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Minutes TC 03/07/2005 - Joint SessionMINUTES OF JOINT WORKSHOP BETWEEN TOWN COUNCIL, EDC A AND EDC BI REGULAR TOWN COUNCIL MEETING FOR THE TOWN OF TROPHY CLUB LOCA TION:100 MUNICIPAL DRIVE,TROPHY CLUB,TEXAS Monday,March 7,2005 6:00 P.M. STATE OF TEXAS § COUNTY OF DENTON § The Town Council ofthe Town of Trophy Club,Texas,met in Workshop/Regular Session on Monday,March 7, 2005.The meeting was held within the boundaries of the Town and was open to the public. TOWN COUNCIL MEMBERS PRESENT: Scott Smith Scott Spence Susan Edstrom Roger Williams Beverly Foley Pam Cates Mayor Mayor Pro Tern (arrived at 6:14 p.rn.) Council Member Council Member (arrived at 6:53 p.rn.) Council Member Council Member STAFF AND GUEST(S)PRESENT: A.l Joint Workshop:Economic Development Corporation A and Economic Development Corporation B. A.2 Town Council,EDC A and EDC B to call to order and announce a quorum. Mayor Smith called the Workshop/Regular Session to order at 6:08 p.m.noting a quorum was present. A.3 Town Council,EDC A and EDC B to meet with Chamber representatives and local developers and to discuss future development and development issues. Donna Welsh Town Manager Manny Martinez Ameristar Diane Cockrell Town Secretary Bobby Harrell Terra Land Development Lisa Ramsey HR Manager Jimi Haire NWPWF Roger Unger Finance Director Wendy Hill TC/Roanoke Soccer Assoc. Adam Adams P &R Director Jimi Haire NWPWF Beth Ann Gregory CD Director Mendy Whitehead Trophy Realators and Metroport Chamber of Commerce Kerin Fleck P &Z Coordinator Richard Kuhlman Metroport Chamber of Commerce Patricia Adams Town Attorney Amanda Foust Resident/Developer Neil Twomey EDCA David Cunningham Midwest Commercial Realty Dwight Morrow EDCA Keith Sockwell Resident/NISD Superintendent Gary Cantrell EDCA Dennis Sheridan P &Zoning Commission Rebecca Shuman EDCB Keith Allen Starwood Homes Bill Devlin EDCB Dennis Sheridan P &Z Commission Jim Hicks EDCB Margi Cantrell Resident Andrew Hayes EDCB Pearl Ford Resident Pete Reinke Resident Pauline Twomey Resident Les Carter Resident Page 2 W orkshop/Regular Session March 7,2005 Mayor Smith had each attendee introduce themselves and share their interest and future plans.The Council was addressed by:Keith Allen of Starwood Homes regarding future plans for development to the north of the Eagles Ridge development.Bobby Harrell of Terra Companies,discussed the Knoll,currently being developed by Terra. Richard Kuhlman,Chair of NW Metroport Chamber,briefed the Council on trends in the real estate market. David Cunningham of Midwest Commercial Realty shared tentative interests for development including chain restaurants and hotels.Kerin Fleck briefed the Council on the Village Shops @ Trophy Club development.Ms. Fleck stated that there are two leasing space vacancies in the retail shops fronting State Highway 114.The dance studio,Me and My Shadow and Wizeguys have gone out of business.Ms.Fleck has met with a prospective restaurant tenant to occupy the Wizeguys space.The Plaza shopping center has a few vacancies as well.A representative from Regency Centers could not be present at the workshop session. The Mayor asked if there is an interest in developing a Task Force of members from Chamber,EDC A &B, Developers and Council to analyze the demographics and start looking for developers. A.4 EDC A and EDC B to adjourn. EDC A and EDC B were called to order at 6:32 p.m. EDC A and EDC B adjourned at 7:05 p.m. The council took a short break and started the regular session at 7:18 p.m. A.S Invocation. Director Briggs gave the invocation. A.6 Pledge of allegiance to the American Flag. Pledge of allegiance to the Texas Flag. "Honor the Texas flag,I pledge allegiance to thee,Texas one and indivisible." Council Member Williams led the pledges. Mayor Smith took time to recognize the 16 years of service and departure of Diane Cockrell,Town Secretary to become City Secretary for the City of Decatur. Discuss and take appropriate action regarding a request for a Temporary Use Community Garage Sale granted by Special Privilege.(Applicant:Anna Langley,Trophy Club Women's Club) Sharon Harris represented the Trophy Club Women's Club regarding the request for approval ofthe April 30th and October 1slgarage sale dates. Mayor Pro Tem Spence moved to approve.Council Member Edstrom seconded;motion carried unanimously. B.7 Discuss and take appropriate action regarding the approval of fiscal year end September 2004 Audit. Council Member Cates moved to table the Audit until the March 21,2005 meeting and asked to include her questions to the Auditor in the minutes.Mayor Pro Tem Spence seconded;motion carried unanimously. A.7 Statement for Audit and Financial Statements From:Pam Cates,Council Member March 7,2005 I set up an appointment to discuss my audit questions with the auditor before the last meeting that was held on February 7,2004 at 5:00 pm.He called at 4:00 pm to tell me he would not make it at 5:00 pm and would meet me at 6:30.Unfortunately my questions would have taken longer than 15 minutes,allowing 15 minutes before the council meeting to set up the computer,etc.Now,he is telling the council that I refused to meet with him so he will not answer my questions. Page 3 Workshop/Regular Session March 7,2005 He said he would respond to my questions in writing.I sent him my questions directly to which he replied to Donna Welsh and Roger Unger.He did not address my questions in his response.I do not understand why he would not respond directly to me or address my questions. My prior experience with auditing is from Ernst &Young,KPMG Peat Marwick,and a local CPA firm.I needed to get answers to my reservations to approve the audit and the financial statements. In his response in the email forwarded to me from Donna Welsh,he said that the Town of Trophy Club is not subject to the Single Audit Act of 1984.I do not understand this as the Town of Trophy Club received $475,000 in park grants and $130,000 in police grants during 2003-2004.The Single Audit Act of 1984 requires that these A133 or "Yellow Book"standards be followed in audits of state and local governments which receive Federal Financial Assistance.There is no mention of grant amount exceptions.When a local government receives Federal Financial Assistance,the audit concept of materiality is lower than other corporate audits. The Single Audit Act was primarily created to give guidelines to getting a quality audit.The guidelines include principles from A-133 "Audits of States,Local Governments,and Non-profit Organizations,Codification of Statements on Auditing Standards,promulgated by the American Institute of Certified Public Accountants,The financial audit standards contained in the Governmental Auditing Standards by the General Accounting Office, SOP 98-3 American Institute of Certified Public Accountants Statement of Position 98-3,Audits of States,Local Government,and Not-for-Profit Organizations Receiving Federal Awards. I want to point out to you that he has a disclaimer in the financial statements that says: The Town has received Federal and State Grant funds which are governed by various rules and regulations of the grantor agency.Costs charged to these programs are subject to audit and adjustment by the grantor agency. Therefore to the extent the Town has not complied with the rules and regulations governing the grants,refunds of any money received may be required. Does this mean that due to the fact that we do not have an audit under the requirements of the Single Audit Act of 1984,we are subject to refunding these federal and state financial assistance? The other comment made in his email stipulated that his internal control questionnaires were used to determine his audit procedures.His financial statement footnotes refer to the fact that the audit was performed in accordance to governmental auditing standards. The second reporting standard for financial statement audits under governmental auditing standards is: The report on the financial statements should either (1)describe the scope of the auditors'testing of compliance with laws and regulations and internal control over financial reporting and present the results of those tests or (2) refer to the separate report(s)containing that information.In presenting results of those tests,auditors should report fraud,illegal acts,other material noncompliance,and reportable conditions containing that information. Internal Control objectives adequately met provide some assurance of the following: Validity and Reliability of data Compliance with Laws and regulations Safeguarding the resources against waste,loss,and misuse. I want to speak about reportable conditions under AICPA standards.Reportable conditions are major deficiencies in internal control.In the event that an auditor finds reportable conditions in internal control during the audit,he must respond (after the audit)with the identification of these reportable conditions.The evidence of reportable conditions allows higher risk of misstatement of financial statements or misappropriation of assets.Under AICPA standards there are 10 reportable conditions.In my opinion,the reportable conditions that concern the Town of Trophy Club are (1)absence of appropriate segregation of duties consistent with control objectives,(2) absence of appropriate reviews and approvals of transactions,accounting entities,or systems output.In my opinion,these two reportable conditions have existed in this town for many years.The Town finance staff is too Page 4 Workshop/Regular Session March 7,2005 small to have appropriate segregation of duties and would have had to change processes to compensate for the size of the staff.Evidence of the appropriate reviews were not understood by the staff to be needed according to my conversations with the Finance Director.The auditor has never mentioned these two conditions in the five years that he has audited the financial statements.The opinions over the last 5 years have been "clean",giving the Town staff and the Town Council the some assurance that there were no issues within the town accounting.The management letter at the end of the audit has never been created.In my opinion,The Town Council did not get the option to accept the risk of reportable conditions which include possible misappropriation of assets or misstatement of financial statements.In my opinion,The Town Staff did not get the choice to implement procedures to prevent any possible misappropriations of assets or misstatements of financial statements. In accordance with Codification of Statements on Auditing Standards,promulgated by the American Institute of Certified Public Accountants or AU 316.35,317.10-.16),if evidence of possible fraud or illegal acts was found, the auditor must obtain sufficient,competent evidence to determine whether,in fact,material fraud or illegal acts occurred and if so determine the effect on the financial statements. The criminal investigation is still in process so determination of materiality to the financial statements is not known.In my opinion,due to the pending criminal investigation,there should have been some kind of footnote disclosure regarding this investigation and that materiality to financial statement has not been determined at this time.Furthermore,it should be mentioned that the Town Staff reported the incident to the appropriate federal party. Citizen presentations:this is an opportunity for citizens to address the Council on any matter whether or not it is posted on the agenda.The Council is not permitted to take action on or discuss any presentations made to the Council at this time concerning an item not listed on the agenda. The Council will hear presentations on specific agenda items prior to the Council addressing those items. Pearl Ford of 2 Spring Creek Court and Neil Twomey of 204 Oakmont addressed the Council. B.l B.2 Council/staff reports:this is an opportunity for Council and staff to provide brief updates on projects and to provide public service announcements.It is not a time for the expression of opinions,questions and answers,or discussion among staff and Council.Discussion is limited to whether Council desires to have a topic placed on a future agenda for future consideration. Council and Staff reports were given. Discuss and direct staff regarding dual roles of EDC A CorporationlWays and Means Advisory Group with respect to establishing a separate corporation and advisory group. Council Member Williams moved to direct staff to investigate with EDC A and Ways and Means to see what their continued future interest is.Council Member Foley seconded;motion passed unanimously. B.3 B.4 Town Council to interview and take appropriate action by Resolution to appoint two candidates to EDCB. A.Tillman C.Burks,III B.Michael E.Claussen C.John W.Cochran D.Amanda Foust E.Vivek Ratna F.Ralph Wm.Scoggins Jim Hicks,Chair of EDC B requested that the applicants attend the next EDC B for discussion.Council Member Williams moved to request the candidates meet with EDC B to be interviewed.Council Member Edstrom seconded.Motion passed unanimously. B.5 Discuss and take appropriate action regarding approval of EDC B funding of booth for Northwest Communities Partnership Realtor Conference in April in the amount of $1,350.00. Mayor Pro Tem Spence moved to approve.Council Member Williams seconded;motion carried unanimously. Page 5 W orkshop/Regular Session B.6 Discuss and take appropriate action regarding approval of Anniversary and Arbor Day Celebration in amount of $3,850.00. Council Member Edstrom moved to take funds from contingency in the amount of $3,850.to support this event. Council Member Cates seconded;motion carried unanimously. March 7,2005 EDC B funding of 20th Year D.5 Consent agenda:Discuss and take appropriate action to approve financials dated January 2005. Consent agenda:Discuss and take appropriate action to approve minutes dated February 7,2005. Consent Agenda:Discuss and Take appropriate action regarding Racial Profiling Report for 2004. Consent Agenda:Discuss and take appropriate action regarding a Resolution supporting House Bill 1227 regarding Utility Relocation. Consent Agenda:Discuss and take appropriate action to appoint Lisa Ramsey as Interim Town Secretary. Council Member Edstrom moved to approve.Council Member Williams seconded;motion carried unanimously. D.l D.2 D.3 D.4 All matters listed as Consent Agenda are considered to be routine by the Town Council and will be enacted by one motion.There will not be a separate discussion of these items.If discussion is desired,that item will be removed from the consent agenda and will be considered separately. F.l Adjourn. Mayor Pro Tern Spence moved to adjourn at 9:01 p.rn.Council Member Williams seconded;motion carried unanimously. *The Town Council may convene into executive session Meeting Act,LGC.55 1.071