2014-06-17 Work Session Minutes

TUESDAY, JUNE 17, 2014

Council met for a work session on Tuesday, June 17, 2014 in Council Chambers. The work session began at 6:00 p.m.

In attendance were Council President Jack Mundie, Council Vice President Jean Mope, and Council Members Keith Bast, Jeff Cusat, and David Sosar.

Steve Guza, New York Life, Scranton discussed a free benefit for City employees. He said it is called a Employees’ Whole Life Voluntary Payroll Deduction Program. New York Life is a 169-year-old mutual life insurance company, which is owned by the policyholders and not publically traded on the stock market. In 2008 during the country’s recession, a lot of companies ceased to exist or had to change the way they did business, but New York Life did not. Guza said they have the highest ratings for financial strength of all life insurance companies. They finished last year with over $20 Billion in surplus. He stated that if they had to payout all of the policyholders in a single day, they could do so and still open for business the next day. This is voluntary and costs the City nothing.

Bill Fleming, Regional Mentor, New York Life is located at the Northeastern Pennsylvania office, and covers the eastern part of the state. Fleming said this program was implemented in Carbondale, Scranton, Dunmore, and every municipality between Carbondale and Hazleton. They also work with some of the counties in the state, and they also work with the State of Pennsylvania. Fleming said this is a guaranteed issue policy, so there are no medical questions asked. Everyone is accepted into the program no matter what health problems they have. They normally receive 38% of employees in the first year. Fleming said there is a 30-day enrollment period, and then there is a re-enrollment 12 months later. He said this program is for people who work 30 hours or more per week. There is flexibility for that requirement for those that work permanent part-time and work every day. He said the minimum amount that can be purchased is $5,000, and the maximum amount is $100,000. This plan is also available to the employee’s spouse, children, and grandchildren, and no medical questions will be asked. Fleming said this is a permanent policy. They sometimes have a better rating than the United States of America does. Fleming said this is a non-ERISA plan. This means that it cannot be part of any union contract, or and negotiations. It is not allowed by law. This policy will be employee owned, and not owned by the City. He said the only obligation to the City would be to open a new payroll slot for the deduction. Employees can sign up immediately and they are covered immediately. It comes with two riders, an accidental death rider and a waiver of premium rider. If anyone becomes permanently disabled, they will pay the premiums for the policy for the rest of their life. Fleming said New York Life declared a 6% dividend in 2014. He said the internal rate of return is between 2.7% and 2.71% currently. He said he has references available. Mundie asked what other cities have this program. Fleming responded Carbondale, Scranton, Dunmore, Taylor, Moosic, Old Forge, Plains, Forty Fort, and they are looking into Wilkes-Barre right now. He said they also work with Lehigh Valley, Montgomery County, Lehigh County, Bethlehem, and Allentown. Sosar said there are police officer and firefighters with previous injuries. He asked if this would preclude them from participating in this program. Fleming said no, everyone will be let into the program, up to $100,000. Mundie asked if Council is eligible for this program, even though they are not considered employees, but are on the payroll. Fleming said as long as you are on the payroll, you will be included. Mope asked if the rate is the same for someone who has had a heart attack and someone who has not. Fleming said the rate stays the same, depending on your age. Mundie asked if this program is just for whole life. Fleming responded they have the whole life contract called Nylaplus. There is a secondary contract that comes with this that is called Nylaplan. Nylaplan is available for every other investment they have, such as Nylife Securities, the number one retirement company as rated by Barron’s Magazine. They have paid out a dividend over the last 150 years. Mundie asked if they took any bailout money. Fleming said no because they are not publically traded in the stock market. There is $20 billion in their general fund. Their strength is built on the great reserve that they have, and they are able to withstand pandemics. Fleming said $10 million was paid to run a pandemic on New York Life, which had 50% of its policyholders die, and there was over $20 billion left. He said they are not the cheapest company in the world, but they are the strongest. They are competitively priced. He gave an example of the rates. Fleming said that studies have shown that 70% of people only have life insurance through their place of employment. Group term does not convert when someone retires or terminates. Mundie asked if Luzerne County is involved with this, and Fleming said they have been in contact with their broker. Mundie asked if he talked to Tom Pribula about this yet, and Fleming said no. Sosar said Hazleton has about 103 employees, and asked if this would fit the model of this program. Fleming responded yes, and the minimum is 100, but in some cases it could go as low as 90. Anything under 100 employees is simplified issue, which means they ask six medical questions first. Mundie asked why the maximum amount of coverage is $100,000. Fleming responded that most people in this program are earning less than $100,000 a year. Mundie said they will discuss it and try to get him an appointment with Tom Pribula.

Bill Seymour of SB & Company gave a presentation regarding their audit proposal. SB & Company was founded almost 10 years ago. He and two other former partners from Arthur Anderson, who were in charge of Anderson’s Mid-Atlantic State and Local Government Practice, founded the firm with the idea to be focused on state and local government audits, and nonprofit industries. Seymour said they are currently the primary auditor for the State of Maryland, University System of Maryland, Maryland Department of Transportation, the Pennsylvania Public School Employees Retirement System, Northumberland County, Harrisburg Housing Authority, and Susquehanna Township. They are the sixth largest federal grant practice in the United States. They employ approximately 90 people, and they have offices in Washington, D.C., Maryland, Pennsylvania (Harrisburg and Philadelphia), and Richmond, Virginia. They also service clients in Wisconsin, Texas, Massachusetts, Alaska, Nevada, Colorado, Florida, and New York. Seymour said they are a certified minority business in Pennsylvania. He said they have a “top down approach.” Seymour said with this approach, they are much quicker to resolve issues and ensure that the statements are issued in a timely fashion. Seymour said he sits on the AICPA’s Executive Committee for Governmental Audit Quality, where he works with individuals from OMBGAO and GASB. The proposed advisory partner, Grey Smith, is currently a board member for the Federal Accounting Standards Board (FASB). He works closely with GASB and FASB. Seymour is also a member of the GOFA PA Central Region Board, where he works with Marita Kelly, who is a “higher up” at DCED. He said they are members of all of the quality centers. He has testified to GASB. He is the trainer for Maryland GOFA. They received an unqualified peer review with no comments in January of 2013, which is the audit of the auditors. They received a rating of pass, which is the highest that can be received. Seymour said they believe in having an open working relationship, and they will work with the City on a year-round basis, which is included in their fee. He said they have a methodology called a “bull’s-eye approach.” He is rated as a partner in the firm on four items. To hit the outer rim of the bull’s-eye is that they have delivered a quality product. Moving in closer to the bull’s-eye is meeting your deadlines, exceeding your expectations, and being available all of the time. The next is that they want to have a quality relationship. The last item is the bull’s-eye, which is providing quality knowledge. He said this four-tier approach does not happen overnight, but does happen over the course of the relationship with the client. Seymour thanked Council for having them here tonight, and said they look forward to working with the City. Mundie asked if the State of Maryland’s audit is on the internet, and Seymour responded yes. It is on the State of Maryland’s website on the Comptroller’s page. Mundie asked if his firm has done any audits for any cities of comparable size to Hazleton. Seymour said yes, and the closest would be Susquehanna Township, and the next closest would be Dover, Delaware. He said he would send Mundie the last audits for Susquehanna Township, Pennsylvania, Dover, Delaware, and Hagerstown, Maryland. Cusat was concerned about the time frame of getting the audit completed because it is so late in the year. Seymour said if he was called tomorrow, they could start the end of next week. They would work within the City’s timeframe. Mundie asked about the single audits that are performed. Seymour said that is part of the audit, and they are due by September 30, 2014. He does not believe the September 30, 2014 due date would not be an issue.

Robert Moore of Dennis Moore & Associates, the City’s current auditing firm, gave his responses to each of the criteria in the RFP for the audit. He believes this will help Council make a decision as easily and quickly as possible. Moore said the first item is technical qualifications. They have the skills to be in compliance with government auditing standards, and experience in time commitments. With regard to specific persons who will be performing the services requested, he will manage and lead the City’s audit as he has been doing since the beginning of the contract back in 2010. He has over 13 years of experience in government auditing and accounting, the first seven years of which were spent with the top 100 accounting firm of Parente Beard. While there, he worked on engagements with the Pennsylvania State System of Higher Education, and was in charge of the Office of the Chancellor in Harrisburg. He has also worked on the City of Bethlehem, Northampton County Community College, and the Hazleton City Authority. He also has many hours of continuing education. He now oversees all of the auditing and accounting engagements they have at the firm. Moore said his father serves as the managing member of the firm, and will continue to oversee the engagement, as he has since 2010. His father’s career covers a period of 39 years, and 27 of those years were with the firm of Parente Beard. He has been a principle for 10 years, and, since 2007, has been the managing member of the firm, and works closely with the team to ensure they meet the deadlines established. Moore said the remainder of the staff have the experience and the knowledge to execute the engagement, and he and his father will oversee them, as they have been doing. They will continue to receive all of the continuing education they need to stay up-to-date on the latest standards. He said the next criteria is soundness of the approach, and the scope and techniques for performing the services requested. Their firm is a firm of professionals, many of which have spent a considerable amount of time training and working for large regional firms. When they opened their doors in 2007, a commitment was made to utilize the leading hardware, software, and internet-based products in the accounting industry. Moore said they use most of the accounting industry’s leading products and tools to service the needs of their clients, including the City of Hazleton. They are using the same tools that top 100 firms are using all across the country to service their client. They are located in the City of Hazleton. Their approach is to identify the areas that have the highest risk for potential misstatements due to error or fraud, and focus the audit on those areas. He said they understand that every area of the financial statements is of equal importance to you, and they feel that by focusing on potential areas for fraud or misstatements, they could offer the greatest benefit. They would also meet with Council to discuss the items, and find out where everyone feels the focus should be placed. The next item is the understanding of the work, the vendor’s understanding of the requirements, and the plans for meeting those requirements. Moore said their firm has an understanding of the City’s accounting and auditing needs, as they have already been providing these services for several years. He said that upon approval from Council, his firm would meet with the Acting Director of Administration and Council to outline a proposed time frame for the audit. This will include weekly updates and milestones to be met in order to arrive at agreed upon completion date. Moore said provided that the Administration is ready to begin and able to supply all of the required items, his firm should have no issues meeting that agreed upon deadline. The next criteria was firm organization, adequacy of facilities and staff, recent relevant experience, ability to commit staff and consultants within the time frame required, and the emphasis which vendor management would place on this effort. Moore said his firm maintains an office one block from Hazleton City Hall. They have a staff committed and ready to continue serving the City. The staff that would be assigned to this audit has worked on it in the past. Other agencies that this staff has worked with include the Hazleton Area School District, Hazleton City Authority, Hazleton Parking Authority, Hazleton Public Transit, Conyngham Borough Authority, Conyngham Borough, the Municipal Authority of the Borough of Ringtown, Black Creek Township, East Union Township, and Kline Township. The last criteria is the location of the firm. Moore said it states that special consideration will be given to qualified certified public accounting firms who maintain offices within the City of Hazleton. Their firm is located at One South Church Street, 400 Renaissance Center, Hazleton. Sixty percent of their staff maintain a principle place of residence within the City of Hazleton. All of their employees pay earned income tax to the City of Hazleton, and they are a property owner and they pay real estate taxes. Many of their employees also own property in the City. Moore said they feel as though they are part of the City of Hazleton. They serve on various nonprofit boards, including Pathway to Recovery (formerly Serento Gardens), Hazleton POWER, and also serve on committees of the Downtown Hazleton Alliance for Progress. They donate their time and talent to help make the City even better. Their employees are raising families in the City, and they are committed to continue serving the accounting and auditing needs of the City of Hazleton for many years to come. He thanked Council for the opportunity to give this presentation, and said he looks forward to continue working with everyone at the City. Mundie asked how many employees they have, and Moore said approximately 10 employees. He added that they are continuing to look into expansion of the business. Cusat said the City has had three different Acting Administrators in the last four years. He asked if his firm would be able to meet the required time frame. Moore said he and Tom Pribula have had some discussions about this. Moore said Council needs to set the timeline, but the Administration has to be able to produce those documents in a timely manner. He said when those individuals left the employ of the City, there was no plan in place, which was a large problem. If awarded the engagement, he would have a list off to Pribula in the morning, and start right away to get everything prepared, get trial balances ready, and be off and running. They are very familiar with the City’s finances, and they are ready to get the audit moving along. Mope said that one of Moore’s major problems was that he was not able to get the information he needed from the Administration in a timely manner, and Moore agreed. Mundie asked if the quoted price also include all of the single audits, and Moore responded yes. There are no extras.

Chief Frank DeAndrea, Hazleton Police Department, gave a presentation on the use of the program entitled Netrastar. He said Scranton is currently using this program, and Wilkes-Barre is in the process of using it. He said that Netrastar spoke with him about the training they could give to the Police Department. They do this for police, fire, and EMS. The computer network is used for everything internally, such as reports, emails, pass-ons, internet, etc. Their reporting is now internet based. The lessons are either already in existence from Scranton, common Vehicle Code questions, Crimes Code questions, Rules of Criminal Procedure, or they will be specific to the City of Hazleton, such as ordinances, and rules and regulations. He said this offers a five minute training session when the officer logs on to the computer regarding rules and regulations, policies, use of force policies, etc. He said he would be able to build questions that are specific to the City, as well as use all of the existing Pennsylvania questions for the Crimes Code, and Rules of Criminal Procedure. The officer will read the scenario question and then it takes you to a multiple choice test. At the end, if you do not get the correct answer, it will go over that question with you again and explain why you were wrong. He said it provides the Police Department with training records, so that if they have to use force, and the City is sued, the Police Department has these records to support its defense. He showed how certain scenarios are created in the system. It also gives a calendar of what days each month a particular training session or question came up. Some things can be scheduled to appear more often than offers. DeAndrea said it keeps a log per user. Mundie asked if this is mandatory, and DeAndrea responded it will be mandatory. This way, he can retain more training records. Mundie asked if he is receiving any resistance from his officers about this, and DeAndrea responded no. Mope asked how he knows that they are learning from this program. DeAndrea responded that the program keeps track of which questions people were having a hard time with per user or per day of the week. It will maintain graphs of who answered what questions, how many people took how many questions, and how many people took how many tests. DeAndrea said everything done in the program with regard to training is trackable. Sosar asked when and where the officers would be taking these tests, and DeAndrea replied they would take it during their shifts, when they start their reports, and it takes about five minutes. He said they have to take 10 training sessions per month, and they work 20 days each month. They will be sent a notice if it is late in the month, and they have not completed the required 10 training sessions. DeAndrea said he is the only one that will write questions that he wants to be specific to his Police Department, such as the Rules and Regulations Manual and City Ordinances. He said the others are generic questions from the Pennsylvania Vehicle Code, Crimes Code, Title 67, Title 42, etc. Sosar asked why this is a Beta program. DeAndrea said it is only being used in Wilkes-Barre and Scranton right now, but Hazleton’s is not designed yet. Until the Hazleton’s is up and running, it cannot be anything but Beta. Mundie asked if there are any other cities with this software, and DeAndrea responded that they are listed on Netrastar’s website. Sosar was under the impression that this software was beta for everyone, and that additional components would be added. DeAndrea said that is not the case. He said there is no cost for this program. The way that Netrastar makes their money is not from the police department. They go to local businesses and ask for contributions to the police department’s free training. If the business agrees to do that, there is a banner placed on the screen regarding that business. Sosar said no one has control over what that company does, there will be advertising, and Hazleton will be used as a model and advertising source in the program itself once the program is up and running. DeAndrea said it is up to him to say to Netrastar that he does not want the questions or answers he creates released to other police departments. He was under impression, according to DeAndrea’s memo, that Netrastar was free to use the advertising as they see fit, and we would have no effect on how it is used. DeAndrea said that is not in the agreement. Sosar said that from past personal experience, when you comment on something, the company can then use your statements in any way they see fit, such as the back cover of a book jacket, a flyer, etc. He gave an example of this. DeAndrea said Netrastar will not be able to use his officers by name because they will not know who the officers are. Sosar said they could still use the City of Hazleton. DeAndrea said he does not know of any company that they have partnered with that could not say that if they are using their product. This is not covered in the agreement. He said we will not be able to control what advertisements they put on the screen for the officers to look at. Mope asked if there is a charge for adding questions to the software, and DeAndrea responded no. This is free to the police departments. They would like for him to develop questions, so that they could build their database. This is beta for the first 12 months, because, while it is being created, there might be some errors that need to be corrected. Mope asked if there are any repercussions if the officers do not take the tests. DeAndrea said yes, there will be a disciplinary procedure. Sosar asked how old the company is, and DeAndrea said he believes it was created in 2007. Sosar said his only concern was about writing new lessons for a program that anyone can use, and Netrastar can then turn around and sell it. He said he wants something to help our Police Department.

Mundie ended the work session at 7:00 p.m.

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