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1992 03 04 CC Minutes, SpecialMINUTES OF THE SPECIAL SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN March 4, 1992 The City Council of the City of Baytown, Texas, met in special session on Wednesday, March 4, 1992, at 8:00 a.m. in the Council Chamber of the Baytown City Hall with the following in attendance: Mario Delgado Don M. Hullum Ray Swofford Pete C. Alfaro Bobby J. Credille Rolland J. Pruett Emmett O. Hutto Bobby Rountree Norman Dykes Ron McLemore Eileen P. Hall Councilman Councilman Councilman Councilman Councilman Councilman Mayor City Manager Assistant City Manager Assistant City Attorney City Clerk The meeting was called to order with a quorum present, after which the following business was conducted: Consider Proposed Resolution No. 1142, Authorizing the City Manager to Sign and Submit an Application to the Economic Development Administration for a Public Works Grant Previously, the city had made application for a grant for the amount of $1.3 million, but recently, Enichem Synthesis has indicated the possibility that that company might locate at the present Enichem site. Therefore, we would like to amend the grant to request $1.5 million in funding from EDA, which is the largest amount that can be requested. The city manager noted that the EDA grant specified that the effluent would be taken to the San Jacinto River. The grant application must be amended if the effluent goes to Spring Gully. The project could be delayed or even stopped if there is public opposition, and there has already been opposition by several residents in Lakewood. Mr. Rountree recommended that we proceed as originally planned and take the effluent to the San Jacinto River. Mr. Rountree also stated that he has asked Kent Laza, City Engineer, to look at oversizing the discharge line. The administration recommended approval of the resolution. 920304 -2 Minutes of the Special Session - March 4, 1992 Councilman Alfaro moved for adoption of the resolution. Councilman Credille seconded the motion. The vote follows: Ayes: Council members Delgado, Hullum, Swofford, Alfaro, Credille and Pruett Mayor Hutto Nays: None Resolution No. 1142 A RESOLUTION AUTHORIZING THE CITY MANAGER TO SIGN AND SUBMIT AN APPLICATION TO THE ECONOMIC DEVELOPMENT ADMINISTRATION FOR A PUBLIC WORKS GRANT; TO ACCEPT OR AFFIRM ANY GRANT AWARD THAT MAY RESULT THEREFROM; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. Consider Proposed Resolution No. 1143, Appointing Don M. Hullum as Alternate to the Galveston Bay National Estuary Program Resolution No. 1143 names Councilman Delgado as the representative and Councilman Hullum as the alternate to the Galveston Bay National Estuary Program. The administration recommended approval. Councilman Swofford moved for adoption of the resolution. Councilman Credille seconded the motion. The vote follows: Ayes: Council members Delgado, Hullum, Swofford, Alfaro, Credille and Pruett Mayor Hutto Nays: None Resolution No. 1143 A RESOLUTION APPOINTING MARIO DELGADO AS REPRESENTATIVE OF THE CITY OF BAYTOWN TO THE LOCAL GOVERNMENT ADVISORY COMMITTEE OF THE GALVESTON BAY NATIONAL ESTUARY PROGRAM FOR THE YEAR 1992 AND DON M. HULLUM AS ALTERNATE SHOULD MARIO DELGADO BECOME INELIGIBLE OR RESIGN. 920304 -3 Minutes of the Special Session - March 4, 1992 City Manager's Report Flood Insurance Reduction - The administration has received notification of a loo reduction in flood insurance effective October 1, 1992. This reduction is due to the efforts of the Planning and Traffic, Inspection, Emergency Management, Public Works, Engineering and other city departments. Continued efforts in this area could result in 25 - 30% reduction in flood insurance premiums for residents of the city. Officers Retiring - officers Dale Schimming and Glen Rosier will be retiring Friday, March 6. A retirement reception is scheduled at the Gray Sports Complex from 7:00 to 10:00 p.m. Bush Terrace - The administration is scheduled to report on Busch Terrace Improvements on March 12. The administration will contact Mr. Joe Neito to determine the best time to hold the meeting. Audit Process - The city manager stated that after the last council meeting he had met with the auditors and the staff to develop information for council. Jim Gerace, with the firm of Gerace, Andrews & McQueen, P.C., explained fee charges beginning with 1987. In 1987 the audit costs equaled $77,500. With 1988 budget the cost increased to $127,000. Extra fees were due to city requiring extra internal control work and also a change in the computer system. As of September 30, 1989, the audit fee equaled $168,000. This fee included general accounting office compliance standards and new standards of the American Institute of Auditors. During that year no bank reconciliations were made and the City of Baytown hired an outside contractor to perform bank reconciliations. Also, it was necessary to devote more time in order to have the audit performed for a timely bond sale. In 1990 the charges were $222,000, due to a change in accounting on cash basis, and no bank reconciliations for eighteen months. The auditors are still dealing with the standards along with the fact that Organized Crime Grant and the city's self- insurance program must be audited. He pointed out that last year when the appointment was made, three firms were considered. All three firms submitted open -ended contracts. The $65,000 figure included auditing the city's accounts. That means having all the papers in order with a trail balance to audit. Any of the three firms would have had the same problem. Council selected the firm of Gerace, Andrews & McQueen because they were familiar with the system. 920304 -4 Minutes of the Special Session - March 4, 1992 Mr. Gerace emphasized that Ken Mitchell and his staff had done a good job, but he feels that the city is understaffed in the Accounting Department. He mentioned that he had performed an audit for another municipality which has eight degreed accountants and a grant coordinator. He acknowledged that the city had added more staff and that catch -up was in process. It will not happen this year but perhaps by next year, the process will begin to level out. Mr. Gerace stated that the current audit is 80% complete and should be about 30 days ahead of last year's schedule. Councilman Hullum stated that he had a problem with the company auditing the accounts and also doing bookkeeping. Mr. Gerace's response to that was the employees performing the bookkeeping work do not participate in the auditing process. Therefore, it is an independent audit. Councilman Pruett, Chairman of the Audit Committee, was recognized and read the following statement: "As Chairman of the Audit Selection Committee, I would like to respond to some of Councilman Hullum's concerns about the audit procedure. I am both angry and concerned that this council has been made to appear inept as well as insensitive to the taxpayers of Baytown over circumstances beyond its' control, and feel important facts need to be brought out. Few governmental contracts are without amendable features, whether for professional service or for construction contracts. This makes possible the continuation of additional work beyond the scope of a basic professional services agreement, or for unseen, unpredictable events in construction projects which are rectified by change orders. At the same meeting which the vote for auditor was taken, council okayed a 40% increase in an engineering contract by a unanimous vote. What bothers me in the case of the audit over run is that council was not kept informed of the additional costs and the extenuating circumstances behind them. In fact, when I checked with the city finance director as to whether or not there would be a problem with proposing Gerace, Andrews & McQueen for the city audit, the fact that they were having to take on extra work which the city could not handle was not mentioned. 920304 -5 Minutes of the Special Session - March 4, 1992 Councilman Hullum, I personally take issue with your statement in the Baytown Sun inferring that city council acted imprudently in spending taxpayers monies in the audit award. This council has been diligent in giving faithful stewardship over the administration of tax monies. Also, I personally resent your statement (if you were quoted correctly) "If they expected me to be a rubber -stamp councilman, they were wrong." I, and I'm sure all other council members, respect your right to vote your convictions on any issue and you have no valid basis to feel otherwise. I am curious as to how and where you obtained figures which the Finance Director could not readily supply to council when you brought them up, and your timing in presenting them. I wonder if you were influenced or motivated by an outside source, and so have some questions of my own. Councilman Hullum, are you a relative of Edgar Hullum, partner in Hullum, Start & Company, a firm which previous to Gerace, Andrews & McQueen had the auditing contract with the City of Baytown? I want the public to know that whether the council decides to budget more monies to adequately staff the Finance Department or continue paying whoever has the audit contract to catch up on work the city can't handle, their tax dollars are paying for services rendered and are not being wasted. If the present staff of the city financial department cannot handle the increased bookkeeping load, then we must budget additional monies for adequate staffing, or continue to pay whoever is awarded the city audit contract to do that work which the city cannot handle. I want the public to know that either way, their tax dollars are paying for services rendered and are not being wasted." Councilman Hullum explained the process that he had gone through in order to obtain information concerning the appointment of the auditor and the audit process. He further emphasized that his only intention was to gather information and requested that council establish guidelines for the auditing process. The city manager stated that he too was concerned with the cost of the audit and in the future both the city manager and city council will be aware of the costs of the audit on a regular basis. However, he emphasized that the staff does not give direction to the auditor. The staff has been meeting with the auditors on a regular basis for several months in an effort to keep abreast of the progress. However, the staff does not set the auditor's agenda and he suggested that the Audit Committee have a more active role in dealing with the auditors. 920304 -6 Minutes of the Special Session - March 4, 1992 Councilman Alfaro suggested that council focus on what could be done to avoid this situation. He suggested that council ask the administration to take a hard look at the staffing in the Finance Department to obtain the goal of presenting the auditors with trial balance and proper papers to audit the City of Baytown's financial statements. He emphasized that the accounting and auditing process should be separate functions and while Gerace, Andrews & McQueen are performing both functions the cost should be separated. He requested that the firm submit a breakdown of the costs for 1991 audit at the March 12 council meeting. Council discussed the possibility of the auditors coming before council prior to beginning any accounting procedure. However, Mr. Gerace pointed out that once an audit begins you cannot stop in the middle. Therefore, council agreed that the auditors should contact the city manager and let him know of any unusual expenditure, the amount of time the job will take, and the costs. The city manager assured council that the administration would take a look at the staffing in the Finance Department and come back to council with a recommendation in this regard. He also reminded council that the City of Baytown would be selling bonds soon and encouraged the auditing firm to continue their work to complete the audit prior to the bond sale. Adjourn There being no further business to be transacted, the meeting was adjourned. Eileen P. Hall City Clerk 3.3.10