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Ken Malloy, representing Malloy, Montague, Karnowski, Radosevich and Co., P.A., reviewed the auditor's opinions contained in the CAFR, and the Management Report. He noted a "clean" opinion has been given. In addition, they reviewed internal procedures and compliance with State and Federal laws. In those opinions, it has been mentioned that internal controls are very good with accounting procedures and employees are being maximized. However, it is a fairly small office for the size of Ramsey and volume of work being done. He stated it is common with cities of this size to give segregation of duties comments, noting only a few people handle the financial transactions which is an inherent situation with no internal audit functions or an ideal system of checks and balances. He stated he believes Ramsey is close to having that comment removed to further that discussion. Mr. Malloy commented on the financial condition statement and use of credit cards. He stated they saw no abuse of the use of credit cards in Ramsey but the State passed a law indicating there have been problems elsewhere so City Council's need to keep a tight control on credit card usage. He commented on how credit cards can be misused and noted that Ramsey makes sure they authorize and address the use of credit cards during its annual meeting. Mr. Malloy reviewed the management report starting with a summary of legislative activity which affects Ramsey. He stated he has attended several seminars hosted on the 2002 legislation and interprets that not a great deal occurred to hurt the financial position of cities since the State deficit problem was resolved by shifting revenue with school districts and recognition of sales tax revenue. However, some impacts to cities have happened including the future of LGA and impacts to TIF. Mr. Malloy reviewed the property tax changes and commented on tax rate compression and lowering of rates on higher valued homes. He noted the new tax for commercial properties which undoes some of the benefits that commercial properties have seen. He stated some legislators might not have realized the negative impact this would cause on some agricultural and commercial areas so adjustments may occur during the next session. Mr. Malloy noted the information regarding tax capacities and rates, noting Ramsey is somewhat lower than the Statewide average of other communities. He then reviewed the goverm~ental fund overview which contained per capita comparisons of all the City's finances other than what is handled in the utility and internal service funds. He pointed out that one of the drawbacks is that the only information available Statewide is already two years old so you have to consider the rate of inflation. He explained this information shows that Ramsey is spending less and in the last two years there has been a boost in federal revenue, mostly for the Highway 47 project. Mr. Malloy reviewed the governmental funds expenditures which included current, capital outlay and construction, and debt service data. Again, Ramsey's governmental funds current per capita expenditures are less than Statewide averages for cities of the same population. Mr. Malloy noted the general fund financial position and financial trends. He stated he does not direct the City about the level of fund balances that should be maintained. However, since cities receive tax payments only twice a year, they do need to put away about one-half a year's expenditures plus a cushion for special projects. Mr. Malloy reviewed the past ten years of the City's general fund revenues, noting State funding has been held flat. He then presented the components of the City's general fund spending for 2001 and the past ten years. He explained that the City's expenditures are in line with other cities in typical spending trends. Mr. Malloy noted the water utility enterprise fund and five years of comparative operating results. He stated the fund is in a good cash position and is fairly stable so it appears the rate is adequate. Mr. Finance Committee/June 11, 2002 Page 2 of 5