CHERYL L. BROWN                                                                                                        117 WEST DUVAL STREET, SUITE 425

            DIRECTOR                                                                                                                                                                                 4TH FLOOR, CITY HALL

   OFFICE (904) 630-1452                                                                                                                                                          JACKSONVILLE, FLORIDA  32202

     FAX (904) 630-2906                                                                                                                                                                                                               


February 24, 2010

5:00 PM


Performance and Audit Subcommittee Meeting Minutes

February 23, 2010


Topic:  Selection of independent auditor for FY09-10 audit


Location:  Conference Room A, City Hall – St. James Building; 117 West Duval Street,

     Suite 425


In attendance:  Council Members Joost (Chair) and Yarborough

Kirk Sherman, Kyle Billy and Heather Norsworthy – Council Auditor’s Office;  Sharonda Davis – Legislative Services Division; Kevin Stork and Mike Givens – Finance Department; Celeste Hicks - ECAs


Meeting Convened:  2:13 p.m.


Kirk Sherman stated that the City had sent out 17 requests for proposals (RFPs) to accounting firms soliciting interest in performing the City’s annual independent audit and received 6 responses.  A screening committee of 3 members (Kirk Sherman, Kyle Billy and Stephen Joost) independently reviewed and ranked the responses with almost unanimous agreement on the ranking of the top 3 firms: McGladrey & Pullen LLP, Ernst & Young LLP, and Carr, Riggs & Ingram LLC, in that order.


MOTION (Yarborough): approve the list of the top three firms in rank order as presented by the three reviewers and authorize the Council Auditor to negotiate with McGladrey & Pullen on a contract, the results to be reported back to the committee – approved.


Council Member Joost suggested several topics that he would like to see addressed in negotiations with the firm(s) for a contract for the City’s audit:

  • What is the auditor’s definition of “materiality” as it relates to pension liabilities and the pension plans’ assumptions?
  • An honest risk assessment of the pension plan actuarial studies and the future sustainability of the City’s pension plans is needed, given realistic investment market return assumptions and the eventual use of more up-to-date mortality tables (not the long-outdated 1990 edition we’re currently using).
  • How do the impending new national accounting standards for booking future employee benefit liabilities affect the audit effort?  One firm’s RFP response mentioned a substantial increase in the audit effort (and therefore cost) to address these new standards.  Has McGladrey & Pullen accounted for this additional effort and cost?
  • Why does McGladrey and Pullen propose fewer work hours than most of the other proposers?  Is their proposal reasonable given the scope of the audit?


Kevin Stork stated that Jacksonville has already started booking funds to account for future liabilities for the cost of retirees being allowed to maintain their City health insurance (albeit at their own cost).  The presence of these older retirees in the pool increases the premium cost to the City and current employees and that differential needs to be accounted for.


Meeting Adjourned:  2:30p.m.


Minutes:  Jeff Clements, Council Research


Tapes:      Performance and Audit Subcommittee agenda meeting– LSD


Materials:   Auditor’s RFP ranking for independent auditor selection