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�r'�� ��r �en�o To: Mayor and City Council �,� i I1 Mal'znen, City Manager l��a : �.hris Miller, Finance Director �i Date: March 19,2007 Re: Considerationof an Audit Committee Date: 4/16/07 Item: S.k Audit Committee ** Reprinted for continued discussion on 4/ 16/07 * * Introduction Earlier this year, Councilmembers Kough and Ihlan met with Staff to discuss the possibility of creating and Audit Committee. This discussion was somewhat prompted by the audit findings cited in the most recent annual audit which identified a couple of operating practices that were in conflict with State Statute. The audit findings cited previously have since been addressed and should no longer appear in the future. The one exception however, is the City's employee recognition luncheon. In this instance, the auditors have opined that the City does not have the authority to spend public monies on employee recognition events — specifically when the event is for the sole purpose of recognizing employees by some certificate, plaque, or gift. While legal opinions on this particular matter may vary, the auditors nonetheless will continue citing the City unless the structure and format of the event is changed. Before addressing the audit committee, it may be beneficial to first identify some recommended changes to the employee recognition event. Those changes are detailed below followed by a general discussion on audit committees. Recommended Changes to the Employee Recognition Event In an effort to preserve the employee recognition event, and remain consistent with State Law, it is recommended that the City establish an annual 'State cf the C�ty' - type event that mandates attendance by most daytime-scheduled City Staff and could include: 1) 2) 3) An address by City Officials on current and future projects, initiatives, or other noteworthy items. A break for lunch and employee recognition event Mandatory training such as Ethics, Right-to-Know, Respectful Behavior, etc. As part of the employee recognition event, the City could continue to provide items such as certificates and plaques as long as the criteria used (i.e. length of service) are applied uniformly to all employees. However, employee recognition items should be incorporated into the Council-adopted Compensation and Benefit Plan in the same manner as the City's Wellness Program (ref; MN Statutes 411.111). By doing this, recognition items would now be considered 'additional income' rather than a gift.