Also in attendance were the following:

Staff persons on hand were Paul Hetland.

The Pledge of Allegiance was said by those in attendance.

Agenda

Humbert moved and Goebel seconded a motion approving the meeting agenda with additions and corrections. Discussion offered. Motion carried 4-0.

Minutes

Joe Hennen moved and Goebel seconded a motion to approve the August 10, 2005 meeting minutes with corrections. Discussion offered. Motion carried 4-0.

V. New Business

2004 Audit Report

Jennifer Thienes from Kern DeWenter and Viere (KDV) was present to deliver the 2004 Audited Financial Statements and Management Letter.

Generally, the funds of the City were reported to be "in good shape."Âť The total receipts for 2004 were $700,145 and the total disbursements for 2004 were $1,149,799. The amount in excess was $449,654 which was due to unbudgeted items of the new city hall, new fire truck, new snow plow, and 2003 street projects follow through costs. The total cash fund balances for the year end 2004 were as follows: $694,765 general, $33,941 area fire service, $98,435 economic development authority, $31,980 other governmental funds for a total amount of $859,121. Thienes noted that the audit showed that the 2004 budget closely followed the 2004 audited financials.

It was noted that the general funds, at year end, are advised to be at a maximum of $350,000. At year end 2004, the City of Freeport was at approximately $695,000. A recommendation was made by Thienes that it could be dedicated to a specific capital project, street projects were given as an example.

State fair request go on to OSA.

Material weaknesses were noted in the management letter which are specified and explained in detail within that document. Of primary concern was the lack of a system to ensure accurate and timely financial statements.

Thienes also noted that improvements were made in 2004 from 2003 and that the systematic concerns raised in the financial system had begun several years ago. He noted that the City Clerk’s duties are, in her estimation, too many and that financial duties often do not take the first priority. She suggested that other services be researched and options such as hiring a finance officer. She also stated that the Office of the State Auditor is less an agency that notes the submission of reports and has adopted more of a regulatory approach, more closely examining issues of non-compliance in cities. She stated that Freeport is among many cities throughout the State that has the same issues outlined in the management letter.

It was noted that the audit will be submitted to the Office of the State Auditor (OSA) by August 31, 2005. The audit was due to the OSA by March 31, 2005. However, this deadline was not made known to the City until February due the change in auditing formats to an cash-based audit from a accrual-based audit which was June 30, 2005. It was noted by Hetland that on several occasions KDV continued to collect fundamental information when all information was accessible and assumed submitted prior to the audit. Hetland further noted that information was being collected as late as 1:30 P.M. on that day. Hetland presented an e-mail message sent on the Monday prior to the meeting requesting that the last of the information be requested by the end of the business day Monday, August 22. In response to an inquiry if the audit could have been submitted earlier by KDV, Thienes only noted the management letter and the accepted no responsibility on behalf of the accounting firm.

Humbert asked how charitable gambling funds are to be administered. Thienes responded that the City needs to request the funds and that the expenditures that may relate to the funds can only be ones lawfully allowed by cities, that is – public purpose expenditures.

Hetland requested Thienes to provide her phone number for any follow through questions that the Mayor or Council Members may have with her. Hetland also noted that the issues outlines would be addressed as soon as possible.

It was decided to discuss the audit at a later point in the meeting before taking action. Soon afterward, Thienes left the meeting.

Open Public Forum

No public remarks were made.

Main Street Lighting addition proposal – south side of parking lot

Hetland brought forward a proposal for four additional street lights for the south side of the parking lot to be paid through donations from Freeport State Bank. Joe Hennen moved and Goebel seconded a motion to approve the additional street lights and accept the donation. Discussion offered. Motion carried 4-0.

Old Business

2nd Street – proposed work

Hetland reported that the purchase order was sent to A-1 Concrete Leveling for the restoration work on 2nd Street.

Consent Agenda

Joe Hennen moved and Humbert seconded a motion to approve the consent agenda which included the following:

  • Claims in the amount of $36,361.15
  • Payroll in the amount of $5,910.63

Discussion offered. Motion carried 4-0.

2004 Audit – Continued Discussion and Action

Worms suggested that Hetland make the necessary efforts to ensure the financial work for the City is completed in the most efficient manner possible. Recommendations included closing the blinds in his office and holding calls to adhering to the set office hour times of 9:00 A.M. to 3:00 P.M. There was further discussion on hiring an additional person to using another city's finance officer or using professional services to address the financial concerns raised. Hetland noted that he would work closely with Jennifer Thienes prior to the next regularly scheduled Council meeting to create a proposal to fully comply with the issues raised in the timeliest manner. He also noted that the City offices are more efficiently operated than when he started and that the financial systematic concerns existed years prior to his employment, he did acknowledge responsibility to correct and address the concerns immediately to avoid a late submission and non-compliance in the next audit.

Hetland also noted that a few items cited in the management letter and the audit were not investigated such as the petty cash amounts, the employee records, and Council documents in the binders. Hetland also noted that he disagreed with the comments in the letter stating that checks were dated other than the date they were issued and in sequential order and that all voided checks weren't retained. He would be asking KDV for documentation on these two points because he noted that since 2003 there wasn't a single instance he could cite. In addition, it was noted that "many receipts did not have supporting document providing little or no audit trail" -Âť which Hetland also felt further information was needed from KDV to show exactly how many checks and which ones because again he noted that he could not recall any instance of this violation. Hetland wanted to note for the minutes that he did not want to appear defensive regarding the recommendations by the independent auditor nor Council, but to note that the items will be addressed and that there were many improvements made in the last two years and efficiencies gained yet improvements can always be made.

Humbert moved and Goebel seconded to accept the 2004 audited financial statements and the management letter. Discussion offered. Motion carried 4-0.

At 9:10 P.M. Humbert moved and Goebel seconded a motion to adjourn the meeting. Motion carried 4-0.