City Council - Special Meeting

I'm just going to ask and see if we're ready to go. Miss uh city secretary, you have everything you need. Yes, mayor. Miss Wolach in the back, are you good? And are we streaming? Okay. Mr. City Manager, how you doing today? Doing good, thank you. All right. Nothing on your end, sir. Yes, sir.

Okay. Um we will recognize a quorum here today. go ahead and call ourselves to order. Uh, this Friday, March 27th, at 2:00 p.m., we're going to go ahead and open up the meeting by um taking public comment. Do I have anyone here today that would like to offer public comment? Okay, I don't see anyone here. So, we'll close public comment. We're going to move into our non-consent agenda. We have uh CLA Clifton Larson Allen, our audit company here. Um, and that is uh Scott Kersnak. And so Scott, we've got you up. We can see you on the screen. I know you can't see us, but you can hear us fine.

I can hear you just fine. Yes. Great. Well, today's kind of a working meeting with um with the one item. And so um we're already uh rolling pretty good. And if we can, we just wanted to hand it over to you and let you take We've got some council members here that that have not seen the document. So, I guess let me back up. Let me back up a half a step. We are missing uh Councilman Prescott. Um he's blessed and favored today to welcome uh his grandson into the world. And so, he will be okay.

He'll be getting a his first grandson here today. So, he is uh at the hospital with his daughter, I believe. Um, so he won't be here. But then, um, Councilman Prescott and myself sit on the audit committee and we met with you guys, was it last Thursday? And so we saw, um, a draft of what you'd presented, but not this draft. And so the other council members got your email last night, but really haven't seen the hard copy until today. So, what I would find very helpful is just to allow you to kind of do what you did in the audit committee um and go through um an overview and hit the highlights, be able to walk us through it.

Uh tell us a little bit more about your scope of work, what you're what you were doing, what you did, and then I would love it if council has any questions. um we can let them ask you questions or we have our uh finance um officers here, finance staff. So um Mrs. Owens could answer any questions as well. So if we can, we're going to hand the meeting over to you for a minute, sir. Mayor, uh, before before we do that, I just want I want I just want to get a little bit of clarity on what our mission is today and kind of

what we're doing because I I know there's been a lot of work on staff's part as well as uh our auditing firm. But my understanding is, I mean, the reason we're here today is the law requires us to file this ACFR within 180 days of the closing of the fiscal year, which is that deadline is is coming up. And so if that's if that's correct, I think that's why we're here. I'm comfortable moving forward to with the filing of the of the draft. U that said, as you said, we just received this yesterday. And uh it's long. It's a 342 pages. I think it's an important report. And so what I what I want to filing of the draft to meet the deadline, I think, is is great. Uh, I don't think it makes sense for us to try to have some type of full discussion about this without time to review it. Uh, and I I guess also time to review a final version of it. Uh, and I guess that would be on the meeting of the 14th. Um, and again, I'm also aware that some members of council have had conversations with the auditor, others have not. I think it's important to have everyone to kind of have an opportunity to review the report and ask those questions so we're all caught up in the same speed because I think just because of the way it works with the audit committee uh you know a couple of you have are kind of ahead of the the the the three of us and then also just given that this is a a special Friday afternoon meeting uh where most people are doing other things there's limited public visibility I think having a robust discussion at a regular meeting provides kind of a much higher level of transparency. And then in addition, Councilman Prescott has other issues today. Not here. You know, if we're going to go in deep, I think it's good for all of us here. So, I support the, you know, I support the filing of the draft to meet the requirement, but you know, I would hope that we would just hold off on really digging in the detailed discussions until we have a chance to review it, ask our questions,

and then we're all kind of up up to speed on it. So, that I just want to get clarity on what our mission was today. Well, I think we I think that's great, Councilman Simpson. So, let's go back and kind of ret track what we had hoped we would have. And so, um, let me let me start by giving somewhat of an explanation. And, and you could, uh, Miss Katrina, you could lend to this. Um, we hired a new audit company this last year. So, this is his first year with us, which there's pros and cons to that. The pro to that is we've got a fresh set of eyes. We're looking at everything again. It may bring some things to light that we had gotten into habits and things that we weren't necessarily paying as close attention to. We have an expert here as a senior that that can speak to many things from his firm as to what's normal and what what's not. So, um I think in in hiring CLA and then also you transitioned to a new accounting software and so we know that you've had some struggles. I think the public's heard that that not everything migrated over and so what we would have liked is we would have loved to have had this draft 2 3 weeks ago and then we could have had some of these discussions and then we could have all sat down and had a robust discussion with um Mr. uh Kersnack at that time. Now what I would say is is we're we're able to do that on April 14th and I agree with with my councilman over here. We want everybody to come prepared. We want everybody to be able to speak to things. We we want to take the time it's going to take in that regular meeting, but we've also scheduled a special meeting here today. We have him uh here with us. We've got the document, and I find it a very good use of time to allow him to walk us through it, give us an overview, allow us as council to maybe bring up some

questions and some things that we're still learning and trying to figure out. What does this mean? When it says restricted, unrestricted, where is this held? Where is that in the document? Can we see this? Did you do that? That way, as you guys reach out to Mr. Kersnack in the future or next week or whatever, as you're reviewing your documents, thank you. Um, I see you over there. Um, then you guys are are listening. And and the other thing that I want to make sure we don't forget, Councilman Simpson, even though I get to sit on the audit committee, it's it's the general public that we want them to be able to understand what the audit procedure is, understand what the audit document is. If they go and look at this online, they they enjoy engaging. They want to listen. We have uh people that that not only are, you know, here regular, but but they watch online. And so I just think, you know, we've all taken the time to be here today. So I would like to take an hour to two hours and go through this. Um I don't want to sit down with our public being notice that we're doing something here and give the um not illusion, but give give the you know insinuation that we just grab something and put it on the shelf. We're we're explaining it very well that we're just going to recede it here and file it in the city secretar's office, but with uh Scott on the line here, I I think it'd be great to at least let him, you know, take us through it. And I know I learned a great deal in the audit committee um just in, you know, the two hours that we had together. And I would like to allow our other council members to to really hear and listen, learn as much, glean as much here today as possible. Totally agree with you. This is not going to substitute that conversation on the 14th. Still want to have the full conversation on the 14th. But, um, let's learn everything we can here today.

Okay. Well, I've got if if we're going to look at that and if we're if we're going to take a a a vote on it to to file it, again, not approve it. I'm I've got a I've got about an hour and then I'm going to I'm going to I've got another conflict that I've got to attend to after that. So, okay. If if you know, if we need to I mean, that would still leave a quorum. I don't know how we want to handle that, but that's Well, I Yeah, I I know we have a quorum, so the three of us can get it filed if conversations um are extended, so we don't want to delay you from your other obligations, but appreciate you being here uh for the time that you have allowed. And uh who knows, we may we may have a a more brief discussion than what we think, but thank you.

Yes, sir. Thank you. So, Mr. Kersnack, if we can hand it over to you, we'll let you run with it.

Okay. Thank you, Mayor Stanley. I did want to offer my contact information to all of the council members. I know Mayor Stanley, you have that which includes my cell phone number, direct line here at the office as well as email. So I know this document was just received last night in PDF form and a printed version was just supplied today and obviously it's a large document. There was not sufficient time to go through the document and formulate questions. But as you're going through this draft document and you have any questions that you want to ask of me, I'm just offering that if Mayor Stanley could share my contact information with the entire city council. Please feel free to contact me at any point to ask any questions you may have.

That's greatly appreciated. I've shared it with the council, but um can gladly send it again if anybody needs it.

Okay. And again, this is a draft of the annual comprehensive financial report for the period October 1st, 2024 through September 30th, 2025. Key word there, it is a draft. And you can probably see as noted throughout the document a uh watermark stamp that says draft subject to changes. So this is a document that could have some changes. Those changes could come as a result of city council questions. We looked into this further and we may have to regroup something or the uh amounts could change. So keep in mind this uh is a document that is open to any changes the city council may have if those changes are warranted, if you will. And just a little report on the audit itself. Uh, as Mayor Stanley had mentioned, this is the first year for uh, Clifton Larson Allen, commonly referred to as CLA, to perform the audit. And again, I thank the city of Earillo for the opportunity to serve as your independent auditors. And again, this is a draft. We would have hoped that at this point it would be a final signed document from CLA to the city. That's what we are aiming for in future years. This being the first year there is a learning curve from CLA learning

the city of Amarillo. But I think the biggest part of this being a draft at this stage as opposed to a final was the city went through a major ERP conversion or software conversion this year which took a lot of time and Katrina you if you're there you could probably interject on this to fully understand the various types of reports and grouping things that come out of that system as they relate to a trial balance and reports and groupings to tie into this annual comprehensive financial report. Uh Katrina, do you have any further comments on that? that that was the major reason for the uh this being a draft as opposed to a final document at this point.

Yes, I will add that when you have a a new system and it's a fantastic system, there are a lot of canned reports that don't actually give you what you want. Thankfully, we had hired consultants to help us build reports. So we were actually able to expedite the needs for the auditor, but many of the the items needed had to be programmed and written to handle the needs for the audit.

And uh thank you Katrina. And I did want to add at this point, I want to thank Katrina and the entire finance department as well as uh Unil Gerber in the internal audit department for their commitment to this audit to get it to where we are right now. I know it's countless hours, overtime hours that have been invested not only by city staff but as well as the CLA staff. So I just want to commend the city of Amarillo as a whole, the the staff for the uh level of effort they put forth to get this document to this stage where we are today. And another thing I did want to mention, when the final document is issued, there will be a signed independent auditor's report in that document with Clifton Larson Allen's signature on it. It will be on CLA letterhead and that independent auditor's report will uh we will render an unmodified opinion which in common terms is referred to as a clean opinion that the financial statements as presented upon final issuance are materially respect in correct in all respects. in relation to uh generally accepted accounting principles. So that is forthcoming with the final uh signed

document that you will receive an unmodified or clean opinion on these financial statements. And again this is a very large document probably a good place to start. uh council members, as you are going through this document to review and formulate questions is to really start at the table of contents and that could steer you to sections of this document where you may want to begin. And it is broken down between your basic financial statements which include the statement of net position and the statement of activities which represent the full acrruel basis of accounting for the city of Amarillo. Behind that are your fund financial statements your which includes governmental funds which are accounted for on a modified acral basis of counting as well as your enterprise funds which are on the full acrual basis of county. This document also includes component units of the city of Amarillo such as the Amarillo Hospital District, the Amarillo Economic Development Corporation and so forth. Due to accounting standards and principles and governance structure and so forth, it has been determined that those component units should are part of the reporting entity of the city of Amarillo. So those

are included in here. and Clifton Larson Allen not only audited the city of Amarillo, we also audited the component units as well. And uh there there is a page in here that has a listing of the component units. Those component units were audited by Clifton Larson Allen with separate uh financial statements to be issued with the exception of a couple of those. I'm trying to get to the actual page of that if you could bear with me. The component units actually begin on page 42. And there will be separately issued financial statements for the Amarillo Hospital District, the Economic Development Corp, the uh Potter Events Venue District. One thing that's on here is the Emorillo Convention and Visitors Bureau. There was a change effective uh October 1st, 2024 where city of Amarillo no longer serves as the fiscal agent for that organization. That is why you see zeros in that column. the Housing Finance Corporation and Health Facilities Corporation, two smaller entities. Those will not have separately audited financial statements, but the uh local government corporation will also

have a set of separately issued financial statements. I just wanted to point out that because this is a comprehensive document and it includes uh component units of the city of Amarillo in addition to the city itself and then the notes to the financial statements that actually begin on page 45 there. These notes provide much more detail of certain of the line items within the basic financial statements. There are actually a lot of notes in here that have very good information. I wanted to point some of those notes out to city council as I'm one of those is note three, your deposits and investments. that begins on page 63. And this gives a discussion of the deposits and investments and culminates on page 65 with a table to show a summary of investment securities of the city September 30th, 2025. And I was had a uh meeting with Mayor Stanley actually uh prior to this meeting. And one of the things we discussed is he had an investment portfolio listing as of September 30th, 2025 which showed a certain dollar amount and there was a question from him

which is a very good question on how that statement can be reconciled to the various amounts that are in the annual comprehensive financial report. That may be a homework assignment between uh Katrina and her group and Clifton Larson Allen to bridge that gap for you, Mayor Stanley. But if you would like for us to uh take on that endeavor, just let us know. So, Scott, I appreciate that. And we'll just we'll pause here for a quick uh stop.

Let me make sure that with with council um council there there's several things that this actford does. It it brings you to the place of actuals. It it puts things in different categories. It helps you understand some things. So when we get different um you guys are familiar you get the quarterly investment or holdings report they send you that every quarter to show you these are all the cedars these are the fidelities this is your cash and cash equivalents you guys should be reviewing that every quarter to kind of see the financial health of the city and that's where those monies are held not only the monies that I think we're um borrowing but then the monies that we have set aside for cash to go and do CIP right jump in anytime time Katrina. But um in that I wanted to make sure that that I'm understanding that quarterly investment report correctly so that we can get that broken down so we can see here's how much we have committed. Here's how much we have restricted like a bond that's restricted to sewer and water. And then here's how much we have that's unrestricted just in cash so that we could get a secondary look not just a budget once a year but a secondary look that matches the acter so that at the end of the year 25 we know how much cash did we have that that we needed for reserves but then how much cash did we have that exceeded reserves that we could apply to CIP and that's going to be an important component as we work through the CIP closeout projects. because they should reconcile as you close out those projects. If you didn't spend the money, you're going to see it sitting over there in perhaps a cedar or certificate of deposit, a fidelity. U Miss Owens, do you have anything to add to that?

I will say on I told you last week during the audit committee that your 93025 presentation that was presented to you earlier did change for the act for if there was some interest that was in acrude interest. We originally had it on that report at cost and uh the auditors wanted that at market. So we increased that report by two million and plus. So it will tie to an updated quarterly report once I get time to get that done. I I know you guys do speak accountant and so make sure that that we're hearing where we're um the interest earnings increased by two plus million dollars for the year on two CDs. Yes.

On two CDs. It was just in a different bucket. It was in acred interest and it was in earnings on the income statement and we just took it from acred interest and put it up into investments. Okay. And that's a great example. So CLA might have brought that to you in in comparing the two different balances. And so then you guys go back and you look and you go, "Oh yeah, that's correct, but we had it in the wrong bucket." Right. And so you've now recognized it over in the in the right bucket. Right. And we will follow that practice going forward.

That's great. Um, now how does council, you know, treat that in in like when you bring that back to council, um, since we balance the budget and we we have a current budget that we're working within, do we identify that $2 million as additional $2 million that we need to account for? You're the it was in in interest earnings on the income side. You don't have a budget on your balance sheet and so in your income side, it was already represented and reported to you. Okay. So, the total revenues is income recognized it. You just didn't have it appropriate or let's say itemized, right? Okay. Great. Thank you. Um Scott, what anything you want to

add to any of that or or I'm going to step back out of the way and let you keep running through this. Uh, I would just want to add, uh, Mayor Stanley, if if you would still want to see some type of reconciliation between the investment holdings report to see how that report ties to the uh, amounts that are presented in the uh, ACTER. just let us know and we will work with Katrina to uh come up with a reconciliation for you that if you still desire to see that.

Uh yes, sir. I think that um Miss Owens has been familiar with this report and and I've requested the breakdown. So, at one point we had uh debt reserves and and we had itemized the debt reserves. The need of the amount of money we held off to the side in order to meet those minimum debt reserves was roughly 23.8 million at that time. Um we now have I guess what would it be page I don't know what page would it be there Scott that that itemized those debt reserves. It shows roughly Yeah. Flip over to page 68. So, revenue bond reserve, water and sewer system. Am I correct in in my understanding that the only bond that requires a debt reserve would be a water and sewer bond? Now,

well, I will actually defer that question to uh Miss Owens. I'm going to have to make sure because I'm I'm just going to have to double check to make sure that that's correct.

Okay. So, we could double check that with Stephen Adams. Um I'm sure and and so he he was the one that that had educated me on that. I think the laws had changed a little bit, but we had restricted in that um report. So, your quarterly investment report had restricted and identified $23.8 8 million at that point in time and said that's not money that we can utilize as a city to go and fix anything or take care of anything. We have to hold that until these these bonds are are paid off because that's the legal requirement. He had come back and said, "Well, no, that's not true. It's actually 4.3 million." And so on page 68 right here, if you look there, it'll come down. And I just want CLA's confirmation that I'm reading this correct. Revenue bond reserve. That's how much we should have that we need to restrict and and not appropriate out of that fund. Correct.

That's that's correct. Is kind of the paragraph above the table. I'm just reading from it as required by bond indentures. And then it goes into that language there. for the water and sewer system as required by bond indigeners. There's a revenue bond reserve of $4,34,568 at September 30, 2025.

So, what I would ask uh Miss Owens, if if you would on behalf of council get us a end of year 930 of 25 itemized uh investment holdings report. So if you look back at that report, it roughly held 585 million in it. And so you've done a good job of going through and you itemized, well, these are the borrowed monies that are restricted. So they're bonded. You you have to spend them on those projects. And then you've got minimum reserves that you have to have. And then we had had a few other things in there. If we could have CLA uh validate, verify that we're looking at all that. Correct. Council would like to see that that quarterly investment report identify all cash cash equivalents that are unrestricted at the end of that year. That way we would know are we holding more money in reserve than what we should be. Um because that represents more projects we could go get to.

I understand. And it's it's to be worked. I just hadn't had time to get to it. I know it. I know it. And and I know this will take a little bit more work. And so let let's take it one at a time, but I would like for council unless Councilman Katrina, are those reserves not automatically rebalanced? I mean, according to the percentage and according to our finan financial policy, are those not automatically rebalanced? They are. And the investment quarterly will let you see what's remaining out of you once you take the debt out and all of the obligations. It'll let you see on the quarterly basis. So if they are in excess, those should be moved automatically. Correct.

Well, you're reserves versus cash. Cash is going to stay in the cash accounts. Reserves are you're going to be allowed to when we come back for uh CIP discussions have discussions of what you would like to do with that. Okay. But I guess what I'm asking is are those not automatically moved once once they go above the minimum reserve? It just stays where it's where it's at. It just stays in cash. It just stays in the fund. And then we come in and say, "Here's your excess." It doesn't move on the balance sheets once a year, right? And we just tell you what. So those are crew. They're invested.

Those acrue interest. And then once a year, you come to us and say, "Hey, reserves are 4.3 million. We've got 5 million in here. We've got $700,000. We need to move to CIP." And it just stays there. And then we start executing capital projects and all of that. and it goes to cash and you start spending it. Okay. So, what are you asking for? So, Councilman, let me let me make sure we're we're explaining it well. You asked a really intelligent question, but but it doesn't work the way that we we have to work. So, nothing can be automatically moved, right? Nothing gets moved unless you appropriate it. And that happens with your vote. And so staff does a good job of identifying the funding,

uh, identifying the need, bringing the need to council, and then that money can't match up to that need without your appropriation. And you can only do that once a year, right? Um, well, I shouldn't say once a year. You can only do that annually. You can come back to it and amend it as many times as we would call a meeting. But so in us identifying excess reserves, which we did in the last council meeting, we brought in roughly $19 million more than we had anticipated.

And so you identified after you netted out some overages, some cost overruns, 13.5 million. Those monies don't automatically adjust. They don't automatically move. There's no such thing as a rebalancing. Um, there is an appropriations though and that's the the step that I want to make sure we're doing here. If we don't know that the excess reserve exists, then we can't appropriate it. And it's not being balanced at the end of the year with a look back. It's only being balanced at the end of the year with the budget. Am I saying that right, Mrs. Owens? Um, I need more information of what it is you're saying.

Sure. I think what council tips is saying at least if I'm understanding is is we will as part of the automatic process of the budget we will bring back we will do the rebalancing process as part of the budget process and if there is indeed excess reserve in any of the funds that will be brought back to the council for appropriation in the next fiscal year. So yeah that process is part of our automatic process. It's not an automatic like there's a software thing, but yet I think what you're saying is that we've already got a process already established in our in our in our calendar year that this summer we will we will rebalance following this audit and bring back to you all the excess for any one of those funds to be identified or appropriated for reserve for the next fiscal year.

And what I'm asking for, let me simplify it. I'm asking for a simple double check. It's an easy reconciliation of accounts. It's like me bringing you a report on your job but then also showing you your balance in your checkbook. Right? So I mean though I have the report here in the form of the budget and well we ran this, we ran that. This reconciliation process works with these quarterly investments because those holdings represent all the monies held within the COA

right at at 9:30 of 25. So, if you're holding 585 million and you run everything and you look back and you go, "Well, technically we should only be including our reserves holding 550 million." Well, then you've identified 35 million of excess reserves and holdings. Now, how do we get there? Well, we have interest earnings that come back sometimes more beneficial than what we calculated. We have revenues that are over or we go to maybe Unil's project of the CIP, the work in progress. So if we have a project that we closed out because couldn't get a ride ofway, couldn't get an easement, well that money was appropriated and held over there in that holdings report, but then it just floats until it comes back to you. So this gives us a good check and balance

and last year it was created for the 93024 and so we will update it for 9:3025 and we will get it to you. Yes. Thank you. And I have the the report that you have that's uh semicomplete on the 930 of 25 and that will update based on the interest on those two CDs. That's great. And then you'll reconcile that with the ACER and and CLA could review that and then if we have questions it allows for CLA to to weigh in. We can we can learn through that together. Absolutely. That's fantastic. So to be clear, yes, this is already happening once a year. We're taking the excess reserves. You're coming to us saying this is how much we have. We're reappropriating. Yes. During your budget,

so it's already being done. You're asking for a second look along the way in the quarterly reports just to see where we are in the quarter.

Well, let me let me disagree. Let me disagree. This is not currently happening. So what what you're saying uh Councilman is is that once a year we get a budget and we have an itemized budget and we take all of our uh revenues less expenditures. We identify the excess over and above the minimum reserves and we appropriate that to a a a capital project that is happening. What we haven't been doing is going back to the ACER and itemizing those monies that are held in that holdings account with our minimum reserves because the first time we did that was 9:30 of 24 and we identified several outstanding balances that we've never gone back and completed and then in 9:30 of 25 we have that same look back. So I'm asking it to be done as a double check. It's not something that we are currently familiar with. Now, we will have to only do that double check piece, the reconciliation piece, it can only be done once a year because of like your debt won't change. Now, your quarterly investment report will absolutely update, but the recon I can only do once a year once we have final numbers.

Great. Well, I'm I'm not asking for it to be like monthly or anything like that. I think it's a good tracking mechanism. And then, um, Scott, is there anything that that I'm, you know, saying in a way that's not easy to follow or that you could more greatly clarify? No, I I think uh I think uh Katrina and CLA both know exactly what you're looking for and she can put that reconciliation together and then CLA will look at that and see if we agree that that actually does in fact uh reconcile back to the actor and then that can be presented to you and council.

Real good. Well, let let me back up here and and hand hand it back over to you, Scott, if you want to keep going on the other areas you like to highlight.

Uh the next major note to the financial statements actually is note seven, capital assets. That begins on page 70 of your ACTER. And this shows the uh capital asset activity beginning of year additions, deletions, and balances at the end of the year for the major capital asset categories. that be uh land capital right away easements, capital projects in process or CIP and then the items that are actually being depreciated, infrastructure, buildings, improvements and so forth. And then there's accumulated depreciation for the items that are being depreciated. And this table actually goes on for two pages. And it's broken down between your governmental activities as well as your business type activities which comprise your enterprise funds, water and sewer, then drainage utility as well as airport. So, it's broken down between those four uh parts of the uh city of Earillo. And the just wanted to point out to uh council though when you look at the CIP capital projects in process a lot of times I refer to that as construction in progress. What these balances are going to represent is for ongoing projects at this point in time. That is the amount of expenditures that have been incurred

on those ongoing projects that have not been uh placed into service and moved into their various uh line item categories such as infrastructure and so forth. Those are only expenditures that have been incurred that have not been moved into their respective line item. That amount does not represent a projects that are in process with a balance to complete. This only represents actual uh expenditures incurred that are sitting in construction in progress. I I just wanted to uh point that out to city council as you're looking through this document and maybe honing in on this note seven that begins on page 70. Uh questions uh council mayor Stanley on uh this actual note to the financial statements

questions. council. No. So, um let's let's break it down. Once again, speaking um accounting is is a little different. So, if you look at the table, balances off to the far right, those are ongoing projects. Can I say it that way? Yes, that is correct. ongoing projects for which that have balances for which expenditures have been incurred. That does

money spent if you if you will that have not been placed into service and then moved into their respective uh capital asset categories such as infrastructure and so forth. So, council that sorry Scott go ahead.

I was just going to say so and again that does not reflect uh remaining balances for ongoing projects to be spent. This just represents actual expenditures incur to date as of September 30, 2025. So council, if you're if you're hearing him say you've got projects that are closed out, they've they've been deleted, right? So those are your closed projects. That means they're moving them over to capital so they can depreciate them. They're capitalized, right? But then you have ongoing work in progress balance. That's just the amount that's been spent to date as of that date, not even today. So it gets a little more confusing. It doesn't represent the amount budgeted or allocated. Right? So if we appropriated a million dollars for a project, project project X and you spent $100,000, that hundred is going to show up over here. It's an ongoing project. You still have $900,000 left there. Now, when you close out that project, this is the tracking mechanism that we all want and need in your CIP work product. Uh, Unil, so let's say we spent 700 on that million and we close the project out. We've now identified a $300 million or I'm sorry, a $300,000 net savings. That's where you can't see that on this report. It's not as easy as just looking at it and going, "Oh, here's what I started with. Here's what I've got left." These are actual costs that are backed up by receipts and then they've been tested. So, CLA has gone in and pulled several of your projects and tested to see uh and I think even some of those came back as a journal entry, right? and you guys had to go back and get more invoices for them to to be satisfied. So, in what Unil is doing, gentlemen, it's different than what Scott did here. And so, this is really good for us to be able to see what we've closed out every year, but we're we're

going to have to get the CIP work product list to compare those projects to see which ones you Neil can say this is a closed project. here's how much money is remaining that was appropriated by say this council or a previous council. Those are the amounts of money that should be coming back to the council in that that uh reconciliation. Th those are the monies that are held in that quarterly investment report. Um so I I think that this is a really good way for us to see this so everybody understands the the terminology of deletion versus work in progress. I think. Okay, Scott. Thank you.

And thank you, mayor. And one thing I did want to point out that may be beneficial when looking at note 7 in the tables on pages 701. There is also another table that's on page 100 of this document that shows it's a table at the very top of that five columns here. project authorizations expected outside funding sources outside funding received complete at September 30th 25 and the city's remaining committed. This doesn't tie to this schedule that's on page 70 in any form or fashion, but I believe uh you deal and you deal, you can correct me if I'm wrong. There should be a detail that you may have of the city's remaining committed that was used to prepare this table that's on page 100. that may be of interest to city council.

We do have the commitment detail and we can provide that if if needed. And I guess after that note, I'm just kind of pointing out significant notes to the financials that have some very good detailed information in those. I'm trying to get to the next note that I want to point out. That actually is note 13, long-term obligations. It's a very lengthy note. That note begins on page 103. And this is a very detailed discussion and presentation of the city's long-term obligations. I just wanted to point that information out to uh city council that that's where you can find the uh long-term obligation toward debt of the city. that note actually I'm just kind of coming through the printed copy I have here. That note actually goes on from page 103 through page 122. It's a very detailed note of the city of Earillo's long-term obligations. I just wanted to point that out to uh city council. Questions? Council.

So, debt schedule is on page 120. Would that be the summary that we would look at for the total debt schedule of the city? I would do 122. 122. Yes. Okay. If you're taking notes,

questions on the debt schedule, gentlemen. No. Scott, I would just ask you, why do you why are you making a why are you pointing this out? Is it was there a a finding or anything in here? Are you just pointing this out to just say, "Hey, look at the dead." Just no finding at all. I just want to point that out is that should be uh very useful or beneficial information for a city council to look at as they are reviewing this document. That was the only reason I pointed out it's a significant note to the financial statements.

And I'd also like to add to that. So your investments, your fixed assets, your debt, your cash are all high-risisk areas in every audit. And so they're going to be discussed at any audit committee, any presentation. Great. Thank you.

And those really are the uh main items in your basic financial statements. And then beginning on page 156, you get into required supplementary information. and then certain and supplementary information that just gives a lot more detail of some of the amounts that are in the basic financial statements. I really did not want to uh spend time on those. I just wanted to point out where those can be found.

So let me let me ask is this a good summary of actuals? Is this when we were going through actuals? This is going to be a really good one, right? Yes, it absolutely is. So, like page 158 where we're we're looking at actuals, um we'd be able to look at different departments and break down or at least funds on the revenue side, not necessarily on the on the expenditure side. Yes, you can. Okay. And that carries on to 159, I believe. Okay. questions guys or we'll keep moving.

And then one final thing I did want to point out. It's not part of this document that is uh being discussed today. There is a second part of the audit of the city of Amarillo. It is commonly referred to as your single audit or an audit of your federal and state grant programs. That actually is issued in a separate document and the single audit is ongoing as we speak.

Okay. It is not it it's not to the point where there is a draft document such as the draft of the annual comprehensive financial report and that document is always presented separate from the uh acter. Just want to give city council a status update on where the single audit stands. Okay, really good. Quick question back on 158, just so I can make sure I'm seeing this right. If we just look at on 158, if you go down to expenditures on police protection, we look at an original amount of 65 million, then we go to a final amount of 66, those are our budgeted. Then when you come over to your actual amount of 71 million, then it kicks it over to an actual on budgetary basis. What is the difference on those two? What? One says 71 million, the other one says 71.1.

I'm going to have to go review that table to just to make sure. Okay. Well, not to delay time here then. If I just had any specific questions as going through it, it okay if I reach out to you, Miss Katrina? I'll just reach out to you directly then. Thank you.

Scott, you're all yours. You're still driving. Well, those actually are the uh main highlights that I wanted to uh point out in the aer at the very end of this document. There are statistical tables. A lot of very good information in there. But I did want to point out that these statistical tables are not audited and they're clearly marked at the top of the heading of each of those pages as unodudited. And I want

I did want to make city council aware of that. And the statistical section I'm referring to begins on page 287 of this document. I want to add that that is standard for every audit that the stats are reviewed but not audited by an audit firm and I'm that is correct. Thank you Katrina. Unfamiliar with that. So stats your statistics or what?

Um it could be anything. It could tell you how many water pipes, small water customers, large water customers can tell you average of homes uh average property taxes. It's historical data. It just really varies in topics, but it's fantastic information, demographic info, stuff like that. Absolutely. Okay. So, not necessarily part of the audit, but included in the audit, right? Okay.

Yes. and Mayor Stanley, since the city of Emorillo annually submits this document to the GFOA, the government finance officers association for a hopeful receipt of their certificate of excellence in financial reporting. The statistical section of an ACT is a required part of the ACT. So in submitting this document to the GFOA, that is a required section of this document.

Okay, I understand that. Council, any questions on Scott's overview? No, all good. Um, Councilman Simpson, you okay for a little bit or you need to Well, I've got about three minutes before I need to leave, but I do have a couple of questions that I'd like to ask. And,

uh, Scott, hopefully these are yes or no answers. So, uh, okay. So a and I know and I know this isn't the final report. So if if the answers to any of these happen to change when it comes back to the final report, but I'm just saying where we are now, there's there's some kind of bigger level questions that I just want to get comfortable with. Uh did you find anything that concerned you? concerning as as far as uh I would I'd say the answer to that is no. the the only thing concerning and it's not really a concern was just uh as the city of Earillo finance department worked through using this new ERP system or software system and getting to learn that better and as Katrina said it's a great system but there is a lot of learning involved in understanding that system and knowing what that system is capable of doing. It's nothing of concern. And I just wanted to point that out again that brand new system and learning curve which again uh in large part led to this document being in draft form right now instead of uh the final version.

Okay. Uh other other than that there is nothing uh concerning that to answer your question in that regard. Okay. Uh as it stands now is this a clean audit with no material issues?

Yes, we will render an unmodified opinion or a clean opinion that these financial statements are materially correct. I think we may potentially, we haven't got that document drafted up yet, but include a written comment about a timely and accurate uh reconciliation and reporting of capital assets which includes uh construction and progress. Mhm. Okay. um

as as a recommendation to the uh city of Emorillo. Were there any disagreements with management in the report? There were not. Were there any significant adjustments that you had to make in the numbers? Well, I guess adjustments were made as we uh went through the audit and Katrina mentioned one uh but as we work together through the audit and some things just had to be reclassified or regrouped but no significant audit adjustments that we found. Okay.

Any other indications of fraud, misuse of funds or irregularities? no fraud or irregularities that we became aware of. That does not mean that some of those could exist that weren't detected by us, but there were none that were brought to our attention nor detected by CLA.

And if if if you were sitting in our seat, is there anything that we need need to dig into further? No, I I believe just the level of detail that I've I've seen today at this meeting and with the meetings with uh Mayor Stanley and the audit committee. just commend you all for the uh level of detail that you all in review that you put into city's financial reports and so forth that it's very commendable.

Got it. So just to be clear, make sure no findings, red flags, nothing that should concern us from a financial integrity standpoint. That is correct. Okay. Thank you, Councilman Simpson. You got anything else? Man, we greatly appreciate you hanging out a few minutes after. Yes. Can I put a caveat? There's no findings on the financial. We do have three findings on single audit that will be coming out that we know of because that's still in process. Those are all process findings. There are not any monetary findings involved in that. Thank you.

Yes. And thank you for bringing that up, Katrina. And again that is separate in apart from the uh financial statement audit. And I would imagine at a later date when the single audit is complete that I will uh present the uh single audit to uh city council and the uh findings that uh Katrina brought up will be noted in that report at that time. Thank you, Katrina, for bringing that up. That's a good point.

Yeah. So, thank you on that and and I I need to revisit. Thank you, M Councilman Simpson. Um, you had said a letter that would include either a recommendation or or an observation. Give me the terminology again on that. Well, it will be uh it could possibly be just a verbal discussion on a more timely and accurate uh reconciliation of capital assets and construction and progress that may be beneficial to uh city council members if they desire that type of information. And it's my understanding that uh uh significant changes in that uh process have already been implemented and uh Mr. path. If you want to expand on that and maybe talk about the changes that have already currently been implemented in regards to uh capital assets and construction progress that may be beneficial for city council.

Yeah, be happy to. Yes, Scott and I had a chance to discuss this here. It was it was about a week or so ago and yes um um one of the things that we've implemented here the last several months is our CIP committee and so we're really encouraging stronger more timely communication working through our capital list of projects looking working through the history of those identifying ones that have been completed we can close out bring back to you all funds working backwards as best we can. And so yes, that's that's in progress. And so we do hope that by this definitely this time next year, if not hopefully way sooner than that, we'll have a process to where this recommendation will no longer be necessary next year. And so because we our goal is to be able to bring to the council um more time information. I know like even talking to Donnie and Jerry, one of the tasks I have for them is when the council gets a list of CIPs each year, we get them spent. Um part of the problem we've had in years past was uh the CIP list would acrew and acrew and acrew. So, as councils change, as priorities change, um, uh, councils would direct funds move somewhere, staff direct funds move somewhere. And so, now with with current council direction, with my direction, we're cleaning that all up. It's much more streamlined, much much more much more direct. And, uh, so that's just an ongoing process. It's a, as you all know, we got lots of other primary jobs. And so, this is one of the things that the committee's been working on as as a focus, but at the same time, um, as time allows. Yeah, that's definitely well in motion. And um and I know talked to Scott about this and we feel good about the direction we're taking that that you will again I don't have a time timeline for y'all for you just yet but we hope to be able to bring to y'all a much more robust process of information about CIPs and the list and so forth. So

thank you Mr. City Manager. And I think u just to reiterate make sure we're I think we're saying the exact same thing Scott. you you're saying that you're going to put it in your letter form um and and it'll come from CLA that we needed to have done these things in a more timely and accurate fashion. So what we've done now is Mr. Hooper has changed lots of protocols and moving forward we have a much greater uh handle on how we're doing this but you who you've worked closely with I believe you that that work uh in progress and those closed CIP reporting form that work product is is finished and complete is that correct sir okay so um Scott I think if um with your recommendation and what we've already done we'll be able to get that closed out work product from Unil and then if council has any further need where something doesn't match what you've audited then you would be able to see specifically and help us walk through that if we weren't interpreting it correctly and so council I would just

great I would just say on the CIPs we've asked for it as a body uh staff is still completing this they needed to get through the audit we should expect it within a week to two weeks weeks. Is that correct? You're going to get the construction in progress or capital projects, work in progress, however you want to show it. It'll show every project number. It'll give you a name and a description, location. It'll give you an appropriated amount that was allocated by council. It'll give you an actuals that was spent. It'll give you an amount remaining. It'll show you if it's over budget. Unil's form runs that as a total. So, at the bottom of all that, you can see do do you as council have any monies remaining that need to be appropriated to future projects or did all the projects get completed that we said we were going to do? You're going to see some projects that no longer have a cost uh benefit analysis. So, the project was uh let's say identified in 2020 and pro the the project cost was half or a fourth of what it would cost us today. And so those monies that were appropriated for that need to come back. You've heard staff say that several times. They need to bring that back to council so that you can appropriate that in the right way to go to the next project. Now the only discrepancy there is somewhere along the way staff had directed some of those monies inadvertently to go to other projects. So there are transfers and I just want to ask in those transfers those have been identified and you guys have tracked them and CLA's seen them right. I think that's and Donnie if you can speak to that. I think that's still in progress being identified. I believe

still in progress. I mean we're identifying the transfers that we would have now. We haven't gone back to like 24 23 22 and looked at those in detail because that was an accepted practice. Okay. So the accepted practice back in 21 let's say was if project X was awarded a million dollars for an appropriations and then the project didn't go for whatever reason. let's say it's a right of way couldn't get it. Staff would go and and utilize that million dollars on a different project without bringing it back to council on a different project that had already probably been brought to council on a CIP list that was approved but didn't have enough funding in that project to complete it.

So staff probably told council where the money was coming from in the form of uh u your minutes and it would have been voted on by council when they awarded the project. Yeah. So those monies can be tracked. They would have been identified somewhere in there. So and even even at the end of the the day, we still have all the appropriated amounts and all of the expenditures reconciled. So even if we didn't know exactly where the money had been transferred, you would know if you had any monies remaining. And I think that's the only thing we're representing here as council is we have an interest in getting every dollar that we've been entrusted with into the community and make sure it's not sitting on the sideline. key to that's identifying those monies so that you guys can continue to bring things uh on the agenda that we can we can push forward and I know y'all are doing a good job of that. So I look forward to getting the CIP work product from Unil and then um CLA's engagement in it as well. Um that's that's all I have on that. Scott, did you have anything further on CIP? Uh no, that is everything I wanted to uh discuss with city council on on the CIP and really everything I wanted to discuss with city council as in regards to the audit itself. some of the key highlights within the act itself I have uh presented already and again uh if any questions coming up come up during the detailed review by city council of this draft document again I invite you all to if you deem it necessary please contact me at any time I'd be happy to answer the questions or

look into the questions to get an answer uh in the future on those questions. Really good. I know I just have two questions left on my list, but I want to wait and see if anybody has anything else before we move on.

So, I I heard you mention by name the Housing Corporation and the Health Facilities Corporation. So, I think those have the same acronym, AHFC. in your report that you gave, it showed borrowed monies uh and an original issued amount. What what I want to make sure of is that the COA doesn't have any obligation to pay those monies or that they've already been paid. So, can Miss Katrina, can you speak to that? Are those

One of them is completely done. It's the larger of the two that is completely done. I think the other one has like 120 some odd thousand. They're not material. and Steve or sorry Scott it's the conduit uh footnote I don't know which one that is can you describe 18 so originally go ahead Katrina

the the housing they were giving loan and these are back from the 80s um they were giving out loans through the housing program I I can't remember off top of my head the details on the health facilities, but the 10 million is already paid and done. So decades ago, $10 million was borrowed through the city on behalf of that organization that was uh let's say the board was staffed by the council. They were nominated. They were accountable. But that has all since gone. I noticed it popped up because it's required to be listed. It is required, but the the amount is less than 130,000 or so. Yeah. And that entity that owes to pay that amount still in existence.

It is the health facilities we meet once a year in in December and they have they're they're on page 42 for their financials. Okay. It's not a very large component unit. I just wanted to alleviate a concern and not have something else to look at. And so thank you for that. My my last question gentlemen and then we'll move forward with getting this thing filed. Um, I I know we had had a discrepancy on our sewer and water uh net starting position. So, I I wanted to get CLA, why they're here, to tell me. Can you take me to that sewer and water fund, sir, and show me what page that's on?

The uh I'm trying to It's 219. Okay. Now remember, mayor that you're looking at the budgetary cash flows on on the reserves of water sewer versus actuals on this. Right. So what you're what you're telling me to make sure everybody's hearing it uh clearly. I was looking at budget numbers that might have said we expect to revenue 110 million. Whether we revenue the 110 or not, that was budgetary. It was a it was a goal, right? We could have gotten more or less, but what you're giving me right here on page 220 is the actuals, right?

Okay. So, correct. Okay. So, I I want to know, can you tell me what our endofear um positive or negative was at the end of the year from a cash position? So, total revenues less total expenditures. Now, I'm not I don't it wouldn't help me for my understanding to have a depreciation that never comes out of the account. So, so what I would ask for is is did the enterprise make money or lose money during that year?

It did. Uh so factoring in depreciation just on the statement, it made 2.8 million. 17.7 is depreciation. So if you back that out, you made 19. Okay. So the enterprise and and I know government doesn't always work like business, right? And we we come at this with a business mindset, but this one actually does. This is a business,

right? And so this business grossed a h 100red million 100 plus million in revenues and it expended roughly 80 million um 81 million in expenditures by the time you add in your I guess you lost $2 million in interest earnings. Was there an adjustment for that? I'd have to check on on what that is. interest earnings should have been in a positive, but I I I so I see that as a negative, so I'm curious on that one. Yes, Katrine and I will get together and uh

I think the brackets are backwards. I think the revenue should be in brackets in the expenses. I'm going to end up in way too many accounting details, but negatives are actually a good thing on that area. In your opinion right now, you you're telling me this this fund, this enterprise profited, right, had in excess of 19 plus million dollars at the end of the year, right?

Okay. So, in in what we were understanding in how the sewer and water enterprise lost money. So, we we expected to walk into the money or into the year. What's the what's our minimum reserve in sewer and water, Donnie? Do we do we need 22 million a year? I don't have that number with me. So the minimum reserve that I I remember looking back and seeing I thought was somewhere around 21 22 million a year and and then we would have put this number on top of it, right? The 19 plus million would have been on top of those reserves that you hold in that account.

Yes. So when you look at the budget, the budget showed that we should have had a net starting position of like 36.9 million. When we voted the budget in, we reduced that down to 7 million. And so I I I want to make sure that I'm not missing something. I I don't know that we lost money in sewer and water from a budgetary standpoint. It was just rebalancing, but you didn't move lose money in actual. So, we rebalance the enterprise, right, based on uh something outside of the enterprise?

No. I And I'll have to go review the details of what the list was because it's been a minute since I've seen what the drivers were on that list. You're rebudgeting midyear for 24 and 25 as your your accepting 2526 budget. Mhm. So, I guess what I would like to do is I'd like to look back and I'd like to get uh a justification from the staff on what monies came out of this enterprise to rebalance. I don't I don't know that we rebalance like that's probably not a a a term that's easily defined. So, so what I would hear you saying is there were additional additional expenditures somewhere that that aren't reflected on this uh in this fiscal year report. What What were those expenditures? Where did the money go? Why did we end up having to start a budget process and a budget conversation at 7 million instead of the 36? And it really wouldn't even be the 36. I know you you could get me the actuals now, but that was just a budgetary number, but there was a loss somewhere in there that we represented on paper when we when we pushed the budget forward. Otherwise, we would have those monies in reserves that could go into CIP. Correct.

Let us look at it. Okay. Because I don't want to say yes and be misled because I I need to review what those details were. Mr. Path, I saw you light up. Did you have anything to add? No, I I agree. I think we we need to regroup and and I mean and the focus has been the audit, not the budget. And so, let me let me get Katrina working on that and we can get we can get Scott's opinion on as well. And we can be ready more for that for the next time.

And and I would offer I know I brought this previously just with this same concern. And I was told you need to wait on the budget. The budget's going to show that the money is what it or I'm sorry, uh you need to wait on the audit. the audit is going to show that the the monies that we budgeted are correct. And so right now, I would say that that doesn't add up for me. So I would like to sit down with with you guys and and see if you can show me what the actual starting position should be now with these actuals in that enterprise. Yeah. Again, this wasn't something that we were looking at. It's something you brought to us and so but we can look at it and and and bring it back at the next meeting. So

great. Okay. Um Scott, you have anything else? Am I seeing that correctly on sewer and water? You you see that it it profited 2.8 million plus there's a depreciation aspect there that governments get to acknowledge for some reason, but there's there's no actual deduction for that.

Yes. I mean that depreciation expense in accordance with the generally accepted accounting principles, it's required to be recorded as an expense of the water and sewer fund. But uh keep in mind that is a non-cash expense that did not actually represent uh monies or dollars expended during the year.

Okay. So, thank you um Mr. Kersnneck on that and and we appreciate the presentation. I know we've drifted a little over our 3:00 or 3:20. Um staff, do y'all have anything else to add? I know. I'm ready to to see if these guys want to move it forward on a a motion. Um Scott, you don't have anything else, do you? I have nothing further uh to add at this point. Uh thank you, Mayor Stanley.

Greatly appreciate your time. We will uh let staff work through these items and then may not need you in person here on the 14th. I know we had talked about bringing you here. You weren't able to get here today. So, you're welcome to come on the 14th um for that acceptance or approval of that, but if we don't need it, then we'll we can do this in a teleconference form again. Okay, that sounds great. Council, nope. I'm ready to make a motion. Okay, I do want to clarify the motion and I think we're all good with it. It's a motion to file in the city's office. Yeah,

perfect. So, I'll move uh to file of the move to file the city of Amarella annual comprehensive financial report. Second. I have a motion and a second to file the annual comprehensive financial report draft um in the city secretar's office. Any further discussion? All in favor, please say I. I. I. Any opposed? Motion passes. Hey, thank you guys for being here today. Um at this time, we'll adjourn. Thank you all. Scott, really appreciate you. You have a great weekend, sir.