG AREA IS REVENUE RECOGNITION.

WE'RE REALLY CONCERNED ABOUT WHAT GETS REPORTED IN YOUR FINANCIAL STATEMENTS AND THAT ARE, YOU KNOW, PROPERLY RECORDING REVENUE. NOW, IT'S A LITTLE DIFFERENT, YOU KNOW, IN THE PRIVATE SECTOR, IF YOU'RE AT IBM OR SOMETHING AND YOU WANT TO REGULATE YOUR NET INCOME NUMBER AND PLAY GAMES, I'LL CALL IT JUST THERE. THAT'S MORE RISK ON THE REVENUE RECOGNITION.

FROM A CITY STANDPOINT, IT'S NOT AS AS DIFFICULT, BUT IN THE GRANT AREA IT CAN BE.

SO THAT'S WHY THOSE ARE TWO STANDARD RISKS THAT WE ALWAYS LOOK AT EVERY YEAR IN OUR AUDITS.

A COUPLE OTHER ONES THAT CAME UP WITH OUR FIRST YEAR OF THE AUDIT HAD TO DO WITH SIGNIFICANT ESTIMATES. AS YOU KNOW, YOUR FINANCIAL STATEMENTS DO CONTAIN SEVERAL SIGNIFICANT ESTIMATES. THAT'S BEEN THE OPEB PLAN.

OTHER POST-EMPLOYMENT BENEFIT PLAN, THE PENSION PLAN, DEPRECIATION ON CAPITAL ASSETS, ALLOWANCES ON RECEIVABLES FROM COLLECTABILITY STANDPOINT.

AT JUNE 30TH, EVEN THE INVESTMENTS, WHAT'S THE VALUE OF THE INVESTMENT AS OF JUNE 30TH? I MEAN, YOU HAVE TO, DEPEND ON, YOU KNOW, IS IT A TREASURY BILL THAT'S EASILY IDENTIFIABLE WITH OTHER MARKET ACTIVITY THAT YOU CAN SAY, YEAH, THAT'S, I'M COMFORTABLE WITH THAT. BUT IF YOU HAVE A CORPORATE NOTE THAT DOESN'T TRADE REGULARLY, YOU KNOW, IS THAT REALLY A FAIR VALUE? SO THAT'S ANOTHER ESTIMATE TO CONSIDER.

AND THEN ACCOUNTING FOR CAPITAL ASSETS BECAME APPARENT DURING THE COURSE OF THE AUDIT THAT THAT NEEDED TO BE AN AREA WHERE WE FOCUSED ON MORE.

AND YOU'LL SEE THAT IN OUR COMMENTS COMING UP IN RELATED TO THE MATERIAL WEAKNESSES THAT WE IDENTIFIED.

NEXT SLIDE PLEASE. SO WHAT YOU REALLY WANT TO KNOW ON THIS DRAFT IS WHAT'S OUR OPINION GOING TO BE ON THAT? AND ON PAGE ONE OF THE, OF OUR REPORT WE HAVE UNMODIFIED OPINIONS AND IT'S A PLURAL BECAUSE OF WE'RE GIVING AN OPINION ON SEVERAL COLUMNS WITHIN THE FINANCIAL STATEMENTS. AND AN UNMODIFIED OPINION IS THE HIGHEST FORM OF OPINION THAT AUDIT FIRMS CAN PROVIDE ON THE FINANCIAL STATEMENTS, ESSENTIALLY SAYING THAT THOSE FINANCIAL STATEMENTS ARE FAIRLY STATED IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND GOVERNMENT AUDITING STANDARDS.

SO THAT'S THAT'S THE GOOD NEWS ON ON THIS PROCESS.

THE RESULTS OF THIS ON THE FINANCIAL STATEMENT SIDE, WE DID COME ACROSS THREE AREAS THAT WE WE FELT WERE MATERIAL,

[00:35:06]

AGAIN, THESE WERE ALL BROUGHT TO THE ATTENTION OF MANAGEMENT EARLY ON SO THAT WE COULD GAME PLAN ON HOW IT'S IMPACTING NOT ONLY THE JUNE 30TH, 2024 AUDIT, BUT ALSO GOING FORWARD FROM AN OPERATIONAL STANDPOINT FOR THE CITY.

NEXT SLIDE PLEASE. REQUIRED COMMUNICATIONS. OVERALL JUST WANTED TO KNOW THAT THERE WAS ONE ACCOUNTING STANDARD THAT WAS IMPLEMENTED DURING THE YEAR. IT'S GASB STATEMENT 100. AND THAT JUST TALKS ABOUT ERROR CORRECTIONS AND HOW YOU REPORT THOSE IN A CITY'S FINANCIAL STATEMENT.

SO THAT HAS BEEN IMPLEMENTED IN THE DRAFT BEFORE YOU.

ALSO, FROM THE AUDIT STANDPOINT, THERE WAS SOME AUDITING STANDARDS THAT CAME INTO PLAY.

143 TO 145 THAT DOVE IN MORE INTO IT, GENERAL CONTROLS AND HOW THAT IMPACTS OUR RISK ASSESSMENT WHEN PERFORMING AUDITS.

SO WE'VE INCORPORATED THAT INTO OUR AUDIT PROCESS THIS YEAR.

WE DID NOT IDENTIFY ANY UNUSUAL TRANSACTIONS DURING THE COURSE OF OUR AUDIT, ALTHOUGH WITH A COUPLE OF THE MATERIAL WEAKNESSES, WE DID FEEL THAT CERTAIN TRANSACTIONS WEREN'T BEING ACCOUNTED FOR TOTALLY ACCURATELY.

SO THOSE HAVE BEEN FIXED AND THOSE HAVE ALREADY.

SO ANY OF THE COMMENTS I'M TALKING ABOUT, THEY'VE ALREADY BEEN FIXED OR REPAIRED AND WILL NOT AFFECT OUR OPINION OR THE FINANCIAL STATEMENTS BEFORE YOU.

AND WHEN WE GET THIS ALL DONE, WE'LL GET A MANAGEMENT LETTER.

AND WHAT THE MANAGEMENT REPRESENTATION LETTER IS, IS MANAGEMENT SAYING WE, IT GOES THROUGH A BUNCH OF BULLET POINTS SAYING THAT ESSENTIALLY THEY GAVE US UNFETTERED ACCESS TO WHATEVER WE NEEDED SO THAT I COULD PROVIDE AN OPINION ON YOUR FINANCIAL STATEMENTS.

DIFFICULTIES. AGAIN, I'VE TOLD YOU BEFORE, THE DELAYS CREATED BY, YOU KNOW, LEARNING CURVE IS PART OF IT, BUT ALSO THE CITY STAFF TURNOVER. TURNOVER AND THE HISTORICAL KNOWLEDGE THAT WAS LOST WITH SOME OF THE PEOPLE, STAFF THAT WAS LEFT. AND THEN YOU HAVE NEW REPLACEMENTS.

AND I THINK THE STAFF DID A GOOD JOB IN RESPONDING TO OUR REQUESTS.

AND WE HAD TO BE PATIENT BECAUSE WE KNEW OF THE LEARNING CURVE ON BOTH SIDES.

THERE WERE NO DISAGREEMENTS WITH MANAGEMENT ON ANY OF THE ISSUES THAT WE BROUGHT TO THEIR ATTENTION.

WE HAD NO CONSULTATIONS WITH OTHER ACCOUNTANTS, SO USUALLY THOSE OCCUR LIKE OPINION SHOPPING.

IF MANAGEMENT DOESN'T LIKE WHAT I HAVE TO SAY, ARE THEY REACHING OUT TO OTHER AUDITORS? IF I KNOW ABOUT IT, I NEED TO LET THE COUNCIL KNOW ABOUT THAT.

AND SO THERE WERE NO SUCH INSTANCES. YOUR MOST SENSITIVE ESTIMATES.

I TALKED ABOUT THE SIGNIFICANT ESTIMATES THAT YOU HAVE, THE MOST SENSITIVE ONES THAT WE LOOKED AT THAT HAVE A HIGHER RISK OF FLUCTUATION HAS TO DO WITH YOUR OTHER POST EMPLOYMENT BENEFIT LIABILITY AND THE RELATED DEFERRED INFLOWS AND OUTFLOWS.

AND THEN OBVIOUSLY CLAIMS PAYABLE BECAUSE NOBODY CAN PREDICT THE FUTURE AS TO THE LEVEL OF CLAIMS ACTIVITY THAT'S GOING TO HAPPEN IN ANY GIVEN YEAR.

UNCORRECTED MISSTATEMENTS, THEY'RE, BECAUSE OF ALL THAT WENT ON, I THINK WE MANAGEMENT WANTED TO DO A CLEAN SWEEP AND TRY TO GET EVERYTHING DONE UNDER THIS AUDIT AS FAR AS CORRECTING MISSTATEMENTS.

SO WE ARE PLEASED TO REPORT THERE ARE NO UNCORRECTED MISSTATEMENTS.

SO PART OF THE CONCEPT OF AUDITING IS MATERIALITY.

AND SO IF I FIND THAT YOU, THE FINANCIAL STATEMENT EXPENSE ACCOUNT IS MISSING $200, WELL, I'M NOT GOING TO IT'S NOT GOING TO CHANGE MY OPINION.

IT'S NOT WORTH CREATING A JOURNAL ENTRY TO POST IT.

I CAN WAIVE THE ADJUSTMENT AND CALL IT UNCORRECTED.

AS LONG AS WE, BOTH MANAGEMENT AND THE AUDITORS AGREE THAT IT'S NOT MATERIAL TO THE OVERALL FINANCIAL STATEMENTS.

AND SO THAT'S WHAT AN UNCORRECTED MISSTATEMENT IS.

CORRECTED MISSTATEMENTS ARE THE ONES THAT KNOW, THESE HAVE TO BE MADE IN ORDER FOR ME TO GIVE YOU THE OPINION ON THE FINANCIAL STATEMENTS.

AND THEN WE THE MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING, THERE'S NOT ONLY THE FINANCIAL CLOSE PROCESS, WHICH I'LL GET INTO BUT THERE'S A COUPLE OTHERS RELATED WITH THE MATERIAL WEAKNESSES THAT WE IDENTIFY.

NEXT SLIDE. THE NEW ACCOUNTING CHANGE I WAS TALKING ABOUT WAS A STATEMENT 100 AND BASICALLY TALKING ABOUT HOW DO YOU HANDLE SITUATIONS WHERE THERE'S AN ACCOUNTING, A CHANGE IN ACCOUNTING PRINCIPLE OR A CHANGE IN ACCOUNTING METHOD, OR MORE IMPORTANTLY, WITH ERROR CORRECTIONS, WHICH WE DO HAVE AS A RESULT OF THE MATERIAL WEAKNESSES.

SO JUST WANTED TO GIVE YOU A LITTLE MORE INFO ON THAT.

SO THAT WAS IMPLEMENTED WITH THESE FINANCIAL STATEMENTS, AND YOU'LL SEE SOME NOTE DISCLOSURES IN THERE RELATED TO THAT.

SO THE MATERIAL, CORRECTED MISSTATEMENTS, WHICH KIND OF GO HAND IN HAND WITH WHAT OUR MATERIAL WEAKNESSES ARE GOING TO BE, ARE BASICALLY IN THE AREA OF GRANTS RECEIVABLE AND THE RELATED UNAVAILABLE AVAILABLE REVENUES AND UNEARNED REVENUES.

WE FOUND THAT AFTER FURTHER ANALYSIS AND MANAGEMENT GOING THROUGH AND DISSECTING IT, WE NOTICED THAT THERE WAS A LOT OF STALE RECEIVABLES ON THERE THAT SHOULDN'T HAVE BEEN ON THERE. NOW, THEY WERE ALSO THAT'S A BALANCE SHEET ITEM ASSET.

[00:40:03]

BUT THERE'S AN OFFSET CALLED UNAVAILABLE REVENUE AND UNEARNED REVENUE.

SO IT'S NOT IMPACTING FUND BALANCE PER SE. SOME OF IT DID IMPACT IT.

AND THERE WAS A MATERIAL ADJUSTMENT OF ABOUT 250,000 FOR THE OTHER GOVERNMENTAL GRANTS FUND AS A RESULT OF WEEDING OUT THE STALE RECEIVABLES. AND SOMETIMES WHAT ALSO HAPPENS WHEN YOU GET GRANT MONEY IN IT GOES INTO THE INCOME RIGHT AWAY AND YOU FORGET TO TAKE IT OFF THE RECEIVABLE AND TAKE IT OFF THE UNAVAILABLE REVENUE AND GET RID OF IT. SO THERE WAS SOME THINGS THERE.

SO THAT'S THE FIRST ONE. JUST A QUICK ONE. WHEN YOU MAKE A CORRECTION IN YOUR RECEIVABLES THAT DOESN'T IMPACT YOUR INCOME, DO YOU OR HAVE YOU MADE AN ALLOWANCE FOR THAT IN THE PRIOR YEAR OR SO.

IT COULD. IT DEPENDS ON THE SITUATION THAT IT COULD IMPACT INCOME.

A LOT OF TIMES WHAT HAPPENS UNDER THE MODIFIED ACCRUAL BASIS OF ACCOUNTING FOR GOVERNMENTAL FUNDS, WHICH THIS OTHER GOVERNMENTAL GRANTS FUND IS, IS THAT THE RULE SAYS THAT IF YOU'RE NOT COLLECTING THAT GRANT MONEY, YOU LET'S SAY YOU EXPEND 50,000 ON A GRANT BEFORE JUNE 30TH.

SO YOU SPENT THE MONEY ON ELIGIBLE COSTS AND YOU EXPECT TO GET REIMBURSED WITH THAT.

IF YOU DON'T RECEIVE THAT REIMBURSEMENT WITHIN 60 DAYS AFTER YEAR END, YOU CAN'T RECOGNIZE IT AS INCOME.

YOU HAVE TO PUT IT INTO THIS UNAVAILABLE REVENUE LIABILITY ACCOUNT, IF YOU WILL.

SO IT'S, YOU KNOW, BOOK A RECEIVABLE BOOK A LIABILITY.

SO THERE'S NO IMPACT ON THE FUND BALANCE. SO IT'S NOT IT'S NOT IMPACTING INCOME UNTIL YOU RECEIVE IT.

OKAY. BUT YOU SAY THAT YOU'VE WRITTEN THOSE OFF THOUGH AT THAT POINT THEN THAT BECOMES AN IMPACT ON YOUR INCOME STATEMENT, RIGHT? NOT IF NOT IF THAT PARTICULAR GRANT HAD A RECEIVABLE AND THE UNAVAILABLE LIKE 100,000, 100,000. AND WE SAY, OH, THAT'S AN OLD ONE. WE ALREADY GOT THAT COLLECTED.

THEY GET RID OF BOTH OF THOSE ON THE BALANCE SHEET.

IT'S NOT AFFECTING INCOME BECAUSE SOMETIMES WHAT HAPPENS, LIKE I SAID, IS THE THE CASH BASIS OPERATION OF THE CITY DURING THE COURSE OF THE YEAR IS GOING TO OH, WE GOT THIS $100,000 IN LET'S BOOK IT TO GRANT REVENUE AND MAYBE NOT NECESSARILY THINK ABOUT THE RECEIVABLE AND THE UNEARNED REVENUE THAT HAVE TO COME INTO PLAY. AND SO THAT HAPPENS. I'VE SEEN THAT IN MY HISTORY OF DEALING WITH CITIES.

SO IT'S NOT IMPACTING FUND BALANCE ON THAT SITUATION.

CAN YOU HAVE AN IMPACT ON THERE? SURE. YOU COULD HAVE A GRANT RECEIVABLE ON THE BOOKS THAT ULTIMATELY NEVER GOT COLLECTED BECAUSE YOU THE TIME EXPIRED TO GET REIMBURSEMENT FROM THE OTHER ENTITY.

THOSE THINGS COULD HAPPEN. THOSE WOULD IMPACT THE INCOME, THE GRANT REVENUE INCOME.

GOOD. THANK YOU. THANK YOU. SO PARDON ME JUST A MINUTE.

LOOKS LIKE WE HAVE THE ARRIVAL OF ONE OF OUR OTHER COMMISSIONERS, OUR CHAIR.

THANK YOU VERY MUCH. WE'VE TRIED TO FILL IN A LITTLE BIT HERE FOR YOU.

THANK YOU. THANK YOU. I TRIED TO TEXT YOU, BUT IT WOULDN'T GO.

OH. GO AHEAD. PLEASE CONTINUE. PLEASE CONTINUE.

I'M SORRY TO INTERRUPT YOU. I'M SORRY. WHILE YOU'RE STOPPING, THERE'S A NUMBER ON HERE THAT JUST.

IT'S KILLING ME. IT'S THE $32 MILLION NUMBER.

YES. THAT'S A THIRD OF OUR ANNUAL BUDGET. HOW DOES THAT NET OUT, AND HOW DOES THAT ULTIMATELY GET REFLECTED IN OUR FINANCIALS, I GUESS IT WOULD BE LAST YEAR COMING INTO THIS YEAR? YES. THAT 32 HAS TO DO WITH CONSTRUCTION AND PROGRESS.

RIGHT. AND SO THERE WAS SOME CONSTRUCTION IN PROGRESS THAT SHOWS US SHOWED AS AN ASSET ON ON THE GOVERNMENT WIDE FINANCIAL STATEMENTS, NOT ON THE FUND, NOT THE GENERAL FUNDS, NOT IMPACTING THE GENERAL FUND FOR THE GOVERNMENTAL ACTIVITIES IT DOES IMPACT.

A PART OF THAT IS WITH THE HARBOR TIDELANDS AND THE HARBOR UPLANDS FUND THAT THERE WAS.

LET'S JUST BREAK THAT FOR A SECOND. THE MAIN ONE WHERE THE MOST MOST OF THIS IS, IS IN THE GOVERNMENTAL ACTIVITIES, WHICH AGAIN, DOES NOT IMPACT THE GENERAL FUND.

IT IMPACTS THE GOVERNMENT WIDE FINANCIAL STATEMENTS THAT, ESSENTIALLY THERE WERE STREET RELATED PROJECTS THAT WERE MONEY WAS GETTING INTO THE CIP CONSTRUCTION AND PROGRESS ACCOUNT.

WHEN A PROJECT CLOSES, THEN YOU WOULD CLOSE, REDUCE THE CIP AND ADD IT TO WHATEVER ASSET CLASS STREETS.

HOWEVER, THE CITIES HAS ADOPTED A MODIFIED APPROACH METHODOLOGY WITH THE INFRASTRUCTURE, INFRASTRUCTURE, STREETS WHICH BASICALLY AGAIN, I'M GETTING INTO VERY HEAVY ACCOUNTING JARGON, SO I APOLOGIZE.

BUT BASICALLY WHEN GASB 34 GOT IMPLEMENTED, WHICH IS THE CURRENT WAY THE PRESENTATION IS ON THE FINANCIAL STATEMENTS, THEY GAVE CITIES THE OPTIONS TO USE A MODIFIED APPROACH, WHICH MEANS DO AN ASSESSMENT OF ALL YOUR PARTICULAR INFRASTRUCTURE, LET'S SAY STREETS. AND AS LONG AS YOU MAINTAIN THOSE STREETS AT SOME GIVEN LEVEL, YOU DON'T HAVE TO DEPRECIATE AN ASSET ON THERE.

YOU'LL HAVE AN ASSET THERE, BUT IT JUST STAYS THERE AND DEPRECIATES IT.

AND SO IF YOU'RE IN THAT SITUATION, ANY PROJECT THAT YOU'RE DOING JUST TO PRESERVE THE STREETS AT THAT MAINTENANCE LEVEL OR

[00:45:05]

SO THE NET RESULT OF THE BOTTOM LINE IS NO CHANGE.

IT WAS JUST A MATTER OF RE CATEGORIZING THE COSTS.

WELL, THERE WAS A CHANGE ON THE GOVERNMENT SIDE.

IT DID AFFECT THE NET POSITION ON THE GOVERNMENT WIDE, WHICH IS THE FULL CITY.

OKAY. SO BUT I WANT TO MAKE CLEAR IT'S NOT THE GENERAL FUND.

GENERAL FUND IS NOT IMPACTED BY THAT. BECAUSE DURING THE COURSE OF THE YEAR WHEN THESE CIP PROJECTS ARE GONE, IT'S GETTING EXPENSED OUT OF THE GENERAL FUND RIGHT AWAY. SO IT'S NOT IMPACTING THAT.

OKAY. SO I JUST WANT TO MAKE HOPEFULLY THAT WAS CLEAR.

AS CLEAR AS MUD RIGHT. THANK YOU. SO OKAY. AND SO THAT WAS THE NEXT ONE.

AND THEN THE YOU KNOW WE HAD A LITTLE BIT DIFFERENT ON THE ON THE HARBOR TIDELANDS FUND.

IT HAD TO DO WITH THE DREDGING PROJECT AGAIN.

IT DIDN'T, THE DREDGING PROJECT STARTED I GUESS, IN FISCAL YEAR 22-23, COMPLETED IN 23-24.

BUT WHAT WAS THE PURPOSE OF DREDGING? WAS IT TO HAVE BIGGER SHIPS COMING INTO THE HARBOR AND EVERYTHING OR BIGGER AREA CAPACITY? NO, IT WAS JUST, YOU KNOW, A MAINTENANCE THING BECAUSE THE SAND AND THE SILT BUILD UP OVER TIME.

YOUR DEPTH LEVEL GETS LOW AND YOU NEED TO REASSESS THAT TO HAVE THE FUNCTIONALITY THAT YOU NEED AT THE HARBORS.

SO THAT IS REPAIR AND SHOULDN'T BE CAPITALIZED.

AND SO WE HAD A $400,000 ADJUSTMENT TO THE NET POSITION THERE, RESTATING THE BEGINNING BALANCE IN THE HARBOR TIDELANDS.

SO THAT, YOU KNOW, AND THEN OBVIOUSLY, BECAUSE YOU SPENT A MILLION, I CAN'T REMEMBER THE EXACT NUMBER IN THE TIDELANDS FOR FINISHING UP THE DREDGING PROJECT THAT GOT EXPENSED THROUGH INSTEAD OF GETTING CAPITALIZED IN THE HARBOR FUND.

SO THAT'S THAT ONE. YES. THE 32.3 IS A BIG NUMBER, I GRANT YOU THAT.

BUT I'M JUST TELLING YOU, IT'S THAT GOVERNMENT WIDE FINANCIAL STATEMENT.

IT'S NOT IMPACTING A CASH FLOW NECESSARILY THERE.

ARE YOU SUGGESTING THAT THE ROUTINE REGULAR MAINTENANCE NOT BE CAPITALIZED? CORRECT. THAT'S UNDER THE CITY'S POLICY CAPITALIZATION POLICIES THAT WERE, YOU KNOW, THAT WE'RE FOLLOWING AND, AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BASICALLY SAY, YOU KNOW, REPAIRS AND MAINTENANCE, YOU ONLY CAPITALIZE REPAIRS AND MAINTENANCE IF IT'S EXTENDING THE USEFUL LIFE OF AN ASSET OR ENHANCING THE ASSET.

AND AGAIN, WITH REGARDS TO THE HARBOR. THE HARBOR WAS AT POSITION X 30 YEARS AGO.

SO HERE'S ITS BASE CONDITION. NOW IT'S GOT THAT BUILD UP THAT YOU NEED TO GET RID OF.

SO YOU'RE JUST PUTTING IT BACK TO ITS NORMAL CONDITION SO YOU'RE NOT IMPROVING AND ENHANCING.

THAT'S WHY IT'S A REPAIR AND MAINTENANCE. AGAIN I'M GETTING 30 YEARS OF TECHNICAL ACCOUNTING ONE.

OH OKAY. THAT'S 301. SO I'LL GIVE YOU ACCOUNTING 301.

I THINK THIS IS VERY IMPORTANT BECAUSE ONE THING THAT HAS TROUBLED ME SINCE I CAME ON THIS COMMISSION, IS THAT THE ROUTINE MAINTENANCE IS ALL LUMPED IN TOGETHER WITH IMPROVEMENT OR EXTENDING THE LIFE. AND I HONESTLY BELIEVE THAT THE MAINTENANCE, ROUTINE MAINTENANCE SHOULD BE A SEPARATE CATEGORY.

YEAH. THE EXPENSE. AND, YOU KNOW, BASED ON WHAT I SAW WITH OUR GOING OVER THE CAPITAL ASSET PROCESS, THE CITY STAFF IS LOOKING AT THE PROJECTS AND DETERMINING WHAT SHOULD BE CAPITALIZED AND WHAT SHOULD BE REPAIR AND MAINTENANCE SO THAT WE DON'T ERRONEOUSLY CAPITALIZE SOMETHING THAT SHOULDN'T BE. I MEAN, ARE THERE ANY GUIDELINES FOR THE.

YEAH, THERE'S GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, GUIDELINES THAT CAN GO OVER THE DO'S AND DON'TS.

AND THEN OBVIOUSLY, I'M SURE THE CITY'S CAPITALIZATION POLICY IS BASED ON THAT.

THOSE OVERARCHING PRINCIPLES THAT ARE THERE. OKAY.

THANK YOU. THEN THE MARINE AVENUE HOTEL AGREEMENTS THERE'S, IT'S A COMPLEX ARRANGEMENT THAT HAPPENED MANY YEARS AGO. BUT THE BOTTOM LINE IS THE MONEY THAT WAS COMING IN WAS TOT REVENUE FROM THOSE HOTELS IS ALLOWED TO GO INTO THIS TRUST FUND FOR THE OPERATORS TO USE IN CASE THEY HAVE DEFICITS IN THEIR MEETING DEBT SERVICE REQUIREMENTS OR OPERATING REQUIREMENTS.

AND SO WHAT WAS HAPPENING IS THAT THE TOT REVENUE WOULD COME IN.

IT SHOWS REVENUE. BUT WHEN IT GOT PAID OUT TO THAT TRUST ACCOUNT, IT HIT THE REVENUE ACCOUNT.

[00:50:02]

AND SO THAT'S WHAT THAT IS PRIMARILY DEALING WITH.

EXCUSE ME THEN THAT ADJUSTMENT ALSO IS REFLECTED IN YOUR FINANCIAL REPORTING FOR THIS.

THAT'S IN THE FINANCIAL STATEMENTS. YES. SO IF YOU WERE TO COMPARE TO LOOKING AT SOME OF THE OCCUPANCY TAX NUMBERS AND IT DIDN'T.

THAT MAKES SENSE. AND IF THAT ADJUSTMENT HAS BEEN MADE. YEAH IT'S YEAH, THAT 2,600,000 AND.

02,600,000 HIGHER ON THAT. AND THEN OBVIOUSLY FROM A NET POSITION STANDPOINT IT'S NOT AFFECTING IT BECAUSE IT'S 2,600,000 OF REVENUE, 02,600,000 OF EXPENDITURE. SURE. IN THE GENERAL FUND.

AND SO. THE LAST ONE I HAVE ON THERE HAD TO DO WITH A MANAGEMENT COMPANY THAT'S HAVING, HANDLING THE RENTAL ACTIVITIES AT THE HARBOR TIDELANDS AND HARBOR UPLANDS. WHAT WE HAD DISCOVERED.

AND PART OF THESE, YOU KNOW, WHEN I, WHEN I'M TALKING ABOUT THE MARINE AVENUE HOTEL MANAGEMENT FINANCE DEPARTMENT BROUGHT THAT UP TO US AND SAID, HEY, THIS DOESN'T LOOK RIGHT. CAN WE TAKE A LOOK AT IT? AND WE WORKED OUT TOGETHER.

SO IT'S NOT JUST ME NECESSARILY FINDING EVERYTHING.

IT'S, IT WAS A COLLABORATIVE EFFORT FOR THE FIRST YEAR.

AND THAT'S APPRECIATED THAT THE STAFF WANTED TO GET THINGS RIGHT.

AND OBVIOUSLY I'M NOT GOING TO GIVE AN OPINION ON THERE.

IF I'VE GOT THESE WILD QUESTIONS ON WILD SWINGS, THAT POTENTIALLY COULD HAPPEN.

SO THE LAST ONE HAS TO DO WITH A, THERE'S A MANAGEMENT COMPANY, THIRD PARTY MANAGEMENT COMPANY THAT'S OPERATING AND HANDLING THE LEASE AND THE RENTAL OF THE HARBOR TIDELANDS AND HARBOR UPLANDS AND THE LEASES AND EVERYTHING.

AND THE WAY IT WAS RECORDING AGAIN, IT WAS RECORDING EVERYTHING NET.

AND BASICALLY WAS RECORDING IT BASED ON THE MONEY THAT THE DISTRIBUTIONS THAT WERE COMING FROM THE MANAGEMENT COMPANY INTO THE CITY.

AND SO WE ARE STILL TRYING TO FINALIZE THAT LAST PIECE RIGHT NOW ON THE BALANCE SHEET IMPACT.

BUT ESSENTIALLY WE'RE GROSSING THAT UP AS WELL, SHOWING WHAT THE TRUE REVENUE SHOULD BE AND WHAT THE TRUE EXPENDITURE SHOULD BE BASED ON THE INFORMATION THAT THE MANAGEMENT COMPANY HAS BEEN PROVIDING.

AND THEN OBVIOUSLY DIVING INTO HOW THEY'RE ACCOUNTING FOR THINGS, BECAUSE THERE WAS A COUPLE WEIRD THINGS ON THEIR BALANCE SHEETS THAT THEY DIDN'T QUITE GET. BUT I THINK WE'RE. THOSE HAVE BEEN IRONED OUT TO MY SATISFACTION TO BE ABLE TO SAY WE HAVE AN UNMODIFIED OPINION ON HERE.

AND SO AGAIN, CITY STAFF HAS BEEN WORKING WITH THE MANAGEMENT COMPANY, TRYING TO GET THAT IN AND GET THAT STREAMLINED AND COME UP WITH A ANOTHER PROCESS TO HAVE THIS MORE REGULARLY PART OF THE PROCESS AND DEFINITELY PART OF THE YEAR END PROCESS OF CLOSING THE BOOKS.

NEXT SLIDE PLEASE. WE CAN UPCOMING GASB STANDARDS WILL GO PRETTY QUICKLY ON THAT.

GASB 101, WHICH WILL BE FOR THE 25 FISCAL YEAR, JUST HAS TO DO WITH ACCOUNTING FOR COMPENSATED ABSENCES.

THERE ARE CURRENTLY COMPENSATED ABSENCES RECORDED ON THE CITY'S FINANCIAL STATEMENTS.

THIS IS JUST ADDING SOME MORE NUANCES TO TRY TO MAKE IT MORE COMPARABLE ACROSS GOVERNMENT ENTITIES.

SO THAT NEEDS TO BE LOOKED INTO AND JUST REASSESSED ON HOW IT'S BEING ACCOUNTED FOR.

I THINK THAT'S ENOUGH ON THAT SLIDE. GASB 102 HAS CERTAIN RISK DISCLOSURES.

AGAIN, I DON'T THINK THIS IS GOING TO APPLY NECESSARILY NECESSARILY.

BUT IF FOR SOME REASON THERE BECOMES A LIMITATION ON RAISING REVENUES OR THERE'S A CONCENTRATION IN TAX REVENUE, LET'S SAY YOUR TOT REVENUE IS ALL WITH ONE HOTEL.

AND THAT HOTEL JUST LETS YOU KNOW THAT THEY'RE THEY'RE LEAVING OR THEY'RE GOING UNDER OR THEY'RE BANKRUPT.

AND THAT'S GOING TO HAVE AN IMPACT ON THE GENERAL FUND GOING FORWARD.

THEN THERE'S A DISCLOSURE REQUIREMENT THAT WOULD NEED TO HAPPEN IN THOSE INSTANCES.

SO THERE'S VERY, VERY SPECIFIC AREAS THAT ARE EXAMPLES THERE.

SO AGAIN I DON'T FORESEE THAT HAPPENING NECESSARILY.

BUT I CAN'T READ THE FUTURE. SO I DON'T KNOW IF SOMETHING COMES UP OF THAT NATURE.

IT NEEDS TO BE DISCLOSED IN THE CITY'S FINANCIAL STATEMENTS.

NEXT SLIDE. THE FINANCIAL REPORTING MODEL AS IT STANDS NOW, YOU KNOW, GASB 34 GOES WAY BACK INTO THE 80S.

THEY FINALLY REASSESSED AND THEY'VE MADE SOME TWEAKS.

AND SO ALL THIS IS SAYING IS THAT THEY'RE GOING TO BE A FEW CHANGES, SOME CLARIFICATION ON DEFINITIONS AND AND SOME REQUIREMENTS IN THERE.

SO NEXT SLIDE. AND THEN DISCLOSURE OF CAPITAL ASSETS.

THEY'RE REASSESSING THAT AS TO THE VARIOUS CATEGORIES.

SO YOU KNOW WE'VE HAD LEASES COME THROUGH. SUBSCRIPTIONS COME THROUGH INTANGIBLE ASSETS.

IT'S JUST REASSESSING HOW IT'S GOING TO GET FORMULATED TO BE MORE CONSISTENT REPORTING ACROSS THE GOVERNMENTAL ENTITIES.

OKAY. AND SO WITH THAT I OPEN IT UP TO ANY QUESTIONS YOU MIGHT HAVE.

AGAIN, THOSE MATERIAL ADJUSTMENTS THAT I TALKED ABOUT HAVE TO DO WITH THE INTERNAL CONTROL FINDINGS THAT WE HAVE THAT ARE MATERIAL WEAKNESSES.

[00:55:08]

OBVIOUSLY, SHORING UP THE CAPITAL ASSETS AS TO AND CAPITAL ASSETS USUALLY ARE DONE AT YEAR END, SO JUST MAKING SURE THAT THERE'S POLICIES AND PROCEDURES IN PLACE TO CLOSE THE CAPITAL ASSETS OUT PROPERLY AND ENSURING THAT THOSE STREET INFRASTRUCTURE PROJECTS ARE CAREFULLY VETTED TO DETERMINE ARE THEY ENHANCING THE ROAD SYSTEM, I.E. THEY ADDED A LANE WELL THAT CAN GET ADDED.

BUT IF IT'S JUST, YOU KNOW, TEARING OFF FIVE INCHES OF ASPHALT AND PUTTING TEN, FIVE INCHES BACK ON, THAT'S PRESERVATION COST. SO AGAIN WE'VE TALKED ABOUT THAT IN OUR MATERIAL WEAKNESSES AS WELL.

IT'S JUST TO GET THOSE CONSIDERED ON. OKAY. AND THEN THE SIGNIFICANT DEFICIENCIES HAD TO DO AGAIN, WITH THE GRANT ACCOUNTING BEING MORE MORE ON TOP OF THE GRANT ACCOUNTING ON A MORE CONSISTENT BASIS SO THAT YOU DON'T HAVE STALE RECEIVABLES.

AND WHEN RECEIVABLES WHEN REVENUES COME IN FROM THAT LOOK TO BE MAYBE GRANT YOU CAN KIND OF TELL WHAT THEY ARE.

SOMETIMES IT'S 100,000. HERE IT IS. YOU KNOW THAT YOU'RE TYING IT TO A RECEIVABLE THAT'S PROBABLY ON THE BOOKS AND ASSESSING THAT REGULARLY.

SO THOSE WERE THE COMMENTS THAT I WILL BE SHARING WITH COUNCIL, CITY COUNCIL AS WELL AS FAR AS MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES.

HOW MANY OTHER CITIES DO YOU DO THE AUDITS FOR? IN A GIVEN YEAR? SO FOR 24, I HAD SEVEN CITIES AND THREE SPECIAL DISTRICTS THAT I WAS IN CHARGE OF.

AND ONE COUNTY. IN CALIFORNIA? IN CALIFORNIA, YES.

DO YOU HAVE ANY KIND OF COMPARISON FOR, SO YOU CAN HAVE SOME BEST PRACTICES? I SHARE THOSE WITH MANAGEMENT AND WITH THE FINANCE DEPARTMENT.

AND JUST FROM, BASED ON WHAT I SEE, THERE'S NO WE DON'T HAVE ANY STANDARD GUIDE THING BECAUSE PART OF IT IS THAT'S NOT THE SERVICE.

I'M TRYING TO PROVIDE THE BEST PRACTICES. THAT'S JUST KIND OF AN ADD ON SERVICE THAT WE'RE LOOKING AT WHEN WE'RE, AGAIN, I'M NOT AUDITING INTERNAL CONTROLS, BUT IF I SEE SOMETHING I WANT TO SAY SOMETHING.

THAT'S THE POLICY. AND I'M DEFINITELY GOING TO SAY SOMETHING IF IT'S OF A MATERIAL WEAKNESS, SIGNIFICANT DEFICIENCY STANDPOINT. DO YOU HAVE ANY.

PARDON ME. ANY OTHER QUESTIONS THAT MR. CALLANAN.

GOOD. TERRIFIC. THANK YOU VERY MUCH. I KNOW THIS WAS AN EXCITING YEAR.

I THINK OUR FINANCE DIRECTOR PROBABLY WOULD AGREE WITH ME ON THAT.

WITH THE CHANGE IN THE DEPARTMENT, WE'VE SEEN SOME EXCELLENT WORK FROM THEM.

AND I KNOW WE HAD A TURNOVER, I GUESS, WITH OUR MAYOR.

AND SO IT WAS KIND OF A VERY EXCITING YEAR FOR THE CITY.

SO WELCOME WE THINK HOPE THAT THE NEXT YEAR, NEXT CYCLE WILL BE A LITTLE BIT SIMPLER NOW THAT YOU'VE GOT SORT OF THE ROAD WELL TRAVELED. THANK YOU VERY MUCH. AND I'M LOOKING FORWARD TO WORKING WITH THE CITY AGAIN ON THE NEXT YEAR'S AUDIT.

AND I'M CONFIDENT THAT THINGS WILL THINGS WILL BE A LOT SMOOTHER.

LIKE I SAID, A LOT OF THE LEARNING CURVE IS OVER.

AND FROM BOTH STANDPOINTS, I KNOW THEY HAD A LEARNING CURVE WITH US TOO, ABOUT WHAT THE AUDITORS EXPECT, AND I CAN'T TELL THEM WHAT I'M GOING TO LOOK AT BECAUSE THAT WOULD DEFEAT THE PURPOSE OF AUDITING. BUT I THINK WE'VE GOT A GOOD RELATIONSHIP HERE TO MOVE FORWARD TO PROVIDE A MORE TIMELY SERVICE GOING FORWARD. SURELY.

GOOD. THANK YOU. AND THEN THANK YOU VERY MUCH FOR YOUR PRESENTATION.

THANK YOU. MOVE TO RECEIVE AND FILE. RECEIVE AND FILE.

WE CAN RECEIVE AND FILE MOTION TO RECEIVE AND FILE.

IS THERE A SECOND? SECOND. OH. ROLL CALL, PLEASE.

OR. ALL IN FAVOR? AYE. ANYONE OPPOSED? NONE. MOTION CARRIED.

WHICH WERE? THANK YOU FOR COVERING FOR ME. THANK YOU.

I THINK WE'RE ON ITEM J.2. JUST FOR THE RECORD, WE DID NOT HAVE ANYONE ON ZOOM OR ECOMMENTS FOR THAT ITEM.

OKAY. DO WE HAVE? WE DO OR WE DO NOT? WE DO NOT.

DO WE DO WE NEED COMMENTS FROM PUBLIC? THERE'S SOMEONE FROM.

OKAY. I WOULD LIKE TO HAVE. OKAY. WE SHOULD I JUMP THE GUN.

SHOULD NOT HAVE GOTTEN. IT'S OKAY. THAT'S WHAT HAPPENS WHEN YOU'RE SHORT TIMING.

YEAH, YEAH. SO ONE QUESTION IS, WILL THE AUDIT REPORT BE POSTED ON THE WEBSITE? OKAY, SECOND QUESTION, I THOUGHT I HEARD, NOW A LOT OF WHAT YOU SAID WAS ACCOUNTING 402, YOU KNOW,

[01:00:03]

THAT'S NOT EXACTLY. WHAT IS IT? TOT IS RECORDED IN THE GENERAL FUND.

I'M SORRY. YES. IF YOU CAN, PLEASE COME TO THE MIC.

THANK YOU. THAT'S OKAY. THE TOT REVENUE IS RECORDED IN THE CITY'S GENERAL FUND.

AND. BUT THERE IS AN AGREEMENT, AND I CAN'T REMEMBER.

2018. 12. 2012. 2012, YEAH. WAS THE AGREEMENT.

AND PART OF THE AGREEMENT WAS, HEY, WE'LL BUILD THE HOTELS.

THIS IS MY UNDERSTANDING OF LOOKING AT STUFF. WE'LL BUILD THE HOTELS HERE.

BUT WE HAVE, WE'RE GOING TO HAVE TO INCUR SOME DEBT AND SOME OTHER THINGS, AND WE WANT TO HAVE A RESERVE FUND SET ASIDE.

AND I THINK THE CITY WAS ASTUTE IN SAYING, WELL, WE'RE NOT GOING TO JUST WRITE A BLANK CHECK.

BUT WHAT WE WILL DO IS ANY TOT REVENUE THAT YOU HOTEL GENERATE, WHEN WE RECEIVE THAT REVENUE FROM YOU, WE WILL PUT IT INTO THE TRUST FUND TO COVER THAT RESERVE FUND ON THE WHOLE AGREEMENT FOR ESTABLISHING THOSE HOTELS.

AND SO THAT'S WHAT I WAS REFERRING TO. SO IT'S NOT A SEPARATE FUND.

IT'S THE GENERAL FUND. AND THERE'S THIS TRUST ACCOUNT THAT IS MANAGED AT THE OPERATOR'S SITE.

AND THERE'S A. A LENDER MANAGES IT. IT'S HELD BY THE LENDER.

THE LENDER. THE LENDER MANAGES. THANK YOU. THAT'S ON THE BOOKS AS A DEPOSIT RECEIVABLE ACCOUNT ON THE CITY'S ASSETS.

JUST. SO THE CITY IS NOT A NAMED PERSON ON THAT ACCOUNT.

I CAN'T CALL IT CASH, BUT IT'S THERE. AND MY UNDERSTANDING, AND FROM WHAT WE SAW IN THE DOCUMENT AND WHAT WAS REPRESENTED TO US IN BY THE FINANCE, IS THAT THERE ARE CERTAIN TRIGGER POINTS IN THAT AGREEMENT.

IF THE OPERATOR DECIDES TO SELL OR REFINANCE OR ALL THIS, THEN THAT RESERVE FUND MONEY CAN COME BACK TO THE CITY.

IF, IF AND WHEN THAT HAPPENS UNDER THE AGREEMENT, AND THE AGREEMENT IS A 40 YEAR AGREEMENT.

SO AT THE END OF THE 40 YEARS, IT COULD COME BACK, WHATEVER IS IN THAT TRUST ACCOUNT AT THAT TIME.

I SEE. OKAY. THANK YOU. YOU'RE WELCOME. THANKS.

THANK YOU. JIM. ALL RIGHTY. WE'LL JUST MOVE ON TO THE NEXT ITEM.

AND WE. WHERE DID YOU GUYS SAID YOU WERE. K. K.

OKAY. SO YOU ALREADY COVERED I.1, I.2. YES.

OKAY. 3. 2 OR 3. AND K. COMMISSION MEMBER ITEMS AND FUTURE COMMISSION AGENDA TOPICS.

[K. COMMISSION MEMBER ITEMS AND FUTURE COMMISSION AGENDA TOPICS]

THANK YOU. AS GOOD A JOB AS I COULD WHILE YOU WERE.

THANK YOU. YOU WERE OUT. SO THAT WAS A QUICK PRESENTATION, I GUESS.

AND YOU COVERED EVERYTHING YOU NEEDED TO COVER WHAT? WE DECIDED TO PUT IT OFF TILL THE NEXT MEETING.

OR WHEN WE HAVE A. WE HAVE MORE COMMISSIONERS HERE TO DISCUSS BECAUSE IT'S A IT'S A TOPIC WE FELT WOULD BE APPROPRIATE FOR EVERYONE.

PRIOR TO THE TIME YOU WERE HERE. OKAY. I HAD TOLD THEM, I TEXTED YOU TO.

YEAH, THAT I WAS GOING TO BE RIGHT. YEAH. AND I KNOW COMMISSIONERS SAMPLES IS NOT GOING TO BE HERE NEXT TIME.

SO YOU'RE GOING TO MISS IT OUT. PERMISSION WAS WAS VERY LIBERAL WITH ME.

THEY LET ME SPEAK AT TIMES THAT ORDINARILY WOULDN'T HAPPEN, AND I APPRECIATE THAT.

I APPRECIATE EVERYONE'S TIME. I HAVE A FULL SPEECH HERE.

IT'S ABOUT PROBABLY 30 OR 45 MINUTES. BUT WHEN I CAME IN, STEPHANIE ADMONISHED ME THAT IT'S HER DAUGHTER'S BIRTHDAY.

SON. SON'S BIRTHDAY. AND SO I'M LIMITED TO EXACTLY WHAT I SAID SO FAR.

[LAUGHTER] I WAS LOOKING FORWARD TO IT. WE WANT TO BE SURE TO THANK YOU COMMISSIONER MEL SAMPLES FOR EIGHT WONDERFUL YEARS. THANK YOU. AND SOME VERY POIGNANT COMMENTS ALONG THE WAY.

AND WITH YOUR LEGACY IS ONE OF A VERY DETAILED AND CARING COMMISSIONER.

SO THANK YOU SO MUCH FOR YOUR TERRIFIC SERVICE.

THAT WAS WONDERFUL COMPLIMENT. DO I STILL OWE YOU 20 BUCKS AFTER WE GOT TO.

COVER THAT AFTER THE MEETING. ALL I CAN SAY IS IT'S BEEN EIGHT YEARS.

IT'S BEEN AN INTERESTING RIDE. THINGS HAVE CHANGED A LOT SINCE I STARTED, AND I LOOK FORWARD TO THIS COMMISSION MOVING THINGS FORWARD.

AS WE'VE DONE. IT'S ALL, I REALLY. I SPENT A LOT OF TIME THINKING ABOUT IT, AND I REALLY THOUGHT ABOUT HAVING A 45 MINUTE SPEECH, BUT I THINK IT'S ALL ABOUT TRUST. AND AS LONG AS THE CITY MANAGER AND THE MAYOR AND THE CITY COUNCIL TRUST WHAT THIS COMMISSION IS DOING, THIS IS PROBABLY THE ONE PLACE THAT IF, THAT YOU HAVE THE EAR OF THE CITY COUNCIL AND YOU DON'T HAVE AN AGENDA,

[01:05:08]

AND WE HERE WE HAVE BEEN AS INDEPENDENT AS YOU CAN POSSIBLY BE.

ALL WE WANT TO DO IS MAKE SURE THAT THERE'S FISCAL RESPONSIBILITY AND THAT WE MOVE THE CITY FORWARD.

AND I LOOK FORWARD TO ALL OF YOU CONTINUING THAT.

THANK YOU FOR YOUR SERVICE. THANK YOU FOR CARING FOR OUR COMMUNITY.

THANK YOU FOR ALL THE YEARS, ALL THE TIMES THAT YOU'VE PUT INTO THE CITY.

THANK YOU FOR ALL THE VALUABLE SUGGESTIONS OR RECOMMENDATIONS THAT YOU'VE HAD.

I'VE LEARNED A LOT FROM YOU. I'VE LOOKED UP TO YOU.

I'M HOPING THAT YOU WILL COME BACK AS AND GIVE US AND SITTING THERE, AND.

I THINK WE DON'T HAVE TO WORRY ABOUT THAT. I THINK COMMISSIONER SAMPLES IS GOING TO BE A VERY ACTIVE PARTICIPANT.

AND DO THREE MINUTE MONOLOGUES FOR US. DON'T TAKE THIS WRONG, BUT FORMAL INVITATIONS AND A LIMOUSINE ARE EXACTLY WHERE YOU NEED TO BE.

WE'LL KEEP THAT IN MIND. SO KEEP IN TOUCH AND WE WILL VALUE YOUR.

AND IF YOU WATCH OR YOU READ ANYTHING AND YOU NEED TO SAY SOMETHING, YOU'RE STILL A VALUABLE MEMBER OF THE COMMUNITY.

I'VE BEEN A CITIZEN HERE FOR WAY TOO MANY YEARS AND WILL CONTINUE TO DO THAT.

SO YEAH, YOU BETTER TAKE CARE OF MY CITY. YES, YES.

AND I LIKE THE PART THAT YOU SAID. WE'RE HERE WITH NO AGENDA.

WE DO NOT BRING POLITICS INTO WHAT WE DO. WE'RE JUST LOOKING AT NUMBERS.

YEP. THANK YOU. YEAH. THANK YOU. AND I BROUGHT CUPCAKES.

LIKE I SAID LAST TIME. SO THERE ARE CUPCAKES.

SO THERE WILL BE A CELEBRATION. I MENTIONED TO YOU.

SO FOR MY COMMISSION OR MY STAFF RECOMMENDATION.

HAVE A GOOD EVENING. GO HOME QUICK. ANYTHING.

WHAT, DID WE DECIDE WHAT WE WERE GOING TO DO FOR, LET'S SAY, PROFESSIONAL SERVICES PROCUREMENT.

DID WE DISCUSS THAT OR DID WE PUT THAT PUT THAT OFF? J.1 THAT'S PART OF THE FUTURE DISCUSSION I BELIEVE THAT GOT OKAY.

SO. OH, OKAY. SO EVERYTHING JUST GOT TO THE NEXT MEETING.

CONTINUE THAT. OH THAT'S MY FAULT BECAUSE I. WELL, NO, YOU'RE MISSING.

YOU'RE MISSING WOODHAM AND MARIN. AND MY SEAT WILL BE A NEW SEAT, SO MAY AS WELL START FRESH NEXT MONTH.

ALRIGHTY. SO WE CAN GO AHEAD AND CLOSE AND ADJOURN.

SO MOVED. SECOND. SECOND. ALL IN FAVOR? AYE. AYE.

ANYONE OPPOSED? MOTION CARRIED. ADJOURNED AT 7:38 P.M.

THANK YOU.

* This transcript was compiled from uncorrected Closed Captioning.