Audit Committee Meeting   11/23/2020

the committee members here.

So there are several people who are listening in and then there are those of us in the participants and actually in the meeting that can participate in the conversation.

What I wanted to start off with is just there's two kind of orders of business that we need to tend to at the outset and one of them is according to our charter we are to elect a chairperson for the committee and I believe it's supposed to happen at the May meeting but it did not occur so I wanted to open this up first and see if there was anyone who would like to

to take on the role of chair for this meeting.

No Liz.

And so that they can run the order of the meeting.

The actual committee members are Jeff Richardson as the county executive, myself as the CFO, Ned Galloway and Liz Palmer from the board of supervisors.

And then from ACPS, Ellen Osborne as,

the school board rep, and Rosalyn Schmitt as the superintendent's representative.

So those are technically the committee members.

And so if, is there any, I, it's so, I can't.

Perfect.

Happy to do it.

I'm happy to do it.

Thank you for that.

If every, if no one objects, I will just continue on.

We have to move.

So Liz made a motion to appoint Nelsie Birch as chair.

Ned seconded.

Aye.

All those opposed?

OK, motion carries.

I will be chair, and we'll move on to the audit committee.

I did want to just read real quickly so people that maybe are attending for the first time just understand the reason for this committee and what we're going to review today.

And so it is a board of, excuse me, it is a committee of the board of supervisors.

The primary function is to assist the board in carrying out its oversight responsibilities

by reviewing financial information provided in the county's comprehensive annual financial report and annual audit.

It will review any material weaknesses in the county system of internal accounting controls as reported by the external auditor.

Robinson Farmer Cox is here today and will be going through those with us and also reviewing the annual audit process and its results.

Before we get started with the run of show and turning it over to Robinson Farmer Cox, I did want to spend a few moments asking Kristy Shifflett, who has been serving in an interim role here in the finance department,

since about the March timeframe with responsibility of overseeing the audit with Cecilia Baber as our controller.

Just to provide some comments about where we've been and a little bit of, a small little bit of history of what's transpired over the last year before we go into Robinson Farmer Cox's presentation.

Yes, thank you, Nelsie.

So as Nelsie said, I'm Kristy Shifflett, good afternoon.

I have been serving in this interim role since March of this year.

And really, my assignment was to help the staff and team produce our audit or financial records for the audit and to really try to support the staff as we completed this work this year.

There has been some, you know,

significant turnover in finance and budget.

And we really wanted to make sure that the staff felt supported and that we were thoughtful about this work as it continued to be completed.

My reassignment was really to support the interim positions and created a controller position as well as a procurement division chief before this audit took place.

And my attention and intentionality was really given to do the audit prep and planning in advance and reassign a lot of roles and responsibilities across all the divisions so that this effort would be shared across subject matter experts in the department and really developing each division's skill set as they play a role in providing this data.

All staff has taken ownership and really played such a significant role this year.

I'm very, very proud of everyone and the diligence that they shared in learning these new things, but also in completing this work.

And as you know, to speak to some of the transition we've had, there's really been a lot of transformational change in this department.

We successfully filled the CFO role, filled by Ms. Nelsie Birch in June,

We followed with merging the budget functions as well as the recruitment for the vacant chief accountant position in August.

And then under Nelsie's leadership, we created the budget division as well as a treasury function.

So I just wanted to give that landscape a little bit of all that has been at play to really try to strengthen our team and be able to provide this audit function even

in a better way than we have before.

Thank you, Kristy.

Good afternoon, everyone.

It's great to be here with you all today.

My name is David Foley.

I'm a partner with Robinson Farmer Cox Associates.

I'm the partner in charge of the county's audit.

And we also have with me, Josh Roller,

who helped on the audit as well.

He's a partner in our office and helps assist with the audit as well.

And so before I get into the results of the audit and go through the CAFR with you all, kind of just wanted to give a brief overview of the audit that we do for the county.

So really, as part of the audit that we do, there's really three main pieces to that.

One is we audit the financial statements to make sure that they're prepared in accordance with generally accepted accounting principles.

The other two pieces we do in accordance with government auditing standards, one is

In addition to just looking at the numbers themselves, we look at the county's internal controls that it has over financial reporting.

So as part of the audit, in addition to just looking at the numbers, we will review those controls to make sure that they're operating effectively as they're designed.

And then the third piece of the audit that we do is the federal compliance piece.

So as part of the audit for the various major federal programs that the county has, OMB has a list of compliance requirements and

So as part of expending those federal grant awards, there's various compliance requirements that the county has to comply with when it's expending its federal awards.

So as part of the audit, we go through those compliance requirements for each of the major federal programs and check that compliance to make sure that the county's complying with those federal grant requirements.

So those are the three main pieces of the audit that we do.

So as such as we start going through the county's CAFR, you actually see three different reports from us included in the CAFR that communicate the results of the audit.

The other thing I wanted to note before getting into the CAFR is this year, typically when we do the audit, we actually come on site to the county offices and perform our field work.

We come usually in the springtime in June and then also come on site in October to do our final field work.

But this year with the pandemic and everything going on, we conducted most of the audit virtual electronically this year.

and actually I thought it went overall it went very well you know conducting an audit in this manner I think both the county itself it was set up well to be able to undergo an audit in this fashion as well as

I think on our end, we were set up well as well to be able to conduct an audit in this fashion.

Most of the audit documentation that we get in store, we use in software and store all of our documents electronically.

And also in addition to how we store the documents, the county also has a lot of documentation electronically.

So when we provided a list of information that we needed, the county was able to go through that list and have all the documents ready for us.

And we use

tools called ShareFile, which was basically a secure portal which allowed the county to be able to gather all that information, securely upload it to us, and provide everything that we required as part of the audit.

I must say particularly in June we did, that's where we did our preliminary field work and I would have to say that this year's preliminary field work was probably the most productive that we had.

The county did an excellent job

of providing that documentation that required for that field work and we were able to get through quite a bit during that week so even though the audit was conducted a little differently this year between working closely with the county and just again both sides being set up to be able to deal with an audit in this fashion I think we were still able to

complete the audit task as we normally do.

So, and one, I just would like to congratulate the county on being able to deal with an audit in that manner and being able to get the documentation that we needed to be able to complete it.

So as part of the audit we've issued the draft comprehensive annual financial report and kind of like to go through this with you all.

The CAFR this year has been in past years has

Four major main sections to it.

There's an introductory section, a financial section, a statistical section, and the compliance section.

So a few things I'd like to highlight.

First in the introductory section,

Starting on PDF, page 7, this is the transmittal letter.

This letter is prepared by management.

It basically introduces the CAFR to the reader, and there's various different sections that's included in this.

in this transmittal letter.

The first section is related to the reporting entity and services.

This section just talks about the county as an entity in a whole and just kind of a brief overview of the services that it provides.

The next section of this letter is on PDF page 10.

It's the economic conditions and outlook.

So this section reports on some of the economic conditions and outlook for the county.

The third section of this transmittal letter is the financial policies

This just discloses some of the various financial policies that the county has in place On PDF page 12 This is the major initiatives.

So this section talks about the current initiatives that the county has As well as in addition it also goes over some of the future initiatives that the county has

in place.

And the last thing in this transmittal letter on PDF page 14 is actually a new piece of this transmittal letter.

This little section that was added related to the pandemic.

So again, this transmittal letter is written by management and just kind of introduces the CAFR to the readers.

The other piece in the introductory section I just wanted to point out is on PDF page 19.

This is the certificate of achievement and excellence for financial reporting.

Each year the county submits its CAFR to GFLA.

There's an award program that you can get the certificate of achievement and excellence in financial reporting.

The county submits this every year.

This is the certificate that the county received for the June 30, 2019 CAFR.

And the county again will be submitting again to this program for the certificate this year as well.

And as part of the audit and getting the CAFR prepared, we go through, GFOA has a reporting checklist that they go through when evaluating whether a CAFR meets this award.

And we go through a checklist to make sure that this year's CAFR will meet that achievement and get that certificate as well.

So that's the highlights in the introductory section.

Next section is the financial section.

And the first part of the financial section starts on PDF page 20.

This is our independent auditors report.

So this is one of the first reports from us that reports the results of the audit.

So in this report, this is where we state we did perform an audit on the county's financial statements.

This report talks about management's responsibility for the financial statements, which management is responsible for the preparation and fair presentation of the financial statements.

This report talks about our responsibilities as auditors, which we are to issue an opinion on the county's financial statements.

And down at the top of the next page is the opinion that we have issued on the county's financial statements.

And we have issued an unmodified opinion on the county's financial statements.

which is the cleanest opinion an author can give on the set of financial statements.

Basically, an unmodified opinion means that the county's financial statements have been prepared in accordance with generally accepted accounting principles.

But again, that's a clean-ordered opinion in relation to the financial statements.

The other two opinions are in the back of the report, which we'll get to once we get to the compliance section.

And I'll go through those opinions as well.

So the next piece to the CAFR is management discussion and analysis.

And that starts on PDF page 23.

and management discussion analysis.

This is more of a narrative overview of the year for the county.

So it provides some financial highlights as well as there's also some summarized type information, includes some comparative information as well.

So for example, on a PDF page 26,

This is the summary of information.

This information comes and ties back to the actual financial statements that we'll see in just a little bit.

But this is a summary in that position, so it reports the county's assets, deferred outflows, liabilities, deferred inflows in that position at the end of the fiscal year.

This

The chart here also is comparative so you can see how the numbers compared from this year to the previous year and there's a section here for the governmental activities which is the county and then the component unit which is the school board.

One thing I'll just note here, this chart here is derived from the full accrual statement so this

includes pension and OPEB information as well as capital asset information.

The next chart is on page 27, which is summary of changes in net position.

Again, this is for the governmental activities, the county funds.

So this reports the revenues and expenses and then changes in that position.

Again, this is comparative so you can see how revenues this year compared to expenditures the previous year and so forth.

Again, this is this statement, this chart here is again the full accrual.

So again, this has the net effect of pension and OPEB and also

has depreciation expense included.

There's also the next chart and here I wanted to highlight is on PDF page 30.

And this is a budgetary comparison of the county's general fund, which is the main operating fund.

Again, this is very summarized.

Again, it pulls information from the financial statements, which we'll see in detail here in just a little bit.

But this is a nice chart here that kind of summarizes so you can see how the original budget and amended budget and how the actual compares to that.

And again, this is for the county's general funds.

We can see during the fiscal year, the county's actual revenues were $303 million compared, which was a little higher than what was budgeted of $302 million.

Then the expenditures during the fiscal year, the county had $270 million in expenditures compared to budgeted amount of $280 million.

and then kind of three quarters of the way down we can see the change in the county's general fund balance which had a decrease of 1.2 million during the fiscal year.

Just a couple other highlights in the MD&A.

On PDF page 32, this is another chart that summarizes the capital assets

that the county has invested in.

And then the next page down, page 33, there's a chart on the changes in long-term debt.

So you can see the various different categories of debt that the county has and then it shows what the balances were at the beginning of the year.

the net increase or decrease during the year and then the ending balances.

So nice kind of summarized chart here.

So that's the highlights in the MD&A.

Again, MD&A is kind of more of a narrative summarized version of the financial activity during the year.

Sometimes a little more reader friendly in this format.

But next is the financial statements.

And the first financial statement I like to highlight is the balance sheet, which is on PDF page 41.

This is the balance sheet of the county's governmental funds.

Again, these are the fund statements.

So these statements more align with the way the county actually operates, the way it budgets.

So these are the exhibits I like to highlight as opposed to the entity wide statements that are in there because GASB requires them and then includes all the capital asset, notepad information.

I'd kind of like to focus the attention on these exhibits here.

So this first one is the balance sheet.

So this reports the assets, liabilities, deferred inflows, and fund balance at the end of the fiscal year for the county.

And there's various different columns on this financial statement.

So for the various

major funds that the county has and also includes a new column this year, a new fund that the county had, the CARES Act Fund, which this fund accounts for and reports for the CARES Act money, the Federal CARES Act money that the county received during the fiscal year.

So this balance sheet, as we can see, if we look at the general fund, which is the first column, total assets of the county's general fund was 71.1 million at the end of the fiscal year.

And then in total assets of all the county's governmental funds had 109 million at the end of the fiscal year.

And if we compare those to the liabilities and deferred inflows on the general fund, we had about over 16 million in liabilities and deferred inflows.

and then overall and for the county's governmental funds had about 20 about 27 million in liabilities and deferred inputs at the end of the fiscal year.

So the next section of this statement is the fund balance.

So basically fund balance is the excess of the

the county's assets over its liabilities and deferred inflows.

So if we see down at the very bottom of the statement, the county's general fund ended the fiscal year with a fund balance of 54.5 million.

And then this statement exhibit also further breaks down the various components of that fund balance between non-spendable

restricted, committed, and then unassigned.

So the unassigned fund balance number at the end of the fiscal year for the general fund was $48.8 million, which is fund balance.

It isn't already been committed or restricted.

That's really available for use for the county.

and then just if we go over to the total fund balance, grand total for the counties, governmental funds ended the fiscal year with 82.3 million in total fund balance and again that's broken down between the various categories as you can see what's non-spendable, restricted, committed, and unassigned.

The next statement is two pages over in this PDF of page 43.

So this is the statement of revenues, expenditures, and changes in fund balance for the county's governmental funds.

So here we can see the total revenues, the expenditures, and changes in fund balance for each of the

County's governmental funds.

So we can see during the fiscal year, the County's general fund had over $330 million in total revenues compared to, if we scroll down a little bit, we had total expenditures of $270 million.

and then if we scroll down a little further, we can see the net change in fund balance.

Again, as we saw on that summarized chart in the MD&A, the county had a decrease in general fund balance of 1.2 million during the fiscal year.

And then again, if we go all the way over to the far right column, this is in total and the total decrease

And counties, overall governmental fund balance is a little over 12 million.

Of course, the biggest decrease is in the county's capital projects bonds.

So it's pretty common to see big

changes in the capital projects fund balance.

One year you accumulate all the funds for various projects and then over the next few years, so you see the fund balance go up and then over the next few years, those projects are expended.

So then that fund balance comes back down.

So it's pretty common to see big fluctuations in the capital projects fund.

The next part of the CAFR I'd like to highlight is starting on PDF page 50.

This is the notes to the financial statements.

So the notes to the financial statements basically summarizes and discloses the significant accounting policies that the county has and uses to prepare its financial statements.

The notes of the financial statements in addition to disclosing the significant accounting policies that the county uses to prepare its financial statements also provide some more detail behind some of the numbers that are included in the financial statements.

So for example, if we go to note 8, PDF page 76,

This is, note eight is the, it's a summary of long-term obligations that the county has.

So this first table here shows the various categories, again, the various categories of debt that the county had.

And we can see the beginning balances, increases, decreases, and then ending balance as well of

as well as the amounts that are due within the next fiscal year related to the various debt.

The next page down just shows in the debt note, this just shows the amortization requirements so you can see how that debt will be repaid over the life of the debt.

And then starting on the next page,

goes into the details so you can see the detail, individual, all the details of the debt that the county has.

And so after the notes to the financial statements, we get into the RSI.

The first exhibit here, like the highlight is exhibit 12, which starts on PDF page 127.

So this is the budgetary comparison schedule for the general fund.

So at the top here we can see the various revenues that the county had during the fiscal year.

And there's four columns on this page.

So you can see the original budget, the final budget, the actual amounts, and then how the

how the actual results compared to the final budget.

So again, for total revenues, the county had total actual revenues of $303 million compared to the final budgeted numbers of 302.

So we had a positive variance revenues in excess of expenditures of $984,000.

The next part of the statement then shows the original budget, final budget and actual for the various expenditures.

And the expenditures are broken down by department.

So again, you can see how each department's actual expenditures compared to the budget and information.

and if we go to the next page down towards the bottom, again, we can see total, the budgetary information for total expenditures, again, 270 million total expenditures.

and actual expenditures compared to a budget of 280 million.

So again, a positive variance of 9.5 million where expenditures were under budget.

And then again, towards the bottom, we can again see the net change in fund balance for the fiscal year for the county's general fund.

The next set of exhibits I'd like to highlight starts on PDF page 64.

And these are the school board's exhibits.

So these are the funds for the school board.

So exhibit 41 is the balance sheet for the school board.

So we can see the various funds, the school operating funds, school food services, and then the school capital projects fund.

Again, this exhibit shows the assets, liabilities, and fund balance for the various school board funds.

So total assets of 40.5 million compared to total liabilities of 23.6.

So at the end of the year, the school's total fund balances for all its funds was $16.8 million at the end of the fiscal year.

The next exhibit is exhibit 43, which is page 166.

So this exhibit here, this is the statement of revenues expenditures and changes in fund balance for the school board.

So we can see total revenues for the school board was 225 million compared to total expenditures.

if we scroll down a little bit, 221 million.

And then down towards the bottom, the net change in the school board's fund balance was 4.30 million during the fiscal year.

So the next section, like the highlight is the compliance section.

And so back here is where we get to the other two reports from us that communicate the results of the audit.

The first one in the compliance section is on page, PDF page 189.

So this is our report on the county's internal control over financial reporting.

This report, like the first report up front, this report was clean as well.

We noted no significant deficiencies or material weaknesses in the county's internal control over financial reporting.

So again, this report was clean.

The third and final report from us is two pages down on PDF page 191.

and this is our report over the county's compliance with each of its major federal programs.

And again, this is required as part of uniform guidance.

This report was claimed as well, most significant deficiencies or material weaknesses in the county's compliance with its major federal programs.

Also no items of non-compliance were noted as part of the audit.

So again, this report that was clean and all three reports from us that are included in the county's CAFR were clean.

So a clean audit again this year for the county.

Just two other schedules I'd like to just point out and highlight on PDF page 193.

This is the schedule of expenditures of the federal awards.

So this schedule shows the various different federal grants that the county had and the amounts that were expended during the fiscal year.

And the first part of the section shows all the county's federal programs.

And then the second page shows the federal programs for the school board.

The school board starts about halfway, halfway down.

And then the last thing is on PDF page 197.

This is a schedule of findings and question cost.

This schedule here summarizes the audit results.

So again, unmodified opinion.

issued on the financial statements, no internal control, material weaknesses or significant deficiencies, no items of noncompliance.

For federal awards, again, no findings or question costs.

If we scroll down a little bit, that list of various major federal programs that we had to audit and

also down at the towards the very bottom that we had again there were no financial statement findings or federal award findings in question calls.

So that's a brief highlight of the the county's CAFR.

Great.

Thanks, David.

I do.

My first one's for you, Nelsie, not to put you on the spot, but you're our new CFO.

Last time we had the CAFR presentation, obviously our former CFO was here.

Yeah, I mean, I think one of the things I shared with the board, and we'll be coming back to you all in December, is that there was a likelihood that we could see a decrease in our fund balance because we did not have a surplus in fiscal 20.

and you know how everything shakes out at the end of the day you know you never quite know until the full audit is done but it's reporting that we did have a decrease in our fund balance so the only thing to point out there from my perspective would be you know you can't

You can't continue to draw down your fund balance.

But the good news about us is we have this fund balance that exceeds our policy levels.

And that's why you see this in a year where we had a challenged revenue environment, fiscal 20.

That's why you're seeing a decrease is because typically,

This government has been able to produce surplus well in excess of its policy level.

Now we're starting to eat away at that what I'll call the delta, the increment, or the surplus that would have been generated in 2020.

So from a financial perspective or from a numbers perspective, I don't have concerns.

We had been talking about this.

I feel like we're in a great spot where we, in a pandemic and in a real challenged environment,

We just decreased our fund balance by a little over a million dollars.

That's incredible financial management.

I think where I have spent the biggest bulk of the conversation with David Foley and my team, which I forgot to introduce Cecilia Baber.

I'm so sorry Cecilia at the beginning.

She's our controller.

So Kristy had mentioned her.

And since she began her role, I think in like the March, April, May timeframe, we did this.

and this is her first official audit as the controller in a new position and you know what we have been talking about is why is it November 23rd and we have a draft CAFR?

We don't have a final CAFR.

That is a concern that I have and we've talked a lot about that and there's two primary reasons for it and we were going to touch on this in a moment but

We have its grant management and our capital assets management.

Both of those

We do not manage them throughout the year.

So it takes us considerable time when we're preparing for the audit to be able to execute all of the information, reconcile everything to get this out the door.

And so that's been part of the challenge that Cecilia has run up against in the last six to eight weeks is trying to take 12 months worth of work and make sense of it in a very short period of time when it's due for the CAFR.

So this is something that I've been talking to Mr. Richardson about that we're going to do things differently.

We actually do need a fixed assets accountant.

That's something that we're in the middle of working through how we get that funded and done.

And we also need a grants administrator.

We don't have one.

And so it is this, as Kristy indicated at the outset, you've got several divisions in finance trying to pull off what really is a responsibility of one person.

And so at the end of the day, there's not that ownership.

And so my concerns are more this operational, how can we not be at the 11th hour trying to get a CAFR out the door when we're supposed to have it to the state by the 30th of November?

How do we incorporate that and do it differently next year?

And quite frankly, it's starting that process now and getting dedicated resources now to focus on these very specific things.

It's not the whole accounting system.

It's really fixed assets and grant management are what are challenging us right now.

And so that's kind of my two cents and what I see looking at this, knowing some of our internal challenges.

I'm elated, quite frankly, that this team, and this is where I'm gonna gloat on them, this was the first time they have done a CAFR by themselves where we decentralized it.

And I was very happy when David Foley said,

All your pre-work you did better than we've seen Albemarle County do for years.

And so I know that we're on to something really awesome, right?

Like that was fabulous because that was our planning and our effort of Jeff Richardson and his team bringing Kristy over

when we had this transition challenge with the CFO leaving, our prior head of accounting leaving, and we were able to pull something off that I think could have been a real challenge.

So that makes me happy.

We've got work to do, but we've got a plan for that.

And that's where I'm excited.

Is that,

I was gonna ask David for this, for a response here, because last year, some questions about staffing was brought up.

Hearing you discuss this the way you just did, Nelsie, makes me realize that, you know, while last year, whether it was the correct perception or not, based on my ears, it was about just throwing more staffing at the situation.

But now I'm hearing it was two specific areas,

And if it is some more staffing, it's a very targeted need versus just more people.

But now I'm starting to understand a little bit more, David, about maybe the crunch time, because we don't do this work throughout the year.

That's a process question, not a staffing question.

Yes, it may lead to the need of more staffing.

But even if all of this current staffing was doing that work throughout the year, then it doesn't require the same push in the final minutes, if you would.

Did you sense some of that this year relative to the comments you guys made last year about staffing?

It's similar.

And again, I mean, Nelsie hit the nail on the head by pointing out these two issues.

Again, when we do the audit, we look at the numbers and we look at internal controls and that thing.

So we don't do staffing or efficiency.

things, but the one thing I can say is, as Nelsie said, capital assets and grant management, we got the capital asset information, the final pieces of that pretty late in the game.

I think the final pieces we got as late as last week.

Whereas typically when we go and we do an audit, when we come on site for that final field work, in this case for the county it was in October, that second week in October was when we did the final field work.

So that's typically when we do an audit and we're focused on the audit that week.

That's typically when we get the set of books, that's also when we get the capital asset information.

And so that did not happen this year until we got that information.

parts of it throughout the last month but kind of the final pieces that tied everything together you know we didn't get till late in the game and you know capital assets drives a lot of what's in the CAFR and not only do we got to make sure that that gets you know incorporated into the CAFR but we also you know as auditors we've got to verify that it's right so you know we would certainly like to see the county be able to have that information

more in line with the rest of their pieces.

That, and then as Nelsie also pointed out, the federal grant piece of it.

That schedule that I showed right at the end, that schedule, the federal expenditures, that nowadays is a really huge piece of the audit, and so that information

You've got so much oversight nowadays.

You got the feds looking at the state and then the state intern has to turn around and look at you all.

So that's a pretty big piece.

And just again, that one came, we got the information we needed, but we didn't have it when we did the final field work.

Well, my reaction, frankly, last year was a different one than it is this year.

I'm hearing progress and

While in your reports, you gave clean reports here and are noting in the same fashion that you did last year.

Right.

And there was definitely improvement this year compared to last year.

I mean, you know, while those couple of pieces were out there, you know, the bulk of the adjustments were done.

Yeah.

Well, I'm hearing just from what I've learned with coming into it thinking about this compared to what I heard last year.

So Jeff, Kristy, Nelsie, Cecilia, I think obviously things have already been, there's been some modifications made internally that this is going to improve this.

And then we have a better eye on what needs to happen moving forward.

It just may take a couple of years relative to those resources, right?

Especially if it's more staffing or teamwork.

So, you know, it was interesting on the revenue, the unearned expenses of that CARES money, just how to track that.

But I think my questions went away when you hit that last, I forgot what page it was, but when I saw the unearned revenue piece and then put over, did CARES or have you been,

And if you've touched on this, I apologize.

Right.

That's correct.

Because it's federal funds, the CARES money is similar to all the other federal programs that the county has.

Once it meets a certain threshold, it's subject to this compliance audit.

This year, the county did expend over $750,000 in CARES money.

So we did have to look at that.

One thing I'll point out related to CARES money specifically is while the county spent some during fiscal year 20 and you know we looked at those expenditures and

you know everything looked okay and what the county expended it on you know they had the proper documentation and they appeared they looked like they were they were allowable cost but really in the grand scheme of things only a very small part of that was spent in fiscal year 20.

So next year there's going to be for FY21 there's going to be a lot more CARES funds that

during FY21.

So the remainder of the first pot that you got plus then you got all the second pot.

So the Count Wu, you know, as part of the audit, those CARES ones are going to be subject to audit again.

And while some of the same things will be looked at, the volume is much greater in FY21 because the volume of actual expenditures was greater.

So that's one thing is we're looking to next year, that's something that the county wants to make sure.

and is prepared to be able to do that.

Again, I think you're on the right track from what was spent in FY20 was okay.

And I would anticipate FY21 would be the same, but again, the volume is much more in 21.

Yeah, it's interesting.

I would imagine COVID is so different for us.

It's this emergency that's just shook up our normal.

I mean, yes, federal dollars or federal dollars in

So you know whether it's the CARES money or other federal grants again so the county's still having to undergo these types of audits so from that perspective it's it's not any different you know overall again this one's just you know again this one

There's a lot and a lot of volume.

There's going to be a lot of volume in FY21.

And again, with this CARES money, the funding came out right at the end of the fiscal year.

And I tell you, the guidance was probably still changing some, but I mean, it was

I mean we spent so much time, and I know the county did as well, just trying to get a handle on what can localities actually do with this money because the guidance came out there when this stuff was first

issued and then you know there was a lot of vague guidance out there and you know there was committees and and conferences that localities were trying to you know talk to other people saying okay what can we really do and I mean even the the federal government was

I mean they were changing their guidance daily and you even had in cases in certain cases where the Federal Department of Treasury had one part of the department saying one thing and then you had the OIG piece of the department saying another so they were kind of conflicting so it really makes it hard for

you all, to try and make sure that you're spending this money in the way that it should.

And it makes it tough on our end too, just because when we're auditing it, we've got to look at that guidance to see what's allowable.

So it was really, I'll tell you, the last few months, three, four months, it was a lot trying to keep up with this.

I know it was a lot on the county side, and it was a lot on our side,

You know, you respond to a question one week and say, you know, this is what we think.

And then the guidance would change.

And so you'd have to, you know, reverse course.

So I mean, that was kind of long winded.

But yes, it's still federal.

It's still a federal money that's that's under that has to undergo an audit like any other federal funds.

But, you know, this is new.

It's new to the county.

It's new to auditors.

So

David, do you have any opinion about the guidance that we can use that CARES money?

We can assume that our emergency personnel

Since March.

Yeah, okay, go ahead.

So there was, I mean, whether you could use public safety or the CARES money to fund public safety, that was one of the hot topics that everybody was, you know, you had some people that said you could do it, you had others you didn't.

That issue there is actually where treasure itself was conflicting.

its guidance and where part of Treasury was saying yes you can use it for this and part of it says you know then you had part and said that it didn't but then I know GFOA and a few other groups kind of got together and went to Treasury and they issued and their latest round of guidance did say that you can use that to fund public safety money so there's

and the Treasury has guidance out there and it lists kind of those positions and says that basically these by nature or by position, those positions are deemed substantially dedicated to COVID and also substantially different use.

based on the latest guidance.

Yes, I do think you can use public safety, use that money to fund public safety salaries.

Now, what you have to make sure of though is you don't double dip on funding.

So, you know, when you get, if you get, you know, state or other federal funding that are funding some positions, you can't turn around and also, you know,

Most of my questions were actually covered with Nelsie's and your response with respect to why so late and also what else besides the decentralized approach to the CAFR resulted in your comment, David, that it worked better this time than last time.

I know every year you come in and say how wonderful everything worked.

but this year apparently it worked better than most.

I got a couple questions about the grant manager.

In the past, I've always been told that we didn't have enough work to have a full-time grants manager.

Clearly the CARES money has required some management.

Yeah, one of the things, Supervisor Palmer, that was brought to my attention is the disconnect between how many grants we actually do manage.

When Kristy actually, I'm gonna put her on the spot if I get this wrong, had reached out to our budget office to ask how many grants come through budget and that they're aware of.

And I think their response was about seven.

And when you look at the CIFA, I think there's around 60.

And so what that tells you is we've got a disconnect between what our budget department or budget division is seeing and administratively working through the process and what is happening outside of budget that then the accounting group has to

Pick up all the pieces at the end of the year to make sense of the CIFA reporting.

And so that tells me something's not right there.

And I absolutely think that there is a role.

One of the first things that when I asked my team, you know,

I got on like, what do we need?

What is some of the challenges we have?

I would say almost unilaterally, when you either think about the departments that we interact with, or budget and accounting, it's we need somebody who is running the show on grants, because it's just it's not well coordinated, and it needs the time and attention.

And so I would absolutely say that that is something that we need to pursue.

But we also need to think differently in how we fund that position.

I think historically it was a general fund funded position.

And it doesn't necessarily have to be that.

So we're actually engaging with some external accounting firm to do some work for us.

and look at the grants that we have currently in our portfolio and how many of those we could have charged and essentially an overhead to that grant to pay for some of our back office

support functions and roles, which the county has historically never done.

And so we're trying to look creative of where the grant pays for itself, the administration of the grant pays for itself.

And in order to be able to see if of the grants that we have out there, how many of those could actually pay for a grant administrator and it not come out of the general fund.

Okay, that's great.

I have one really small question.

I'm sure other people have questions, but I obviously haven't looked at this yet until you opened it up, David, on that, given that it just came this morning.

But is there a page in there where all the tourism money, as you were flipping through the pages, I saw that in the description you had what comes out of tourist-related

Tourist related revenue.

It's in the transmittal letter.

So, Supervisor Palmer, that number, so I wrote the transmittal letter that comes from leadership and management and we used, I worked with Roger Johnson from the Economic Development Office

and CICVB to come up with that.

So it's not necessarily numbers that would be in our CAFR, it's more talking about tourism's impact on our local economy.

And I think that we have some local tourism related taxes, we're 13.8 million.

All right, that's fine.

And I'm just, I think I had a few written down and I think that they were mainly answered during that first section.

So I'll be quiet now.

Any other committee members have a question?

We haven't heard from...

Ellen or Rosalyn or Jeff?

I'll let the schools go first since they've not had an opportunity to speak at this point.

I'm okay.

I don't really have any questions.

I've not looked at the document very much.

I had to work this morning.

To me, Ellen, go ahead and work that through me in my office.

And this will come back, obviously the full presentation gets made to the board.

So you can also have questions ready at then.

I can't remember when that happens.

Yep, it's next week.

The school board, when does it go to the school board that fast, too?

Yeah, we typically present to the school board.

I just wanted to take a second and ask Nelsie, and you may want to elaborate on this, that when you were speaking earlier about identifying the positions

and in the area of grants management and capital fixed assets.

And you talked about also examining the appropriateness of whether the funding for those positions should come from general fund or should come from outside general fund.

I'd also point out that you've got a handful of positions in your department that are currently frozen.

and that you've also explored the opportunities to take several positions in the department, re-examine those positions and be able to reclassify those.

And so at the end of the day, we may not be talking about a net increase in positions in the department.

It may be a combination of taking vacant positions and reclassifying those and actually moving those into other areas and then also that with the combination of moving where the positions are paid for out of the general fund and either like Nelsie described through the appropriateness of grant.

Yeah, Jeff, the only thing I would add to that is, you know, one of the things that I've been talking to my leadership team about, you know, there's six divisions underneath the chief financial officer.

And, you know, what I'm really, we have six frozen positions right now.

And where I'm really focused, much like you were talking about, Jeff, is, you know, where is our greatest need?

and is our greatest need in the areas where we currently have positions that are frozen.

While they're always, all of you have worked in government or been involved in government for some time, you could always have more, but we have six, to me, six opportunities to look at things differently.

And given the environment that we're in, where our resources are likely to be tight for some time,

I'm looking at it from, okay, what is our greatest need and how can we fund them from other areas outside of the general fund?

Because the general fund is gonna continue to be constricted and challenged over the foreseeable future given our economic environment and not sure how low are we gonna go economically and how long is it gonna take us to recover?

So I just wanted to add that.

Thanks, Jeff, for that.

Any other questions?

Good?

Okay.

So with that, I think we did have an opportunity on this management response.

Yes.

So we did cover this, actually.

So you guys were right on point in following our talking points here.

that we wanted to talk about the capital and grants management efforts.

I would say that while we discussed how much has gone into reorganizing and planning so much of this work and improving and improving our business processes really takes management and leadership time and focus as well.

And I appreciated the conversation on the CARES Act because

That has also taken some of our attention and our plans to do a lot of this business process improvement this year.

It definitely, while we've been very successful, the CARES Act definitely distracted some of our attention to those things.

We couldn't absorb it all.

And we wanted to make sure that we were very effective and compliance driven on the CARES Act.

So I just wanted to tie those things up as well.

It took many of staff across finance and budget to coordinate all of that and continues to, to your points, Ned, to make sure that we're being very careful in our grants management in that area.

And so lastly, I think we covered most of it.

Yeah, I just wanted to add that when we talk about the effort

for preparing for the audit, and then also for the CAFRA, the number of staff hours that goes in in a very short period of time, which the pandemic and while the CARES grant funding was a blessing to this region, it added a lot of work on staff that is already maxed in preparing for the audit.

Just to give you some context,

There's about 15 people in finance and budget who focus the varying degrees throughout early summer and into the fall on the audit, putting in probably about 700 personnel hours to this effort.

That's without a pandemic and that's without a massive federal grant that we also have to oversee compliance on because when we talk about grants management,

A lot of times the grants are being managed by the external department that benefits from that grant.

And finance has stepped into this oversight role.

And with the CARES grant, we stepped into both.

We were compliant and administering the grant at the same time.

And a lot of it was the same people who were also working on the audit.

And we'll be doing that again next summer as we prepare for audit.

And it also just highlighted when we talk about grants management and fixed assets management is that I really want to take the opportunity to commend the team in coming together in a way that they had not come together before under Nelsie and Kristy's leadership to prepare for the audit.

We really did have an on deck effort to this.

And I just see good things going forward.

But this recognition that

We are taking some of this, not quite cursory oversight, but the various minimum of oversight that we are required to do for grants and for fixed assets, and then pushing that into a very constricted timeframe.

Nowhere was that more evident that we need to fix that problem than this year.

Thanks, Cecilia.

Do you wanna transition us?

Yeah and so first off for the fiscal year 2020 audit there were no new GASB pronouncements that were implemented so there's no new changes in how anything was reported when you're trying to compare 2019 to 2020 audit reports.

At the start of the pandemic, GASB went ahead and extended the implementation date of all upcoming pronouncements.

The two that we're going to talk about

briefly today, and we talked about these the last meeting as well, so I'll try to keep it somewhat brief and then answer any questions you all have would be the one that's on the screen now, GASB 84.

This will go into effect for fiscal year 2021.

It requires custodial funds to be reported in the financial statements, and the one

actual effect for Albemarle County will be the school activity fund audited numbers will need to be now recorded as a special revenue fund in the CAFR going forward and I think when we met last time it was we were still a little unsure there was kind of some conflicting guidance going back and forth whether they would actually have to be in the county audit report but we are

now taking the stance that they will need to be put in there.

And the other GASB statement we'll talk about today would be GASB 87.

This one's kind of, it's been in the works for a few years now.

And again, it was pushed back implementation date.

It will not go into effect until fiscal year 2022.

It eliminates the difference between an operating lease and a capital lease.

This is the next GASB statement that will require significant work both on you all side and our side and you know it is not till 2022 but that that might sneak up on us a little bit and it's really just going to be it's going to be a lot of informational gathering of all the different leases that the county has.

And on, you know, I'll just add to it on GASB 87, the lease standard.

Certainly, you know, as part of doing the audit and helping the county get the CAFRP together, you know, we'll do everything on our end to help, you know, get this incorporated into the CAFRP.

But as Josh said, even though we're still a year or so away from the standard,

The work, the upfront work that you all have to do as far as gathering, you know, let's gather all the information to gather all the leases that are out there just so because right now we may not know the whole universe out there.

So right now, what the county has to do is gather in all that information and then

Once that's gathered, then we can take it from there and help analyze it and help get it to get the standard implemented.

But the reason why we've talked about this standard for the last few years is GASB is constantly coming up with new accounting standards.

Issuing new GASBs that the county has to implement and some of them don't really affect you that much.

Some of them are, there's not a lot of upfront work.

It's just putting in a few paragraphs in the CAFR to comply, even with GASB 80, statement 84.

Basically, we're just taking numbers from one report and putting it into another.

Sometimes there are these casualties that come up that do require some upfront work.

And so that's why we just want to make sure we keep communicating these things so that the county, the last thing we want is the county to be caught surprised by, oh, guess what?

We got to implement this year and implement this Gatsby this year.

So that's why we always have this section

you know with the committee just to talk about you know as we always are looking ahead a few years just to say hey you know in a few years you know there's this big accounting pronouncement out there that's gonna you know require additional work I mean I remember back in the day when GASB 34 you know was issued there was a ton of upfront work that was required on that so I do think GASB 87 is going to require some upfront

Great, thanks.

And there's a separate audit that we do usually in the summer every year where we come in and we audit all the individual schools, school activity funds.

And exactly like you said, it would be where this individual schools are collecting money for field trips or the school dance, et cetera.

Wow.

Maybe I should reserve my comments as a parent versus a member of the board here.

Just thinking, I'm still writing checks for $5 here and $7 there.

And I think electronic means to transact money might, I don't know what the costs are for that.

So I better just stop well before I get myself.

So you'll see, hopefully when we come back in the spring, we will have a plan forward for how we're going to tackle this statement 87, what is our plan of attack, and how we're going to make sure that we start FY22 with the process that allows for us to manage this over the year.

So it's not a scramble at the end of the year because this is certainly something that we don't want to get behind on because we're probably already significantly behind from an operational perspective.

Absolutely.

And I do want to add, Nelsie, you might not have been able to connect that some of that chart of accounts work that we are doing to identify capitalized leases.

Great.

Thank you for that.

If there are no other questions, I'm just trying to look on my screen to make sure there's no hand raised.

Do we have a motion?

Is that it?

Are we done?

Is that the presentation?

Okay.

Is there a motion to adjourn?

So moved.

Opposed?

Great, hopefully I did okay.

Supervisor Palmer, do you have a moment if you're, Supervisor Palmer, can you stay on for just a moment?

Yep, absolutely.

Great, yep, that's good.

Jeff, do you want to stay on for this CARES question?

Are you good?

Okay, so we're good with everybody, Kristy needs to stay on.