Ashland City Council
Work Session Minutes
Wednesday, October 29, 2008
Mayor’s Conference Room 4:00 p.m.
Wednesday, October 29, 2008, Mayor’s Conference Room 4:00
p.m.
Purpose: Audit 2007/2008
ATTENDANCE:
Council members: Robert L. Valentine W1, Robert M. Valentine W2, Ruth
Detrow W3, Paul Wertz W4/President, Stephen Stuart, At-Large
Mayor: Glen Stewart
City Engineer: Jim Cooper
Finance Director: Anna Tomasek
Fire Department: Mark Burgess
Council Clerk: Valarie Bishoff
Assistant to City Engineer: Larry Paxton
Media: T-G Travis Minnear
Public: John Chorpening
ROLL CALL: Robert L. Valentine W1, Robert M. Valentine W2, Ruth Detrow,
Paul Wertz, Stephen Stuart
PLEDGE OF ALLEGIANCE:
Anna Tomasek, Finance Director: As part of the report, the City
of Ashland received some report letters from the Auditors and we are
talking today about is Funding number 2007 002 which basically is a
noncompliance finding for Ordinance that was established back in 1975.
Ordinance 5-75 establishes, what we call our Capital Improvement Fund;
which is also known as Fund 405 and in the Legislation, it states that
the monies all of the City of Ashland’s investment income goes
into Fund 405 and the deposit of that Fund and the expenditures are for
only Capital Improvements expenditures of that nature. During the
2007 Audit, there were transfers in the amount of $299,164.00 and the
actual citation that was for Brookside Swimming Pool and Golf Course
Funds which is not true and correct. I did talk to the Auditors,
Don McIntosh and they forwarded us the email that lists all of the
transfers and I will pass that out to everybody. We can go over
the list. What we found out is on this list of transfers.
Some of the transfers in the actual finding were true in fact Capital
transfers and some were Operating transfers. When we went through
the list, one of the items Mr. McIntosh cited was; and we are going
down the paper to the middle section where it says 405 and we are only
going to concentrate on the transfers that relate to the 405. All
the transfers for General Funds 242 and 249 at the top of the page are
okay. So we are going to start with 405, basically with the
amount of $34,811.05 and work our way down. The transfers for
Park were okay, those were in fact Capital. Then we have a lot of
transfers that are from 405 to 435 which 435 is the Sidewalk
Program. I informed Mr. McIntosh that 435 is actually Capital,
that Sidewalk Program. He said, we are not going to worry about
that for 2007, however the City of Ashland needs to address 435 the
year 2008, that to not get a citation for 2008, and that all Capital
items such as sidewalks needs to be charged directly out of Fund 405
and that we do not need to do additional transfers from that
fund. So that is that section.
Mayor Stewart: That entire section?
Anna Tomasek: That entire section there, they said it is okay, it
is Capital, we are not going to worry about it for 2007, however for
2008, we have to make corrections.
Mayor Stewart: But all three items in 405, the 212 are okay too?
Anna Tomasek: They are okay.
Paul Wertz: Back to 212.
Anna Tomasek: Those are all Capital items. Like tractors. I
have a copy of all the checks and the audit trails and we went through
every one and did it line by line.
Robert L. Valentine W1: So after 2007, we can’t take any
Capital Improvement out for sidewalks?
Anna Tomasek: You can but it has to be charged directly out of
Fund 405. Do not do transfers. Take it directly out of that
fund.
Mayor Stewart: Bob that is where we talked about 405, and we have
several line items with expenditures.
Anna Tomasek: Any questions so far before I move on? Okay
the next one is the Swimming Pool. There were three
transfers. The one that was considered operating is the first one
of $9,500.00. That is where the auditors considered that to be
improper and we need to come up with a Correction Action Plan to take
care of the $9,500.00 for the swimming pool for 2007.
Then you go on to the next section, which is the golf course and there
were eight transfers and out of the eight transfers, two were
considered improper and those were the last two. $85,000.00
dollars which was transferred for the Youth Golf Program and the last
one was an operating transfer for $57,500.00 was considered
improper. So, for the year 2007, there are three transfers that
need to be looked into and we need to have a Correction Action Plan to
take care of that for 2007. We have a current situation also
going on for the year 2008, but we can just stick to the year of 2007
for now.
Mayor Stewart: What does this amount to, $152,000.00?
Anna Tomasek: $152,000.00 dollars for the year 2007.
Mayor Stewart: And the auditors have in fact agreed with your
finding that they are in fact, they were in error not identifying
Capital vs Operating in these?
Anna Tomasek: Yes, and we faxed them all of the audit
trails. I have spent hours on the phone with Mr. McIntosh going
back and forth on all of these.
Mayor Stewart: So you have that documented.
Anna Tomasek: Yes.
Paul Wertz: What is the one on the last page?
Anna Tomasek: The last page is General Funds, those are proper.
And the last one was a judgment order and that one is also proper.
Robert L. Valentine W1: This is a question of procedure.
When the auditor has a meeting with, as far as these Funds are
concerned, do the Council members attend that meeting?
Anna Tomasek: This was just over the telephone.
Robert L. Valentine W1: Well, when they came and they have a
meeting, all Councilman can attend?
Anna Tomasek: Yes.
Mayor Stewart: They could. I don’t know how many
attended.
Robert L. Valentine W1: The point is, that is a closed meeting?
Mayor Stewart: No.
Robert L. Valentine W1: That has changed. The County
Government, it was different. We had the auditor report then all
three Commissioners could go in but no one else.
Anna Tomasek: They were here and they went over all of these
funds.
Robert L. Valentine W1: I am just curious, is that a different
procedure in City Government?
Richard P. Wolfe, Law Director: No. I don’t think so.
Robert L. Valentine W1: Otherwise, the press wasn’t
involved or no one when the auditor reports, is that right?
Anna Tomasek: Yes that is correct.
Anna Tomasek: So that is the 2007 finding and they also suggested
from the finding, we needed to correct the operating transfers in 2008,
our current books so we don’t have to face this in next
year’s audit.
Paul Wertz: So basically you are saying the Swimming Pool and the
Golf are the main things?
Anna Tomasek: Right. And then, this year we need to take
care of 435. Basically transfer the money. The money is
appropriated in Fund 405. We need to create additional line items
in Fund 405 and just charge all the sidewalks.
Paul Wertz: Is that being done?
Anna Tomasek: It is in process, yes. And there is money
appropriated to Fund 435. I recommend either we don’t spend
the money in 435 or we un-appropriate that. That is totally
Council’s choice on how you want to handle Fund 435 for the year
2008.
Robert M. Valentine W2: So this is 2007. Now in 2006, we
didn’t do any of this?
Anna Tomasek: Oh we did this in 2006, 2005, 2004; it was not a
finding then.
Robert M. Valentine W2: And it has changed from 2006 to
2007? How are we supposed to know that changes?
Anna Tomasek: It was just the auditors reviewed our laws and they
cited us this year.
Robert L. Valentine W1: So it is possible that it wasn’t right
before?
Anna Tomasek: That is correct.
Robert M. Valentine W2: So they only went back one year?
Anna Tomasek: They are only concerned about 2007 and 2008 and
forward. They are not going to go back.
Stephen Stuart: How much has been transferred from 405 to the
Golf Course this year in 2008?
Anna Tomasek: In 2008, looking over our records, we have a total
amount of $161,000.00 dollars that needs to be corrected and that is
just for the Golf Course only.
Mayor Stewart: Is that the only area we are concerned about?
Paul Wertz: Is the Swimming Pool all right this year?
Anna Tomasek: It has a current negative balance.
Ruth Detrow: Anna, where is 435?
Anna Tomasek: It is right after 405.
Ruth Detrow: So everything goes after that?
Anna Tomasek: Right. I told them that those are in fact
Capital items and they looked at the audit trails and agreed that those
were Capital items. They said just do not do this again in 2008
and obviously we already have and we need to take some corrective
action for this year. And so far there are no Pool transfers as of
today. We do have two transfers for the Golf Course on the books
right now in the amount of $161,000.00 dollars.
Stephen Stuart: It also looks like we spent operating from 405
for the 435 this year.
Anna Tomasek: Right, we will have to correct that.
Stephen Stuart: $20,294.00.
Anna Tomasek: Yes. Correct.
Paul Wertz: So how are we handling this?
Anna Tomasek: Talking to the auditors, they recommended basically
we need to adjust 2008 to beginning cash balances, we will have to
amend the estimated resources, submit it to the budget
commission. We will need Legislation to find the source, for
example General Fund to make those, Swimming pool and Golf Course
Funds. Obviously when we move the money from the Golf Course and
Swimming pool back into Fund 405, that takes care of the finding, but
it leaves those funds in a negative balance which we cannot have so we
will need to find another source or another Fund to offset those
negative balances.
What sources are those?
Anna Tomasek: The General Fund
Paul Wertz: So we are talking $161,000.00, and $152,000.00
plus $9,500.00 right?
Anna Tomasek: No. The $9,500.00 is already included in the
$152,000.00.
Paul Wertz: Okay. So together it is $161,000 with
$152,000.00.
Anna Tomasek: Yes it is $313,000.00 dollars grand total.
Comments or questions?
Stephen Stuart: I am just thinking of down the road; maybe we are
not at that point of doing that in terms of talking about the
future. In terms of 405 and do we want to have a different
structure or investment earnings than everything going into the 405?
Mayor Stewart: I am not prepared to say yes or no. I
think that what the Ordinance directs us from 1975, it would take some
change of that and I feel we are capable of doing that but I
don’t know if that is laid in concrete or if it is flexible.
Stephen Stuart: Rick respond to that. It would seem
to me that an Ordinance from 1975 doesn’t have to last forever,
you know it can be changed.
Richard P. Wolfe II: Are you asking me something? You all
got my letter from October 7? Well that explains all of the
options as I see them. It breaks this whole thing down into three
different segments, so I think the path is fairly clear what you need
to do. Mr. McIntosh is quite anxious to get 2007 cleared because
he can’t finish his report until we decide how we are going to
handle this and this date is on him to get it resolved. So if
$152,000.00 is the number and that is what is agreed on then we need to
change our books, he will change his report and that takes care of that
except for the fact that changes those two funds at the beginning of
2008 and then it adds to the dilemma that we have and I didn’t
know for sure what the amount was in 2008 for the Golf Course but now
we know it is $161,000.00 and so the issue with 435 isn’t the
kind of expenditures; just simply the transfer. It is supposed to
be paid directly out of that Fund rather than transfer it to some other
Fund and so since fortunately the money hasn’t been spent yet or
at least not very much of it; it can just all be transferred back into
it. Reimbursement to that Fund. So then we have to make
those Funds that have a deficit balance in 2008, we have to at least
bring them up to even and that is where you got to figure out where you
are going to come up with the money.
Paul Wertz: Well there is no choice; the General Fund is the most
we have.
Mayor Stewart: The only place I know of.
Richard P. Wolfe II: Then after you resolve that, then you get to the
question that you had; yes, that Ordinance could be changed but there
have been several discussions about whether we could do it
Retro-actively and correct all of this and I don’t think that can
be done and so we are going to have to look at it prospectively.
Robert M. Valentine W2: Correct it, in these two and then redo it
from there.
Richard P. Wolfe II: I think I laid out several choices and I
don’t think they are meant to be exclusive. There could
probably be some other combinations and permutations but you
don’t have to put all of that money into the Fund 405. If
you wanted to direct a certain amount into the General Fund in the
future, but if you do put it in there and is designated for Capital
Expenditures, then that is how you have to use it. So for some of
this, it is not a question of, you know, this list here that shows its
transfer for operating expense, the auditors are squirming a little bit
about the issue of transfer but they are looking at what the actual
expenditure was for and as far as 2007, all they want to do is get the
amount corrected and I guess $152,000.00 dollars is the agreed upon
amount, so that is the first item of business. And you are not
going to be able to act on that today but in whatever form you want to
do that, you either call a Special Meeting or put it on the agenda for
next week. But that should be the prompt item of business.
And then the fun begins to try to straighten out 2008. We can
actually, my understanding, based on Rick’s letter and other
information that only takes Legislation only to correct 2007; what it
does, it builds the negative 2008 balances in a couple of funds and
then we will have to make a; and I don’t know if it takes
Legislation to move that back.
Richard P. Wolfe II: Yes, you are going to have to have
other Legislation once you decide how you want to do it.
Robert M. Valentine W2: Is it time to pray for a bigger carryover
balance?
Richard P. Wolfe II: Well, that is one of the other things; if
there is an amendment of the anticipated revenues, then you have more
monies to appropriate. But I don’t know what information
you have right now.
Robert L. Valentine W1: Well as of last month, wasn’t it
around $2,000,000.00 dollars (2 million)?
Anna Tomasek: With the carryover? For General
Fund? Yes.
Richard P. Wolfe II: Whether or not the receipts are exceeding
the estimate. That is what he is asking.
Mayor Stewart: The estimate was how much Anna, for this
year? From our Taxes is what we are looking at right?
Income tax?
Anna Tomasek: Right. Currently our Income Tax is down 1.2%,
about $100,000.00 dollars to the comparison to last year.
Mayor Stewart: But how is it compared to what we appropriated out
of it?
Anna Tomasek: We are on track.
Robert L. Valentine W1: About 7.5 million wasn’t it?
Mayor Stewart: Of what I am trying to determine is; is there a
probability of having more funds available then what we actually
appropriated?
Anna Tomasek: We appropriated for income tax, grand total amount
was $7,700,000.00 and we are on target as we have so far collected 84%
of that amount.
Stephen Stuart: We received; I think slightly more property tax
than what we had anticipated?
Anna Tomasek: Yes.
Stephen Stuart: Without turning that page, what is your figure on
that?
Anna Tomasek: Property tax was $600,000.00 dollars and we have
actually collected $668,000.00.
Stephen Stuart: So you have $68,000.00 roughly.
Anna Tomasek: But we have only collected half of our personal
property tax.
Robert L. Valentine W1: And what did we estimate in the General
Fund for the year, at the end?
Anna Tomasek: What we balanced for the carryover? I would
have that down the hall. It is not in this report.
Robert L. Valentine W1: I thought it was around $220,000.00
wasn’t it, at the end of this year? Because I had asked
that question a couple of times, haven’t I?
Anna Tomasek: I will get back to you on that.
Stephen Stuart: Basically where we are right now, you are saying
that there is no; there is nothing to amend as far as the estimated
resources to increase it?
Anna Tomasek: Not right now.
Mayor Stewart: Help me past this one more time Anna; Income tax
is a significant piece of our General Fund and we estimated our City
Income Tax to generate how much? We appropriated how much?
Anna Tomasek: Correct. $7,700,000.00.
Mayor Stewart: And we are at 84% of that?
Anna Tomasek: And this year also, for income tax, our refunds are
higher than they have in the past. Income tax refunds are higher.
Mayor Stewart: We are already refunding for 2008?
Anna Tomasek: For Businesses. For Net profits.
Robert L. Valentine W1: So the Auditors didn’t file
anything against anyone, they just filed against us on the grounds that
we spent the money from the wrong fund is that what you are saying?
Richard P. Wolfe II: Well this isn’t a final audit
report. Now here is the thing. We can sit back and do
nothing and if we do and then they are going to make a finding for
adjustment against us. This is our opportunity to correct it, and
before he finalizes his report and this is the way it has been
recommended and I don’t see a whole lot of other choice as far as
2007. Now 2008 you have a couple of different choices to make as
far as how you want to correct things, but you know what needs to be
corrected and what the amounts are. There are two or three different
steps as far as I see. All need to be addressed promptly.
Paul Wertz: 2007 needs to be adjusted right now.
Richard P. Wolfe II: You need to entertain this with some
Legislation to correct this. If you are not going to have a
Special meeting between now and Tuesday, then it just should be on the
agenda for Tuesday. That way Mr. McIntosh can finish up his
report and he can correct those numbers and as far as that particular
finding or noncompliance, I think then it will probably be in
compliance.
Paul Wertz: Lets have the Legislation ready for the next meeting
then.
Richard P. Wolfe II: You need to decide how you want to handle
it. But you are going to have to transfer the 435 monies back to
405, that is going to be part of it. And you are going to have to
move monies from General Fund into the Golf Course in order to make up
that deficit, assuming there are monies there and then that will at
least put you back to even.
Anna Tomasek: And swimming pool.
Richard P. Wolfe II: Well you said there wasn’t anything
for swimming pool for 2008.
Mayor Stewart: Would it not be okay to address with the necessary
Legislation to clean up 2007 and then get that behind us next Tuesday
night and then would it not be okay to address the balance of the
Legislation the following if that is what Council wants to do; but at
the same time, I think Rick is suggesting that we need to move our
appropriations around with Legislative direction because we have to
move money from somewhere to get the funds balanced and the negative
compounds this. It is 2007 and 2008, so we have to address this,
this year.
Richard P. Wolfe II: Well you folks with Anna’s guidance on
that are going to have to decide what the numbers are and where they
are coming from.
Mayor Stewart: You can draft the language; we have to tell you
how many dollars we want from where to where.
Anna Tomasek: Recommendation for 2007 is to adjust the beginning
cash balances first and then for Council we have legislation to move
money from the general fund to the swimming pool and to the golf course
and that takes care of 2007 and then we will have to do an estimated
certificate. That takes care of 2007.
Ruth Detrow: That can’t be done in one piece of Legislation
can it?
Richard P. Wolfe II: I prepared an Ordinance for you to do
that. It is all set to go. It is all that is
necessary. Then it becomes a bookkeeping issue.
Paul Wertz: Lets have it on for the next meeting then.
Anna Tomasek: I gave you the account numbers. The account numbers
for the Golf Course transfer that would come from 2901 going to 615
transfer. It comes from the General Fund going into the Golf
Course. That is the $152,000.00. That is the actual
transfers that will need to occur to make those funds back in the
black. So the first step that we will do in our books is adjust the
beginning cash balances and the second step is once this transfer, you
all actually have to approve the transfer in moving money from the
General Fund back into the swimming pool and golf and once that has
been passed by Council, then we will move those monies into those funds
and that will take of 2007. I just added the 435. It is up to
Council on how they want to handle 435. Either transfer or
un-appropriate funds. There are two different ways of handling
that.
Stephen Stuart: Getting back to Glen’s question though on
the Income Tax revenue so far. We are at a total of 84% of
anticipated and that was as of the end of September. We have to
exceed 100%.
Anna Tomasek: Yes. We will exceed but I don’t know
what that amount will be yet.
Mayor Stewart: But the key is, that is one of the few places that
we have to draw this from and 84% of 7.7 million is closer to ten
months revenue than it is 9 months revenue.
Anna Tomasek: But not all 100% of that revenue goes to the
general fund. It is split between the street and park and general
fund.
Mayor Stewart: I agree with that. But those that are over,
if it goes over, it goes into the General Fund. So anything over
the estimate, goes to the General Fund.
Anna Tomasek: Yes.
Stephen Stuart: Again, we don’t know how much, within a few
days, we are going to end the month of October, so now we have 2 months
left.
Anna Tomasek: We can estimate what we anticipate.
Stephen Stuart: Absolutely.
Mayor Stewart: And we have history on what percentage you collect
the last two months of the year.
Stephen Stuart: So that seems to be a viable source for 2008.
Mayor Stewart: To clean up the problems generated in 2007 and
2008.
Anna Tomasek: It will impact the end year carryover.
Paul Wertz: So we address the 2007 with Legislation from Rick, so
then the following meeting we have to have 2008 corrected, with
Legislation for that right Rick?
Richard P. Wolfe II: You already have an Ordinance to do that.
Paul Wertz: Right okay.
Mayor Stewart: I am okay with that.
Richard P. Wolfe II: I can change it to put in the numbers, if
you want the numbers. I don’t think that is
necessary. It says to direct to adjust end-of-year balances in
the 2008 beginning balances to the extent that monies from 405 were
expended in 2007 for operating rather than capital and that is
$152,000.00. So you have it right there.
Paul Wertz: Well, if everybody agrees, then we have to do it.
Robert M. Valentine W2: If you are telling us legally it is good,
I am good with it.
Anna Tomasek: This takes care of 2007.
Richard P. Wolfe II: Yes and it is all it is meant to do.
Don McIntosh said that he and Anna had come to an agreement as to the
amount and $152,000.00 is my understanding that that is the
amount. I can put that in there if you want to see those numbers
in there but that is what it is. Then the separate piece of Legislation
will address 2008 and you are going to need two parts of that is to
transfer the monies that went from 405 to 435 back into 405 and I need
to know the exact amount because you said some money has already been
spent?
Anna Tomasek: That is correct. Approximately of $20,000.00
dollars.
Richard P. Wolfe II: Is there an issue about that expenditure?
Anna Tomasek: No.
Richard P. Wolfe II: All right, so the full amount that went out
isn’t going to back in. Because you already spent
$20,000.00.
Anna Tomasek: We just need to move it directly into 405.
Richard P. Wolfe II: Including the money that was spent or just
the amount that is unexpended?
Anna Tomasek: The amount that was spent.
Richard P. Wolfe II: All right. Then, what; are you going
to show another transaction that it is coming out of 405?
Anna Tomasek: The money is already appropriated in Fund 405 and
we do a transfer each month for anytime money is expended out of Fund
435. We shouldn’t be doing a transfer between the two
funds. It should be paid directly out of Fund 405.
Richard P. Wolfe II: You are missing my point though. If we
transferred monies out of 405 into 435 and we have spent $20,000.00 of
that money, then the money we are going to put back into 405 is the
original amount less $20,000.00. We are not going to put back in
what we have already spent, that was my question.
Anna Tomasek: That is correct.
Richard P. Wolfe II: So that amount is what?
Robert M. Valentine W2: $141,000.00, roughly 140,000.00.
Right? It was $161,000.00.
Anna Tomasek: It was $161,000.00 for 2008 plus.
Richard P. Wolfe II: No that was the Golf Course.
Nan Wertz, Asst Finance Director: 435, $175,000.00.
Anna Tomasek: We appropriated $175,000.00 for Fund 435 because
when we put the appropriations together we were going to get a note to
start the sidewalk program and then it was $25,000.00 dollars for city
sidewalks.
Mayor Stewart: For what it is worth, I show $154,000.00
unencumbered of which $150,000.00 that never materialized. So
there is only $4,000.00 dollars of the $25,000.00 that hasn’t
been spent; $4,530.00.
Richard P. Wolfe II: So what is that total?
Mayor Stewart: The total unencumbered $154,537.77 as of the end
of last month.
Nan Wertz: And that has changed. There were some transfers.
Anna Tomasek: It has changed, we spent more.
Richard P. Wolfe II: I just need to know what the correct number
is that needs to go back into 405. And then monies apparently
need to go from the General Fund into the Golf Course Fund. I
just need to know the numbers and the amount.
Anna Tomasek: For 2008 that would be $161,000.00.
Richard P. Wolfe II: Well that would have to cover the deficit
from 2007 also then.
Anna Tomasek: That is the $152,000.00.
Richard P. Wolfe II: I need the total. The total that is
going in is $313,000.00.
Nan Wertz: I think it is going to be a little more than that.
Richard P. Wolfe II: Just give me the right numbers and then I
will take care of it.
Anna Tomasek: The swimming pool is $9,500.00 out of the
$152,000.00 for 2007.
Richard P. Wolfe II: But once we get the piece of Legislation in
place next week, then we are not talking about two different years, we
are just talking about one year because all of the amounts come
together, in the beginning balance of 2008. It
changes. I just need to know the account numbers and
the exact dollar amounts and then we can have that for the second
meeting.
Questions or comments? None
Adjourn to Executive Session at 4:40 p.m.: to consider compensation of
Public Employees / Elected Officials.
Motion to adjourn to Executive Session by Paul Wertz, moved by Robert
M. Valentine W2 and seconded by Robert L. Valentine W1.
Ayes: Robert L. Valentine W1,
Robert M. Valentine W2, Ruth Detrow, Paul Wertz, Stephen Stuart.
Move to go back into Regular Session by Robert L. Valentine W1,
seconded by Robert M. Valentine W2.
Ayes: Robert L. Valentine W1, Robert M.
Valentine W2, Ruth Detrow, Paul Wertz, Stephen Stuart.
Back to Regular Session at 5:29 p.m.
Move to Adjourn Regular Session by Stephen Stuart, seconded by Ruth
Detrow.
Ayes: Robert L. Valentine W1, Robert M.
Valentine W2, Ruth Detrow, Paul Wertz, Stephen Stuart.
Meeting adjourned at 5:30 p.m.
Submitted by
Valarie F. Bishoff
Clerk of Council