Minutes - January 7, 2008 - Audit Committee

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• Langue: English

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Meeting Minutes   Audit Committee   Monday, January 7, 2008 3:00 p.m.    

1. Opening Remarks/Roll Call   Chairman Williams called the meeting to order at 3:02 p.m.   Present: Rick Williams, Chairman Jackie Feagin Barbara Chick Preston Edwards   Staff: Bill Dollar Bryan Bradford George Kauffman Craig Hametner Liz Romero Randall Mahaffey Steve Culpepper Priscilla Wilson Craig Barnes Robby Neill Chief Bates Carol Cooper   Visitor: Paul Mayer, Garland Chamber of Commerce   2. Consider approval of the minutes from the meeting of November 19, 2007   Chairman Rick Williams: Jackie, or Barbara or Preston did you have any minutes comments, Liz did her normal good job.   Jackie Feagin: My only comment is that it is very good minutes but I must admit I do not think in my seven years in Council, that I have ever been to a meeting, that at least I did not talk, evidently I did not ask questions and I want that so noted.  

 

Chairman Rick Williams: I had a couple of picky changes on the minutes, on page 2 first paragraph about the middle, it says “The recommendation is that reconciliation” I want to change “is”to “be” and then the sentence underneath that it says “Also to consider the hand held citation technology because that would greatly increase the accountability over the citation process in the citations that are issued so that we know where all of them are at.” take out the word “at” and on page 3, 4 inches down on the left hand column, it begins “Police Department presume warrants”I think that should be “pursue.” Does that make sense? I think it is “pursue warrant” I think that is the word there.   Motion was made to approve the November 19, 2007 minutes as amended by Preston Edwards Motion seconded by Barbara Chick Motion was approved     3. Chamber of Commerce Presentation   Chairman Rick Williams: We have a Chamber presentation today and Mr. Chamber is here.    Paul, basically this started a couple of months ago as you probably know and there was an interest with what the Chamber does with our money for lack of a better term and so we thought an overall presentation about the City of Garland with our funding and your actions would be a good thing here.   Paul Mayer:  The presentation that I handed out, is that it answers several questions and one is that I am looking at a lot of new faces since 1995 when we instituted the partnership so I thought maybe a little bit of time talking about how we got into this place in the first place, a little bit about a couple of scenarios what our competition is spending on economic development and the current results of this endeavor and then turn it over to answer any questions that you have.   Fundamentally, we have operated since 1995 under a contract with the City that basically says we are going to do economic development as defined by the Economic Development Steering Committee so and I am not sure exactly how much we want to get into that. I have shared all that information, the contract, financial statements, and our audits with your Auditor. The time I want to spend is basically on those points that I have mentioned.   If you go back in time, way back in time, 1895 is when the Chamber got started. Chambers of Commerce and Economic Development are synonymous terms or at least they started out that way. We were formed to build an economy wherever we were. In 1895, it was cotton and dairy and all kinds of agriculture things. Up until about 1979 and at that time we had a change of staff and the Chamber Exec went away. For about ‘79 to about ‘80, or ‘85 there wasn’t really any economic development activity going on. About ‘85 is when Jeff came on board and the City instituted a formal economic development program within the

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City of Garland. In ‘89 is when I came on with the Chamber and it was primarily to reinstitute economic development as we come to know it back into the Chamber. Chamber and Economic Development ’79 got out of it. City instituted a program in ’85. We operated from 1990 to the end of 1994 or beginning of ’95 as two separate economic development departments. The Chamber had a staff person, and the City had a staff of 5 or 6 folks at that time. It was the election of 1994 when Jamie Ratliff was elected Mayor that the idea of putting this altogether was first surfaced. May of ’94 Jamie is elected, Ron Holifield is the City Manager and pretty soon after that Jeff Muzzy is the City Manager and pretty soon after that, I am in a room with Jeff Muzzy and we are talking about how to put all of this together. There had been a lot of conversations going on for the 4 years as to why do you have 2 economic developments? They are bumping heads and on and on and on. The next page is kind of a scenario, the estimated budget of the City department in 1994 was about $800,000 and that is the number that was given to me and it just stuck in memory and I don’t have the actual budget figures and that is staff of 5 or 6 folks and programs and the building over there on Kingsley. I think one of the things in Jamie’s mind was let’s take the $800,000 and let’s leverage it against the Chamber’s resources and just playing games with numbers; if we had kept the City department, and if there was a 3% increase today it would be about a $1.2 million; if there was a 5% increase depending on salaries and those kinds of things it would be a $1.5 million. My point in all of this is that the idea that Jamie brought forward was if the Chamber says they are involved in economic development and we said that. We hired a person, we funded it separate from the Chamber and above Chamber dues and if we can take not that $800,000 but in 1995 it was $250,000 that the City started this contract and said we will put $250,000 in and the Chamber will put it’s $100,000 plus all the resources of the Chamber and we have a leverage deal. Since ’95 that’s the way we have operated.   Chairman Rick Williams:  Did the City staff totally shut down in ’95?   Bill Dollar:  They went away, they all went away?   Paul Mayer: If you come up to date the little tab the part that says leverage, today   the City is putting in to economic development in 2008 you will put in $443,235 and we are matching that all in with everything that we do, $572,000 of non-City funds that come from a variety of sources which are Chamber dues, activities, economic development, investors, school district, everything. Jamie’s thought that we could leverage public dollars with non-City dollars in 1994 is true today. This is what you are getting and when you look at the competition, the non-sales tax cities, these are the folks that participate in DART who don’t have the option of charging a half cent sales tax to fund economic development that’s the Irving’s, the Plano’s and Richardson’s. This is their ED budget. These are the dollars that come from use of their cities into the economic development process, population, relative staff size and the funding source. In the case of Irving, it’s a city and then they have a separate Las Colinas Association that puts

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in some. The bulk of that is City money. When you look at the sales tax cities the folks that aren’t part of DART that can charge the 4A and 4B you can see the ED budgets and what we are competing against, Allen at $5.6, McKinney at $8.5, Mesquite, they did not approve the full half cent and Rockwall at $2 million. If you go to the last page, the value, I think with this plan the leveraged resources come in together and more importantly then the money what we have done since ’95 when we formally instituted this partnership we said we are all in this together. We have a tax base that is just as important to the business community as it is to the City of Garland as it is to the School District. It’s all of our jobs to maintain and grow that tax base. Businesses don’t exist in a vacuum and it’s just as important to SST and General Dynamics and all these companies that we grow the tax base because they don’t want to be the only tax payers. They want their employees to have a quality of life. They want schools, they want roads, they want public safety. Since ’95 just the projects that the partnership, when I say the partnership that’s not the Chamber, that’s the City, that’s the School District, that’s all of us working together, $1.326 billion worth of new tax base and about 15,590 jobs. Where does the money go? Very simply, the money goes to support these activities and a variety of things. We sit every month at the Economic Development Steering Committee and we talk about specific projects and we go through a very extensive planning process. Our mission at the Chamber is the economic viability of Garland, Texas, that’s our stated mission. Everything we do, everyday we come into that place is around that mission. Today it looks like we got activities and new business recruitment and we have a big effort in business retention that is a huge part of our economy. We have a huge effort in workforce development because that’s how we are going to hold on to these companies and we got the whole chamber side of it is small business development everything from networking to education to publications that promote our local businesses. We are expanding our partnership with the workforce development. As you know we have approved the idea with all of your consensus of going in to the community college facility. We do it in a very lean fashion. We are 7 folks and there is a chance to add some more folks through some grant dollars that we are working on. But I think back to Jamie Ratliff’s vision about leveraging and putting us all together and to make us focus together, it was a good thought then and it’s a good thought now and I think we are delivering the value in terms of day to day how you manage the money. We have a chamber finance committee. We have a separate accounting firm. We do our independent audit every year. All the ways you can manage money so it does not leak out and do bad things, we work to do that. We have two signatures on every check; the process to approve bills is two or three folks. With that, I will just sit back and answer any questions you all might have.   Chairman Rick Williams : Thank you Paul. Very good presentation. Certainly I needed a little catch up on the history. Jackie, do you have a comment?  

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Jackie Feagin: Just a couple of questions. First of all, I would like to say that I think the Economic Development does a good job. I had the privilege of being appointed to it by four different Mayor Pro Tem’s and I was Chairman one year of it so I feel very strongly about it. There is some questions though that I would like to ask by reading through this stuff. I noticed year ending December 31, 2006 and 2005 it shows that there was a total, it actually says direct expense salaries and indirect salaries.   Chairman Rick Williams : Jackie, what page are you reading from?   Jackie Feagin : I am sorry it is on one of these deals ”Chamber of Commerce Independent Auditor’s Report” it’s on page 10.   Chairman Rick Williams : Of that material that we got in our packet?   Bill Dollar : It’s that last page of the audit report.   Chairman Rick Williams . Ok.   Paul Mayer : Yes, I’m with you.   Jackie Feagin : Direct expenses and indirect expenses. You got two different salaries; you got salaries for direct expenses and salaries for indirect expenses. What would be the difference if it’s a salary? Whose salaries make up this $319,468? You’ve got salaries of $170,820 that was on December 31, 2006 and then you had salaries of $148,648 also that was indirect expense and you add those two together and you have $319,468. I ask what is the difference in direct expense. I mean the salaries in direct expense vs. indirect.   Paul Mayer: When we entered into the contract in ‘95 the board of the Chamber was adamant about doing separate accounting. When you take in public dollars you want to be able to tell the public what you do with those dollars. We have two sets but not two sets of books. We have two financial statements, one is what we call the Chamber of Commerce, and one we call Economic Development. When we say expenses we have two people that are identified as Economic Development people those are Ayako and Dawn before that it was Gregg and the indirect expenses are the pieces of the rest of us that do Economic Development activities. Right now, because of the way we are structured a big part of my salary is accounted for in that and pieces of other folks. Again, the important thing is that you all did not ask us to do that we decided that we would do that. You hand us a check and said do economic development. Now we are getting into accounting stuff and if you need to have our accountants to come in and talk about how we allocate and all those kinds of things, I can certainly do that.  

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Jackie Feagin : In fact, for your defense, when this contract was made up and it’s still in effect now, really there were no guidelines set other then it would escalate so much and there would be an audit every month and at the end of the year there would be an independent audit that you would furnish to the City.   Paul Mayer : The contract is pretty simple; it says the governing body is the Economic Development Steering Committee so we have all three entities that participate that will direct the program. In terms of oversight, we provide the City Auditor in this case with a copy of our monthly financial statements. We are to do an independent audit each year and after that, that’s pretty much how we manage our business is how we manage the business. We do not do anything behind close doors especially how it relates to our partnership. That’s the answer to your question Jackie.   Jackie Feagin : But up until last year, and not trying to being critical to anyone, our Internal Auditor said that they had never received an audit report. That is what started all of this.   Paul Mayer: I understand and that is a fair question. We got caught up and I brought back copies of the audits. There was a time when I was bringing them over and putting them on Jeff Muzzy’s desk and he said, “Paul, this is taking up room.” I told him if you lal need it, it is there and you know where to get it if you need it. Again, that was not to the letter of the contract and I fully acknowledge that. When you all brought your new Auditor in, he and I sat down and we went over the contract and he said, “Let’s do this, bring me these financial statements, bring me back audits” so weprovided all of those and again, the intent was not to hide anything, the intent was to keep Jeff Muzzy’s desk clean and we did a pretty good job from our standpoint but I do not know if you all did that.   Jackie Feagin: I noticed on this year’s audit that the School District still has not paid their $50,000. When do they usually kick that in?   Paul Mayer:  Well, they pay that in September and they pay that every year. They paid that this year. Tell me what page you are looking at?   Jackie Feagin : Well, I read that about two or three times and it’s on the 2007 audit. It shows where the revenue is and it shows that the School District had not paid their money yet.   Paul Mayer : That is not an audit. That is our monthly financials. That is the period ending September 30 th and that check came in October. We have it now. We do our audits on a calendar year.   Jackie Feagin : But if they paid it in September though then it should have shown in your monthly financials.  

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Paul Mayer : They did not pay it in September.   Jackie Feagin : Oh, they didn’t? I thought you said it is due in September?   Paul Mayer : We send out the letters and the invoice and its how it goes through their processes.   Jackie Feagin : But it has been paid now?   Paul Mayer : Absolutely.   Jackie Feagin : Ok. Are the funds set up in two different accounts? We have an Economic Development partnership. I mean not a development partnership but an account and then a regular Chamber of Commerce account.   Paul Mayer : Are you talking about a banking account, yes, the answer is yes. Actually we have three or four banking accounts.   Jackie Feagin : I know but it’s not all thrown into the general fund I guess it’s what I am trying to say.   Paul Mayer : No, there is an Economic Development, there is a private investor, there’s the Chamber and I think there is a Leadership Garland account.   Jackie Feagin : If the Chamber, votes to go to the college, will the property tax that we are paying now, will go away, is that correct?   Paul Mayer : It will go to the new owner of the building if they are a tax paying entity. Whoever owns that building will pay the property taxes if they are a tax paying entity they will pay the taxes.   Jackie Feagin : You have not made a decision as to what you are going to do is that correct?   Paul Mayer : We have made a decision that all things being equal we are going to occupy space. The intent is to put the building up for sale. That has not been done formally but it has been done informally.   Jackie Feagin: The point is what I was trying to get at is, that much expense will go away if you move in where the college is.   Paul Mayer : Taxes, building maintenance, the things that would accrue to the owner of that building.   Jackie Feagin : That would be less money to have to pay out?  

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Paul Mayer : More money that we can put into the programs.   Jackie Feagin : I must say that with the Chamber handling this it is certainly a smoother operation then we had back when we had two different departments. I followed it pretty close back in the early ‘90’s and it always seemed like there was something wrong.   Paul Mayer : Well it’s never as efficient and I will say this, I have worked in lots of places before I got to Garland with Economic Developments. You had a good Economic Development team this was not a function of anybody doing bad stuff. I think a couple of things happened, one there was some turnover and there were some unfilled positions. Jamie campaigned and his big deal at that time was privatization, he liked that term. When he was elected we sat down, and I say we the Chairman of the Chamber I can’t remember but I think it was Ed Jackson, Jamie, myself, and Jeff, well it was not Jeff until June because Ron was still there but we sat down when Jeff became City Manager and said “look, I know this was on of my campaign issues and I still feel strongly and I know if I were to go to Council today this is June of ’94 I probably could get five votes but I am smart enough and I am experienced enough to know, that if you Jeff and you Paul if you can’t figure out a way to make this sustainable because politics and politicians and elected folks come and go.” So from June of ’94 to till January of ’95 when we signed the deal is when Jeff and I spent the time because you can understand you are moving one function out of the City and you are moving it in and you are contracting it with the Chamber and the relationship prior to ’95 with not staff to staff but I am talking about leadership to leadership and kind of the community where the school district was over here and they really did not talk to anybody. You had folks at the City and folks at the Chamber that they really did not get along very well. Now you are putting all that together and the things that Jeff and I talked about were things that the way we function our day to day basis we are your Economic Development staff. We spend as much time, in fact I was a little bit concerned about getting here on time because I was on the phone with Robert Wunderlich trying to get Fifth Street resolved with General Dynamics and we do this every day with almost every department of the City, well not almost, but every department of the City and your terms and I appreciate the vote of confidence. Jackie, the thing that makes this work is the quality and the depth of the relationship and the trust. Because you throw the Chamber in there and say okay we are going to hand you this money you go do it without buy in and that took some time. I mean there were some folks that were saying we don’t know if this is the way it should be, but thirteen years later, and we knew this every year and we sit and talk about how we can do it better. It’s been a function of starting with a pretty good basis and building on that for a long, long time and gearing ourselves around a common definition of how we can find results. It has been tax base and it is going to change because we are not going to have the double and triple digits of new tax base coming in. There are the Town Centers and Bass Pros and Centerville Market Places but there is still quite a bit of land to develop and there are still quite of bit of projects that we will work on. Right now

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we are as concerned about the $916 million of existing tax base that is represented by 88 manufacturing companies as we are about the new stuff but we do all of that.   Jackie Feagin : I must say that some of this stuff is really not charged to the Economic Development partnership that the Chamber actually performs. I am talking about the AM connections and the PM connections that every one of those that the Ambassadors attend. Actually we promote Garland with Economic Development and you are always there to put a word in and that makes a big difference.   Paul Mayer : The way I look at that part of the operation, that’s the small business development side of it that’s the independent business those are the folks that need several things; they need a way to meet folks and build their business. They need management training help. They need promotion. They need to be in the directory. They need to be advertised in the newsletter and that’s their outlet to the small business side of that. It’s different from industrial or commercial development and it’s different from the big retail development. It’s different from business retention but it is part of the whole thing that we call Economic Development.   Jackie Feagin : You commented about the stuff here well from 1895 when this was started. You did not touch this but I guess you did not have to but back in 1950 was when the Garland Chamber was incorporated into a non-profit group.   Paul Mayer : In ‘50 was when we became the Garland Chamber of Commerce. We started out as the Garland Business Club or Commercial Club, 35 folks in 1895. We were formally recognized by the state of Texas in 1950.   Jackie Feagin : You don’t have it in here but the person that had your job now was Bruce Williams.   Chairman Rick Williams : Anything else Jackie?   Jackie Feagin : Just keep up the good work.   Chairman Rick Williams: I appreciate you Jackie.   Jackie Feagin: One other question, Mr. Internal Auditor, are you satisfied with the audit? Do you have recommendations and everything that is going to end up needing to do? Mr. Chairman is that all right to ask that question?   Chairman Rick Williams : It certainly is.   Craig Hametner : In looking at the financial information that was provided, the first report I go to is the Independent Auditor’s Report and it, it says “In our

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opinion the financial statements referred to the above present fairly in all material respects,” when I see that it is the hgi hest standard that you can get in an audit report. I have no issues with it. This is an independent auditors report so that tells me that they passed the independent auditors test.   Jackie Feagin : Okay so to follow up there is nothing else that you see that your department needs to do is that correct?   Craig Hametner : At this time no Sir, not unless you have something, I do not.   Jackie Feagin : Thank you Mr. Chairman. Thank you Mr. Mayer.   Chairman Rick Williams : Barbara, Preston any thoughts?   Paul Mayer : We are scheduling that right now. I was talking with Ayako last week, we are looking for dates. It’s getting him back up here.   Chairman Rick Williams : George and Brian do you have any pearls of wisdom for Paul before he leaves? Okay, Paul thank you very much for coming down. I think this is about just what we needed, not too much and not too little. I appreciate the history and that projection of what it would be costing us to have 5 or 6 staffers on board at this date I think is particularly interesting.   Paul Mayer : In the spirit of partnership, this is an ongoing thing. If there is anything that you need, we don’t have to have a formal meeting you can just ask us.   Chairman Rick Williams : Thank you, Paul.   4. Payroll Audit   Chairman Rick Williams : Basically, when I looked at the Payroll Audit my general feelings were that there were some coding errors and some minor control issues but it seems like management pretty much agreed with most of the findings. I did not find anything particularly exciting there. Jackie did you get excited about the Payroll Audit?   Jackie Feagin : No.   Chairman Rick Williams : You didn’t? That is a good thing. No one else had any comments?   Craig Hametner : Mr. Chairman, just a couple of comments about that particular audit. In the draft audit report that you have, there were no management accomplishments in there. We got them late, I did get them today. In the final version you will have management accomplishments in that particular audit.

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  Chairman Rick Williams : In fact, I was going to ask you about that why don’t I just do that right now. Some of these audit reports have a real pretty cover sheet with prepared by and it identifies the particular auditors that were involved where as this one did not have the prettiness in it. Is that a matter of the old one vs. a new one?   Craig Hametner : Right. What we are trying to get out of is these fiscal year ’07 audits. We are doing our best to get those out. Those were under the old format and the new fiscal year ’08’s will be under a different type of report format so that is why you see a difference there. Chairman Rick Williams: It will identify who actually did the audit and a separate section for the Management Accomplishments I figured that is what it was.   Craig Hametner:  Back on the Management Accomplishments one thing that I want to mention is that in order to provide balance to the audit reports we allow management accomplishments to be put into the audit report but one thing you have to understand is we put those in verbatim based on the auditee. We do not audit those management accomplishments. You’ve got our audit report and then you’ve got management accomplishments that is the side of the auditee. So you’ve got both the auditor and the auditee comments. Auditee comments again are verbatim but we do not audit those management accomplishments.   Bill Dollar : We appreciate that very much. I have never been called an auditee before.   Barbara Chick : When you do the next audit, do you make sure that whatever management said they are doing, that they are currently doing it?   Craig Hametner : If you are referring to the management accomplishments section, no not unless you want us to we will do that but normally we do not do that. I do not go in and check what the management accomplishments state. I do my audit but I do not go in and audit the management accomplishments that they give me because again, I am trying to provide balance to the report. You are getting their point of view and in the audit report you are getting our point of view and that provides balance to the report. Now if you want me to go in and check that then I will do that but I normally do not do that.   Chairman Rick Williams : I do not think we want that.   Bill Dollar : What if there is a statement that was made that was outrageous that really brought that if you read it, you thought, “How in the world can that be?” I think that would lead to ask some questions.  

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