Audit Committee Meeting   11/30/2022

I'm gonna call this meeting to order, if that's okay.

As the chair, this is so, it's still, now I'm in person doing this.

Virtually I've got it down, but the in-person thing is a little intimidating.

So it is 2.30, and I'd like to call to order this November 30th, 2022 meeting of the Audit Committee.

Meeting, this meeting, information about this meeting is posted on our county's website under the Audit Committee homepage for reference.

And those committee members who are present today is Board of Supervisors Jim Andrews, School Board Rep Ellen Osborne, County Executive Jeff Richardson, myself, the Chief Financial Officer as Chair, Nelsie Birch, and the Superintendent Designee, Rosalyn Schmitt.

Absent for the moment is Ned Galloway, so we will make sure when he comes in, the other Board of Supervisor representative will be appropriately announced in the minutes or what have you.

So other attendees, I do want to introduce Jacob Sumner.

Many of you have probably seen or worked with Jacob.

He's the assistant CFO for policy and partnerships.

Jacob has had to take on the role of helping us with our audit.

We've had an unfortunate absence by our assistant CFO for operations who would normally do this audit.

She's been

out for for some time.

So Jacob has stepped in and he has done this before.

He's the former director of finance at Hanover.

So he is very well equipped to do this work.

So thank you, Jacob, for that.

And he will be leading a lot of the discussion today when our controller

left in April.

We hired Ben and his team at Citron Cooperman, Ben Carlin, I forgot your last name for a moment, to help us with the audit process.

We knew that we would not be able to absorb that work without having a layer of knowledge and abilities to kind of corral us.

And so Ben

has been working since this spring trying to help us get our stuff in order and be prepared for the audit.

And then David Foley is going to walk us through our audit results and that's really the reason for

This afternoon is we've got some preliminary results that we want the audit committee to have in anticipation for the upcoming board meeting.

I believe it's December 14th that will bring back the final audit for the public and the rest of the board.

So with that, there's a couple more members.

It's not on my sheet, but I did want to recognize just so people know who's in the audience.

Chase Chandler is our

New Accountant Manager, so he runs the accounting shop.

Not quite two years, and has really proven himself in the accounting world.

Yeah, it's a seven, which is awesome.

Andy Bowman, everybody knows Andy, he is our

Chief of the Office of Management and Budget, and does not have a huge role today, unless we call it him.

And then Kim Garner, who has been an amazing asset to us.

She is the head of our grants unit, which is a unit that we created once we went through CARES and realized we are not structured to do this well.

And we had some challenges getting our CIFA done, which I think, you know, we'll talk maybe a little bit about today, which is one of the reporting requirements we have for all grants is the CIFA for the federal and state grants.

And so Kim and another member, Vicki Melanphy have this unit that has really, really paid off to help us with all of our grants, compliance reporting, and also finding and getting grants where we can provide some value to departments.

And this was something we hadn't done before.

So today we're going to review the FY22 audit results.

And we do have a few other agenda items.

Typically, we only have that on the agenda.

There's a few other things we wanted to bring in front of this committee because one of them is quite new.

And it's the Board of Supervisors had asked for different reporting related to our volunteer fire companies.

And we didn't really have a great vehicle to provide some analysis for what did we learn.

and so Jacob is gonna walk us through kind of where we are with that project, what's to come and get some feedback on that agreed upon procedures program.

And then we have some update on some of our contractual relationships that we'll talk about later that the committee has been interested in in the past.

I will update you on those as we get towards the end of the agenda and then we will adjourn.

So with that,

Are there any changes that any member would like to make to the agenda before we get started?

Okay, great.

Seeing none, I move that we approve the agenda.

Do I have a second?

Second.

Great.

Anybody opposed to that?

All in favor?

Great.

Yes.

Okay.

It's probably not the way you're supposed to do it, but I'll get better at this over time.

So the first item on the agenda is kind of a new one also, which I forgot to mention.

David Basemi had sent out, David I forgot to, David is my right hand person over there and I forgot to acknowledge you.

I'm very, very sorry you were not sitting that way.

David sent out the new policy for our consideration related to

Virtual meetings.

And so we are in class three, I believe.

And so what this policy is, is suggesting, unfortunately, the wording is a little weird, it says all virtual meeting policy, that means the meeting itself is all virtual, not that this committee can always be virtual.

And so we would recommend or we are recommending that we go to having one hybrid meeting,

A year, this committee meets twice a year.

And so the spring meeting is more of a getting us geared up for the audit.

It's not the nuts and bolts of the audit.

So my recommendation is we do that one virtually.

And then the fall one is always in person.

And so that's what this policy is suggesting, but open for ideas.

If you all want to get together in person twice a year, we could also do that.

Great.

Any opposed?

So, okay.

Great.

Motion is moved.

And now, we are on to the FY22 audit results.

And Chip Foley, can we start with you?

No, we're not.

We are starting with Mr. Sumner.

Thank you Nelsie, I appreciate it.

And I will introduce David here again in just a minute.

I just want to give some introduction, give a little background on where we're at so far in the audit.

From staff perspective, David is going to speak from the auditor perspective and present more of the statements themselves and go over the required communication that

He has our auditor is required to communicate with those in charge of governance, which is you all.

So before your seats today that you'll find a packet, small packets, and I know its size because typically our national statements aren't this

Then there are typically about 180, 190 pages, which this is last year's.

And this is representative really where we're at right now in preparing the financial statements and going through the audits.

A lot of this work has gone into the prep.

Right now there are still some key components to the financial statements that aren't ready yet.

We will present the full report to the board for supervisors at the December 14th meeting.

We'll have it ready and prepared to go on our website whenever it's ready to be presented as well.

So some of the things that are missing that are not in these statements are that it's in the packet today are our transmittal letter which is really an introduction to our audit and our financial statements.

It is really one of the more colorful documents or parts of the financial report because it gives us an opportunity to really

talk about certain economic conditions, talk about different things that are going on in the county, initiatives, things like that, as opposed to a lot of the hardcore numbers and footnotes and things like that.

Some of the other things that are missing are the MD&A, that's Management, Discussion, and Analysis.

That is really a comparison of last year's financial numbers, particularly compared to this year's.

And it also allows us to have some more context and adds more flavor to those numbers as well.

The largest section that is missing is our footnotes.

And that's one of the more complex areas outside of the statements themselves, actual numbers, because there's a lot of meat in those.

Those explain the numbers and the words and talk about a lot of our accounting philosophies and our accounting practices.

They talk about our major components of our statements like our debts, our capital assets.

They talk about

pronouncements, governmental county pronouncements that we've implemented this year, and ones that are coming up in the future that may affect financial status.

So they're really complicated and really complex, especially as you talk about these large runs, like fixed assets and pension, you know, pension and net note, those are a lot of compliance driven type of notes.

There is another section at the very end of the document that you'll see once it is completed is the statistical section.

That is a tenured history of certain statistics throughout the county, and some of those are financial in nature, our revenues and expenditures, fund balance, but also goes to some things outside of just the raw numbers.

It talks about our population, school enrollment, our fees and things like that, our tax rates, assessed value, things like that.

So it adds a

A really good history, even though our financial statements are really focused on the current year or the one that we're just closing, a statistical table in the back will give a good context for history and historical perspective as well.

So these are not the final.

And as you thumb through these, you'll see that there are draft written throughout the routes.

So I just wanted to relay and let you all know that more is coming.

and we'll have the full final report on December 14th.

I would say that this year we've had some challenges.

I mean, to get to this point, we've had to overcome quite a few obstacles.

Nelsie mentioned our staffing challenge.

I think we're very fortunate to be able to promote and fill some positions within.

With Chase being our new accounting manager, we also had a vacancy in our payroll manager position.

We were able to fill that within.

And payroll is a key component as 85% of our budget is personnel related.

So that having a solid person in our payroll manager position is also critical.

We also are without a controller right now as well.

So a lot of these are key players in pulling together the year-end and pulling together the financial statements and working with our auditors as we go through the audit.

So we're

We've overcome those and we're getting there, but I just wanted to recognize that it's been a challenge.

I'm very thankful to have Ben and his staff help us out to really add some leadership to add some

perspective on timing and helping make sure that we're staying on track and just give us some more resources because we needed it.

We need those extra resources to help really get to this point.

And with all new systems, there is the effort and the work going into preparing and implementing the system, but there's also the post implementation time where we're trying to stabilize the environment.

We're trying to make sure we get reporting correct, trying to make sure that all things that are integrated within that system, but if it integrates with another system,

all those things work work well sometimes they don't and sometimes it takes a little bit for that stabilization period so that happened mid-year as well seeing great results as we're getting through that but i think i think you'll see that as some of the one of the challenges that we had overcome this year

The other thing that was not mentioned earlier that Ben and his staff has helped us out with is a new accounting pronouncement.

So GASB is the Governmental Accounting Standards Board and they create these accounting statements which are really the rules that we have to live by as governmental accountants how we present our financial statements.

And one of the bigger ones that came out and was implemented for this year is GASB 87 regarding leases.

And lease is a broad term in our general vernacular, but from a governmental accounting standpoint, it's a little bit more narrow.

There are some specific things that we have to look at to make sure that what we call a lease fits within those parameters.

What makes that challenging is we had to go back and look through all of our documentation, look for these leases.

So it took a concerted effort to actually go find these because these weren't on the financial statements before.

This is brand new.

Very thankful that Ben and his folks have been able to help us out, help us review the documents, do the analysis, help prepare new footnotes that will be in the statements when they're finalized.

So all that is some of the hurdles we've had to come up with this year.

I think one of the things that may have been discussed in previous years is fixed assets and grants.

I think we've come a long way, particularly in the grants arena.

You know, with Kim's leadership in the grants unit and with Vicki's support as our grants accountant, we've come a long way and I think our grants

Reporting is becoming better.

It's easier for us to maintain and manage the financial side of those grants, particularly from the lands of an audit and a financial statement preparation perspective.

So I want to give a shout out to them.

Fixed assets is a work process.

You know, it takes a long time to turn a big ship and we have a lot of fixed assets and a lot of capital projects.

And so we're still working on that and we're still working through that.

And so I expect this time next year to give you another update of where we are with fixed assets and capital projects and things like that.

Cause that also is a big portion of our budget where we spend a lot of our funds.

So with that, before I turn it over to David, I do want to give a shout out to the accounting team, specifically named Chase Chandler, who is leading the accountants, Stacy Smith, Lisa Davis, Shelby Coleman, Tanya Knudl, and then I also want to recognize Vicky Malanthi, who is our grants accountant.

And they've all been very integral to this process, very, very, very dedicated staff, making sure that we are where we are today, and particularly on

around the corner on these Spanish statements.

So without further ado, I want to introduce David Foley.

He is with Robinson Farmer Cox.

Thank you, Jacob.

Good afternoon, everyone.

Glad to be here with you all.

As Jacob said, we've got through quite a bit of the audit, but there's still some pieces left out there that we still need to obtain and review.

So while we've made a lot of progress, there still are those pieces out there.

So what I've done for this meeting is kind of pull together some select pieces of some of the items that are more complete.

Also have drafts of the opinions and governance letter and management letter that we issued this year.

Again, they're not complete.

They're in draft form.

These are what the anticipated results are going to be once everything is wrapped up, completed, and pulled together.

Again, as Jacob said, with the pieces that we're missing, the packet, we're missing the footnotes that are still being worked on.

We've got, and we'll go through these in a little bit, we've got some select fund statement financials that we have in draft that we can go through.

With some of the pieces that we're missing, we still have to get those pieces to get all the financials done and pull together the entity wide financial statements.

And we have received the CFUN grant information so we're finalizing our review over that.

So still some work left to do, but I think everybody can, after a long hard road, I think everybody can see the light at the end of the tunnel on this one.

But just like to go through some of these items that are pulled together.

The first section is the draft opinions.

So they're included.

In the county's annual report, there are three reports from us that communicate the results of the audit.

And again, these are the draft opinions that we anticipate that these will be how they will look and the final results will be.

The first report we have here is our independent auditors report.

And this report looks a little different this year in terms of formatting.

The auditing standards, they had a change in really the format of the report.

It used to be in this report that there was a lot of information towards the top and then the opinion that you issued was kind of towards the bottom and which generally the opinion is what most people are interested in.

So they, I think this was a good change that they made to the reporting and they kind of moved the opinion up towards the

The top of the report, so it stands out and that's really the first thing that you see.

So in our independent orders report, we do state that we did perform an audit of the county's financial statements.

and we have anticipate issuing an unmodified opinion on the county's financial statements, which an unmodified opinion is the cleanest opinion in order to get 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.

Down at the bottom of this page, the first page of the report, the opinion will note that the county did, as Jacob discussed, did have to implement a new, the county policy, GASB 87, which deals with the reporting of leases

Again, previously operating leases didn't have to be reported in the financial statements as assets and corresponding liabilities.

The county's hard at work in pulling this stuff together so that the financial statements will have the effect of the standard reported in them.

The flipping over a few pages is the second report from us.

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

So as part of the audit, we

gain an understanding of the internal controls that the county has in place over its financial reporting, you know, for the purposes of designing our tests and testing, you know.

would be able to issue an opinion on the financial statements.

So this report, we do again anticipate this report will be cleaned as well.

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

We do have, while this report is claimed into the significant deficiencies in material weaknesses, we do have some recommendations that we had as part of the audit, which I'll be going over here in a little bit that we issued in the draft management letter with some recommendations that we had as part of the audit.

And then if we go two pages over is the third report, which is our report over the County and School Board's compliance with its major federal grant programs.

As part of the audit, in addition to just looking at the financial statements, any time an organization expends over $750,000 in federal grant expenditures, you have to undergo a single audit, which is basically a compliance audit over its federal grant programs.

So for the major federal grant programs for the county and school board as part of the audit, OMB provides a compliance supplement with a list of those various requirements that the county and school board have to comply with when it's carrying out and expanding its federal grant programs.

This report, again, we anticipate will be a clean report.

We noted no material weaknesses or significant deficiencies in the county's compliance with its major federal grant programs.

So again, we anticipate the three opinions that are included in the, the three reports that are included in the annual report to be clean.

The next section is graphs of some various financial statements.

So the first one is exhibit three, which is the balance sheet for the county's governmental funds.

And so the balance sheet reports the assets, liabilities, deferred inflows, and fund balance for the county's governmental funds.

And then the statement also has columns for the various different

governmental funds that the county has.

The first column is the general fund, which is the main operating fund of the county.

Then we've got the federal and state grants fund, a fund for the CARES Act and ARPA funds, capital

a column for capital improvements and then for some of the other non-major funds there's a column to incorporate the rest of the governmental funds to the county and then have a total column so we can see the total numbers for all the governmental funds

So total assets at the end of the fiscal year for the county and the general fund ended the year with total assets of a little over $101 million and then total assets for the governmental funds was

$174 million.

Then there's a section for liabilities and deferred inflows for the county with less than $6 million in liabilities for the general fund.

Deferred inflows related to property taxes, $14.5 million.

And then the bottom section of this report is the fund balance for the county's governmental funds.

So total fund balance for the general fund end of the year, around $80.6 million.

And then total governmental fund fund balances

$130.9 million.

And then this statement also breaks down the fund balance into those various categories between non-spendable, restricted, committed, and then unassigned.

You'll see there's some items that are highlighted.

We'll need to get the updated numbers for those.

So the numbers that you're seeing here will change a little bit.

And this is the draft of those statements.

The next financial statement is Exhibit 5.

This is a statement of revenues, expenditures, and changes in fund balance for the governmental funds.

Again, you have the same columns, and then this statement shows revenues, expenditures, other financing sources and uses, and then down at the bottom is a change in fund balance.

for the various governmental bonds.

So towards the bottom, that change in fund balance, the general fund balance had a decrease of 836,000.

And then total fund balance for the governmental funds increased by 18.7 million, largest increase in the county capital projects.

The next couple set of exhibits are the, these are the statements for the non-major governmental funds.

These are the smaller funds that we saw included in the column over in the front.

Exhibit 31 is just the balance sheet for the non-major governmental funds.

This reports by fund type, so the non-major special revenue fund, stat service, and then the stormwater control capital project fund.

and the exhibit after that is the same categories, the statement of revenues, expenditures and changes in fund balance.

And then the next set of exhibits or the detail of those non-major special revenue funds,

So this is a balance sheet, so the various non-major special revenue funds.

And then the following exhibit, the 34, that's a statement of revenues, expenditures, and changes in fund balance for those non-major special revenue funds.

The next exhibit is the

the non-major debt service funds, there's two debt service funds, one for the accounts for the general accounting debt, and then one fund that accounts for the school debt service.

The next exhibit, exhibit 44, this starts the school board's exhibits.

So District 44 is the balance sheet for the school funds.

Again, the school funds have separate columns for the various different funds.

We've got the school operating fund, school food services, activities fund, and then the school capital projects.

Yeah, so the activities fund, those numbers, in addition to the county and school board audit, there's also a separate audit done on the school activities funds.

And so the results of that audit and the financials have to then be reported over on the schools,

the school board's financials.

This was something that was new last year with GASB 84 and that audit is as close to completion.

There's a couple items we're waiting for the schools to be able to finish that audit and pull those numbers into the report but

that are being completed shortly.

And so once that's done, then we'll have those numbers will be updated in this report.

Exhibit 46, this is the statement of revenues, expenditures, and changes in fund balance for the school funds.

and then down towards the bottom you can see the net change in fund balance for the various school funds.

And that's the last of the exhibits, financial statements and services.

Again, there'll be plenty of other exhibits that will be included in the final report, but these are the ones that are available.

They're also the funds that are more aligned with the way, you know, you budget, you operate, you know, there's entity-wide funds while they're required by CASB that they don't,

It's really aligned with the way you budget and operate.

So, again, as we'll be pulled together, but these exhibits are kind of the main ones we typically would point to.

The next section is a draft of our governance letter.

So this letter, the auditing standards require that we make certain communication to those charged with governance.

So we do so in the form of this communication letter.

I'd just like to briefly go through those.

The first part is some qualitative aspects of accounting practices.

Again, management is responsible for the selection and appropriate use of accounting policies.

We do state in here that the county did adopt a new accounting standard, GSB 87.

Accounting estimates are an integral part of the financial statements.

So for example, management's estimate of useful lives over its capital assets, and that's using the determinant of depreciation expense.

Two other significant estimates are related to the pension and OPEB.

Liabilities have to be reported.

Those are estimates as well.

Those are performed by actuaries to provide that information for the county's reporting.

The next page, difficulties encountered in performing the audit.

We had no significant difficulties in dealing with management as part of the audit, but it was very cooperative with us and trying to get information that we requested as well as answering any

Questions that we may have as part of the audit, corrected or uncorrected misstatements.

Certainly any audit adjustments that we have will be provided to the counties and they can post to their system so that basically your financial system agrees with the audited financial statements.

Disagreements with management.

We had no disagreements with management over financial reporting.

Again, if we had any, we'd have to disclose this to you all.

Management representations.

We will be requesting certain representations from management before we issue the final report.

This is done via a signed representation letter.

and then lastly management consultations with other independent accountants as far as we're aware management does not consult with other independent accountants in terms of second opinion shopping but again those are just the required communications we have to make to you all

So last section of the packet is a draft of the management letter that we had issued as part of the audit.

So

As part of the audit, we identified certain items that didn't rise to the level of material weakness or significant deficiency, but things that we saw or thought we wanted to make recommendations and going out to help improve internal controls for the county.

So the first item noted here is related to the for the school board federal grant reimbursement request and you know Jacob had pointed out the a new payroll system had to be implemented this year and as part of that

There were some issues with code coding and allocation of payroll expenditures to the various grant general ledger accounts.

And as a result, there was a period print from January 1, 2022 through June 30th through the school board

was not able to submit reimbursement requests for various federal grant programs.

So that caused a delay in receiving federal grant reimbursement for qualifying expenditures.

So again, those were requested for that period in October of 2022.

David, can we pause?

Because I would really like, Jacob, you've done some preparation to look at, we just got these last night, but there's answers for all of them.

But I want the committee to have a perspective of where we are with these and the improvements that we've made and what caused this issue.

Because that post, you mentioned it in your introductory statement,

When you focus so much on implementing a system,

and not enough on what happens after stuff like this happens.

And so we did not have the resources due to multiple reasons.

I won't bore the committee on the reasons that the staffing resources collectively were a challenge, but among them was because we had to implement an HRS system in order to handle our 1095 reporting that we've mentioned to the board as the ACA compliance that we had an issue with.

Our vendor was not reliable.

And so we needed to do an HRAS system that took away our consulting services.

And then at the same time, we had some challenges with turnover and the payroll function.

And so the kind of the complexity of that created some of this.

But I do want a chance if we can, just to talk a little bit.

Yes.

So this finding in particular, one of the things that we've already implemented and one of the

I think one of the biggest recommendations that we've taken up and put in practice is developing additional tools to make sure we have the right coding for our employee accounts for their costing, essentially, so we can post it to our general edgers of the way schools have the

The ability to pull the right reports so they can submit for reimbursement on a timely basis.

This actually took some custom reporting.

We had to give some of our consultants time to help build some additional, we'll call them allocations.

Some of our payroll system, it's finite to a certain degree.

There are certain limitations on how to to cost certain things out and so but we have a way to get around that to fix and really essentially fix that between the point of where we run payroll and finalize and pay our folks who actually record those entries to the general ledger which is the basis for what we use to report our or submit our reimbursements to

Federal Government to the state where we have our reimbursement request go to.

That's a place that's been tested.

That's been working well.

It took us to October, you know, to really to get it, to get it there.

The next recommendation we had is related to, again, grant reimbursements, but in specific, specifically with Title VI-B.

You know, when we noted during the year or during the audit that

There had been no reimbursement requests submitted during the fiscal year for Title VI-B.

So the only funds that came in for VI-B were funds really related to FY21.

And then those Title VI-B grant reimbursements for FY22 weren't requested for the whole year until after year end.

And again, certainly Title VI B is a significant program.

I think it's got $3.7 million in total for the year.

Again, reimbursement requests at the minimum should be done quarterly.

And that's when they're small, when you have a significant amount of

And I'll say this is very similar to the one we just mentioned.

A lot of it is personnel payroll related.

That is a question.

Sorry for being late.

We're throwing out the cash, expecting to be reimbursed, though.

Well, we know that anyway.

So cash.

So the cash flow, it makes it

More important that we monitor our cash flow in that situation because if we don't have the cash that we normally would expect at that time, we have to make different decisions on a cash flow perspective.

I believe so, yes.

I believe school staff, they have access to the systems where those grants are housed.

But they pull the data out of the financial system, but then they submit that as part of the support for the request.

But we work to finance and budget works closely with school fiscal services, because we're using the same system, and we have to use the same data.

I do need to follow up with fiscal services on that.

What is the, so the question I had, and I'm sorry that I didn't think of this before.

So we have the new system in place in January that created this compounding effect of the reporting, but for the first part of the fiscal year,

So for the, most of the grants, yes.

I mean, so Title I, ESSER, you know, that money was being done, that reimbursement request was being done monthly.

Then January came and then it came to a halt.

So yes, typically that's done.

Now for Title VI-B, that was a little different case that even the first part of the year, there had been nothing.

And on the big scale scheme of things, discussing, I'm trying to remember, interior weakness or deficiency, I didn't rise to that.

But mainly because we were an accounting board inside, we were just tying up our cash flow.

Yeah, I mean, it wasn't like we weren't monitoring or accounting for it.

Right.

Right.

Yeah.

Yeah, absolutely.

And the best practice usually speaks to some other reason why you want to do it.

Investment income in this case would be one of them where you can properly

account for all the things and doing it quicker.

It's easier to do it when you do it more timely from a staff resource perspective.

So there's always reason for the best practice, which is why you want to do it.

Because some of these other ones I'm really intrigued by because we've not necessarily had the

had this come to us to say we need to do things differently here because there's a different consequence for not doing it.

And so that's why I'm very excited that this is the first management letter I've received.

David knows this.

We've talked about it since I took the helm here because it's important.

I want to know what they're seeing and how we can do better best practices because there's another reason why you do that best practice which isn't a material weakness or deficiency, right?

The next item, we noted there was a few departments, one in particular, that one of the things we did, it was part of the audit, we did a test of receipts and looked to make sure that things are being deposited.

properly accounted for and can timely.

And our test noted that the receipts coming from community development were not remitted to Treasury so that they could be deposited in a timely manner.

So for instance, we sold receipts in the amount of $4,283 that were collected in May of 2021

and then 19,000, over 19,000 receipts were collected in June of 21 through August of 21 didn't get to Treasury for deposit until October of 2021.

Again, the longer money sits around before it can be deposited, the greater chance that things could happen to that.

So certainly best practices and

Anytime cash is received, that should be deposited at a minimum within three business days.

And then I believe the county even has a policy on this.

Once any department receives in excess of $250, it needs to get to Treasury and so that it can be deposited that day.

So it was towards the beginning of the year, there was a long delay in community development.

Then we also, later on in the year, there was still an instance of a delay.

It was a little shorter this time, but $677 that was collected on March 31st didn't get brought in until April 11th.

And then there was one receipt in our test that popped up.

School board receipt for $100.

It was received on June 3rd.

It didn't get remitted until June 15th.

So again, at a minimum three business days, that money should be brought in so it can be deposited.

So this one, just to bring back the community development situation, much of the big dollar value was before Comino was put into place.

And I think that part of the reason this has gotten better, I'm looking at my people here, is because Comino's in place and we've had much better processing and tracking of the activity on the community development side.

Comino is the building, I don't know what they call it,

When you get a building permit, it's a system that uses the new front end software.

They still don't have a back end, which is what the community development system will give them.

But it's that front end, and they didn't have a front end before.

But we've been spending a lot of time, and Chase, you've been involved, and Jen Lin's been involved in revenue administration, trying to shore this up.

No, that's what I was going to say.

There's been some certain efforts, particularly with revenue administration, where

So I understand you take a fee, it gets accepted, the receipt's handed out to whoever gave us that fee, and then it just set before it went to Treasury.

Is this timeframe any part of this related to

work from home and we wouldn't have had this time period.

We were still doing a lot of staff not in the office.

So I, yeah, Ned, I think there was actually a, there's some personnel issues related to this in particular.

I can't speak more to that.

That's what really made these go high high high high and it was before Camino.

So there was no tracking system.

And I think there was some situations where it literally sat in a stack.

Yes.

And there was a major effort to go through all of that last fall, which is why you saw a large deposit in whatever, October time frame.

But that should not happen again because we can actually see, and there's a better tracking mechanism.

Yeah, so somebody took it in, not just the person that took it.

Somebody else knows.

That's exactly right.

The next recommendation we had was related to the vendor master file.

We received from the county a vendor master file that we used for several purposes.

One, we wanted to match up payments if they were on the vendor master file.

But the file that we were provided had the lowest quality and data quality and

Naming structure was just not a very clean, was not a clean file.

Vendors with multiple IDs, temporary IDs,

inconsistent naming structure.

There was some vendors with missing tax identification numbers.

And I'll add from a staff perspective that it is best practice to maintain a current vendor master file.

So that means that it has to be worked through regularly.

And that means looking through all our vendors, especially those that we may have not had business with over several years.

We have some data cleanup that we need to do.

I know going into the new CSM to our new financial system, this will be a big precursor to that as well.

So that's something that is definitely on the horizon that we see coming.

But this is from a day-to-day standpoint, or from an annual standpoint, quarterly standpoint, something that we need to look at.

And a lot of this revolves around clean data, but it's also some internal control too.

These first two items sound like something specific to changes we've made.

Sounds like there were some personnel things relative to that time.

So I don't ever recall this type of thing coming up.

Certainly you change based on inquiries of staff.

Time specific due to certain circumstances.

So this isn't necessary.

So based on the work you did, so I understand what you just said, this was one, well, let's take a peek at this.

This is what you meant.

This is the list.

Some of it is really the vendor management process as well.

Our system is a little clunky from a perspective of managing vendors at multiple addresses.

So a lot of times for Dominion Power, paying on power bills, there are multiple mailing addresses where we'll send those funds.

And our system is an older system that does not handle multiple addresses.

Great.

So that's one of the reasons that that's there.

It still needs to be reviewed and looked at and worked on.

Some of the temporary vendors are for items such as juror payments.

That's not going to be like a regular payment where we're procuring a service or are good, but that is a payment we need to make.

We need to have them as a vendor in our file.

So some temporary vendors are expected and are going to be okay.

The next item is related to VRS.

So monthly VRS

information is entered into the VNAB and then uploaded and then the county has to submit payment to BRS.

And so as the county is processing that payment to BRS, really the VNAB system spits out an amount that says that you should pay.

and then that amount should also be then reconciled to what the payroll system and the general ledger says.

So that is a policy change, not to say policy change, but that is a post-payroll process that has been improved.

Working through the BNAB system and reconciling that snapshot with what was withheld within payroll, doing that for all of our employees for payroll, it can be, it's a challenge.

And with the new payroll system, getting data out, the reports out, that was a learning curve for us, particularly this year, as we're trying to,

to make sure that what we withheld from employee paychecks regarding their pension and their contributions to the retirement matched what was expected from Virginia Retirement System and what was paid.

That has been complete.

We did a thorough, I'll call it internal audit, internal review, and we made sure that all employee accounts were up to date, all employee deductions, withholdings, however you want them.

label it but we're accurate and we did have we did have to make some adjustments we did have to go back and we communicate with employees were those folks that we needed to deduct some additional retirement to make sure that they were caught up in some instances there were some adjustments in the other way that we have we had withheld a little bit too much so we we have completed that process we've gone through that and that that is caught up you know that we we took that as a big chunk

And the last item is related to payroll.

We noted as we were doing some payroll testing, there was an instance where a person received a net zero paycheck because the withholdings that the system took out were in correction and left them with a zero dollar paycheck.

And that is part of our standard payroll process that we do every two weeks for our parent employees.

Right before we hit the button to approve it, to submit it, we're looking at our top 20 earners, we're looking for those that have high hours to go through overtime.

We're also looking at folks that are

Have zero earnings.

Obviously, is there a reason for that?

Would they want to live without pay?

Make sure that is accurate.

One of the things that greatly helps in that effort is bringing on the HRIS system ADP.

So particularly during this time between January and June, because we're talking about this fiscal year, payroll was just an ADP.

And so the benefits side was still in GP.

And our financial aid was more for financial systems.

And so there was some separation there and trying to get the data to work.

What was a challenge?

Now having HRIS and payroll both in ADP, it's a much smoother transition of data from what we call the human personnel profile side.

That's your base pay, your position, your benefits over to what actually is being paid from your salary to your hours to your deductions and withholding.

Awesome, thank you.

Anything else?

I know we're a little bit over time.

Good?

Maybe you can leave if you want, or you can... Yeah, you can leave.

That's one thing.

We have a quality control department before we issue the final report.

They go through it with a fine-tooth comb.

So, but thank you for pointing that out.

Thanks, David.

Then you can also get on the road at Bethesda.

We really appreciate you coming and helping us.

Sure.

So as you all may be aware, one of the things that we work very closely with our volunteer power companies is we're a major funder for volunteer power companies and an integral part of our fire and emergency services umbrella that we provide to the county.

So we want to make sure we're doing our fiduciary duty with those voltage power companies and one of the things that has historically been presented from the power companies is their annual audit.

One audit we saw today is only a snapshot

and it can only go so deep into their financial wellbeing, to the organization, things like that.

So we wanna take it one step further, get a little more information.

So we developed what's called an agreed upon procedures process.

And that's a terminology in the accounting and auditing world where a set of procedures is prescribed and given to an auditor to perform on whatever entity it is.

And it's really a checklist.

They go through and follow the procedures.

And so we implemented that last year.

as part of trying to get some additional information, additional oversight, and really insight into the volunteer fire companies.

And some of that is the procedures we asked their audit firms to do is look at their budget to actuals, look at their

The revenues are coming in.

We look at their membership roster.

So it wasn't just a financial related review.

There's an operational aspect to it.

We want to make sure that the members we have on our roles match the membership that they have on their roles.

And then there's some certifications that are required that they're up to date.

I will say all the good news is good news.

So there's no news here.

All the reports that came back were complete.

All the companies were in compliance.

They completed the report.

The auditors gave final reports to us.

And in my review, my analysis of all those results, there was nothing that stood out.

There was some

Some things I would expect to see.

Somebody's on a roster on one but not the other.

There's really some timing differences.

But all in all, they were compliant.

I will say that we are going to make some changes to that AUP for this next year.

We received what we asked for.

What we asked for wasn't quite what we really wanted.

So from lessons learned from both that process, we need to be a little more prescribed.

and be very precise on the procedures.

For example, if we ask the auditor to obtain a trial balance, will they obtain the trial balance?

And our intent was obtain and share with us.

Report to us a trial balance.

Well, if it's not in the procedures,

they're not going to go the extra step it is purely black and white it is this step for step and so that's some of the enhancements we're making um that's that uh we'll be going out to the volunteer companies probably tomorrow the the other item there's a new section this year we've expanded uh fixed assets so we fund apparatus for our volunteer fire companies we want to make sure that apparatus is that they that that

The fact that they all came in is in and of itself a win.

If I recall, some of the certifications dealt with the ability to drive the apparatus.

And that can be brought back later.

We do.

Yeah, I think you're right.

Real deep.

Yep, yep, yep.

And this, we have worked these AUPs, the fire chief, his deputy chiefs, his chief of staff, they are very much involved in this and have been the whole time.

So this has been in connection with their operational review.

This is kind of financial review, but we've been together on that.

Okay, the last thing is really an update on, I was very vague here on our contractual relationships.

One of them is going out for a new external auditor.

So we will be starting that process.

Jacob has got the timeline and an update for that.

So at best practice, which that's a theme for today, a sense best practice for auditors is to want to enter in a long-term contract, which is typically around five years.

The reason for that is so your auditors get to know your environment, know your internal control environment, that they understand the operations and the financials.

However, it is important that to have fresh eyes.

So industry and best practices is to at least go out for procurement every five years.

And so we're at that time that we need to need to do.

It doesn't mean that our current auditors can't bid doesn't mean that they might, you know,

The timeline for that is right around the corner.

We've been working on developing the RFP for our services that it will go out the beginning of January.

That will be out on the streets for about a month and a half, the most two months.

So beginning of March, we look to have all the responses back and look to be under contract by April 1st.

So at your spring meeting in May, we fully anticipate to introduce the auditors that are under contract.

One of the things we've learned and that we want to build in-house

is the support we've had historically has been our external auditor really does a lot of the work that we should be doing in-house with our general accounting staff.

We really have not had general accountants on staff.

We've typically had a controller accounting manager and then a series of accounts payable and accounts receivable professionals.

And so much of that, much of the reason we don't close monthly, we don't close and do the things we're supposed to do quarterly is because we've left it to our auditors to do it for us at the end of the year.

We cannot be in that space anymore.

We are too sophisticated.

We're too complicated in the government.

And that's part of what we're, we're building.

The board has been very supportive of adding additional accountants, which we're in the process of recruiting for right now.

These are going to be high level general accounts.

We'll work for Chase.

and getting that expertise at-house.

And so while there will be an opportunity for our current auditor to bid, our expectations will be different and this is not a low cost bid.

So it will not be structured that way because we really need to see different things.

And so if they can rise to the occasion, that will be great, but I think it is time.

And I know, you know, Ned, you've been a very big supporter of this effort

that we're going there.

And by the fiscal 23s audit, we'll have new requirements.

I don't know if we'll have a new auditor, but we'll definitely have new requirements for the audit.

The management letter should speak to you.

That is the first one I've ever seen since I've been here.

And there's so much more that I know of that they should

That are basics, like the thing you asked about.

I love that you asked about it.

Wait, this vendor records.

Yeah, it's been like this forever.

So, so anyway, so we're, we wanted to give you all an update on that.

And it's going to be a hard effort, and this is going to, it's going to change some things about what we hear and see in the event we get a new auditor.

And before we get a new financial system, but I think that's a great time for us to know, before we get the new financial system and do the implementation, we have a lot of great documentation

about where we have some weaknesses, where we need to shore some things up that can really be helpful.

The last one I wanted to mention is the board had supported, and we talked about it a little bit last year, the committee also endorsed it, which was a fraud, waste, and abuse hotline.

So this is kind of phase one of an internal auditing function.

that we currently do not have in the county.

We want to be, the AUP is, and part of the reason I wanted Jacob to come here and talk about that is that's really an effort to do a little bit of internal auditing.

We're auditing the auditor's perspective of what's happening in a fire company.

I didn't say that very well.

But that's where we want to be.

We want to do more of that.

We want to be able to do that, you know, with John and other things, really develop that muscle.

And so one of the areas that we will certainly, it wasn't called out here, but another auditor might call it out that you do not have a place for people to come anonymously.

and talk about any fraud, waste or abuse that's happening.

That's a normal thing that should be there.

And so we have enlisted a company who does this work.

We're doing it, it's totally anonymized, like multiple layers.

There's no way that either the vendor or us could ever find out who is putting in this information.

And that person who puts in the fraud accusation, if you will,

has their way to get into the system to look at their account, but we will never know who that person is.

So it's completely anonymous.

It's used in Arlington.

And I think Louden is who we're piggybacking off of their contract.

And so we plan to have this up in January and doing, this is for the public.

So this is both internal.

We want employees and people who engage with the county

Yeah, so we actually have a meeting next week, I think maybe with Rosalyn and Dan Redding to talk about what does this look like for the schools?

And what I shared was this is really about the fiscal responsibility.

And so that is why there is likely to be schools things that will come in here that will need to be investigated.

And so that's where I would see it happening.

Rosalyn and Dan or Claire will need to direct the resources to get it investigated so we can take action with whatever that might look like.

Do we have a whistleblower policy?

Does this sound specific to broad views of that?

Who's going to report that?

We have, and any of the staff can help me with this, if you will, we have worked on our harassment types of policies in the organization.

And we've rewritten that in the last 12 to 18 months.

We've done organization-wide training.

specific to a whistleblower.

So the non-retaliation has steps and guidance if you are reporting higher levels of management for inappropriate behavior.

I don't know specifically if we have a whistleblower's policy.

Yeah, me and I have specific discussions about this.

We're going through, in fact, my inbox right now are a number of draft policies, local government draft policies to look at in that vein.

And so I can follow up with much more detail.

The non-retaliation stuff really has to do with

So the company does.

So the company that we're hiring, it's really inexpensive.

I think it's only like two or $3,000 a year because it's all electronic.

So it's on the computer, but they essentially, we've got to work through.

That's one of the things we're working on is the workflows.

What happens when somebody puts in an issue?

Who does it go to?

And that is one of the things I want to talk to Jeff about is

Where does this information need to go?

And we haven't fully thought through that about where does it need to go?

Who needs to know about it and be copied on it?

So we're working through that.

It's a very good point, bringing Steve's group in.

So the who on that group, that will be something we'll work through.

It's a great call.

I mean, we'll learn more as we go, because we don't have it now.

Yeah, be careful what you wish for.

Anybody before we adjourn?

I do hope that the Audit Committee sees a trend of theme here of this organization moving in a way, and size and complexity certainly matters.

We are way too big of an organization from a financial standpoint not to have an internal audit function.

I mean, we just are.

And there's components of that.

And one thing this committee did not ask was how long our auditor has been our auditor.

But it's been a significant period of time.

And we are the largest, we are the largest client of this auditor.

And that matters greatly.

That means what they see here, they don't see anywhere else.

And he was five years ago, but it's been right, right.

So so we are moving and it is it is significant, heavy lifting to change auditors.

It is significant, heavy lifting.

I did it just before I came here.

and it's really hard work but it's necessary.

If it's necessary, it's necessary for the right reasons if that happens.

So I'm very excited about the direction that he's going that it's not without a lot of hard work and so but this committee has been very helpful but because we've had some of these discussions you mentioned

here, and we've been working toward that.

So Nelsie, thank you, Jacob, thank you.

Also, thank you for the relationship we have with the schools division, too.

They are also a very large organization.

We want to stay in lockstep with them when it's appropriate and want to help them in any way we can.

Motion to adjourn?

Okay, meeting is adjourned.