Finance Committee

Finance Committee Monday, July 15, 2024, 8:00 A.M. Virtual meeting pursuant to Chapters 113 and 115 of the Codified Ordinances (as amended in Ordinance 22-28), and Resolution 22-29, enacted on March 22, 2022. Members present: Council Member, Nancy Moore, Chair Council Member, Anne Williams Council Member, Carmella Williams Council Member, Kim Bixenstine Citizen Member, Martin Kolb Citizen Member, Anthony Moore Citizen Member, Ketan Patel Others present: Mayor, David E. Weiss Chief Administrative Officer, Jeri E. Chaikin Director of Finance, John Potts Neighborhood Development Specialist, Brendan Zak Principal for Rea & Associates, Inc., Chad Gorfido, CPA Frank GoForth, League of Women Voters * * * * DISCUSSION ITEM: AUDITORS EXIT CONFERENCE – CHAD GORFIDO, CPA, PRINCIPAL AT REA & ASSOCIATES, INC. Auditor Chad Gorfido opened the discussion with the results of the audit for the year ending December 31, 2022. Mr. Gorfido went through the sections of the audit report starting with the opinion on the financial statements. The financial statements are presented fairly in all material respects in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Rea & Associates, Inc. issued an unmodified, clean opinion. Management is responsible for the preparation and fair presentation of the financial statements. Rea & Associates, Inc.’s responsibilities include professional standards to be independent and to have professional skepticism during the audit. The required supplementary information and management's discussion and analysis sections are the responsibility of the City and those sections are unaudited. However, Rea does read through them to make sure there's nothing materially misleading. There is no audit opinion on those sections. For the supplementary information the City presents individual fund financial statements and schedules. These are the budgetary schedules and the individual fund financial statements. Rea first began with a discussion of their audit opinion. Rea stated that in their opinion, the financial statements are presented fairly in all material respects in accordance with U.S. GAAP. This is what’s called an unmodified or clean opinion. Rea will tie all the numbers back to the financial statements and make sure everything matches. Also presented with the financial statement is other information such as the introductory and statistical sections. Those are also unaudited sections. Similar to the required supplementary information, Rea does read through those sections and make sure there's nothing materially misleading. The last section of the opinion reference is the government auditing standards report. The auditor’s report on internal control over financial reporting and compliance is in accordance with government auditing standards. In a government audit, Rea is required to report on internal controls. Rea does not necessarily test or express an opinion on internal controls. However they do look at the implementation and design of internal controls to make sure there's no deficiencies that they would consider to be significant deficiencies or material weaknesses. That section does provide the definitional items of what a significant deficiency or material weakness would be. The last paragraph on this page is the most important one. It does state that Rea did not identify any deficiencies that they would consider to be significant deficiencies or material weaknesses. So, again, this is a clean report. Also, under government auditing standards Rea is required to identify and test material compliance requirements. For Ohio, the Auditor of State's office issues what's called Ohio Compliance Supplements where they go through the Ohio Revised Code (ORC) sections, and they determine what they consider to be material in the ORC that Rea is required to test. This would also include any Ordinances or City policies that Rea would consider to be direct and material to the financial statements. This section states we did not identify any instances of non-compliance that would be considered to be material. The next report is a report on compliance for each major federal program, and internal control over compliance in accordance with Uniform Guidance. This is the single audit or federal audit report. The first section is Rea’s opinion on the compliance for each major federal program. The City complied in all material respects with the compliance requirements outlined in the Office of Management and Budget (OMB) compliance supplement. So, again, that is an unmodified opinion. Similar to the opinion on the financial statements, this also discusses the responsibilities of management and the responsibilities of the auditor. Under a federal single audit in accordance with the Uniform Guidance, and internal controls over compliance, Rea is required to test internal controls over compliance. They will identify the directive material compliance requirements, and then test controls over those requirements. This section states that Rea did not identify any deficiencies in internal control that they would consider to be significant deficiencies or material weaknesses. The last section is the report on the schedule of federal expenditure. This is to the supplementary information and in relation to the opinion, Rea is stating that the City’s federal schedule is presented fairly in all material respects in relation to the financial statements. Page 2 of 5 Next is the federal schedule. This outlines, on a cash basis, all of the City’s federal expenditures for the calendar year. Next there are notes to the federal schedule. These are just standard notes that are required to be presented last. In the first section, the summary of auditor results basically quickly summarizes everything. So, in summary, Rea had an unmodified opinion on the financial statements. There were no material weaknesses or significant deficiencies, no material non-compliance items, and no findings related to the City’s federal programs. Director of Finance, John Potts expressed appreciation for the work by Rea & Associates, Inc. during both the compilation and audit of the Annual Comprehensive Financial Report and went on to say that both Rea and the Finance Department have a strong, collaborative working relationship. Citizen Member Kolb was encouraged by Mr. Gorfido’s comments about working with the City. He asked if it was unusual for an audit firm to audit a municipality year after year with ongoing clean audit reports. Mr. Gorfido went on to state that typically within the exit conference, he would go over another report called a Management Letter, where that would disclose the immaterial recommendations or immaterial non-compliance violations. Today, he was not presenting one because they did not have any. Mr. Gorfido stated that for a city of this size, that is pretty rare. A good amount of audits can go without findings, but to go without even a management letter is very impressive. * * * * APPROVAL OF THE MINUTES OF THE REGULAR MEETING JUNE 17, 2024. Chair Nancy Moore stated that the minutes of the June 17, 2024 meeting were unanimously approved. * * * * REQUEST TO ENTER INTO A PURCHASE AGREEMENT WITH JIMMY JOHNSON TO ACQUIRE THE CITY OWNED VACANT PARCEL LOCATED AT 3702 MENLO ROAD (PPN: 735-20-155) FOR $1.00 FOR USE AS AN EXPANDED SIDE YARD. Neighborhood Development Specialist, Brendan Zak requested to enter into a purchase agreement with Jimmy Johnson to acquire the City owned vacant parcel located at 3702 Menlo Road for $1.00 for use as an expanded side yard. Page 3 of 5 Mr. Zak stated that this is an application from Mr. Jimmy Johnson who lives at 3706 Menlo Road. He is applying to acquire the city owned lot at 3702 Menlo Road for use as a side yard. 3702. Menlo is 36 feet wide and 119 feet deep and Mr. Johnson's home is to the left of the vacant parcel. The city acquired this parcel back in January of 2011 after demolishing the home in 2009. The applicant meets all qualifications and conditions for the side yard program, including living in the property next door. The property is out of foreclosure and is current on property taxes. There are no outstanding building housing or zoning code violations. The applicant's property will be permanently consolidated with the vacant lot as part of this program. This is consistent with the City and neighborhood goal of expanding the size of yards in the neighborhood. The City has no other redevelopment plans for this vacant lot, and staff considers the use of this lot an improvement over the city maintaining a vacant lot. This was reviewed and unanimously approved by the Neighborhood and Economic Development Committee last week. Citizen Member Moore asked if the City has seen any situations where we have gone forward with this sale of a parcel and the applicant has not been able to keep it up. Mr. Zak stated that we have had a few who have gone through the program and went under contract but then decided not to purchase the lot. There has not been any foreclosures due to taking on the extra property tax expense and the City has not received any maintenance complaints in recent years. Citizen Member Kolb asked about the increase in volume of these requests. Mr. Zak stated that these requests have increased in recent years and that this speaks to a rebound in the neighborhood and residents wanting extra space next to their house. Chair Moore commented that there has been a slight change in that we have decided to take ownership and transfer condos, which has been a kind of a change in policy. We think it's a very good development in many condo associations in that they are now turning over what was basically a tax non-producing property to ownership through renovation that they have undertaken due to our ability to transfer title to them. CAO Chaikin spoke to the comment on the side lots sales increasing. They have increased since we made two changes to the program mostly because of the burden on Public Works to maintain the properties and also because we were not selling that many side lots. We changed as to a set purchase price of $1 and we also do not require that there be improvements to the property. So the fact that the City has made it more affordable for the neighbors has also helped. The Mayor went on to say that we continue to look at this program on a regular basis. There has been an increase in activity. In particular with combining this with our infill program, we do look at this and whether $1 is the right consideration for these properties going forward. We will continue to evaluate that. On the condominium side we have not had a program like we do for the side lots with respect to condominiums. But we have identified a modest uptick in the number of condominiums Page 4 of 5 that are in default. The City will continue to expand our review and encouragement of working with our condominium associations. When a condominium goes into foreclosure it puts an additional burden on the rest of the condominium association. And so we have been reaching out and trying to establish good working relationships with our homeowners associations for these condos. It is a fair amount of work on behalf of the homeowners association, and that's one of the things we're continuing to work on is finding ways to assist them. Council Member Bixenstine stated that she has heard from condo residents who live in some of the older buildings on Van Aken about how the infrastructure of their buildings is in need of repairs. She asked if the City has any interest in having some kind of program that would assist in some updates to the infrastructure to those buildings. The Mayor stated that the City has been talking about providing support and assistance to the homeowners association to manage that. Particularly with some of the older buildings things like garages and roofs do need upgrades. It is difficult to find ways to generate additional reserves and escrows and funding for these major capital repairs without putting a real burden on the residents of the condominiums. Particularly where we have older seniors in those condos who may have owned them for many, many years. It is a challenge but we continue to at least think about it and try to come up with approaches. We have had some modest success, but we will keep working on it because the more we can get those properties back on the market it helps out the overall condominium. Council Member Bixenstine commented that she does worry about some of the issues as being safety issues, particularly if you have a condo with a lot of seniors and one or two elevators is out. The Mayor commented that the City continues to look at that but does not believe we have had nearly the issues in our condominiums as we have had in our older apartment buildings. The Finance Committee approved the request to enter into a purchase agreement with Jimmy Johnson to acquire the City owned vacant parcel located at 3702 Menlo Road for $1.00 for use as an expanded side yard. * * * * There being no further business, the meeting was adjourned at 8:30 a.m. The next meeting will be August 19, 2024. * * * * Respectfully submitted, ________________________________ John J. Potts, CPA Director of Finance, Finance Committee Page 5 of 5