Informational Meeting

MINUTES Informational Meeting Tuesday, September 27, 2022 at 4:00 PM Carnegie Town Hall, 235 West 10th St., Sioux Falls, SD 57104 1. Call To Order Council Members Present: David Barranco, Sarah Cole, Rich Merkouris, Greg Neitzert, Marshall Selberg, Pat Starr Council Members Absent: Alex Jensen, Curt Soehl Council Member Greg Neitzert called the meeting to order at 4 p.m. He announced that Councilors Curt Soehl and Alex Jensen were not present; and asked if there would be any objections to him chairing the meeting. There were no objections. 2. Councilor Remarks There were none. 3. Presentations A. August 2022 Monthly Financial Statement by Shawn Pritchett, Finance Director Presentation: Approximately 15 minutes followed by discussion Pritchett began his presentation by stating that the general Labor Force & Employment numbers are up about 3.3% over this time last year; and labor force overall is up 2.5% over last year. The unemployment rate continues to decline and it was at 1.7% in July, this is the lowest rate seen in 22 years. Statewide unemployment is at 2.1% and nationwide it is 3.8%. Pritchett said inflation continues to be a challenge and there was a slight dip to 8.3% in August, which is down 0.8% from July. The energy sector is driving inflation and it is up 23.8% over last year. He expressed his concern with the food sector being up to 11.4%, which is about 9.5% higher than prior to the pandemic. This is the largest 12 month increase since May 1979. Building Permits YTD Building Valuations continue to be extremely robust, according to Pritchett. Through August there is about $1.55B in building valuations, which is ahead of last year by about $821.3M. This is almost a 300% increase of over two years ago. New commercial projects, which includes multi-family developments, is the driving growth factor. Pritchett said all new commercial is up by $662M. New residential values are down slightly by 7% or $16M. Building remodels are up by $36M or 78%. Sioux Falls YTD Residential Permits (Units) shows that: 546 single family units were permitted, which is down 92 units from last year; 2,873 multi-family homes were permitted, compared to 1,479 last year; overall there were 3,744 units permitted, which is more than 1,300 from last year. Sales Tax Collections without Audits is up 8.9%. Entertainment Tax  Collections without Audits is up slightly at 10.3%. Industry Taxable Sales Data, for July, shows a decline for eating establishments and home furniture. Lodging Tax Receipts showed a 2.6% increase for August. Lodging BID Tax Receipts was down by 4.4%. General Fund - Revenues YTD show that the City has received more than $133.7M, which is 68% of the budgeted expectations. General Fund - Expenditures YTD shows the City has expended $129.8M of the budget or 59%. Pritchett said that they will be bringing forth some supplements in October. Discussion followed regarding: the use of the American Rescue Plan Act (ARPA) funds and the Public Safety Homeownership Program; parking ramps and bonds; and the paying down of the Orpheum Theater's debt. B. 21-07 340B Pharmacy Agreement Audit by Ryan Lauseng, Internal Auditor Presentation: Approximately 5 minutes followed by discussion Lauseng noted that the this presentation was presented to the Audit Committee in late August. He then began his presentation by providing background on the agreement. In 1992, Congress passed Section 340B of the Public Health Service Act. Through this section, drug manufactures agreed to provide discounts on covered outpatient drugs purchased by "covered entities", such as Falls Community Health (FCH), that serve the most vulnerable patients. In 2011, FCH and Lewis entered into an agreement for the pharmacy to provide services to eligible patients, in regards to 340B outpatient drugs. In 2021, there were 3,570 prescriptions filled and 898 patients. Lauseng spoke about the audit objective, which was to determine if Lewis was compliant with the requirements of the agreement. For the audit scope, a detailed testing consisting of a sample of 340B drugs dispensed from January 1, 2021, through December 31, 2021, was used. Two of the things that the audit was looking for was to see if there were any duplications of discounts or diversion. Lauseng said that he did not find any instances of these happening. Four findings of the audit, included: Lewis doesn't implement any inventory optimization processes to ensure sufficient levels of inventory; Lewis doesn't utilize a "tracking system", which is a requirement of the agreement; 20% of prescriptions tested did not have a designation that the patient was 340B-eligible; and Lewis is not providing all of the required quarterly reports. Recommendations were made for Lewis to: utilize PioneerRX, a pharmacy software currently used by Lewis, to establish a more efficient inventory optimization process; for FCH and Lewis to work on a "tracking system"; for FCH to utilize eClinicalWorks, their electronic health software, to allow them to identify 340B drugs on their prescription forms; and for Lewis to provide FCH with quarterly reports. According to Lauseng, FCH and Lewis are already working on remediation. The audit conclusion determined that Lewis is compliant with the majority of requirements outlined in the agreement. Discussion followed regarding: it being upsetting that no one from the Health Department showed up for the presentation; if a third party was brought in to assist with the audit; questioning if it can be stated that there was "no fraud abuse" since that is a legal determination; being interested in the City Attorney's opinion, regarding if there was no fraud; how is the prescription paid for after the discount has been applied; inventory optimization; who determines if someone is 340B eligible; the use of paper or electronic prescriptions; the Eastgate Lewis is the only one used in the program; does this program include the use of specialty medications; and how does a provider know if someone is 340B eligible.  C. 21-06 Damage Recovery Billing Audit by Emily Newell, Internal Auditor Presentation: Approximately 5 minutes followed by discussion Newell began by speaking about the background of the audit, which included information that the City is a self-insured entity and seeks reimbursement for property damage losses from third parties; the revenue and expenses budget is impacted by the recovery of losses; and the most common type of damage claims is the result of a vehicle accident damaging property, such as street lights, stop signs or fire hydrants. The recovery process, for damaging City assets, involves various departments, including Finance and City Attorney's Office. Invoices, for 2021 reflecting property damage, totaled $217,274. Property damage revenue totals for 2021 were $248,884. It was explained why the property damage invoices and revenues don't match. Sometimes payments are made right away or after they have gone to collections. Payments are noted in the time period that they are made. The objective and scope of the audit was to assess the effectiveness and efficiency of the Damage Recovery Billing process to ensure the City is recovering labor and material costs to repair damages to City assets. The testing period was from January 1, 2020 through December 31, 2021. The audit findings were: materials invoiced with an overhead charge in one City department; estimated labor rates utilized for invoicing in one City department; and billing for damages to City property claims procedures not formally documented. Overall, standardizations of departments were on the same page. Three recommendations were made. Newell said that their recommendations were already being implemented with some already being fully implemented. The recommendations included: the utilization of specific software for processing damage recovery claims; establish a monitoring program to ensure department procedures are in place; and to store documents electronically. Opportunities for improvements included: decision-making procedures for write-offs; and utilizing VueWorks, an asset management software program. Overall, it was determined that the Damage Recovery Billing invoicing process is currently conducted efficiently and effectively; initial invoices are generated quickly; and within the scope of the project there was no evidence of fraud, waste or abuse detected. Discussion followed regarding: accounts receivables; the need for a statement that the former Internal Audit Manager, was not a part of the audit process; VuWorks and how it works; and write-offs. 4. Public Comment Scott Ehrisman spoke about the following: the dangers of pharmaceutical drugs in the wrong hands; not knowing if fraud existed with the Pharmacy Agreement Audit; why it's taking so long to replace traffic lights at 17th and Cliff; and the Internal Audit Manager position. 5. Adjournment Council Member Greg Neitzert adjourned the meeting at 4:54 p.m. Denise D. Tucker, MMC, Assistant City Clerk