Lake Elmo seeks financial services after firm backs away from contract

City’s accountant resigned after finance director’s contract terminated

The city of Lake Elmo is renewing a search for financial management services after a firm withdrew from a contract before work began. Some blame pointed questions from one council member.

“Since learning last Thursday that [the firm] was not going to be able to enter into a contract without full council support, we are working diligently to get other proposals,” City Administrator Kristina Handt said during a special council meeting Feb. 14.

During the Feb. 7 meeting, Handt presented a recommendation to hire AEM Financial Solutions, a financial management firm, to replace the city’s outgoing finance director Cathy Bendel. On Jan. 31, a split city council voted to end its contract with Bendel. Since Bendel’s departure, the city’s part-time accountant has resigned.

During the Feb. 14 meeting, Handt explained why she recommended moving to contracted financial services after speaking with other city administrators.

“The responses I got back from others who have recently gone through this is that the pool for finance directors is pretty slim,” Handt said Feb. 14. “The market out there is a move to private firms.”

AEM president Jean McGann presented the firm’s services to the city council Feb. 7. The fee for the remainder of 2017 would be $86,363. There would be additional charges related to audit preparation for 2016. In comparison, the annual cost for a finance director including taxes and benefits would be $113,706.15. The annual cost for services under the agreement in 2018 and 2019 would be $101,700 and $104,280 respectively, inclusive of audit preparation.

On Feb. 7, the council voted 3-2 — with council members Julie Fliflet and Jill Lundgren dissenting — to enter a contract for financial management services. But AEM backed out before the contract could be finalized.

“Quite honestly — in our past experiences working with cities and with city council — if you don’t have the full support of the council we will not be successful,” said McGann in a phone call. “There are so many decision that need to be made, and in our experience, you need to have the full support of the council to be successful.”

Mayor Mike Pearson said he was part of a conference call that took place Feb. 9 — two days after the city council meeting — when staff from AEM said they would not longer seek to have a contract with the city.

“They expressed some concern about how the meeting went and some things that were said,” Pearson said Feb. 14. “Frankly, I think some statements were made that were disingenuous at best and incorrect at worst.”

During the Feb. 7 discussion about hiring the financial management firm, Fliflet was critical of the recommendation and wanted to see other options brought forward or considered by the staff.

“For so many reasons I feel that we will be getting a disservice to a huge, critical area of our city that our taxpayers rely on and our staff relies on,” Fliflet said.

During the Feb. 7 meeting, Fliflet said she had asked about former city auditors during her time on the finance committee, and stated that AEM was the city’s auditor three to five years ago. She alleged that the city was not satisfied with the service.

“We switched because this firm had significantly higher rates and — I understand from conversations at the finance committee — we weren’t all that satisfied,” Fliflet said. “It’s concerning to me that we are not looking at any other options whatsoever.”

Fliflet was not present at the Feb. 14 meeting, but stood behind her Feb. 7 statements in a later phone call.

“It didn’t feel good that there was not another option and I stand behind my vote,” Fliflet said. “I think the recommendation was poorly done and not in line with our purchasing practices.”

A new search

During the Feb. 14 meeting, the council discussed the next course of action in seeking financial management services for the city. Handt told the council she had sought out temporary employment agencies and other firms to find financial services.

“They have admitted that they don’t have a large pool of folks with municipal experience,” Handt said. “In light of the fact that we will have nobody left in the department, I think that is something we will really need.”

Handt also stated that city council interactions may also play a factor in finding contractor services.

“None of them were able to provide services or declined to provide services after watching our last meeting here and how we treat contractors,” Handt said.

“It’s sad that we find ourselves in a position that it seems nobody wants to work with the city of Lake Elmo,” Councilmember Justin Bloyer said. “I think we need to have a frank discussion … about what’s going on and why the wheels seem to continually be falling off of this bus.”

The council vote 3-0 — with Fliflet and Lundgren absent — to direct the city administrator to contract financial services with another firm.

“At this point, I don’t have any estimates on cost,” Handt said.

Contact Alicia Lebens at [email protected]