Annual audit makes recommendations
City of Denison responds with corrective action
Iowa State Auditor Rob Sand on January 31 released the audit report for the City of Denison.
The report concerned the fiscal year that ended on June 30, 2019.
The audit gave a detailed accounting of disbursements, receipts and other financing sources for the City of Denison, the Denison Library Friends and the Denison Volunteer Firefighters Association, as well as financial details of the city’s investments, liabilities and employee benefits.
The report identified one “material weakness” and two “significant deficiencies” but found “no instances of non-compliance or other matters that are required to be reported under Government Auditing Standards.”
Deputy Auditor of State Marlys K. Gaston acknowledged “the many courtesies and assistance extended to us by personnel of the City of Denison during the course of our audit.”
The material weakness identified in the report was a lack adequate segregation of duties for individuals handling transactions for the City of Denison and Denison Library Friends.
“In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee,” the report noted.
The city response stated that the city and the Denison Library Friends will work to provide greater oversight of how transactions are handled.
One significant deficiency detailed in the report was the lack of a definition of a “non-exempt employee not covered by a union contract.”
“Because the Personnel Policies and Regulations Handbook has not identified which employee classes are non-exempt or exempt, the Handbook is not clear regarding hours to be worked, overtime and compensatory time expected for exempt employees,” the report stated.
“The lack of a clear policy could cause confusion between management and employees regarding the expected hours to be worked, overtime and compensatory time.”
The City of Denison responded that it “will review the personnel policy and put expectations for exempt employees not covered by a union contract in writing.”
The other significant deficiency noted involved the city’s computer systems.
“The City does not have a written policy requiring password changes and the software does not require the user to change passwords periodically,” the report noted.
“By not periodically changing user passwords, the likelihood of an unauthorized individual gaining access to the City’s computer system increases. This could result in a loss of data or compromised data, resulting in unreliable financial information.”
“The City will talk to their IT contractor and get something set up to require password changes every 60 to 90 days. In addition, the City will review its policies over its computer system,” the city responded.
The auditor’s report stated that no instances of non-compliance were noted.
In a section on “findings related to required statutory reporting,” the report detailed 11 items.
1 - “Disbursements at June 30, 2019 did not exceed the amounts budgeted. However, disbursements in the community and economic development function exceeded the amount budgeted prior to the budget amendment,” the report noted.
“The budget should have been properly amended as required by Chapter 331.435 of the Code of Iowa before disbursements were allowed to exceed the budget.”
The city’s response stated, “Due to management being out of the office unexpectedly for an extended period of time, this amendment was not completed before disbursements were exceeded. The City will monitor the budget expenditures more closely.”
2 - The report stated that no questionable disbursements that “may not meet the requirements of public purpose” were noted.
3 - No disbursements of city money for travel expenses of spouses of city officials or employees were noted.
4 - Two business transactions between the city and city officials or employees were detailed.
For plumbing services, Verlin Koch, father-in-law of City Clerk Lisa Koch, owner of Verlin Plumbing Plumbing, was paid $992 and city council member John Granzen, owner of Granzen Plumbing & Heating, was paid $691.
“In accordance with Chapter 362.5(3)(j) of the Code of Iowa, the transactions with Verlin Plumbing and Granzen Plumbing & Heating do not appear to represent a conflict of interest since the total transactions during the year were less than $1,500,” the auditor concluded.
5 - Surety bond coverage of City officials and employees was in accordance with statutory provisions.
6 - No transactions were found that should have been approved in the city council minutes but were not.
7 – “Except as noted, no instances of non-compliance with the deposit and investment provisions of Chapters 12B and 12C of the Code of Iowa and the City’s investment policy were noted. A resolution naming official depository has been adopted by the City. However, the maximum deposit amount was exceeded during the year ended June 30, 2019,” the report stated.
“The City will review and update the depository resolution on a regular basis,” was the city’s response.
8 - No instances of non-compliance with the revenue note resolutions were noted.
9 - The Annual Urban Renewal Report was properly approved and certified to the Iowa Department of Management on or before December 1.
10 – “During the year ended June 30, 2019, the City awarded a contract for $63,595 to Reisz Construction for repair of the Boulders Conference Center roof. At the time the contract was awarded the City only had one competitive quote. Chapter 26.14 of the Code of Iowa requires cities with public improvement projects, other than road, bridge and culvert projects, with an estimated total cost which is less than the competitive bid threshold ($135,000 for calendar year 2018 and $139,000 for calendar year 2019) but greater than the competitive quotation threshold established per Chapter 314.1B of the Code of Iowa, to make a good faith effort to obtain at least two competitive quotations. The competitive quotation threshold was $55,000 effective January 1, 2015 and $57,000 effective January 1, 2019,” the report stated.
“The contract was awarded on August 28, 2018, however, the second quotation for $72,000 was dated March 8, 2019,” the report noted.
The auditor recommended that “The City should comply with Chapter 26.14 of the Code of Iowa and obtain at least two competitive quotations for public improvement projects (other than road, bridge and culvert projects) with estimated costs less than required for competitive bidding but greater than the competitive quotation threshold.”
The city responded that “The City will comply with Chapter 26.14 of the Code of Iowa and obtain two competitive quotes. In this instance, a second quote was received before work began which was more than Reisz Construction, so Reisz Construction completed the work.”
11 – “During the year, a Council Member was paid $250 for traffic control work during RAGBRAI,” the report stated.
“The payment appears to violate Chapter 372.13(8) of the Code of Iowa. The City should consult legal counsel to determine the disposition of the matter, including whether to seek reimbursement of the $250 paid to the Council Member.”
The city’s response was that “RAGBRAI paid the City the funds to pay all the volunteers for traffic control. The City was just a pass through for the funds.”
The auditor verified that the city received funds from Denison RAGBRAI LLC, which had indicated that funding would be provided for traffic control.
“In the future, the Denison RAGBRAI LLC, or any other organization, should pay volunteers directly to avoid potential violation, or the appearance of violation, of Chapter 372.13(8) of the Code of Iowa,” the report concluded.
The State Auditor’s Office noted that it accepted the city’s responses where given and acknowledged the city’s response on item 11.
Audit shows decrease in city receipts, disbursements
The City’s receipts totaled $9,772,728 for the year ended June 30, 2019, less than a 1% decrease from the prior year. Disbursements for the year ended June 30, 2019 totaled $9,406,306, a 5.6% decrease from the prior year.
A copy of the audit report is available for review on the Auditor of State’s web site at https://auditor.iowa.gov/audit-reports.
City of Denison’s early retirement policy
Will honor policy for the one employee who already took it
by Gordon Wolf
After discussing an early retirement policy for as many as five meetings, the Denison City Council on February 4 rescinded the November 5, 2019, motion that established the policy.
At the same time, the city council included language in Tuesday’s motion to honor the early retirement agreement for an employee who had applied for early retirement after the policy was established.
At its last meeting in January, the council gave recommendations to amend the policy as follows.
- Change the age of eligibility from 55 to 60 years, decreasing the city’s maximum exposure to five years before the employee reaches Medicare eligibility.
- Change the city’s contribution toward the employee’s single-person insurance to 100 percent for 30 years of consecutive employment and 50 percent for 20 years of consecutive employment with the city. Those levels had been 50 percent for 10 years of consecutive employment and 100 percent for 20 years of consecutive employment.
- Removed 10 years of consecutive employment as criteria for early retirement.
The amount of the city’s contribution to a retired employee’s health insurance would be based on the individual premium at the time the employee retires. Currently the amount of that premium is $6,920.88 per year.
Prior to the council’s vote last Tuesday, during the public forum, Rod Bradley said he had sent several emails to the mayor and council members that stated the concerns he has with the early retirement policy, and he asked the council to rescind the policy, although it should honor the agreement with the one employee who had already applied for early retirement.
“One of the things that you’ve been told is that this policy somehow saves the taxpayers of Denison money. As a matter of fact, I believe there was a document distributed to the council showing a savings for every single employee that could possibly take advantage of this program. That’s not true. It’s not true at all,” he said.
He continued that for every employee that takes early retirement, the city will spend $6,900 a year (the amount of the single-person health insurance premium), but the city is also going to pay the insurance for the replacement person that is employed.
The policy will cost the taxpayers of the community and nobody has been able to show him that early retirement policy will result in a savings, Bradley added.
When the council began to discuss the early retirement agenda item, Councilwoman Jessica Garcia said she wasn’t comfortable to vote yes to the revisions.
She added later that early retirement policies are most common with schools but even then it is a policy that is reviewed and opened on an as-needed basis based on employment needs, potential layoffs and similar situations.’
Councilman David Loeschen also has he had a level of discomfort in approving the revisions and said he would like to rescind the November 5 motion and look again at why the city would offer an early retirement policy and do a study.
Councilman Corey Curnyn said he had received a phone call and had had a couple conversations with an employee about fitting the parameters of the early retirement policy.
He pointed to two factors that might have saved the city money. One was dependent upon the insurance premium increasing when an employee reached a certain age. He gave the example of 55, but explained that Lisa Koch, the city clerk, said that was not the case with the city’s insurance. Curnyn added that the city was not going to discriminate on the basis of age by hiring someone younger than the person retiring anyway.
The other factor was hiring someone who is single to replace the retiring employee who has the family, individual and spouse or individual and children insurance, all which are higher premiums than the single premium.
“You’re not going to hire somebody based on just them being single,” said Curnyn. He added that even if the replacement employee is single, that would not make up for the difference for a savings.”
Councilman Greg Miller thought the other councilmembers were on the right track on not being able to vote for the revisions to the policy.
Mayor Pam Soseman said she had heard from people in the private sector who said they are opposed with the city going forward with the early retirement policy.
“They think that at some point you’re going to backfill and you’re going to still be paying off the early retirement people, and eventually the new hires will be catching up, and it will be a constant draw on the tax dollars we have to spend,” she said, adding that the private sector doesn’t offer early retirement and that those she had spoken with wanted the motion that established the policy to be rescinded.
She offered that the council could look at the reasoning for an early retirement policy during a goal-setting meeting that will take place in the future.
FAA contacts city again about funding
to complete crosswind runway
by Gordon Wolf
It appears more likely that the Federal Aviation Administration (FAA) will come up with some discretionary funding to advance the completion date of the crosswind runway at the Denison Municipal Airport.
At last Tuesday’s meeting, City Manager/City Engineer Terry Crawford told the council that he had just found out recently from the FAA that it may be able to come up with the funding to supply its 90 percent of the share of the grading, paving and lighting required to complete the project.
Crawford said the grading that needs to be done could cost as much as $1.9 million and the paving and lighting could be as much as $1.8 million, a total of $3.7 million.
He added that the reason the project was being phased in was that the city had been receiving $150,000 a year from the FAA. This amount would be saved over four years so that a $600,000 project could be done.
At that pace it could have been another 10-12 years before the project could have been completed.
Crawford said at a $3.7 million project, the city’s 10 percent share would be $370,000.
He added that he told the FAA that the city could come up with its 10 percent share, a decision the city council had previously made.
The FAA will let the city know as soon as possible about the discretionary funding. Crawford said it would likely be soon because the crosswind runway plans are in flux. Crawford said he has been working on the plans for a phased-in project but would have to speed up the work due to the discretionary funding.
“If we do go ahead (on the runway project), we probably won’t have any funding for street projects other than Avenue C and 7th Street, which we have a grant for,” Crawford said.
Exception to Denison’s park rules to
accommodate purpose of dog park
by Gordon Wolf
The City of Denison’s park regulations say that all dogs must be on a leash in any city park. However, that rule is contrary to the new Denison Dog Park, which will open soon.
The purpose of the dog park is for dogs to be able to run off leash once inside one of the fenced-in areas.
For that reason, the city council will take up an exception to the park ordinance at its next meeting.
Evan Blakley, who represents the dog park, said dogs will have to be on a leash until they are in one of the fenced-in areas.
He added that the Denison Parks & Rec Board had approved the rules and regulations for the dog park.
Making changes to an ordinance is under the authority of the city council.
The city council will also take up another ordinance amendment at its February 18 meeting. The council gave its consensus to change the ordinance for the airport commission to allow one member to live outside the city limits.
It was pointed out that the city already allows one member of the housing board and two members of the Boulders Conference Board to live outside the city limits but within Crawford County.
The council directed that the city attorney draft the language for the ordinance amendments.
Denison city officials updated on
Rotary Roads program
by Gordon Wolf
Denison city officials received an update on the Rotary Roads program initiated by the Denison Rotary Club. Evan Blakley, the co-chair for the program, provided the information.
“Over the past two years the Denison Rotary Club has been working on an ambitious project to increase trail connectively for Denison,” Blakley said.
“We are making great progress. We do have an initial engineering plan and a variety of trail alignments we are looking at,” he added.
Blakley said the Rotary Club was not divulging the location of the intended trail alignments because the club wants to talk to the landowners first.
He continued that the Rotarians would be approaching the city very soon to ask for an update to the regional transportation plan that is done in coordination with Region XII Council of Governments. The city council would have to vote to approve the update.
“It’s basically setting community priorities as far as where future trail development will go as well as regional priorities, and that’s what I need to get Region XII involved in,” Blakley explained. “That in turn goes on to the statewide DOT (Iowa Department of Transportation) map as far as priorities, which is important when we start seeking funding.”
He said the Rotary Club is not asking for funds right now and said the Rotarians anticipate the majority of the burden would not be on the City of Denison. He continued it is possible the Rotarians would come to the city where matching funds are needed in order to use grant funds.
“We’re not asking for that now. We may not ask for that in the future. We just want to be transparent,” Blakley said.
He said the Rotary Roads program is a grassroots community club bred and run initiative that will be a multi-year project.
Blakley didn’t divulge how many miles of trails would be involved but said, “It will be more than 10. I can say that for right now.”