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HomeMy WebLinkAboutMarch 29Finance and Investment Committee Meeting Town of Los Altos Hills Town Hall Council Meeting Room Monday, March 29, 2010 Chair Roddy Sloss who prepared these minutes called the meeting to order at 3:40 p.m. Members present: Allan Epstein, Frank Lloyd, Stan Mok, Bill Silver, Roddy Sloss, Lalla Stark Members absent: Jim Lai, Jean Mordo Staff present: Nick Pegueros, Finance Director Guest: AJ Major, Partner, Vivrinek, Trine & Day (Town’s audit firm) Public Present: None Approval of minutes: The March 9, 2010 meeting minutes were approved as submitted. Review of draft March 31, 2009 Town Financial Statements (“draft”): The subject draft was distributed at the meeting and sent to FIC members by email a few hours before the meeting. As compared to the Comprehensive Annual Financial Report (“CAFR”), the draft lacked 1) the transmittal letter; 2) narrative accompanying MD&A; and 3) the statistical section. The narrative accompanying the MD&A tables is expected to be completed and the audited financial statements are expected to be filed with the dissemination agent of the West Loyola Sewer Bond offering by the March 31, 2010 filing deadline. Mr. Pegueros described the draft contents and took questions from FIC members. FIC members were invited to submit additional questions and comments to Mr. Pegueros after the meeting since there was not enough time to thoroughly review the draft before the meeting. Mr. Major explained accounting and reporting for the West Loyola Sewer Bond funds in the financial statements. The FIC members inquired about and discussed accounting and disclosure for pensions and other Post Employment Benefits. Mr. Pegueros responded to questions about major budget to actual changes noted in the financial statement footnotes. Next, Mr. Major discussed required communications from the auditor to the Town resulting from the financial statement audit. These communications are formally made to the Town Council and not to the FIC because the FIC is not a formal Audit Committee. Mr. Major anticipates delivering a “clean opinion” on the Town’s 6/30/09 financial statements. He also anticipates delivering the customary letter regarding internal controls. The letter will note a “significant deficiency” in internal controls driven by understaffing in the Finance area caused by employee turnover. While the letter has not yet been drafted, effects of the significant deficiency in internal controls include 1) delayed issuance of the March 31, 2009 Town financial statements (good practice calls for issuance within 6 months after the fiscal year end), 2) significant (more than $40,000) journal entries proposed by the auditors (including West Loyola Bond accounting, Grant accounts receivable, Internal Service Fund classification and related cost allocation, unaccrued Los Altos sewage treatment plant costs, unreconciled fund transfers, and an uncapitalized Town vehicle), and 3) an absence of separation of functions (need at least 2 finance employees to achieve minimum checks and balances.) The above noted letter accompanied by Mr. Pegueros response is expected to be issued to Town Council on or before April 15, 2010. The Town has already taken the following corrective actions: 1) engaged Vivrinek, Trine & Day to provide special assistance to complete the financial statements and audit before the aforementioned March 31, 2010 filing deadline; 2) engaged Maze & Associates (CPA firm) to provide part time temporary finance staff for an indefinite and extended period; and 3) initiated a search for full time permanent finance manager. Despite the weakness in internal controls, Mr. Major noted that he had no concerns about fraud, irregularities or improprieties. Continued Finance and Investment Committee Meeting Minutes, Monday, March 29, 2010 – page 2. Quarterly review of Town’s investments: Mr.Pegueros provided a multi page handout related to the Town’s investments at February 28, 2010. The FIC reviewed the handouts, and discussed alternative investment strategies for short term investments. It was noted that due to the aforementioned staffing shortage and low Federally insured short term interest rates, it was difficult to optimize this strategy. Mr. Sloss suggested using an online Vanguard service to buy FDIC insured CDs as a substitute for the Comerica service that had presented a limited number of opportunities due to its comparatively higher fee structure. Mr. Mok suggested asking PFM, the Town’s longer term investment manager, to purchase short term Treasury securities. Mr. Lloyd suggested looking into 3 different local banks that offer money market accounts with 0.75%+ interest rates and that are FDIC insured. Ms. Stark offered to research the money market accounts and report back to the FIC at its next meeting. No actions were recommended to the Town by the FIC. Presentations from the floor - none Review of FIC future meeting calendar (tentative April 19, 2010). FIC members expressed an interest in investigating longer term investment proposals as part of the upcoming Town annual budget cycle. Mr. Pegueros noted that Town Council is scheduled to receive a presentation from Town Staff on April 29, 2010 regarding capital spending. In that regard, Mr. Pegueros will send Mr. Sloss information related to unfunded pensions and post employment benefits. Mr. Sloss and Mr. Mok will review that information to determine if there is enough information to develop an advance funding proposal for FIC consideration. In addition, Mr. Sloss will forward to FIC members a Town Hall lease prepayment study he previously prepared. Mr. Epstein proposed reviewing infrastructure long term capital requirements so as to ensure that these needs are known by the April 29, 2010 Council presentation. To the extent the aforementioned work leads to a substantive proposals for the FIC to review, a FIC meeting will scheduled on April 19, 2010. Adjournment - The meeting adjourned at 6:10 p.m.