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Record of Proceedings

Committee on Administration, Finance and Law and Public Services Special Meeting - July 22, 2024

Common Council — Monday, July 22, 2024
BodyNew Britain, Connecticut
SessionCommon Council
DateMonday, July 22, 2024
StatusFILED
Video Record
0:00 / 1:15:35

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1:10

Good evening.

1:10

I call to order the July 22nd special meeting of the Committee on Administration, Finance, Law and Public Services.

1:16

The time is now six oh seven p.m.

1:19

And Miss Clerk, will you please call the roll?

1:31

Good evening.

1:32

Good evening.

1:34

Alderman Connors.

1:35

Here.

1:36

Barbosa?

1:37

Magnamera?

1:38

Here.

1:39

Santiago.

1:40

President.

1:40

Simpson.

1:42

Gibson.

1:43

Here.

1:44

Bubble.

1:47

Smedley.

1:49

Beloin Savitra.

1:53

And today we'll be seated Alderman Russell.

1:57

I'm actually an observer.

1:59

Yes.

2:00

You're sitting in for Alderman Smedley.

2:05

Thank you, sir.

2:07

And Alderman MacAdam.

2:16

Correct.

2:17

Thank you.

2:25

Thank you, Madam Clerk.

2:27

Tonight the first item on the agenda is the presentation of the audited financial statement fiscal year ending June 30, 2023.

2:34

May I have a motion?

2:38

I make a motion to accept and refer to the full council with a neutral recommendation.

2:42

Motion to accept and refer with neutral from Alderwoman Belowing Surveyor, seconded by Alderman Russell.

2:48

All in favor say aye.

2:50

Oh wait, sorry.

2:51

Sorry.

2:52

Apologies.

3:32

So part of my agenda for this evening is to first start with just talking about the scope of our audit services.

3:39

What do we do for the city?

4:04

Then I'm going to talk about the tested programs in the state and federal single audit.

4:16

Okay.

4:17

And then um some industry insights um on new GASB standards that are coming down the pike.

4:25

What do I have?

4:27

This one.

4:29

Okay, great.

4:31

Um, so just to describe to you the scope of our audit services, we do render an opinion on the city's financial statements.

4:38

And I think it's important to note that I say the city's financial statements.

4:43

The city's responsible for those financial statements and the numbers in them.

4:47

We come to audit them and render an opinion on whether or not those numbers are materially um representative of government of generally accepted accounting principles.

5:01

With that, we also render an in relation to opinion on the schedule of federal awards and state financial statements, which we call the state and federal single audits.

5:13

So those schedules are in relation to the financial statements as a whole.

5:26

And we'll go over what we've tested later in the presentation.

5:31

The last two bullets on this slide.

5:51

What do you mean when you say that?

5:54

So we gain an understanding of internal controls based on our audit steps and our audit requirements under government auditing standards.

6:04

We do not say the city is, we don't opine that the city's financial up internal controls are good or bad.

6:13

We just report you any findings that report as a result of our audit.

6:23

As far as audit opinions go for both 22 and 23, um, the city did receive unmodified reports both on the financial statement side and the federal and state awards.

6:38

That means that the city received clean opinions on both the financial statements and the compliance testing that we performed on the state and federal single audit.

6:49

That's what you'd want to receive in every each and every year.

6:52

The city has done that for both those years.

Discussion Breakdown — Share of Meeting
Budget Equity Analysis█████████████████████████████████████████████55%
Fiscal Sustainability████████████████20%
Public Engagement█████6%
Procedural████5%
Personnel Matters████5%
Procurement Process████5%
Technology and Innovation██3%
Public Health█1%
Summary of Proceedings

Committee on Administration, Finance and Law and Public Services Special Meeting - July 22, 2024

The special meeting was called to order at 6:07 PM in the Common Council Chambers. The primary agenda items were the presentation of the audited financial statements for fiscal year ending June 30, 2023, updates on finance department staffing, progress on financial close processes, internal controls, and the timetable for procuring audit services for 2025-2026. Council members received detailed information and discussed the city's financial condition, audit findings, and plans for improvement.

Discussion Items

1. Presentation of Audited Financial Statements (FY 2023)

The external auditor from CLA (Leslie and Grace Maswita) presented the audit results. The city received unmodified (clean) opinions on both the financial statements and the federal/state single audits. Key financial highlights as of June 30, 2023:

  • Net position (full accrual): $46 million, an increase of $168,000 from FY2022.
  • General fund balance: $25 million, including $7 million of assigned fund balance ($3.6 million for FY2024 budget balance, $3.5 million for Board of Education).
  • Unassigned fund balance: $17.9 million, approximately 7% of budgeted expenditures.
  • General fund balance increased by $751,000 during FY2023.
  • Property tax collections: 96.34%.
  • Revenues exceeded budget by $573,000; expenditures were $178,000 under budget.
  • Pension funding: police 53.95%, fire 63%, MERS 68% (state-run), elected official plan pay-as-you-go.
  • ARPA fund: $30 million remaining to obligate by December 31, 2024, and liquidate by December 31, 2026. (Later clarified that only $550,000 remained uncommitted as of the meeting, with funds being allocated to the Mount Pleasant project.)
  • Total indebtedness: General obligation bonds approximately $315 million; overall debt limit $948 million; net debt applicable to limit $518 million.

The auditor reported two material weaknesses: (1) timeliness of bank reconciliations, and (2) financial close procedures. There was also a compliance finding for late filing of the financial statements (due December 31, 2023, but issued much later). As a result, the city no longer qualifies as a low-risk auditee for federal single audit, requiring 40% testing instead of 20%. Management letter recommendations included periodic reconciliation of OPEB liabilities, capital asset review segregation of duties, and analysis of general liability reserves.

Finance Director Jonathan Perigini explained that the FY2022 audit took 18 months due to 75% staff turnover, while FY2023 was completed in 6 months. Staffing is now fully in place (as of May 2023), and the bank reconciliation process has been broken up and assigned to multiple staff with checklists. The goal is to have the FY2024 audit issued by December 31, 2024, to regain compliance.

2. Status of Finance Department Staffing and Capacity

A discussion item. Director Perigini stated the department is now fully staffed after losing high-level staff in 2022. Cross-training and a new checklist system for bank reconciliations have been implemented. Council members debated the distinction between valid reasons and excuses for delays; some stressed the need for timely audits and accountability. The auditor noted significant improvement from FY2022 to FY2023.

3. Response/Progress on Establishing Formal Financial Close Process (Findings 2022) and 4. Plan of Action to Strengthen Internal Controls (Findings 2023)

These items were discussed together as the findings were identical. Perigini outlined:

  • Bank reconciliations: now done monthly with responsible parties and cross-training. The material weakness is partially completed and expected to be removed for FY2024.
  • Grants and capital projects: staffing changes caused delays; now a dedicated grant staff member is in place, and newly hired budget/capital projects fiscal officer started January 2024. Focus for FY2024 is to complete retainage, deferred revenue, and accounts receivable early to aid audit testing.
  • Non-compliance with uniform guidance: the FY2023 state single audit was completed a few days after the final extension deadline (July 3, 2024). The goal is to issue FY2024 audit by March 31, 2025, to remove the compliance finding.
  • A meeting with the mayor and audit team was scheduled for the next day to coordinate the FY2024 timeline.

5. Request for Qualifications and Timetable to Conduct Independent Audit 2025-2026

The city must notify OPM by June 1, 2025, of the auditor for FY2025. Perigini proposed issuing an RFP by February 1, 2025, to allow time for review by the audit subcommittee and council. The audit committee will vet proposals and recommend to the full council. Council members requested clarity on the committee's role in interviewing firms; Alderman McNamara noted the ordinance defines the committee's authority. The timeline was accepted as a discussion item.

Key Outcomes

  • Motion to accept and refer the FY2023 audit report to the full council with a neutral recommendation passed by voice vote (all in favor, none opposed).
  • No formal votes were taken on items 2, 3, 4, or 5; these were discussion items only. Council heard updates and expressed expectations for continued improvement.
  • Next steps: Finance director to meet with auditor and mayor to finalize the FY2024 audit timeline; audit committee to develop the RFP for audit services to be issued by February 1, 2025.

Meeting Transcript

Good evening. I call to order the July 22nd special meeting of the Committee on Administration, Finance, Law and Public Services. The time is now six oh seven p.m. And Miss Clerk, will you please call the roll? Good evening. Good evening. Alderman Connors. Here. Barbosa? Magnamera? Here. Santiago. President. Simpson. Gibson. Here. Bubble. Smedley. Beloin Savitra. And today we'll be seated Alderman Russell. I'm actually an observer. Yes. You're sitting in for Alderman Smedley. Thank you, sir. And Alderman MacAdam. Correct. Thank you. Thank you, Madam Clerk. Tonight the first item on the agenda is the presentation of the audited financial statement fiscal year ending June 30, 2023. May I have a motion? I make a motion to accept and refer to the full council with a neutral recommendation. Motion to accept and refer with neutral from Alderwoman Belowing Surveyor, seconded by Alderman Russell. All in favor say aye. Oh wait, sorry. Sorry. Apologies. So part of my agenda for this evening is to first start with just talking about the scope of our audit services. What do we do for the city? Then I'm going to talk about the tested programs in the state and federal single audit. Okay. And then um some industry insights um on new GASB standards that are coming down the pike. What do I have? This one. Okay, great. Um, so just to describe to you the scope of our audit services, we do render an opinion on the city's financial statements. And I think it's important to note that I say the city's financial statements. The city's responsible for those financial statements and the numbers in them. We come to audit them and render an opinion on whether or not those numbers are materially um representative of government of generally accepted accounting principles. With that, we also render an in relation to opinion on the schedule of federal awards and state financial statements, which we call the state and federal single audits. So those schedules are in relation to the financial statements as a whole.

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