I CALL TO ORDER

Mayor Thurston called to order the Special City Commission Meeting at 5:02

PM.

II ROLL CALL

Present:

4 -

Commissioner Melissa P. Dunn,Vice Mayor Lawrence Martin,Commissioner Sarai

Martin, and Mayor Ken Thurston

1 - Commissioner Denise D. Grant

Absent:

ALSO PRESENT:

Desorae Giles-Smith, City Manager

Zach Davis-Walker, Assistant City Attorney

Constance Stanley, Police Chief

Andrea M. Anderson, City Clerk

III THIS WILL BE A LIMITED AGENDA MEETING. THE ONLY ITEM TO BE DISCUSSED

WILL BE:

RESOLUTION NO. 24R-03-48:

RESOLUTION OF THE CITY

COMMISSION

APPROVING

AND

THE

ADOPTING

CITY

THE

LAUDERHILL

CITY OF

ACCEPTING,

LAUDERHILL’S

COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR FISCAL

YEAR ENDING SEPTEMBER 30, 2023; PROVIDING FOR AN

EFFECTIVE DATE (REQUESTED BY CITY MANAGER, DESORAE

GILES-SMITH).

Attachments: RES-24R-03-48-CAFR City FY 2024.pdf

AR 24R-03-48

City of Lauderhill Fiscal Year 2023 Audit Presentation (As Referenced

Within Minutes)

Roderick Harvey, Partner with HCT, the auditing firm of record, gave

PowerPoint presentation on the City’s annual CAFR, as detailed in the backup,

highlighting the following:

• They would be providing as of March 25, 2024, an unmodified or clean opinion

on the City of Lauderhill

• The presentation covered the City’s current financial condition, the Auditor’s

Report, the Financial Statement, and financial indicators

• The scope of the audit included performing tests, such as compliance testing

in accordance with the Generally Accepted Auditing Standards (GAAS), and

Government Auditing Standards

• There were no changes to the auditors’ risk assessments; they would issue

the appropriate auditors’ reports; there were no outstanding matters; and all

significant accounting policies would be noted in note one of the Financial

Statement

• There were no accounting pronouncements applied to FY 2023

• With regard to required communications the auditing firm must issue those

charged with governance; there were no matters to report in the three areas

noted and listed

• There were no control deficiencies, no related party issues were noted or

detected; if the City’s audit report was being used in another document, HCT

should have the option to review the document to ensure their audit report was

as issued

• The areas they tested and had no findings to report included: no illegal acts or

fraud;

disagreements

with

management;

significant

difficulties

encountered during the audit

• HCT was deemed independent based on their assessment in accordance

with the American Institute of Certified Public Accountants (AICPA).

Deputy

City

Manager/Finance

Director

Kennie

Hobbs

continued

the

presentation, reviewing the City’s current financial position as of February 28,

2024, highlighting the following:

• 41.67 percent of the fiscal year (FY) passed

• Of the $92 million General Fund budget, just over $51 million or 54 percent

was

collected;

$41 million

roughly

48 percent

was

expended;

encumbrances were removed, roughly $38 million had been expended;

expended meant dollars actually spent, or dollars committed

• The enterprise fund represented the City’s water and sewer funds, stormwater

fund, and the Lauderhill Performing Arts Center (LPAC); these funds totaled $81

million; year-to-date, the City collected $18.3 million, and expended $15.8

million; this was misleading, as the total included a bond the City received, so

there were additional costs that were capital-related that would go toward

revenues and expenditures; the City began working on water plant, and sewer

line improvements

• All revenues and expenditures were on pace to meet projections, so no major

adjustments were needed at present

• During April, staff usually presented the Commission with a six-month budget

update; at the time of that presentation, recommendations would be made in

relation to amending the City’s revenues and expenditures; every department,

and every line item was examined, after which adjustments were

recommended, whether up or down, moving money between accounts

• Cash on hand: roughly $5 million; the April budget update would include a

category from which the City would recognize additional revenue; that is,

interest income; Assistant Finance Director Karen Pottinger and her team were

diligent in ensuring the City’s excess funds were invested, enabling the

opportunity to earn unanticipated revenue, thereby, allowing the City to do some

things that were not planned previously; this would result in an adjustment up in

interest income

• American Rescue Plan Act (ARPA) dollars: the City was on track to expend

the roughly $18.1 million, of which $13.4 million was already spent; the

remaining $4.7 million would be expended during the remaining six months of

the current fiscal year.

Commissioner S. Martin sought clarification on the enterprise fund revenues.

Mr. Hobbs explained revenues in the enterprise funds recognized both operating

revenues, and proceeds from bond closing, etc. The City recently closed on

the $30 million bond, so once those dollars were recognized, it would impact

revenue, as they would be reflected as revenue. Staff would have a clearer

representation of where the City stood at the April budget presentation versus

what was shown at present; again, staff foresaw no issues related to the City’s

enterprise funds, as they were all on target.

Commissioner S. Martin asked about the ARPA funds, and how the City’s ability

to roll back its tax rate would be affected.

Mr. Hobbs clarified, as long as all the ARPA dollars allocated to the City were

expended prior to the end of the current fiscal year, the City could roll back the

tax rate if this was the will of the Commission.

Mr. Harvey continued the presentation, highlighting the following:

• Page 26: cash and investments - $64.5 million; restricted cash - $1.4 million;

total cash - $65.9 million; total assets - almost $300 million; liabilities - $233

million; net position of $78.8 million

• Page 28, General Fund: total fund balance - $19.6; unassigned fund balance -

$5 million; fund balance related to ten to 15 percent of operating expenditures,

and for the year under audit, it was at $5.72 million; revenue - $78 million;

expenditure - $71 million; debt service transfers - $9.5 million; an end-of-the

year positive change of fund balance of $2.1 million

• Page 33, Enterprise or proprietary funds based on what the City charged

users: net position

operating revenue

$83.3 million; unrestricted net position

$30 million;

$33.8 million; operating expenses $34 million; interest

expense - $600,000.00; a positive change in net position of $769,000.00

• Three-year spread/trend shown for 2021 to 2023

• For all four pension plans, net position percentage related to total pension

liability: general employees $88.1 million; firefighters $86.5 million; police $78.4

million; confidential and managerial $68.3 million

• With trend analysis, it was important to see a positive movement in the trend,

up or down for several periods to clearly determine if the trend was positive or

negative for years one through three; if the trend fluctuated or bent both ways,

one year up, down or flat, most account CPAs would deem the trend

inconclusive, as the up and down made it difficult to clearly determine if the

trend was favorable or unfavorable; for year 2023, favorable 7, unfavorable 5, 14

of the calculations were inconclusive, giving an overall score for the last three

fiscal years, based on the five-year trend shown, that the auditors deemed the

overall ratio analysis was inconclusive

• The ratio analysis was deemed to be favorable.

Mr. Hobbs interjected to explain there were certain trends the Auditor General

(AG) considered critical, and the ones included in the presentation were the four

indicators considered critical by the AG. The first critical item was indicator 2,

which was entity wide, and it represented unassigned and assigned fund

balance over unrestricted net position; it showed favorable when looking at the

two trends, but then a slight decrease due to spend down cash. He said cash

had a major effect on critical indicators, and as he explained before, as the City

spent its ARPA and general obligation (GO) dollars down, this reduced the

City’s cash position; as cash decreased, it had an impact on a number of the

financial indicators, but specifically the four being highlighted. Indicator two was

favorable, and if the City received more grant or bond dollars, those indicators

would increase, as the additional funds would directly impact them. Mr. Hobbs

said the next critical indicator was indicator 4, the General Fund that showed

favorable; it spoke specifically to cash and investments over current liabilities,

and the City’s ability to pay its current bills. The next critical indicator was 4G

General Fund governmental funds; this indicator showed inconclusive, as the

City intentionally spent its GO bond and ARPA dollars.

The fourth critical

indicator was 4P for the City’s proprietary funds: water, sewer, storm water, and

LPAC, and they received a favorable trend. Thus, of the four critical trends,

three were favorable, and one inconclusive.

Vice Mayor L. Martin desired more clarification on the trends deemed

inconclusive for the public’s benefit.

Mr. Harvey said years ago the State assigned certified auditors the task of

looking at identified trends to determine if a government agency was heading in

a bad direction. Auditors interpreted the trends they observed, and though the

public might see trends labeled inconclusive, they should take the time to

understand what the City was doing. He noted a government agency wished to

ensure that for any fiscal year, liquidity was most important, as this ties in cash,

expenditures, etc., understanding that ratios would swing based on the

operations of the agency. Based on the current City of Lauderhill audit, and the

auditors’ conversations with the Mr. Hobbs and his staff, the auditors knew there

was a meaningful spend down of cash for various reasons, and this would

result in more trends to slide from favorable to inconclusive; the auditors

expected to see a slide up in the next fiscal year, as some transactions were

expected to bring cash to the City. For example, the bond the City recently

issued would result in an increase in cash and revenue.

Commissioner S. Martin sought additional clarification on financial indicator one.

Mr. Harvey noted the exaggeration trend downward involved OPEB, and the

increase in pension liabilities. There was a concerted effort by the AICPA and

the Governmental Accounting Standards Board (GASB) to have governments

take into account more of the long-term expenses as they related to staff.

Thus, in 2025, GASB 100, and 101 would be implemented to place more liability

on the balance sheet for all governments. He said the trend seen now would

continue because those two standards boards wished to make sure

governments reported, captured, and dollarized those liabilities that were

potentially owed to staff. These were the beginning of those OPEB, or pension

liabilities being booked on the balance sheet. Mr. Harvey stated the good part

was since all government entities had to make this change, as it related to bond

ratings, there would be a similar dip for all governmental entities and taxing

districts. He would get the exact date the GASB changes would take effect, and

send it to the members of the City Commission and City administration; it would

be either in late 2024, or sometime in 2025.

Commissioner S. Martin asked if there was any way to estimate how much the

change would be.

Mr. Harvey felt it would be premature to put a number out now, but it would have

an impact to the liability section of the City’s balance sheet.

Commissioner Dunn questioned what the overall impact would be.

Mr. Hobbs commented that the City was reflecting a large liability, and additional

liability would be going on the books. GASB 101 was related to how an agency

accounted for leave time; that is, vacation, sick, etc., and they were currently

reflected as some percentage.

The new GASB required governmental

agencies to show much larger portion, such as 80 or 100 percent, but

Finance staff did not know what that number would be, as there were some

elements in the City’s policy that staff had to work with in doing the calculations

that would be reviewed and approved by the auditor to determine the final

amount. He stated, with regard to the pension liabilities, even though the City

was showing a much greater pension liability on the books, it would not be due

for years to come, but the standards boards wanted the liability to be fully

reflected in the books, so the public was aware it existed.

Vice Mayor L. Martin felt this to be a good conversation, as it educated the

Commission and Lauderhill public on such matters, and facilitated a better

understanding.

Mr. Harvey stated, for a point of clarity, the change he spoke of was GASB 101,

and it would be implemented for fiscal years beginning after 12/15/2023, so it

would take effect for the City’s financial statements beginning October 1, 2024,

ending September 30, 2025.

He invited anyone wishing to have a detailed

discussion on actuarial values, etc., he would be more than happy to do so on a

Sunday at 8:00 a.m. He continued his presentation:

• They were happy to report there were no significant deficiencies, or material

weaknesses based on their audits for the fiscal year ending September 30,

2023

• There was a tripod of responsibilities: management was responsible for the

financial statements, the design, and implementation of the controlled

environment, and for providing the auditors access to people, and information;

elected officials were responsible for oversight of the financial statement

reporting process, and to establish an environment for controls and programs

designed to detect, deter, and correct fraud

• It was the auditors’ responsibility to communicate certain findings, such as: if

they suspected or identified noncompliance with rules and regulations; any

issues with internal control matters; any findings, issues arising during the

conduction of their audit.

Commissioner Dunn asked if Mr. Harvey could state definitively for the

Lauderhill public if the City passed, failed, etc. its annual audit, and whether the

City was operating in good financial standing.

Mr. Harvey reiterated HCT was issuing a clean, unmodified opinion for the City

of Lauderhill for fiscal year ending September 30, 2023.

Based on their

analyses of the 29 conditions, their experience, and expertise, they thought the

City was in great financial strength and health, particularly when considering the

liquidity of the City, as it related to its cash balances. He added that on behalf of

the auditing team it was an extreme pleasure to serve the City of Lauderhill, and

they looked forward to serving the City for many more years.

Mayor Thurston opened the discussion to the public.

Varion Harris, Lauderhill resident, mentioned House bill that proposed

amendment MC12024, and another amendment WMC32024 that dealt with a

homestead extension; he wished to know if they passed, how would that impact

the City of Lauderhill’s next fiscal year’s budget.

City Manager Giles-Smith was unsure if those bills actually passed, but she

could have Mr. Hobbs and his staff do an analysis to show how it could affect

the City’s budget. She believed if they passed it would increase the existing

homestead exemption, and automatically increase it in subsequent years.

Vice Mayor L. Martin understood they required a vote by public referendum to

pass; it could not take effect automatically in Tallahassee. He noted any of the

bills passed, and resulted in a negative effect on the City’s budget, staff would

have to find a way to replace those funds to prevent the City having to reduce

services.

A motion was made by Vice Mayor L. Martin, seconded by Commissioner M.

Dunn, that this Resolution be approved. The motion carried by the following vote:

3 - Commissioner M. Dunn, Vice Mayor L. Martin, and Mayor K. Thurston

Yes:

Abstain:

Off Dais:

1 - Commissioner S. Martin

IV ADJOURNMENT - 5:51 PM