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HomeMy WebLinkAbout10.04.2023 SP Minutes @6:35CALL TO ORDER MINUTE S SPECIAL MEETING MEASURE W CITIZENS' OVERSIGHT COMMITTEE CITY OF SOUTH SAN FRANCISCO Wednesday, October 4, 2023 6:35 p.m. IN -PERSON MEETING Chair Del Rosario called the meeting to order at 6:35 p.m. ROLL CALL Chair Del Rosario, present Vice Chair De Guzman, present Committee member Zemke, present Committee member Brosnan, absent Committee member Rey, present AGENDA REVIEW No changes. REMOTE PUBLIC COMMENTS No remote public comments made. WELCOME AND INTRODUCTIONS Director of Finance Karen Chang provided a brief overview of the agenda for the evening. MATTERS FOR CONSIDERATION 1. Motion to approve the Minutes from the meeting on August 2, 2023. Motion — Committee Member Zemke: To approve the minutes from August 2, 2023, Committee Member De Guzman/Second — by roll call vote: AYES Chair Del Rosario, Vice Chair De Guzman, Committee Member Zemke, Committee member Rey and NAYS: Non; ABSENT: Committee member Brosnan; ABSTAIN: None. Motion passes unanimously. 2. Measure W Audit Planning Phase presentation by Amy Meyer, Maze & Associates After the presentation, Amy Meyer opened for questions. Vice Chair De Guzman asked to clarify that the audit report was for fiscal year end June 30, 2023. Vice Chair De Guzman asked if Maze & Associates issued an internal control report? Ms. Meyer stated that they don't opine on internal controls, but they do test for internal control and if there are matters that are found, they will report on them. Vice Chair De Guzman asked if she was aware of an internal control audit done by the City of South San Franisco. Ms. Meyer stated that there was none that she was aware of. Vice Chair De Guzman asked if internal control was tested and if they had questionnaires. Ms. Meyer stated that transactions are picked, they look for reviews and approvals, to see if they are in compliance with the city policies. They test to ensure internal controls are in place and functioning. Ms. Meyer stated that they do not opine or issue an opinion on internal control because it would require auditing many more data points. Vice Chair De Guzman clarified that it is the Sarbanes-Oxley in commercial accounting set of standards. Ms. Meyer confirmed. Vice Chair De Guzman asked if there was an intentional material misstatement, would they be able to find it. Ms. Meyers stated that the audit was designed to detect material misstatements. Vice Chair De Guzman asked Ms. Meyers what "compliance testing" is? Ms. Meyer provided an example of compliance testing vs. the City's purchasing policies and Federal guidelines. Vice Chair De Guzman asked if there were Federal laws that may be attached to the Measure W compliance. Ms. Meyer stated that most taxes can be spent on general expenditures/programs. If it was a non-federal disbursement, the city still has to comply with its own purchasing policy. Ms. Meyer stated that they do obtain a confirmation, a report of Measure W remittances to the city, from the State and reconcile to the City's general ledger to ensure that State says it sent to the city made it into the general ledger. Vice Chair De Guzman asked for clarification on the expenditure side, is it for Measure W purpose? Ms. Meyer stated that because Measure W is a general tax, the city self restricts what the funds are spent on each year. There are no exterior rules that dictate what you can and cannot use the funds for. Chair Del Rosario asked if there was a threshold reviewed for expenses or is it spot checked? Ms. Meyers stated that disbursements are selected judgmentally for testing, a threshold is not set. Vice Chair De Guzman asked if they have a rule of thumb, such as 5% of materiality? Ms. Meyer stated that when transactions are selected, there is no dollar amount. There is no dollar threshold that is set. Vice Chair De Guzman asked if they performed random testing and if it will be substantial enough. Vice Chair De Guzman asked how many transactions are tested? Ms. Meyer stated that each year may differ. They have to ensure that the transactions are representative of the wide range that they are testing. Chair Del Rosario asked what happens if a violation is found? Ms. Meyer stated that they would question transactions. Usually there is documentation supporting appropriate audit evidence that can determine that it makes sense, and it is reasonable. If it is not, 1) we would have a recommendation that things need to change, 2) Depending on the context of error, we may have to test more. Vice Chair De Guman asked what kind of audit opinions Maze & Associates provide for the government? Qualified opinion or unqualified opinion? Ms. Meyer stated that historically for South San Francisco, they have provided unmodified opinions equivalent to unqualified opinion. Each year is individual, they have clients that they issued modified opinions, qualified, or adverse; it depends on the results of that particular year's audit. Vice Chair De Guzman asked if qualified opinions mean one cannot rely on financial statements. Amy stated that it can be qualified in one particular area as opposed to an overall issue. Vice Chair De Guzman asked when they should expect the first draft of audit? Director of Finance Karen Chang stated that we should have a draft at the next meeting in December. Vice Chair De Guzman asked Ms. Meyer if they were on -site or virtual? Ms. Meyer stated that they do what they call a hybrid when necessary. Most of the audits they perform are remote. They usually have a day or two on site for any areas that the city may not have an electronic record or something they need to see in person. Most of the audits are remote. Chair Del Rosario asked if this was the same audit, they previously reviewed line by line. Director Chang stated that auditors do not review line by line. Director Chang stated that Chair Del Rosario was referring to the report that Committee Member Brosnan mentioned in earlier meetings of Measure W regarding a more detailed report. MEASURE W COC MEETING MINUTES December 6, 2023 PAGE 2 6 Chair Del Rosario stated that she wanted clarification on the layers of auditing. There are people approve the expense, then you have a threshold, then you have a layer of audit. Director Chang provided an example of the process. Director Chang stated that there are several layers of internal control within the city. Vice Chair De Guzman clarified that there is a budget manager that looks at the books to ensure that there is a budget for that contract. Director Chang stated that staff reviews and compares to ensure there is a budget for that project and line items before it is paid. Vice Chair De Guzman asked when they should expect a draft audit. Director Chang stated that she would provide a draft at December's meeting. Vice Chair De Guzman asked if auditors looked at the budget vs actual. Ms. Meyer stated that they do review the budget and if there are significant variances, they will ask questions. Vice Chair De Guzman asked if that was part of the management discussion and analysis. Amy confirmed and stated that it is a requirement for the management discussion and analysis that is written by finance staff. There is a section that required discussion of any significant variances between original and final budget. There's the final budget and actual page for the general fund. IN PERSON PUBLIC COMMENT: No in person public comment. 3. Action minutes -Presentation and discussion on Measure W Financials. Director of Finance Karen Chang provided a brief overview and update of financials. Director Chang stated that for the fiscal year 2022-23, we are expecting to receive total tax revenue of about $15.6 million. There is a project expenditure and debt service payments. We are expecting total expenditure to be about $10.6 million, leaving a surplus of about $5 million. The fund balance at the end of the year is expected to be about $16.8 million. Director Chang provided a breakdown of actual expenditures of two major projects for the Civic Campus; the Police station and Library, Parks & Rec building. Total budget was $14 million and year to date, $2.2 million has been spent. We expect another $12 million will be spent on those projects. The pavement program has about $1 million remaining in the budget. We are continuing to make payments to the debt service which is about $8.2 million. Debt service on the third tranche will be coming in FY 2024-25. Chair Del Rosario asked if this included the new sports field. Director Chang stated that it was included separately as it was mostly paid by the bond. Director Chang provided a recap for questions at the previous meeting regarding cashflow and balance sheet. Director Chang stated that the beginning fund balance is about $11 million plus the revenue, minus the expenditure. The ending fund balance is about $16.8 million. The balance sheet consists of the cash of $14 million and the two months receivable that need to be collected. Chair Del Rosario asked if this included May and June. Director Chang confirmed. Director Chang stated that there were three tranches of debt issued. The first tranche of $53.8 million funded the Police Station, the second tranche of $104 million funded the streets, solar, and civic campus. The third tranche of $65 million funded the Orange Memorial Park ball field, aquatic center, and Colma Creek bridge. MEASURE W COC MEETING MINUTES December 6, 2023 PAGE 3 7 Director Chang provided a breakdown of project expenditures. The Police Station had a project cost of $53.8 million and cumulatively we had already spent about $53.6 million. The street improvement project $24 million, about $21 million was already spent and there is about $2 million left. The Civic Campus is $78 million. Director Chang stated that there were other funding resources besides Measure W funds that -were used on the projects. The slide presentation is to show how much funding was used from bond issuance. Director Chang provided clarification Civic Campus projects — projects PF1707 (Police Station) & PF2103 (Library/Park & Rec). The Civic Campus was made up of numerous funding sources including donations. The package that was sent out to the Committee included the summary of year to date of all funding sources. Vice Chair De Guzman asked if the unspent bonds of $8.62 million was real money. Director Chang provided an explanation between budget and actual. Chair Del Rosario asked for clarification that Measure W funds would be used last. Director Chang confirmed. Chair Del Rosario asked how donations work. Director Chang stated that there are business donors for specific causes. Vice Chair De Guzman asked if the donations were donated to LPR, would that be recorded in the Measure W books? Director Chang clarified that donations were not recorded in Measure W books but would be part of the project. Vice Chair De Guzman asked if the total bond funds were $222 million. Director Chang stated that it was $222.8 million from bond proceeds. Chair Del Rosario clarified that it was for the three tranches. Vice Chair De Guzman asked it can be stated that the City of South San Francisco has $222 million of total assets. Vice Chair De Guzman asked, prior to Measure W, how much of assets did the City of South San Francisco have? Director Chang stated that the information could be found in the financials under capital assets. Committee Member Zemke asked if there was a mechanism that the committee can be notified with any new projects that the City Council adds to list for Measure W funding. Director Chang stated that Measure W is a general tax and city council votes on projects they want to fund. When the city council sees that there is revenue available, they want to fund other projects. Director Chang advised that she would communicate that to the City Manager's office. Director Chang in conclusion asked if there were any additional types of reporting that the committee would like to see. Vice Chair De Guzman asked if Director Chang could provide a narrative for Measure W such as the one the City of San Clemente provides. Director Chang stated that she would look into it. Chair Del Rosario asked about voting for a new Chair. Director Chang stated that it would occur in February 2024. ADJOURNMENT Being no further business, Chair Del Rosario adjourned the meeting at 7:35 p.m. Submitted by: Patty Gomez Secretary MEASURE W COC MEETING MINUTES Approved by: Del Rosario 'tdAwiq e6f 6 a7mem Chair December 6, 2023 PAGE 4 1.1 Approved by the Measure W Citizens' Oversight Committee: 1 Z / 4 b / 2 Z� MEASURE W COC MEETING MINUTES December 6, 2023 PAGE 5 1H File #: 23-1030 Version: 1 City of South San Francisco Legislation Text P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA Agenda Date: 12/6/2023 Item #: 2. Presentation to the Measure W Citizens' Oversight Committee on the Measure W Preliminary Financial Results for Fiscal Year 2022-23 (Amy Meyer, Maze and Associates) City of South San Francisco Page 1 of 1 Printed on 12/1/2023 powered by LegistarT11 10