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UH, IT'S TUESDAY, JUNE 21ST, YEAR 2022 AT 3:00 PM WE DO HAVE A QUORUM I CALL TO ORDER THE DAY TOWN FINANCE COMMITTEE MEETING.
[a. Consider the approval of minutes of the Finance Committing meeting held May 10, 2022.]
ONE A IS CONSIDERED THE APPROVAL OF THE MINUTES OF THE FINANCE COMMITTEE MEETING HELD MAY 10TH, 2022.CAN I GET A MOTION? MOTION TO APPROVE? I'LL SECOND.
[a. Receive the City of Baytown's Annual Comprehensive Financial Report and Single Audit Report for the fiscal year ending September 30, 2021.]
RECEIVE THE CITY OF BAY TOWN'S ANNUAL COMPREHENSIVE FINANCIAL REPORT AND SINGLE AUDIT REPORT FOR FISCAL YEAR ENDING SEPTEMBER 30TH, 2021.UM, HAPPY TO INTRODUCE STEPHANIE AND KATIE FROM, FROM AUDITORS WHO ARE GONNA PRESENT THE, UH, REPORT TO YOU.
UM, BY WAY OF PREAMBLE, OBVIOUSLY YOU REMEMBER OUR CONVERSATION AT THE LAST MEETING WHERE WE TALKED ABOUT THE PROGRESS OF THE AUDIT AND REACH YOUR ATTENTION, SOME OF THE CONCERNS AND SOME OF THE ISSUES THAT WE'VE BEEN DEALING WITH.
AND I THINK STEPHANIE AND KATIE CAN TALK ABOUT THAT A LITTLE BIT MORE GRANULARITY, AND WE ARE HAPPY TO TALK WITH YOU ABOUT WHAT HAS BEEN HAPPENING.
WHICH DEAL WOULD YOU MIND RECAPPING SINCE LAST TIME WE DISCUSSED THAT COUNCILMAN POWELL WAS PRESENT, BUT NOT COUNCILMAN JOHNSON? THAT'S RIGHT, SIR.
SO, YES, I THINK I'VE TOLD YOU YES.
SO I, I'LL GIVE KIND OF MY, THIS IS OBVIOUSLY MY VERSION OF EVEN WENT TO MORE DETAIL FOR YOU PERSPECTIVE.
SO, UH, THROUGH THE COURSE OF THE AUDIT, IT BECAME APPARENT, UH, A NUMBER OF, UM, MIS POSTINGS AND ERRORS IN TRANSACTIONS WITHIN THE GENERAL LEDGER HAVE NOT BEEN PICKED UP BY THE BANK RECONCILIATION PROCESS.
MY EXPECTATION IS THAT THOSE ARE VERY, THINGS SHOULD BE PICKED UP BY, BY THAT PROCESS AND ON INVESTIGATION.
AND THANKS TO, UH, THE WORK OF, UH, EL HARRIS IN THIS REGARD.
AND IT BECAME APPARENT THAT OUR INTERNAL CONTROL ENVIRONMENT WAS COMPROMISED BECAUSE THE RECONCILIATIONS WERE NOT STANDARD THAT ISLAND TREES OR I WOULD EXPECT.
WE HAVE A, WE HAVE AN AUDIT, BUT WE HAVE A FINDING WHICH, UH, I HAVE TO SAY I AM HAPPY TO TAKE BECAUSE IT'S TRUE.
WE NEED TO, UH, IMPROVE UPON THE, UH, DIRECT INSTALLATION TO, TO IMPROVE UPON THE INTERNAL CONTROL.
SO THAT'S REALLY THE WAY OF BACKGROUND.
I CAN GO IN A LITTLE BIT MORE DETAIL ABOUT THE NATURE OF THE, THE ERRORS.
UH, THEY WERE COMMITTED, UM, BY STAFF WHO, WHO LONGER WITH US.
UH, I CAN'T SAY THAT THAT'S EXACTLY THE REASON THEY'RE LONGER WITH US, BUT THEY, WHY THERE ARE NOT.
UM, WE DID PARK COMPANY WITH ANOTHER MEMBER OF STAFF DIRECTLY AS A RESULT OF THE FINDINGS FROM THE AUDIT.
UM, AND WE ARE CURRENTLY NOW REBUILDING THE WHOLE RECONCILIATION PROCESS.
WE HAVE REASSIGNED SOMEONE WITHIN THE FINANCE DEPARTMENT JUST RECENTLY, TODAY, EVEN THERE WAS, UH, WAS GOING THROUGH, UH, THE STATUS OF THE CURRENT YEAR AT BANK RECONCILIATIONS.
WE HAVE ALSO OVER THE COURSE OF THIS YEAR, ENGAGED WITH ANOTHER, UM, FIRM TO ASSIST US WITH INTERNAL AUDIT.
SO OBVIOUSLY STAFF AND HER TEAM DO THE EXTERNAL AUDIT.
THIS WILL GIVE US INTERNAL AUDIT COVERAGE, WHICH IS SOMETHING THAT I KNOW RICK AND I HAVE TALKED ABOUT IN PEOPLE FIELD IS LACKING THAT WILL REINFORCE THE INTERNAL CONTROLS THAT WE HAVE.
AND THEY WILL BE LOOKING AGAIN IN A LOT OF DETAIL ABOUT, UH, THE PROCESS OF RECONCILIATION UPON THAT.
AGAIN, MY NAME IS STEPHANIE HARRIS AND I AM ONE OF THE PARTNERS WITH OUT HARRIS.
CHECK WITH US TODAY IS OUR AUDIT MANAGER, KATIE, WHO LED KIND OF OUR ENGAGEMENT TEAM ON THE AUDIT THIS YEAR.
UM, AND SO WE WILL JUST KIND OF START OUT OF ORDER.
TRADITIONALLY, I WOULD WALK US THROUGH THE FINANCIAL STATEMENTS AND THEN THE SINGLE AUDIT AND MORE OF THE HOUSEKEEPING ITEMS, WHICH INCLUDE OUR REQUIRED AUDITOR DISCLOSURE LETTER AND THE MANAGEMENT LETTER.
UH, NORMALLY THERE ISN'T MUCH FOR BAYTOWN TO THE MANAGEMENT LETTER.
UM, HOWEVER, AS YOU JUST HEARD IN THE, IN THE RECAP, WE DID IDENTIFY THROUGH THE AUDIT PROCESS A MATERIAL WEAKNESS IN THE CITY'S INTERNAL CONTROLS OVER FINANCIAL ACCOUNTING AND REPORTING.
AND WHAT'S CONCERNING IS THAT IT WENT UNDETECTED SO LONG.
UM, THIS WAS AN ERROR THAT WASN'T FOUND AT THE YEAR END, BUT WHEN WE STARTED DIGGING, IT WAS SOMETHING THAT WENT BACK, UM, AS FAR AS WE COULD TELL ALL THE WAY TO THE BEGINNING OF THE YEAR.
UM, AND THERE WAS ALSO, IN ADDITION TO JUST AN ERROR, WHAT ALSO WAS OF CONCERN WAS THE FACT THAT, UM, WHOEVER IT WAS
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OR PERSONS RESPONSIBLE FOR THE BANK RECONCILIATION PROCESS, THERE APPEARS TO HAVE BEEN SOME SORT OF INTENT TO CONCEAL THE ERROR.BECAUSE IF YOU WERE JUST TO LOOK AT THE BANK RECONCILIATION IN ISOLATION, YOU MAY NOT HAVE SEEN SOME OF THE RED FLAGS, UM, THAT WERE THERE.
IT KIND OF TOOK, LOOKING FROM MONTH TO MONTH, FOR EXAMPLE, WHEN YOU GO FROM ONE MONTH TO THE NEXT, YOU WOULD EXPECT THAT YOUR BEGINNING BALANCE FOR A MONTH WOULD MATCH LAST MONTH'S ENDING BALANCE.
AND THAT APPEARS TO BE ONE OF THE THINGS THAT THIS INDIVIDUAL OR INDIVIDUALS, UM, CHANGED IN ORDER TO BE ABLE TO CONCEAL A LARGE SUM OF MONEY.
AND SO IN THIS CASE, WE WERE TALKING ROUGHLY OF A NET, $3 MILLION, UM, THAT WENT LARGELY UNDETECTED.
AND SO, BUT BEFORE SEPTEMBER, THAT'S KIND OF HOW SEPTEMBER GOT TO WHERE IT WAS BECAUSE IF YOU WERE TO JUST LOOK AT THE ENDING BALANCE, IT WOULD APPEAR, IT WOULD'VE RECONCILED.
BUT IF YOU DID FURTHER INVESTIGATIONS, YOU WOULD'VE SEEN THAT THE CITY'S INVESTMENTS DIDN'T ACTUALLY TIE OUT TO OUR INVESTMENT STATEMENTS.
UM, AND GOING BACK MONTHS PRIOR TO SEPTEMBER, THERE WERE SOME RED FLAGS IN TERMS OF THE ITEMS THAT WERE IN THE BANK EACH MONTH ON THE PRESS ON THE RECONCILIATION.
SO AGAIN, WE'RE WE'RE, UM, REPORTING THIS AS A MATERIAL WEAKNESS.
IT DOES SHOW UP IN THE SINGLE CITY SINGLE AUDIT REPORT.
AND AGAIN, THE SINGLE AUDIT REPORT IS REQUIRED BY THE EXTERNAL AUDITOR WHEN THE CITY EXPENDS MORE THAN 750,000 IN ANY 12 MONTH PERIOD.
AND SO ANYTHING THAT'S A SIGNIFICANT DEFICIENCY OR HIGHER MUST BE REPORTED THERE.
SO YOU'LL SEE THAT, THAT COMMENT THERE, BUT THAT'S THE ONLY ONE THAT'S THERE.
BUT AS A RESULT OF THAT BEING IN THE SINGLE AUDIT, UH, MANAGEMENT MUST PREPARE WHAT'S REFERRED TO AS A CORRECTIVE ACTION PLAN.
AND SO SOME OF THE ELEMENTS TO THAT CORRECTIVE ACTION PLAN, WHICH ARE IMPORTANT HERE TO THIS COMMITTEE, ARE ONE WHO'S RESPONSIBLE HERE AT THE CITY FOR DEVELOPING THE CORRECTIVE ACTION PLAN.
UM, WHAT ARE THE STEPS THAT ARE GONNA BE TAKEN TO ENSURE THAT WHATEVER THE DEFICIENCY WAS IS IDENTIFIED, UM, A CORRECTED, AND THEN THREE, WHAT'S THE TIMELINE FOR IMPLEMENTATION? AND SO THAT BECOMES IMPORTANT WHEN WE STEP AWAY FOR THIS COMMITTEE TO BE ABLE TO HOLD MANAGEMENT ACCOUNTABLE AND CONFIRM MEETING.
UM, AND SO THEY'VE DONE A GREAT JOB OF PREPARING THE CORRECTIVE ACTION PLAN TO ADDRESS SOME OF THESE ITEMS WITH THE RECONCILIATION OF, UM, THE BANK ACCOUNTS AND THE EMAILS.
SO ARE WE SURE THAT IT WAS JUST THESE TWO INDIVIDUALS THAT PLAYED A PART IN THIS? SO I KNOW HE WAS RESPONSIBLE FOR THE, FOR THE ACTUAL ERRORS AND THEY'RE NO LONGER WITH US.
UM, ONE PERSON WAS RESPONSIBLE FOR PERFORMING THE RECONCILIATIONS, BUT THE EXPECTATION IS THAT THEY WOULD BE REVIEWED BY SOMEONE ELSE.
AND I THINK THAT'S WHAT STEPHANIE'S GETTING AT.
IT WOULD APPEAR THAT THAT REVIEW DID NOT IDENTIFY, AND ACTUALLY THAT THE SUGGESTION IS THAT, UM, THERE WAS A LACK OF SCRUTINY AND, UH, AND ACCEPTANCE THAT JUST BECAUSE ON THE FACE OF IT, CASH BALANCED, WHICH IT DID ON THE FACE OF IT MM-HMM
UH, THAT THERE WAS NO FURTHER DESPITE THE RED FLAGS.
AND, AND I'LL TELL YOU THIS THERE, AND I WENT THROUGH EVERY SINGLE BANK RECONCILIATION FOR EVERY MONTH TRYING TO DRILL INTO THIS AND READ LIKE WE ARE THERE.
UM, BUT THE PERSON WHO WAS SUPPOSED TO CATCH IT DIDN'T CATCH IT, DIDN'T PURSUE IT.
AND ARE WE SURE THAT THIS WAS ONLY, THIS HAS ONLY HAPPENED THIS YEAR BECAUSE THE QUESTION THAT COMES TO MY MIND IS, YOU KNOW, WHY WOULD IT BE JUST THIS YEAR? AND ARE WE, DID WE MISS SOME THINGS IN PREVIOUS YEARS? OKAY, SO I MEAN, I CAN'T NECESSARILY SPEAK TO PREVIOUS YEARS.
WE HAVE CLEAN AUDITS IN ALL OF THE PREVIOUS YEARS, AND THERE'S NO SUGGESTION THAT WE WOULD, WE WOULD HAVE ANYTHING OTHER THAN THE CLEAN AUDIT FOR, FOR ANY OF THE YEARS.
SO I DON'T THINK THERE'S ANY, UM, SUGGESTION WE SHOULD GO BACK AND, AND LOOK AT PRIOR YEARS.
UM, MY OWN VIEW IS THE WEAKNESSES IN INTERNAL CONTROLS HAVE BEEN HERE FOR SOME TIME.
AND, UM, IT COULD BE A COMBINATION OF GOOD FORTUNE, UM, OTHER PEOPLE WHO WERE INVOLVED IN PRIOR YEARS POTENTIALLY, UH, HAVING TROUBLE OFF IN THE PAST.
IT COULD BE ALL OF THOSE THINGS.
UM, I DO KNOW FOR A FACT THAT ONE MEMBER OF STAFF LEFT DURING THE COURSE OF, UH, FISCAL YEAR IN QUESTION AND THE MORE SENIOR MEMBER OF STAFF WHO WAS LEFT, UM, BEING A COUPLE OF FAIRLY FUNDAMENTAL AND VERY BASIC ERRORS.
AND THAT WOULD SUGGEST TO ME IT WAS BECAUSE THE VIRGINIA MEMBER STAFF WAS ESSENTIALLY DOING THEIR JOB.
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THE, THOSESO THAT EXPLAINS WHY IT WAS JUST THIS YEAR.
UM, AND, AND THIS IS A VERY COMPLEX ISSUE BECAUSE OF A CITY THIS SIZE.
UM, THERE'S ALSO SOME ADDITIONAL COMPLEXITIES WITH REGARDS TO THE SY CITY'S FINANCIAL ACCOUNTING AND REPORTING SYSTEM, AND THAT THERE'S A LOT OF POSTINGS THAT ARE, UM, IN THE AGGREGATE.
AND SO IT'S NOT REAL CLEAR ON THE SURFACE.
IT TAKES, UH, RUNNING MULTIPLE REPORTS AND DOING A LOT OF LEGWORK TO MAYBE SEE SOMETHING THAT WAS POSTED ON THE SYSTEM SIDE TO A CASH BALANCE VERSUS WHAT YOU MAY SEE ON THE BANK STATEMENT.
AND SO SOME OF THE THINGS THAT WE IDENTIFIED IN THE PROCESS OF TRYING TO RESOLVE THE DIFFERENCE WERE, UM, SOME OF THE ITEMS THAT POST DIRECTLY TO THE BANK WERE NOT, AND THERE'S NO PARTICULAR PRO AUTOMATED PROCESS SAY HERE AT THE CITY TO CATCH THOSE TYPES OF THINGS UNDETECTED.
SO SOME INDUSTRIAL DISTRICT PAYMENTS THAT WERE MADE THAT WENT DIRECTLY TO THE BANK, DID NOT MAKE IT TO THE GENERAL LEDGER POSTING.
UH, THERE WAS A CONTRIBUTION BY A MUD THAT HIT THE BANK, BUT IT DID NOT MAKE IT TO THE GENERAL LEDGER.
SO THOSE ARE JUST SOME IDEAS OF THINGS.
SO, YOU KNOW, UM, AND JUST THE CLEAR VOLUME OF ACTIVITY IN ANY ONE MONTH, AND WE'RE TALKING ABOUT A 15 MILLION STATEMENT.
SO THERE'S A LOT TO DISSECT, UM, WHEN THINGS START GOING ASTRAY.
AND THAT'S WHAT I'VE BEEN SORT OF THINKING ABOUT IN PURELY PERSONAL TERMS. WHAT'S IT LIKE, IMAGINE WRITING A COUPLE OF CHECKS A YEAR AGO, YOU FORGET ABOUT, AND YOU KNOW YOUR BANK YEAH.
THE BANK BALANCE IS RIGHT, BECAUSE YOU'VE FORGOTTEN THAT SOMEBODY'S PAID DIRECTLY INTO YOUR ACCOUNT, A COUPLE OF CHECKS DURING THE COURSE OF THE YEAR.
AND THAT WAS THE ISSUE WE HAD.
WE LOOKED AT GO, THIS IS RIGHT.
OH, HOLD ON, THAT NEEDS TO BE CORRECTED.
ONCE WE MADE THAT CORRECTION, IT THREW ALL OF IT OUT.
SO THAT, THAT'S WHY WE GOT WHERE WE, WE HAVE YOU THOUGHT ABOUT, UH, A DIFFERENT SYSTEM? SOMETHING? YES.
SO IN THE NEXT NUMBER OF WEEKS WE WILL BE HAVING CONVERSATION WITH TYLER BECAUSE AS YOU KNOW, WE'VE IMPLEMENTED ER GOV FOR PLANNING.
THEY IMPLEMENTING UTILITY BILLING FOR BILLING, AND WE AIM TO INTRODUCE BUNI FINANCIALS FOR GENERAL LEDGER AND PAYMENT FINANCIAL SERVICES.
SO, UH, WE WILL, BUT THAT'S TWO YEARS DOWN THE TRACK.
SO IN THE MEANTIME, WE NEED TO MAKE SURE WE HAVE A ROBUST RECONCILIATION PROCESS, AND THAT'S WHAT WE'RE WORKING ON RIGHT NOW.
SO THAT'S THAT REDUNDANCY THAT WE, YEAH.
AND I, IN, IN MY PREVIOUS CITY, WE, WE HAD AN AUDITOR AND THEN WE HAD AN AUDITOR, YEAH.
AND THAT AUDITOR'S JOB WAS TO PREPARE US FOR THE AUDIT, AND IT, IT WORKED REALLY WELL.
AND YEAH, SURE, ERRORS ARE MADE, UH, ESPECIALLY IN A COMPLEXITY, BIG BOOK, HE, THAT DOESN'T BOTHER ME AS MUCH.
THE ERRORS DON'T BOTHER ME AS MUCH AS NOT PICKING THEM UP AND, AND COMMUNICATING THAT.
THAT'S THE THING THAT REALLY BOTHERED ME THE MOST.
AND BECAUSE, I MEAN, WE'RE A QUARTER BILLION DOLLAR BUDGET AND, UH, I, I THINK PROBABLY, UH, UH, ALL DAY LONG ERRORS OCCUR.
UH, FINANCE DEPARTMENTS PICK THOSE UP, THEY CORRECT THOSE.
I THINK THAT'S WHAT'S HAPPENED IN, IN PREVIOUS YEARS.
AND THIS TIME, UH, WE DIDN'T HAVE SOMEBODY THAT WAS SUCCESSFUL IN DOING THAT.
AND SO THAT'S WHAT REALLY HELPED US.
AND SO I'M VERY SATISFIED WITH THE PLAN THAT, THAT THERESA AND, AND, UH, AND VICTOR HAVE, UH, DEVELOPED.
AND I, I'M PRETTY SURE THAT OUR AUDITORS ARE GONNA BE PRETTY SATISFIED WITH THAT AS WELL AND MAKE SURE THIS DOESN'T HAPPEN AGAIN.
SO LET'S STAY ON THE MANAGEMENT LETTER IN THE BACK OF THE LARGE BOUND DOCUMENT.
WITHIN, WITHIN THE COVER, YOU'RE GONNA FIND OUR MANAGEMENT LETTER AND REQUIRED AUDITOR DISCLOSURE LETTER, STAPLE DOCUMENTS, THE MANAGEMENT LETTER, ALL THE WAY TO THE BACK STAPLE DOCUMENTS AND TUCKED INSIDE THERE.
UM, SO WE JUST DISCUSSED THE FIRST COMMENT.
THE NEXT ONE IS SIMILAR IN NATURE, UM, BUT A LITTLE DIFFERENT.
SO IN THIS CASE, UH, CITY, AGAIN, AS YOU THINK ABOUT THE CITY, IT HAS MULTIPLE, WE REFER TO ALMOST AS BUCKETS OF MONEY.
AND SO A BUCKET OF MONEY MAY BE SYNONYMOUS ANONYMOUS WITH A FUND, A DEBT SERVICE FUND, THE GENERAL FUND, UM, A COMPONENT UNIT IN THIS CASE, UM, THE COMMUNITY DEVELOPMENT FUND, THE BAY CREEK PUBLIC IMPROVEMENT DISTRICT, UM, AND THE MUNICIPAL DEVELOPMENT DISTRICT.
EACH OF THESE FUNDS, UM, BASICALLY
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SHARE CASH WITH THE CITY'S GENERAL FUND.AND IN THIS CASE, UM, POOL CASH IS WONDERFUL, ESPECIALLY FOR AN ENTITY THIS SIZE.
BUT ONE OF THE DANGERS OF PULL CASH IS WHEN ANOTHER FUND THAT PARTICIPATES, UH, GOES NEGATIVE, WE HAVE THAT FUND HAS ESSENTIALLY SPENT MORE MONEY THAN IT HAD AVAILABLE TO IT.
SO IF YOU KIND OF THINK ABOUT YOUR OWN PERSONAL CHECKING ACCOUNT, ESSENTIALLY YOU HAVE OVERDONE YOUR ACCOUNT.
UM, AND SO IDEALLY WHEN THAT HAPPENS, THERE SHOULD BE SOME SYSTEM, UM, PROCESSES IN PLACE TO ALERT STAFF AND MANAGEMENT THAT A FUND HAS GONE NEGATIVE AND THAT YOU ESSENTIALLY APPROVE THAT BORROWING OF MONEY FROM THE CITY'S GENERAL FUND OR SOME OTHER ENTITY THAT IS COVERING THAT DEFICIT.
SO IN THIS CASE, UM, MDD JUST OVER 166,000, THE COMMUNITY DEVELOPMENT FUND WAS JUST OVER 1.3 MILLION.
UM, AND THE BAY CREEK BID WAS MUCH SMALLER AT APPROXIMATELY 14,000.
UH, THE NEXT ONE WAS EXPENDITURES AND EXCESSIVE APPROPRIATIONS.
AGAIN, THIS REFERS TO THE MUNICIPAL BUDGETING PROCESS.
AGAIN, WE HAD EXPENDITURES THAT EXCEEDED THE FINAL AMENDED BUDGET.
UH, THIS WAS WITHIN THE DEBT SERVICE FUND, THE GENERAL FUND AND THE CRIME CONTROL AND PREVENTION DISTRICT.
SOME OF THESE THINGS CAN BE RATHER MINOR.
UH, WE MAY HAVE FOUND SOMETHING IN OUR SEARCH FOR UNRECORDED LIABILITIES.
OTHER, OTHER TIMES WE MIGHT JUST SIMPLY LOSE TRACK OF THE BUDGET VERSUS AN ORDINANCE.
SO IN THE CASE OF THE DEBT SERVICE FUND, COUNSEL DID AUTHORIZE AN ORDINANCE FOR THE ISSUANCE OF REFUNDING DEBT.
HOWEVER, ONE OF THE ACCOUNTING ENTRIES THAT'S MADE, UM, WHICH AS WE TALK ABOUT BANK ACCOUNTS, DIDN'T NECESSARILY FLOW THROUGH THE BANK ACCOUNT 'CAUSE IT WAS A NET TRANSACTION.
WE WOULD COME IN AND ENSURE THAT THE CITY HAD GROSSED UP THE PROCEEDS TO RECOGNIZE THE ISSUANCE COST AS WELL AS THE PAYMENT TO THE REFUNDING ESCROW AGENT.
UM, AND WHEN THAT HAPPENS, THE BUDGET WASN'T AMENDED FOR THOSE THINGS, EVEN THOUGH WE HAD ADOPTED AN ORDINANCE TO AUTHORIZE THAT PARTICULAR TRANSACTION.
AGAIN, OUR RECOMMENDATION IS, UM, TO TRY TO MONITOR THOSE BUDGETS AS BEST TO YOUR ABILITY AND MAKE THOSE AMENDMENTS BEFORE APPROPRIATIONS ARE SPENT.
AND THEN THE NEXT ONE IS SIMPLY JUST A FUTURE ACCOUNTING PRONOUNCEMENT THAT IS EFFECTIVE FOR FISCAL YEAR 22.
IT IS ANOTHER RATHER LARGE STATEMENT.
UH, WE DON'T EXPECT THE IMPACT TO BE AS GREAT AS THE PENSION AND OPEP REPORTING REQUIREMENTS, BUT THIS IS A NEW ONE FOR OPERATING LEASES.
TRADITIONALLY, FOR OPERATING LEASES, THEY DON'T GO ON THE CITY'S BALANCE SHEET, SO YOU WOULDN'T SEE A LONG-TERM LIABILITY.
HOWEVER, OPERATING LEASES TYPICALLY HAVE A THREE YEAR, FIVE YEAR, 10 YEAR TERM, DEPENDING ON WHAT IT MAY BE THAT YOU'VE ENTERED INTO AN OPERATING LEASE FOR IN A SMALLER ORGANIZATION, MOST COMMONLY YOU WOULD SEE OPERATING LEASES FOR LIKE XEROX COPIERS AND THINGS LIKE THAT.
UM, THIS NEW STANDARD WOULD REQUIRE THAT YOU LOOK AT THE TERM OF THE LEASE AND DEVELOP WHAT IS THE NET PRESENT VALUE OF THAT OBLIGATION FOR THE ENTIRE THREE YEAR, FIVE YEAR, 10 YEAR TERM.
AND YOU PUT BOTH AN ASSET ON THE BALANCE SHEET FOR A RIGHT TO USE ASSET.
SO WE, IN THIS CASE, RIGHT TO USE ASSET WOULD BE COPIERS.
AND THEN WE'D HAVE A LONG TERM LIABILITY FOR THE TERM OF THE LEASE FOR THE VALUE OF THOSE.
SO IF I COULD JUST COMMENT ON THAT LAST ONE POINT TAKEN, WHICH IS WHY WE WILL BE AVOIDING LEASE ARRANGEMENTS, UM, ON THE ISSUE OF NEGATIVE CASH BALANCES, AGAIN, POINT DID CATCH.
UM, MY UNDERSTANDING IS THAT'S BEEN CUSTOMER PRACTICE HERE TO, UH, CONSOLIDATE OUR ACCOUNTS IN THIS WAY.
I THINK WE CAN, UM, DO BETTER AT MAKING THOSE SORTS OF ADJUSTMENTS TO AVOID THAT IN THE FUTURE.
THE OTHER THING, AS YOU KNOW, WE'RE MOVING TO CADENCE BANK FROM JP MORGAN CHASE, AND WE ARE, TERESA AND I PARTICULARLY ARE HOPING THAT THAT WILL HELP, PARTICULARLY WITH THE REPORTING, UH, THAT WE GET FROM, UH, FROM THE BANK, UH, BECAUSE I KNOW, UH, WE HAVE BEEN A BIT FRUSTRATED WITH THE, THE, THE LACK OF, OF REPORTING, UH, CAPABILITY IN JP MORGAN CHASE.
SO AGAIN, I I THINK THAT'S SOMETHING WE CAN, UH, WE CAN WORK ON ON THE ISSUE OF THE EXPENDITURES IN EXCESS OF APPROPRIATIONS.
SO RICK AND I HAVE BEEN TALKING ABOUT THIS FOR SOME TIME.
UM, WE WOULD LIKE TO BE BRINGING YOU BUDGET AMENDMENTS OVER THE COURSE OF THE YEAR.
WE THINK THAT IS GOOD PRACTICE AND I WOULD SUGGEST TO YOU THAT THIS FINDING BEARS OUT THAT THAT IS GOOD PRACTICE.
HOWEVER, UH, THERE HAS BEEN ADVICE GIVEN TO BOTH RICK AND ME PREVIOUSLY, THAT THAT'S SOMETHING THAT WE CAN'T DO, UH, BECAUSE OF STATE LAW OR WHATEVER.
SO GOING FORWARD, EXPECT TO SEE, EXPECT TO SEE BUDGET AMENDMENTS, UH, WHICH WOULD DEAL WITH THIS.
UH, COULD I JUST SAY I WOULD LOOK AT THESE, UM,
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MOST OF THIS RELATED TO EXPENDITURE FOR, UM, PUBLIC SAFETY PERSONNEL.SO THAT'S, UH, FIRE AND POLICE.
AND IF ANYONE THINKS THAT THIS MEANS WE'VE OVERSPENT THEIR BUDGET, WE HAVEN'T BECAUSE WE'VE KEPT WITHIN THE OVERALL, UH, THE OVERALL BUDGET BECAUSE OF THE EFFECT OF THE GENERAL FUND CONTINGENCIES.
WHEN YOU SEE THIS SORT OF THING HAPPENING, WE SHOULD BE ABLE TO GO BACK AND TELL YOU AND AMEN THE BUDGET TO REFLECT REALITY.
SO I HAVE TO SAY THE NEGATIVE CASH BALANCES AND THE EXPENDITURES AND EXCESS APPROPRIATIONS REALLY SURPRISES ME BECAUSE THIS ISN'T THE KIND OF REALITY THAT I'VE BEEN PRESENTED AS A COUNCIL MEMBER.
UM, I'VE BEEN TOLD IT'S NOT IN THIS BUDGET OR THIS ACCOUNT, AND SO WE CAN'T DO IT.
OH, WELL WE HAVE ALL THIS EXCESS MONEY IN GENERAL FUND.
WELL, WE CAN'T USE GENERAL FUND MONEY FOR THIS ACCOUNT AND YOU CAN ONLY USE MONEY IN THIS ACCOUNT.
AND THIS TELLS ME THAT THAT'S NOT, UM, TRUE.
SO, UM, IT'S DISAPPOINTING TO HEAR, AND I'M THINKING BACK TO ALL THE THINGS THAT I KNOW COUNCIL MEMBERS HAVE ASKED FOR THAT WE'VE BEEN TOLD THERE'S NO MONEY FOR MM-HMM
AND, UM, I, I LIKE THE RECOMMENDATION OF A FORMAL POLICY ON HOW, UH, DEFICIT BALANCES WILL BE COMMUNICATED TO US.
UM, I'M SURPRISED THAT IT'S NOT REQUIRED ALREADY FOR US TO APPROVE MOVING MONEY FROM GENERAL FUND TO COVER DEFICITS AND OTHER FUNDS.
I'M SURPRISED THAT'S NOT ALREADY A BASE.
NO, THAT, THAT, THAT'S, THAT'S NOT, THAT'S NOT WHAT THIS IS.
THIS ISN'T ABOUT MOVING MONEY AT THE GENERAL FUND TO, UH, TO COMPENSATE OTHER, OTHER FUNDS.
THAT WASN'T THE POINT THAT, THAT I WAS TALKING ABOUT WITHIN, SPECIFICALLY WITHIN THE GENERAL FUND.
AND JUST REFLECTING UPON THE FACT THAT WHAT ABOUT THIS ONE? OH, IN TERMS OF NEG, SO THAT'S ABOUT, THAT'S ABOUT HOW WE MANAGE AS, AS STEPHANIE SAID, THE BIG BUCKET OF CASH THAT WE KEEP FOR ALL THE FUNDS.
IT'S NOT, IT'S NOT ABOUT CO-MINGLING BUDGETS, BUT TO RECONCILE THESE THREE NEGATIVE BALANCES, THE DEFICITS WERE ADJUSTED FROM THE GENERAL FUND TO ELIMINATE THE DEFICIT, RIGHT? FROM THE, THAT MEANS WE TOOK MONEY FROM THE GENERAL FUND AND PUT IT IN MDD TO COVER THE ONE HUNDRED AND SIXTY SIX, FIVE HUNDRED FOUR, RIGHT? YEAH.
I TOOK $1.3 MILLION FROM THE GENERAL FUND AND PUT IT IN THE COMMUNITY DEVELOPMENT FUND.
ESSENTIALLY THAT IS WHAT HAPPENED BECAUSE YOU CAN'T, THE BANK'S NOT GONNA HONOR THE CHECK IF THE CASH WASN'T THERE.
BUT THEY DID HONOR THE CHECK BECAUSE AGAIN, YOU HAVE THIS BIG POOL OF CASH.
SO WHAT HAPPENS ON THE GENERAL LEDGER SIDE NOW IS THE GENERAL FUND REFLECTS A RECEIVABLE.
IT SAYS, UH, MDD AND COMMUNITY DEVELOPMENT, YOU NOW OWE ME THIS ONE POINT WHATEVER MILLION.
AND EACH OF THESE FUNDS NOW REFLECT RATHER THAN DEFICIT CASH.
SINCE WE KNOW THEORETICALLY THAT DOESN'T EXIST, EACH OF THOSE FUNDS NOW SHOW A DUE TO GENERAL FUND FOR THAT AMOUNT.
'CAUSE I THOUGHT WE ALREADY, WE HAD A PROCESS IN PLACE WHERE IF THAT WAS GONNA HAPPEN, WE HAD TO APPROVE IT, BUT I GUESS I WAS WRONG OR MISINFORMED.
UM, I DON'T KNOW HOW YOU FEEL ABOUT HOW TO DEAL WITH THAT IN THE FUTURE OR A POLICY.
I JUST FEEL LIKE WE SHOULD KNOW AND APPROVE THAT THAT'S GONNA HAPPEN.
SO, SO THESE SORTS OF THINGS HAPPEN LARGELY BECAUSE OF TIMINGS OF CASH FLOWS MM-HMM
SO WHERE THINGS ARE GETTING PAID BECAUSE THEY HAVE TO BE PAID THE THE OBVIOUS, IT'S NOT A REAPPROPRIATION NO, IT'S IT IS NOT EXACTLY, IT'S A MATTER OF CASH FLOWS.
IT'S ABOUT THE TIMINGS OF CASH FLOWS AND IT REFLECTS THAT WE HAVE ESSENTIALLY A GREAT BIG POOL OF MONEY AND WE MAKE SURE WE PAY ALL THE BILLS.
AND SO FOR INSTANCE, THE MDD SALES TAXES COMING IN, THE STUFF HAS TO GET PAID PARTICULARLY FOR SOME OF THE PROJECTS.
SO DOES IT MAYBE PAY THE GENERAL FUND BACK? YES.
IT GETS ESSENTIALLY IT'S SETTLED UP.
BUT WHAT, WHAT I THINK WHAT STAFF NEEDS SAYING IS WE SHOULD DO THAT MORE OBVIOUSLY AND SAY, HEY, THIS MONEY IS OWED TO THE, TO THE, THE GENERAL FUND'S BANK ACCOUNT BY THIS FUND SO THAT IT TIED UP AND WE JUST ALLOWED IT TO ORGANICALLY FLOW.
AND, AND WE REALLY, AND, AND GOING BACK TO YOUR EARLIER COMMENT, UH, HEATHER, I I, I THINK WE TRY TO HONOR, UH, TO THE GREATEST EXTENT WE CAN WHAT COUNSEL APPROPRIATE FOR CERTAIN PURPOSES IN THE BUDGET.
BUT I WANNA GET BACK TO, TO, TO, UM, VICTOR'S EARLIER STATEMENT.
UH, I'VE AMENDED THE BUDGET AND EVERY CITY I'VE EVER WORKED IN, THERE WAS AN OLD ADAGE BACK IN THE CITY I WORKED IN, SAYS, YOU CAN ONLY AMEND THE BUDGET 365 TIMES A YEAR.
AND SO, UH, I GOT HERE AND LEGAL ADVICE I WAS GIVEN, AND EVEN OUTSIDE OF OUR CITY WAS THAT YOU CANNOT AMEND THE BUDGET UNLESS, UH, YOU HAVE SOME KIND OF BONAFIDE EMERGENCY.
WELL, THAT WOULD BE LIKE A HURRICANE OR, OR
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SOMETHING LIKE THAT.UH, I JUST NEVER HAVE THOUGHT THAT WAS TRUE.
BUT I'VE NEVER HAD LEGAL COUNSEL THAT WOULD EVER, UH, TELL ME ANYTHING DIFFERENT NO MATTER WHAT RESEARCH THEY DID.
I'VE ASKED COLLEAGUES AND THEY WERE PRETTY MUTED.
WELL, IF THAT'S WHAT YOUR ATTORNEY SAYS, YOU KNOW, THAT, UH, I, I SAID, WELL, YOU GUYS AMEND THE BUDGET.
A COUPLE OF 'EM SAID, NO, WE DON'T AMEND THE BUDGET.
WELL, THEY DON'T HAVE CITY'S NEAR AS COMPLEX AS OURS.
AND UH, SO ONE OF THE THINGS I WANTED TO DO WITH SCOTT WAS TO RENEW THE CONVERSATION MM-HMM
OUR NEW ATTORNEY WITH, WITH FINANCE, AND GET SOME LEGAL, UH, BASIS FOR TELLING YOU WHETHER OR NOT WE COULD ACTUALLY AMEND THE BUDGET.
AND THAT WOULD BE, I THINK, UH, AN IMPORTANT TOOL, UH, IN YOUR HANDS.
AND ESPECIALLY IF WE CONSIDER WANTING TO DO CERTAIN PROJECTS DURING THE MIDDLE OF THE YEAR THAT, THAT WE HADN'T COUNTED ON THE BEGINNING OF THE BUDGET.
AND WE, WE'VE DONE OUR LEVEL BEST WITHIN THE RESOURCES WHERE WE HAVE TO ACCOMMODATE EVERYTHING THE COUNCIL'S WANTED TO DO.
BUT, UH, THIS WILL GIVE US JUST ONE MORE QUIVER AND OR ONE MORE ARROW IN THE QUIVER TO BE ABLE TO DO THAT.
BUT I, AGAIN, I WANT YOU, WE HAVE AN OVERSPENT HERE AND THERE MANIPULATING ANYTHING.
IT IS JUST A MATTER OF ONE BUCKET AND CASH FLOWING IN AND CASH CASH FLOWING OUT.
AND HONESTLY, WE JUST DON'T COLLECT SOME TAXES AS FAST AS WE DO OTHERS.
PROPERTY TAX, WE GET ALMOST ALL AT THE SAME TIME.
BUT THERE MAY BE THINGS THAT WE FINANCE OFF A PROPERTY TAX THAT WE JUST HAVEN'T GOTTEN THE PROPERTY TAX.
SO SALES TAXES, KIND OF PAYING FOR IT UNTIL THE PROPERTY TAX COMES, COMES IN.
IT'S A VERY DYNAMIC SITUATION AND IT'S CAUSED BY HAVING THIS BIG BUCKET OF MONEY.
SO HERE I DON'T, THERE'S NOTHING, ANYTHING UNTOWARD THAT'S, THAT'S BEEN, BEEN DONE.
IT'S JUST A MATTER I THINK OF WHAT YOU'RE TALKING ABOUT IS JUST MAKING SURE THAT IT'S VERY OBVIOUS TRANSPARENT.
AND UH, THAT CERTAIN FUNDING IS OWED TO THAT OVER HERE.
AND I THINK IT'S JUST A GOOD IDEA.
WHAT I'M HEARING IS WE'RE GONNA HAVE A PAPER TRAIL NOW.
AS THE DYNAMICS INTERACT WITH EACH OTHER.
YOU'VE GOT IT EXACTLY CORRECTLY.
NO, WE'RE NOT OVERSPENDING ANY BUDGETS.
IT'S JUST THAT THAT FUNDING FOR THIS JUST HASN'T COME ONLINE AS FAST AS FUNDING FOR THIS OVER HERE.
SO THIS IS JUST KIND OF TAKING CARE OF THIS NEED OVER HERE, BUT THEN THAT FUNDING COMES IN, THEN THAT FUNDING TAKES CARE OF THIS.
AND IT ALL HAPPENS ORGANICALLY AND VERY DYNAMICALLY.
BUT WITH, WITHIN THE PRESCRIPTIONS OF LAW, WE'RE NOT, WE'RE NOT VIOLATING ANY LAWS.
UH, BUT IT'S JUST A GOOD THING.
I THINK THIS ELEVATES OUR TRANSPARENCY AND OUR ACCOUNTABILITY BY MAKING SURE WE HAVE SOMETHING THAT COMMUNICATES, UH, WHAT YOU'RE, YOU ARE SUGGESTING.
'CAUSE IF YOU KIND OF THINK ABOUT THE OLD DAYS BEFORE WE HAD THIS IN, UM, SOMEBODY COMING UP WITH THE IDEA OF POOLING ALL YOUR RESOURCES, YOU WOULD'VE HAD A SEPARATE BANK ACCOUNT FOR EACH OF THESE ENTITIES.
COMMUNITY DEVELOPMENT WOULD'VE HAD ITS OWN BANK ACCOUNT.
AND SO WHEN IT DIDN'T HAVE ENOUGH MONEY TO HONOR THE CHECKS THAT IT WAS GOING TO CUT, YOU HAD TO PHYSICALLY MAKE THE TRANSFER.
WELL, ONE OF THE NICE THINGS ABOUT POOL CASH IS YOU DON'T HAVE TO PHYSICALLY MAKE THE TRANSFER, BUT HOWEVER YOU HAVE IN EFFECT LENT THOSE FUNDS TO THE OTHER FUND.
AND SO THIS IS JUST TRYING TO MAKE POOL MONEY COMES OFF UNTIL THE OTHER MONEY FUNDING SOURCES COME ONLINE, WHETHER THAT'S THE GRANT FOR A REIMBURSEMENT GRANT, WHETHER THAT'S TAXES FOR SOME OTHER PURPOSE.
YEAH, BUT YOU LIKE THAT VICTOR, THAT SYSTEM INSTEAD OF HAVING SEPARATE ACCOUNTS.
WELL, IT, IT, IT CUTS OUT A LOT.
YOU DON'T GET RETURN CHECKS THEN, UM, YOU ALSO ADMINISTRATIVELY YEAH.
BUT I THINK THIS IS JUST SUGGESTING THAT WE NEED TO BE CLEAR, PARTICULARLY THIS IS AT YEAR END.
WHERE THIS FUND TO CALL IT THE MDD HAS PAID THE MONEY OUT FOR THE HOTEL CONVENTION CENTER BECAUSE OF ALL THE SALES TAXES IT'S COLLECTED.
WE HAVEN'T GOT THE END OF THE YEAR YET.
GENERAL FUNDS GOT THE CASH BECAUSE OF ALL THE CASH THAT'S SITTING THERE FOR PROPERTY TAX THAT PAYS AT THE END OF THE YEAR.
WE NEED TO RECORD THAT AND SAY, HEY, THAT'S OWE.
WHAT HAPPENS IS, SO OVER THE COURSE OF THOSE MONTHS, IT'S TRUED UP.
BUT WHAT WE'RE SAYING AT THE END OF THE YEAR, WE NEED TO RECORD IT.
AND KNOW EXACTLY WHAT IT'S OWED BY WHAT, THAT'S WHAT THIS WILL DO.
WELL, THIS TYPE OF DYNAMIC STILL CONTINUE IN THE FUTURE.
THAT'S NOT, THEY'RE NOT, THEY'RE NOT SAYING THAT'S A BAD THING.
ANY OF THESE DEFICITS ARE NOT BAD THINGS.
IT'S, WE'RE NOT COMMUNICATING IT, I THINK AND THAT'S WHAT WE NEED TO DO.
WE NEED TO BE TRANSPARENT ABOUT THE FACT THAT THIS IS OCCURRING.
ALRIGHT, SO THAT'S THE MANAGEMENT LETTER.
THE OTHER ITEM THAT WAS TUCKED IN THERE WAS THE REQUIRED AUDITOR DISCLOSURE LETTER.
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IS MORE OF A HOUSEKEEPING ITEM WITHIN HERE.YOU'RE GOING TO FIND WHAT OUR ROLES AND RESPONSIBILITIES ARE AS THE EXTERNAL FINANCIAL STATEMENT AUDITOR, AS WELL AS WHAT THOSE ARE OF MANAGEMENT WITHIN THE AUDIT PROCESS.
AND THEN BEHIND ALL OF THAT, YOU'LL FIND THE ADJUSTMENTS THAT WERE POSTED THROUGH THE AUDIT PROCESS.
SO LET'S TURN TO THE ACTUAL FINANCIAL STATEMENT, WHICH AGAIN IS THE BIG DOCUMENTS.
PAGE 13, IF OUR OFFICIAL REPORTS CAN I UH, I'M GONNA GO CHECK TO SEE IF MY NEXT APPOINTMENT IS HERE.
I'M IN KIND OF A HALF HOUR SURE.
I'M SO, BUT UM, I'LL REJOIN YOU IF, IF MY APPOINTMENT DOESN'T GO ALRIGHT.
AND AGAIN, THIS IS THE GOOD NEWS AND THIS IS AGAIN WHAT WE WOULD BE HIGHLIGHTING AT THE COUNCIL PRESENTATION THURSDAY NIGHT.
UH, VERY PLEASED TO SAY THAT WE ARE ISSUING A CLEAN UNMODIFIED OPINION ON THE FINANCIAL STATEMENTS.
UNMODIFIED BEING THE HIGHEST LEVEL OF ASSURANCE WE CAN PROVIDE AS THE INDEPENDENT AUDITOR.
THAT THE FINANCIAL STATEMENTS ARE MATERIALLY CORRECT AND THAT ALL DISCLOSURES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES WERE INCLUDED.
AND AGAIN, IN THIS MEETING, WE'RE GONNA TALK ABOUT SOME OF THESE THINGS IN A LITTLE, UH, LOWER OR GRANULAR LEVEL OF DETAIL THAN WE WOULD THURSDAY NIGHT.
BUT PAGE 32 AND 33, THIS IS THE STATEMENT NET OF NET POSITION FOR THE CITY AS A WHOLE.
THIS PARTICULAR PRESENTATION IS FULL ACCRUAL WHERE THE SAME BASIS OF ACCOUNTING USED BY A FOR-PROFIT ENTITY.
AND HERE YOU'RE GONNA SEE COLUMNS ON PAGE 32 FOR GOVERNMENTAL ACTIVITIES, BUSINESS TYPE AND A TOTAL.
AND THEN OVER THERE ON THE RIGHT YOU'LL SEE COLUMNS FOR THE MUNICIPAL DEVELOPMENT DISTRICT AS WELL AS THE BAYTOWN AREA WATER AUTHORITY.
BUT FOCUSING ON PAGE 32, IN TOTAL, THE CITY ENDED THE YEAR WITH TOTAL ASSETS OF APPROXIMATELY 832 MILLION TOTAL DEFERRED OUTFLOWS OF RESOURCES.
AND AGAIN, THESE ARE PRIMARILY LONG-TERM ITEMS THAT ARE SIMPLY GOING TO BE RECOGNIZED IN A DIFFERENT FISCAL PERIOD RELATED TO PENSION AND OPEP BENEFITS AS WELL AS THE ISSUANCE OF DEBT.
THE CITY HAD APPROXIMATELY 27.8 MILLION IN DEFERRED OUTFLOWS.
YOU ENDED THE YEAR WITH TOTAL LIABILITIES OF JUST OVER 394.7 MILLION DEFERRED INFLOWS.
AGAIN, OTHER ITEMS THAT ARE BEING DEFERRED UNTIL A FUTURE ACCOUNTING REPORT REPORTING PERIOD RELATED TO PENSION, OPE AND DEBT OF 18.6 MILLION.
THIS DID LEAVE THE CITY WITH AN OVERALL POSITIVE NET POSITION OF JUST OVER 446 MILLION.
THE MAJORITY OF WHICH REPRESENTS THE CITY'S INVESTMENT IN LONG-TERM CAPITAL ASSETS.
JUST GLOBALLY KIND OF LOOKING, IF YOU WERE TO READ, UM, THE MANAGEMENT'S DISCUSSION AND ANALYSIS, YOU WOULD NOTE AN OVERALL INCREASE IN TOTAL FOR ASSETS AS WELL AS LONG-TERM LIABILITIES.
AND THAT'S PRIMARILY RELATED TO THE ISSUANCE OF LONG-TERM DEBT DURING THE YEAR.
OH, BEFORE I TURN THE PAGE, PAGE 33, 1 OF THE MORE SIGNIFICANT THINGS THAT HAPPENED DURING THE YEAR WITH REGARD TO MDD WAS ALSO THE ISSUANCE OF LONG-TERM DEBT FOR THE DEVELOPMENT ACTIVITY GOING ON AT BAYLAND ISLAND.
AND SO THAT FUND NOW HAS APPROXIMATELY 69.7 MILLION IN, UH, RESTRICTED CAPITAL FOR CAPITAL IMPROVEMENTS AS WELL AS JUST OVER 5.3 MILLION FOR FUTURE DEBT SERVICE.
IT ALSO HAS A CORRESPONDING LONG-TERM LIABILITY FOR THE DEBT THAT WAS ISSUED OF 72.7 MILLION.
THIS IS THE STATEMENT OF ACTIVITIES.
ALSO FULL WILL BE SOME NON-CASH ITEMS LIKE DEPRECIATION EXPENSE ON THE CITY'S CAPITAL ASSETS.
AND THIS IS A SIDEWAYS PRESENTATION OF A TRADITIONAL INCOME STATEMENT.
UH, READING THAT LEFT TO RIGHT, THE CITY HAD JUST OVER 188 MILLION IN EXPENSES FOR THE 21 FISCAL YEAR THAT INCLUDED JUST OVER 54.1 FOR BUSINESS TYPE.
THE MAJORITY OF THAT 54.1 REPRESENTS THE COST FOR THE PROVISION OF WATER AND SEWER SERVICES AT JUST OVER 41 MILLION, APPROXIMATELY 7 MILLION FOR SANITATION JUST OVER 200,000 RELATED TO THE BAYLIN ISLAND DEVELOPMENT.
UH, 3.7 MILLION FOR AQUATICS AND JUST OVER 2 MILLION FOR STORMWATER.
OF THAT 188 MILLION APPROXIMATELY 133.9 MILLION REPRESENTS COST INCURRED FOR THE PROVISION OF ALL OTHER MUNICIPAL SERVICES, WHICH INCLUDED PUBLIC SAFETY, PUBLIC WORKS, PARKS AND REC, AS WELL AS INTEREST ON THE CITY'S LONG-TERM DEBT.
KIND OF FOLLOWING THAT TO THE RIGHT, THE CITY COLLECTED DIRECT CHARGES FOR SERVICES OF 67.4 MILLION, THE BULK OF WHICH RELATES TO BUSINESS TYPE ACTIVITIES, UH, IN THE FORM OF CHARGES TO SERVICES FOR SERVICES RELATED TO CUSTOMERS PER WATER AND SEWER AND SANITATION.
AND THEN OTHER CHARGES FOR SERVICES OF 7.4 MILLION RELATED TO YOUR GENERAL GOVERNMENT ACTIVITIES AND THESE PRIMARILY WOULD BE PERMITS AND MUNICIPAL COURT OPERATING GRANTS
[00:35:01]
AND CONTRIBUTIONS WERE JUST OVER 7.9 MILLION FOR THE YEAR.CAPITAL GRANTS AND CONTRIBUTIONS WERE 6.7 AND THEN FOLLOWING THAT ALL THE WAY OVER THERE TO THE RIGHT, YOUR NET EXPENSE AFTER THOSE PROGRAM REVENUES WERE JUST OVER 105 MILLION FOR THE YEAR.
FOLLOWING THAT DOWN TO THE BOTTOM OF THE PAGE, YOU'LL SEE THE CITY'S GENERAL REVENUES AND AGAIN, GENERAL REVENUES ARE THOSE THAT AREN'T, UM, COLLECTED OR INTENDED TO FINANCE A PARTICULAR SERVICE.
RATHER THEY CAN BE USED TO FINANCE ALL YOUR MUNICIPAL OPERATIONS AND THE LARGEST OF WHICH REPRESENTS PROPERTY AND SALES TAX DOLLARS AS WELL AS INDUSTRIAL DISTRICT PAYMENTS.
FOR THE CITY OF BAYTOWN, THE CITY HAD JUST OVER 140 MILLION IN GENERAL REVENUES FOR THE 2021 FISCAL YEAR.
THIS DID RESULT IN OVERALL POSITIVE INCREASE IN YOUR NET POSITION OF APPROXIMATELY 34.3 MILLION.
SO TURNING THE PAGE TWO 40 AND 41 40 AND 41 IS THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE CITY'S GOVERNMENTAL FUNDS.
THIS PARTICULAR PRESENTATION IS MODIFIED ACCRUAL OR THE SAME BASIS BY WHICH YOU WOULD GENERALLY ADOPT YOUR OPERATING BUDGET FOR THE CITY'S GENERAL FUND.
TOTAL REVENUES FOR THE 21 FISCAL YEAR WERE JUST OVER 155.4 MILLION TOTAL EXPENDITURES, WHICH DOES INCLUDE BOTH CAPITAL OUTLAY AS WELL AS PRINCIPAL.
AND INTEREST ON CITY ISSUED DEBT WAS APPROXIMATELY 155.2 MILLION.
OTHER FINANCING SOURCES AND USES THIS YEAR INCLUDED TRANSFERS IN AND OUT BETWEEN THE CITY'S GOVERNMENTAL AS WELL AS BUSINESS TYPE FUNDS AS WELL AS LONG-TERM DEBT THAT WAS ISSUED.
OVERALL, YOU HAD NET RESOURCES OF 44.4 MILLION, WHICH PREDOMINANTLY REPRESENTS THE ISSUANCE OF LONG-TERM DEBT, WHICH ALSO CONTRIBUTED TO YOUR OVERALL INCREASE IN FUND BALANCE OF 44.6 MILLION.
THE BULK OF THAT INCREASE CAN BE SEEN WITHIN THE CAPITAL PROJECTS FUND, AGAIN AS A RESULT OF THE ISSUANCE OF DEBT OF 36.3 MILLION.
UH, ALSO THE CITY DID ISSUE SOME REFUNDING DEBT THAT'S RECORDED WITHIN THE DEBT SERVICE FUND OF JUST OVER 16 AND A HALF MILLION.
AGAIN, THIS WAS A GREAT OPPORTUNITY FOR THE CITY TO REDUCE FUTURE DEBT SERVICE BY APPROXIMATELY 1.6 MILLION.
AND IT ALSO REC RESULTED IN A LONG-TERM ECONOMIC GAIN FOR THE CITY OF 1.5 MILLION.
AGAIN, AS WE'RE HERE AT THE GENERAL FUND, ONE OF THE BENCHMARKS WOULD BE TO LOOK AT THE CITY'S ENDING FUND BALANCE OF 48.3 MILLION WITHIN THE GENERAL FUND.
IN COMPARISON TO WHAT YOUR ANNUAL OPERATING COSTS WERE OF JUST OVER 101.1 MILLION, YOU WOULD GENERALLY WOULD WANNA SEE AT LEAST 25% TO BE CONSERVATIVE.
UH, THE CITY HAS A VERY HEALTHY ENDING FUND BALANCE AT THAT 48.3 MILLION, WHICH REPRESENTS APPROXIMATELY 48% OR ROUGHLY SIX MONTHS WORTH OF OPERATING COSTS.
THAT IS, UH, ESSENTIALLY ANYTHING THAT I WOULD WANT TO HIGHLIGHT WITHIN THE ACTUAL FINANCIAL STATEMENTS.
UH, IF YOU WERE TO LOOK WITHIN THE REQUIRED, REQUIRED SUPPLEMENTING INFORMATION, WHICH IS ABOUT THREE-FOURTHS OF THE WAY THROUGH THE REPORT, AND IF YOU LOOKED AT THE SCHEDULE OF FUNDING PROGRESS FOR THE PENSION AND OPE PLANS, YOU WOULD SEE THAT THE CITY HAD A NICE OVERALL REDUCTION IN LONG-TERM LIABILITIES RELATED TO BOTH THOSE PLANS, PRIMARILY AS A RESULT OF INVESTMENT EARNINGS.
CAN'T SAY THAT WE WOULD SEE THE SAME THING NEXT YEAR.
AND WE DID ISSUE A SINGLE AUDIT THAT IS THE SMALLER, THINNER DOCUMENT.
AND I'M GONNA TURN YOUR ATTENTION TO PAGE NINE.
THIS IS THE SCHEDULE OF FINDINGS AND QUESTION COSTS.
HERE YOU'LL ESSENTIALLY SEE A SUMMARY OF OUR ENTIRE AUDIT PROCESS, LIKE THE OPINION WE ISSUED ON THE FINANCIAL STATEMENTS.
WE'VE ALSO ISSUED AN OPINION ON THE CITY'S COMPLIANCE WITH ITS MAJOR FEDERAL AWARD PROGRAMS THAT WE TESTED.
AND FOR 2021, WE TESTED, UH, BOTH OF THEM WERE COMMUNITY DEVELOPMENT BLOCK GRANTS.
UH, THEIR ASSISTANT ASSISTANT LISTING NUMBERS WERE 14.218 AND 14.228.
VERY PLEASED TO SAY THAT AS A RESULT OF OUR TESTING OF THESE TWO PROGRAMS THAT WERE ALSO ISSUING A CLEAN UNMODIFIED OPINION ON THE CITY'S COMPLIANCE WITH ITS FEDERAL GRANT PROGRAMS, WE DID NOT IDENTIFY ANY FINDINGS IN THE AUDIT PROCESS OF THOSE GRANT AWARDS.
ON PAGE 12, YOU CAN SEE ALL OF THE CITY'S FEDERAL GRANT ACTIVITY FOR THE FISCAL YEAR AND FOR THE 2021 YEAR, THE CITY HAD A TOTAL OF APPROXIMATELY 5.6 MILLION.
AND THAT CONCLUDES ALL MY RETURNS.
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ADDITIONAL QUESTIONS FOR ME OR KATIE AS YOUR INDEPENDENT HONOR COUNCILMAN? I'M GOOD.WITH ALL ITEMS ON THE AGENDA HAVING BEEN DISCUSSED, I NOW ADJOURN THIS MEETING.