City Council - Regular Meeting

In addition, just in general, the city is growing. There's more complex accounting issues that are going on, more capital projects, more grant activity. As the city expands, you should always consider increasing your staff just because it may get to a point where there's more finance director. So I'll say in general our assessment was the city city of your size city of your sizes that we have larger staffs. Obviously the lack of vacancy a lot of these issues but just addressing the growth of the city.

Okay. Number three is related to your cash management specifically the pulled cash fund. So the city utilizes what's called a pulled cash pulled cash fund but that is where multiple funds general fund debt service utility fund capital projects fund special revenue funds. So all your different all your different funds will share one or multiple cash accounts and they'll have a position within those cash accounts. Now this is convenient because you have less bank reconciliations to to maintain and take care of. So they're typically Ideally should be less work involved but the risk is that it's not monitored correctly and one fund may overspend within their their available funding. So when they do when that does occur they are actually pulling pulling from other funds. So your general fund is is unknowingly funding capital projects or some other fund is is fing that for a fund that goes into a deficit position. So this should be monitored. Anytime there's a def deficit position, there should be a reason for it. If there are funds that are within investment investment account that need to be transferred within the pool cash fund to address this deficit that should be handled quickly immediately or there should be some mechanism to identify that and address it. All right. The next finding is related to your capital projects fund. So we did cover the deficit position at the end of the year within your capital projects fund. So we identified the the city did have an initial capital improvement plan which had several projects and certain amount of funding allocated to those projects. But at some point during

the year the city over spent that available funding and ended up in the year in a deficit position of about six million. So that sits on the books today but it'll ultimately need to be transferred over general fund or some other funding source in the future. All right. Uh next is comment number five. This is just related to the maintenance of your capital assets. Um so typically we've come in and assisted the city with the accumulation of any capital activity and depreciated those those assets for for tracking and for the financial statements. So the more the larger the city gets the more difficult this is for a third party. Ideally, the city should have staff and the city's going to be in a position much better position to be able be able to identify certain projects and costs and track those much better than we can. So, our recommendation is that the city take that take that uh take that task over and start maintaining it in. All right. Next is related to your public funds investment act uh compliance. So, the as part of the in addition to the city's financial statement audit, we review the city's compliance with the public funds investment act. So, has the investment policy been um reviewed and approved and adopted in accordance with this with this act? Have the investment officers attended training? Are the required investment reports being submitted to council no less than quarterly? Um, so there were some issues with the city's compliance that are noted here, but a recommendation and this has been a funding for a couple years now, but it's a pretty pretty But I I think some consistency in the finance direct department would address this. All right. And the the next comment is related to a new accounting standard

that is going to be adopted for the 2425 fiscal year. This is related to how the accounting for your compensated absences. Typically, this just would have been your paid time off or anything that was paid out on termination. What this what this new statement does is require cities to generally book uh any leave that is ultimately going to get used. So that would not only include your comp time and pay time off but it would also include your sick time. So traditionally if that was dependent on a future event it would not get considered at year end the liability but going forward that's going to have to be considered. So what's going to happen generally is your compensated absence liability is is going to be increased quite a bit for that sickly portion. All right. So that concludes the findings. Be happy to take any questions. We don't know what approved or what funds. How can you Right? So the the audit opinion is based over the accuracy of the financial statements. When you look at the financial statements, are the cash balances correct? Are the payables correct? Are the assets correct? The information within the report you're reviewing is correct. So that is where you you get an unmodified audit opinion. The findings and recommendations those

are internal control related. So you may have material weaknesses in operational areas and other internal control related areas. Those are the that's where your findings come in. Um so to receive an un modified audit opinion or an adverse there would have to be material errors within the actual numbers and statements within the report. So the numbers you're seeing are correct. They just identify deficit positions like you said or other they identify those errors which are being But those are the correct ending balances and these financial statements are reported.

Just clarify what you're saying. the numbers that you're looking at. So the if they were reported double, they've been corrected and the financial statements that you see do not contain the the duplicate numbers. So if you look at your say you received a a draft set of financial statements straight from the city's financial accounting software, uh it would be vastly different than what you're viewing here today because it might include those double accounting and other corrections that haven't been made yet. Once those corrections have been made and incorporated into the financial statements, that's where you would receive a clean order. I think what it does though, it kind of gives us a false sense of of being a newcomer to the council as it may, I was told early on by other council members that we got a clean bill of health in terms of our audits. which made me assume that we didn't have any problems. And then I'm told that's probably one of the worst we've seen in 40 years.

So I I don't know whether our counting or terminology needs to be changed or something, but we'll get a A+ something that tells me there's something wrong there, but it's not Well, when we're talking unmodified audit opinion, um yeah, that that terminology is pretty set in in the accounting industry. There's not much not much we can do with that. Um so it is based off the reliability of the financial statements.

I think the other thing to keep in mind is this was a year ago. Yeah. Right. So we expected this audit let's be honest to not be very right. So I think a year from now if our audit still looks like this then we're in big trouble right because we've been working for

but I guess my point is it's still gonna say unmodified either way you know. Yeah. I mean, it's kind of like you can be unmodified and have no money or you can be unmodified and have money, right? I mean, that's essentially I like to having money. Yeah. But I but I just want to make sure that this was we're thinking this was retroactive that in a year working with gradient and getting our accounts better and getting that pool of money taken out of

it was just awful confusing for me coming in going I hear people say this is the worst I've seen in 40 years and then but we got a clean bill of health like that can't be possible but I didn't go through it's a misunderstanding I would say the uh the findings and recommend are really the areas that are going to highlight those those issues. Um, and at least half the issues were I'm reporting to today have been in past audits. So, some of these these these issues were there last year. There's some new ones obviously, but um yeah, the findings are recommend recommendations are designed to hopefully provide the city with um a tool to implement that would prevent some of these errors happening. uh going forward. So if there's, you know, we want we want the reports coming out of the city's accounting system to be correct. So when you get your monthly reports, um those numbers should be accurate. Uh these areas should be cleaned up. The pool cash numbers should be corrected. Um you should have counting staff that can address it. So that you know that's the goal with the with the findings recommendations. So since we just got this report today, we haven't had a real chance to look and dive into it. We'll be out of town all next week. So look forward to poss I don't I don't think they're mutually exclusive. I think they can both be right, but things can be sloppy.

I don't know if I'm saying that. I'm not an accountant, but that's that's my that's my right. you're saying the numbers are correct, but we got some cleaning up to do in terms of our internal controls, in terms of the pool accounting, in terms of understanding where our capital revenues are coming in.

You can look at it like um you know, if if the audit wasn't giving you assurance these numbers were correct, you may not know the actual position that the city is in. So you may be under, you know, impression that it's not quite as bad as I'm reporting to you here today. So the the accuracy of the financial statements are are extremely important. So there are um at this point cash position there are other impact accounts that are are segregated and they're reported within these financial statements and there are other restrictions that are also reported specifically related to pulled cash that that is your operating account generally and that was pulling from your capital projects fund is is the result or is really what caused the the deficit decision. So you went from a what should have been restricted for capital projects um where you may have had at the end of last year you may have had three or four million within that fund to a complete deficit of about 10 million

or six million I'm sorry as of the end of the year. Yeah, this was this was last year. This was last year.

I get that. But you can't continue. also known as that account. I think the question is that now this was a snapshot a year ago. So that's after regardless of whe

Sure. So what I would say first of all and I have a presentation after um you know our auditor has here. So I'd like to shed some light on that presentation that I hope would shed some light on the discussion. So I don't have this because I think it'll shed light on this discussion as well because I I think it is relevant. Um I I think what what a lot of things are are being said are are actually true in a lot of sense that can be happening at the same time. And so being here the time that I've been here, one of my first questions to staff was, what are we doing currently with monies that are coming in currently today?

You know, having whatever happened in the times past fine. I I can't fix the past. We can report past. We can make sure we drill down, find what happened, and report accurately. accurately, honestly, and as quickly as possible uh to the public, to our community. And that's what we're trying to do today. As council member uh said right now, it's um yeah, we expected this. We we all knew this. We all knew that these weren't going to be great numbers. U but we insist that this must be part of the process that must be done. So, reporting fiscal year 23 to 24 numbers of what transpired transpired. uh whether the actions that were taken were taken moving forward in that poolled account and the way that was being used, how it was being used and all the intricacies to be able to give you all those uh day-to-day operational issues. I cannot answer for that dayto-day because I would have to have radiance in here. I'm not even sure Pam on a day-to-day for that 2023 24 can answer because I will tell you another thing too the individuals that are in that 2023 24 period all of that staff is no longer working for the city of Elgen. So historically we cannot even ask those individuals to see what transpired during that time. And so what we're working with moving forward when we start talking about that pulled account and what we're doing today in that pulled account is not allowing those dollars to come in for any monies or any revenues to be able to further instigate any further confluence of those dollars back into those accounts the way that they were before. If I'm being asked a legal question, I can't give you a legal answer because I'm not an attorney. We do have one

present here. So, I'm going to defer that question there. What I will say as your interim city manager is that we're working every day very hard to be able to do the very best with what we have. The first thing is provide the most accurate reporting. Can I say that it's the best uh reporting um with um our auditors? For sure. We wanted to make sure that we're doing that, that we have all the answers to fill in some other pieces which is finding those folks to come in because we're plugging holes with some great people from gradient but that's not our solution. We they're they're a great crutch but they're you know they're a crutch for us. We need in-house experts. And so again to answer the question about the legalities of it I I can't answer for that piece. But what I will say too is that uh we know our current issues. We're working with our audit team to make sure that we're we're trying to get better at what we're doing and then that we're we're now continuing um the process moving forward because that's the last thing I'm wanting to do trying to do uh with this moving forward. So, uh we're we're asking for guidance almost on a daily basis. This poor gentleman I met today but has gotten to know me quite well. Uh and only just to know that please guide us because we just don't know enough to get us to dig out of the mess that we're in. Uh, and I say that respectfully to everyone involved in the situation because I'm in that same boat. Um, so I I know that may not have answered the the your question entirely, but once I get to the slide that I'm going to show you, we're going to see how it has been a historic ongoing issue that we have not cured.

And I fear that we're going to continue to have some some of those same issues and not so much on maybe that particular issue with that pool cash. Pool cash does come up year to year, but I I can't speak to legality with TML an attorney or any legal question that you may have. So, I'm sorry, Council Member D. I cannot answer that. And if Mr. Mark wants to attempt it, then then so be it. But I I just can't go to that. I can only speak for for staff at this point.

So, can we go ahead? If y'all don't have any more questions for him at this point, let us go ahead and go through your manager report. You can begin doing want to present to us. back December of last year and received the audit that you just received today right now, which is the 24 audit. And then next year which I called again the 25 audit. So if you start looking at the uh issues uh or the findings I should say of what the 23 audit produced. So last year it was found to have internal control issues, pulled cash, bank reconciliation, PFIA and compensated absences. And again we put them in in red, yellow and green. uh red being you know finding straight up uh yellow being improve you know where it's it's it's a lot of you know medium level issue but improving issue and that really again if you look at our uh management responses to the statements if you hadn't I'd love to respond to those or you can read those in your packets because I think it it shows some thoughtful responses to the findings. Having said that though,

this find those findings that you saw list out the internal controls, bold cash, bank racks, P FAS, capital assets, staffing, capital projects, and compensated absences were all just listed. You all just heard them right now. That's in there. And so you've seen from two years now, and it's gone back more years, but I just didn't didn't want to crowd the screen. But you've seen for a couple years now, pulled cash has been out there. Bank reconciliation has not been done the way it really should be. The investment reporting, compensated absences, and compensated absences, we just haven't been accounting for uh sick leave, which we don't pay out sick leave. So that's why we don't well we haven't done it. Uh but internal internal controls, which is very big. So, as we see year to year, these are things that we know that we need to be working on. We already know that our our PFIA investment reports had a couple reports or quarter reports that were not completed. Capital assets remains a continuing issue that we're still working on. Bank reconciliations have become better. They've turned from red to yellow. Internal controls have been cured. Staffing remains a constant but is get going to get better. If maybe I will turn that to green. Uh I hope I'm going to undershoot it. Keep it yellow. Capital projects we believe has been cured. Pull cash is has gotten better. Compensated absence we believe will get better. But see how I'm saying and how we backtracked where the story has been written now just as the story had been written prior to in this story which I already to say there's no other way. It's not a very good story.

So we know it was not done as best as we could. It was not tracked as best as it should have. Uh there's a lot of things to like you know from it. Buck stops here with me and that's the way things go. So from this point forward what I'm trying to say is we understand what needs to happen. We understand what needs to move forward with what we have. As far as the greater pieces and the questions you had, Council Member St. Pierre, I cannot address that. What I can address are those pieces moving forward. What I can address is hiring good staff to dig us out of those other holes because if we don't have good staff, I can't turn the reciliation process to green because I might not have enough people to sit there and do probably a be the best job to get and to keep internal controls maybe where it needs to be. However that is. So I guess in in showing this graphic is what I'm saying is there is a history of problems that we have been needing to cure. our auditor, our third party uh audit team has come in and fully admitted that it's ugly. It's gotten better. It's going to remain somewhat ugly until we dig ourselves out. There's no shortcuts. So, it's gonna still take some work. It's still going to take some grind. And it's going to take a lot of work coming out of our finance department and out of your management team. And y'all are going to play a big role too because come January, you're going to get those financial reports on a monthly basis. You're going to get quarterly financial or investment reports come to you so

that you'll have somebody standing here and giving you investment reports. And so you know the investment um status of of this community and this city and so you're watching this go on and so that you can have things that could be mutual not mutually exclusive or you can have two things happening at once where you could have bad news but it's honest bad news or honest Yeah. honest bad news until we turn that upside down and make some you know turn it black. That's all I can give you is just sheer honest information while we're working on turning red into black. Right.

Could you look into council member about the pool making sure? Yes, ma'am. In fact, I I'll be asking our city attorney to guide me through that and see if we can how we can get that done. Yes, ma'am. Yes, ma'am.

But as for deputy mayor, without having proper counting. And so going off of everything else that I've researched um without proper accounting is enough to get state auditor or CPA finding material and it's enough to get the controller to the city code. I also have some other questions like can we say for sure any balances were not covered by funds that such as can we say for sure to cover negative balances because we can't prove it then we're going against Texas local government code 10200 and 10210 cannot funds without

um do you want me to answer your question? Yes. We are not using what you're referring to as a pulled cash account. It is sitting at Logic until we're done figuring out the allocations. We have a consolidated account that we opened up at the beginning of fiscal year 24. Excuse me. We're not using the pulled cash that you're referring to. It's still the $6 million sitting at Logic that I referred to the last meeting we were at. I don't understand your question.

I cannot say that. I did not work in finance in 23. So I think that what we can conclude for this because we can go through this back and forth all night long. Uh we can't do go back and find we don't have people to ask. We don't have a clue how it was done. We don't have a track how it was done. Going back uh will never get you anywhere. you're going backwards, but you need to figure out what we're going to do going forward and make for sure that what we think may have happened and yes, what we think may have happened because I wasn't there. I'm not a finance person. Pam was not there. She's not a finance person per se. And so we have people that unfortunately we did the best that we could possibly do at the time. Yes, ma'am. Okay. So, the thing of it is what we need to understand. We can't in the past, you have to go forward. And what it is that we're going to do going forward is what we need to work on. I understand council member Sia, I'd love to know what happened, too. But I wasn't on the council then, nor was I mayor. So, I'm not going to go and try Excuse me. I have floor. We're not going to go back and try to figure out what all did happen while we're still spinning our wheels and not going forward.

We will go forward and also We have a right asitu. We absolutely should. How can you if you don't know what to go back for?

Because you get a forensic audit and that's you know what I think that is the key problem what we have already is the word forensic audit. We have to go oh Jesus. Yes. Jesus needs to come on now because we definitely need to know when your tax I'm not saying I don't want to know.

That's what you're saying. No, I'm not. Don't put words. I'm saying I don't want to spend months and years looking back. I want to go forward. That's you. I want to spend months and years to go back. I want to know what my tax dollars were and my constituents want to know what they tax

respectfully. We understand what you said. Now moving question. Yes.

Well, again, so forensic audit will be have to be mapped out and it'll be the details that you put into it because you you'd have to parameters you'd have to say I I and voted on to say we need to go back from these years to these years to look for this type of potential this possible potential these sort of findings not just general snooping general um financial reviews of every potentiality because what will end up happening they're going to ask for a uh an RFQ to be sent down for forensic audit services and they're going to say well what are our guard rails and say we need you to go back the last number of years we need this scope right so we need you to look at this uh these types of accounts uh make sure that they were done according to state law, general county principles and provide us, you know, the findings and then you pick the firm, they'll give you cost timelines. It could happen where you open you could have a one track happen and it could open a layer and it could open layers. So, a lot of things can happen from those things. What will happen is that that firm will come back and say, "Well, we found this. Do you want to continue to travel down the road this way or however it may be?" But you do have to generally come out. It's not a one size fits all. Uh let's let's have a forensic

audit in just general terms. You do have to put a scope out there what you're looking for because it will be different for different cities and Not a one size fits all. Yes, sir. Do we have any other discussion?

No, it's because it was not an emergency. That's what you asked for. I really don't like for an agenda item to discuss this not as an agenda item discussion. Yes.

Yes ma'am. Uh thank you mayor council. So, while we're at in talking finances, all thing finances, we did want to talk about SB1851, um 1851 as it's been talked about within cities across the state of Texas, um has come into effect and what it uh talks about as it's being uh described and as it applies to cities in the It's u described and defined um the tax code I'm going to read off on the tax code side tax year as a calendar year tax spec the act specifically specifies that a tax year begins on or after September 1st 2025. Um what SB1851 states is that if you don't have your audit, a audit, an approved audit. U ready by the time uh you consider your tax rates and you approve raising your taxes then or you cannot raise your taxes if your audit has not been completed as that's understood through at least TML and because this law has just come into effect this year the The way TML has understood this, other cities have understood this, many other cities and has published their opinion attorneys as well is that the tax year

obviously starts in 2025. So as you approve an increase of the tax rate, for us. They pushed back or could not have that hasn't made the courts yet. believes that they are right in the position that taxis becard. We are qualified attorney from TML's opinion attorney. So please I know some questions. I don't have that yet city attorney but city

There's no Perfect. special events.

Hello again. So much of me today. I'm so sorry. Uh So, in your packets, you've received two memos from me. This is in response to a question that was asked in the September council meeting about how much money we spend in fee wavers. I worked with Chief Noble and Directors to come up with these numbers and they include any waivers that were made for public works time, PD time, park, street closures.

Thank you, Council. Next, uh, in your packet, you'll have your historic board. If anyone has any questions on that, any of those next Oh. Uh, we have Mr.

on the crosswalk. So, I I guess I can speak to Yeah. Bo Are you looking for your dad or what? That would be you, Bo. Okay, let's go with first names. All right. Keep the list. Yeah. Update on Many of you guys can imagine it's a very fluid situation. They talked to the local office. They were unaware that the weather was going to come out until it actually was sent to all the cities. Uh so they were reading at the same time it was being distributed to the cities. Um what they basically come in as an email as of this morning basically said this is what the design looked like. We want to go ahead and try to leave it. Text said they would take a look at it. They would have to go back and have conversations about what the intent of the letter was. that basically said you have three options. is remove it within the 30 days from Octo provide a plan of when you could actually remove it if it was going to be later or provide a stand with the Texas municipal traffic control devices and so staff after talking to city manager basically directed us to take a look at it. We've gotten all the information that was submitted for the grant and we will try to put together something to be able to submit to text saying that we feel that it still meets the merits of health and safety for uniform. Other than that, that's the best I can do. Will they accept that it's just simply now the city's issue to keep it there? I

don't can't tell you how that will exactly play out. a timeline other than we have to submit before that 30-day period that letter November basically November 7th decides to submit something I have talked to the local basically said we Day of the dead. There's no way that they basically said they will look at exemptions as long as it

I don't think that it I don't think it would hurt to get a letter at a minimum. The grant um I can tell you briefly again all this information today the grant basically was awarded based on health and safety essentially to make it better in that particular area. Um what text has specifically asked is that's all good backup material they'll actually use that as part of their decision or not again city funds or not city funds I don't know if they'll even consider that what they have said that they will look at specific letters it's municip traffic. So that is what they put on. So that's what So that is the fluid situation. The letter from text from the governor at that direction explicitly says as well that that conflicts and causes it's not uniform you expect it to be black and confuse people driving. So the way that the letter actually was all of you guys it specifically calls out murals or any kind of artwork any kind of striping whatever the case may be on a roadway that's

meant for traffic essentially. So, we will address what we can with that, but I can't give you a definitive answer of how they're going to review it, what they're going to review it against, and how they're going to interpret their direction that they're g Thank you. Uh, next item, notification of the appointment of Kayleie Fry as the economic development director by Economic Development Corporation. On uh, this is uh, on my part a notification that on October the 8th, the EDC board um, at their board meeting appointed from interim to director Katie Fry and it was it is just a notification on our part to the council that was intent. All right, moving on to our consent agenda. We have it for September 9th, September 16, September 23rd and then possible action to approve street on Friday October 24th through midnight resolution city I'm sorry authorization of the repair of the pump at the water treatment plant number six resolution Texas authoriz consent agenda.

Second to amending all the same.

Yes. Um I'll try to summarize it as best. It's a lot of jargon, but as you're aware, B&Z from time to time they have workshops where they look at the current development standards and things of that nature. Um, sometimes go through and have like a refresh compared to other municipalities in the general area or some particular members have concerns and they want to walk it through. Um so we did have a couple of workshops here recently where we went through a couple of different codes and basically to summarize what's before you today is changing the code currently as it exists when we're building a structure at the 100 year flood plane. The city of Elvin's code is very specific. It says the structure base must be at or above the 100year flood plan. So essentially means you're right there. Um after a lot of debate and back and forth um they've had some engineers come in and kind of discuss it with them. What they're proposing is to change that code to basically be the structure must be one foot above the 100 flood plane or higher essentially. Um obviously developers anyone building the home that's near a creek or whatnot they would have to take that into account in setting their structure. Um most of the rest of the changes in there are just All of our codes basically say or latest version of we basically have updated a lot of the terminology in there to be what the latest is today. It still is latest version thereof basically but basically if we're going to change one section we went ahead rewrote through it to just bring it up to date as it is. But at the basis of this particular one is they essentially wanted to ensure those structures are set one foot above the 100year flood plane instead of at and above. A few administrative items that they did through the workshops too is they came

up with a list of very specific notes that they wanted to see on flats so that it wasn't a different iteration from different engineers. Basically came up with a checklist that's It's already on the website forward. So administratively they did that version but this is actually

yeah it does not go backwards. So it would only be new builds they're going for that are not already on the books. You know platted they're platted and they have elevations. Those are what they are would So essentially from a renovation as you guys are well aware the flip maps are changing throughout county and county submitted back flood plane insurance or flood insurance to property based on the So from a city standpoint, if you're doing a retrofit, it would only be against what you are retrofitting. Like if there's a building addition. So if the existing building was at right at the 100 flood plan and you were doing an addition essenti We have any further announce.

I think it's different depending on early Let me pull it up so I don't butcher it. Um but so our early voting location is um for Travis County is Elementary early learning center. Um the election day locations, the two closest to us obviously um would be that Mayor Elementary Early Learning Center and

Ministerio Fidelia Christian. It's the church on County Line Road. That's easy. That's easy for you to see. Yes. And while I'm up here, um, Bastrop County is the North Bastrop County Community Annex, 704 Bull Run Road.

Oh, it's the old That's right. I'm sorry. That's right. You're right. The old tax else