Audit Committee Meeting   11/27/2023

All right, well, it's 1030.

We'll go ahead and call the Audit Committee meeting to order.

I just wanted to welcome everybody here today.

It is November 27, 2023.

We're meeting in County Office Building, McIntire Room 241.

I'll do a roll call of our participants real quick, and then we'll get started on our agenda.

From the schools, Ms. Osmond?

Here.

Ms. Schmitt?

from the county side, Mr. Andrews?

Here.

Mr. Richardson?

Here.

We're going to be talking about our FY 23 audit results.

We're going to get a report out from Shenandra Usher, our assistant CFO for operations on the audit work.

Yes, thank you, Jacob.

Good morning, everyone.

I'm Shenandra Usher, the Assistant CFO for Operations.

This morning, I'd like to provide you some context and background for the structure that we created for our year-end process that led up to today's meeting.

Unfortunately, we had some of our challenges from fiscal year 22 spillover into fiscal year 23.

Those things include staff turnover, a lack of positions being filled.

We went an entire year without having a controller in place.

But we also had additional leadership transitions that took place in the spring of fiscal year 23.

in fiscal year 23, we were able to onboard new auditors within fiscal year 23.

But going back to some of the payroll stabilization, we also implemented HRIS within fiscal year 23, which led, which is a whole nother system added to our ADP workforce now, which also led to some issues and some complications.

Although it's not perfect, we're working on improvements.

and this, because this is a new part of the software for this particular HRIS system, we're going through a software component of our system.

And then through all this, we've recognized our challenges from fiscal year 22.

So we created weekly check-in meetings for our year-end process.

auditors here for some training sessions to get us up to speed with our onboarding and our creating our partner.

We ramped up our communications with the Department of Finance and Budget to communicate throughout the organization in order for our external departments to understand what their expectations were in regards to compiling all our financial information to create our financial reports.

We also developed a learning series

which we trained external departments on certain deliverables that align with those expectations that we set for the entire organization.

So with all that being said, I'd like to give thanks to some of the offices that are present with us today in our audience for their time and their collaboration on making sure that we were able to get through all the things that we need to get through for our year-end procedures that leads us up to our audit committee meeting today.

And I'd like to start with the Office of the Controller.

And I'm super duper excited to announce that

For one of the first times in two fiscal years we're fully staffed in that office.

So we have a controller, we have a deputy controller, we have an accounting manager, we have a payroll manager, we have all the accountants and payroll specialists that we need to fully support the organization.

So I'm really excited about that.

I'd like to go on to thank the Office of Grants and Agreements, the Office of Management and Budget, the Office of Revenue Administration, the Office of Procurement,

the Office of the CFO, the Office of Treasury, and also schools fiscal services because we all spent time together collaborating and working together to make sure that we were able to

get through all of our procedures, all of our new items that we had to take on for our staff in time and development, working with new auditors.

There was a deeper dive that went into the audit this particular year.

So just being able to work together and collaborate, it's been a wonderful experience and we've been able to identify what we need to continue to improve

as we grow and train our new staff and develop a smoother, more seamless process for the future.

So with that being said, today Brown-Edwards will present some of the highlights of our audit to date.

The full report of the audit to include our year-end results, our final revenues and expenditures, our final fund balance numbers, and all those things will be presented at the board meeting on December the 13th.

Thanks, Andrew.

Any questions from committee members before I introduce our auditors about the process for year end?

I did want to talk about, before I introduce Megan to really leave the next part of the conversation,

what it's like to have a new audit firm and to have a new partner in the year-end work.

This year, and you'll see this in the results that Megan and Addison will talk about briefly, there's a learning of each other that we have to go through.

They have to learn our environment, they have to learn our processes, they have to learn our systems.

And we also have to learn about them, how they ask for documentation, the platforms they use, how they like to see things presented to help with their audit work papers.

So this initial year is a lot of extra work where we're getting to know each other.

We're learning how to work closely together, particularly on the timelines.

And so I want to really think Brown-Edwards and they've just been a great partner through this whole process.

They've provided some training in areas that we needed.

They've been very clear in the communications and participated in all the meetings that we've needed.

And so this year was a year of transition of auditors.

So this is a

Hopefully next year won't be as intense as it was this year, but I just wanted to acknowledge the effort on both the staff side and the auditor side as we go into that.

One thing that we'll talk about on December 13th at the Board of Supervisors meeting is Brown Edivers will also be back then to talk about the report along with Ms.

Usher at the Board of Supervisors meeting.

Okay, so I'm Megan Argenbright, nice to meet you guys.

One of the things to start out with is to manage your expectations is that the December 13th may be a draft of the report.

It may not be a final report.

There's a lot to happen in the next two and a half weeks between now and then in order to get things rolling.

As Shenandra mentioned, and Jacob mentioned, new auditors, transitions, new employees on the county side, it's taken a massive effort from all parties involved.

And we're learning about the county and the schools as they are learning about us.

And so our goal is absolutely presenting drafts.

If we can get finals, more power to us, right?

numbers, numbers, right?

What we're going to do today is kind of talk about where we are, what we're planning on doing in the next two and a half weeks to get things completed.

The first item is SPEDAS, which is Subscription-Based Information Technology Arrangements.

It is a new standard and just like leases was implemented last year,

Speedis was very similar but honestly a way bigger lift and the reason for that is that leases are everybody kind of knew what leases were out there right what buildings are we the lessor or the lessee of what do we have the subscription stuff

was very widespread for county and for schools the number of programs that are out there and just gathering that information with the IT departments on both county and schools were very helpful but not only gathering the information looking at the contracts seeing if it

And if it doesn't, then how much was it?

And so we haven't quite gotten there, if you will, on SPEDAs.

And so the decision is we're not going to reflect that in the financial statements.

I do want to be clear that I don't think anybody's decision will be influenced if SPEDAs are not reflected in the FY23 Act for

There's an asset and an offsetting liability, very little, if any, income statement impact.

So I don't think any decision making will be altered.

These agreements have always been there.

It's just how they're being reflected in the act would be different in FY24.

It's not something you want to do wrong either, right?

And you don't want to miss any.

You don't want to record any wrong.

And so we want to make sure we're doing it

Correct the first time, the first go round.

So other open items, we still have some single audit items that are open.

That is federal compliance.

There were six programs that needed to be tested this year, and we are working on getting the last

items.

There aren't too many of those left, but that is an open item that we do need to wrap up, specifically the ESSER program.

We will need to wrap that one up.

That one has maybe the most runway to go, but not concerned about that.

ESSER, it's also called the Education Stabilization Fund.

Yeah, we like our acronyms, and we call things many different things.

So

We also have some capital asset work that needs to be done on our end.

There's been some back and forth on that.

And so hopefully we're at a point where we can just audit the most recent to kind of explain a little bit of the audit process, right?

So once we

We have to audit the most recent information that was provided to us, but we're hoping to wrap that up this week.

And the same with material variances, which are things that we ask

Like when we're all said and done, all entries are in and every numbers are not moving, we compare current year to prior year.

And then we ask questions about things that hit a certain threshold and make sure they make sense.

So those are the things that Addison and I are planning on getting all the way through this week.

So we do issue a management letter.

We'll probably have a draft of that in tandem with our financial report for the 13th.

In that, we do provide some feedback where we feel operations or systems might be able to be modified or have a little bit more oversight in order to improve financial reporting, compliance, a variety of things.

I do want to just cover a few of those and what that entailed.

So the first one for us was there were some school grants which are connected to ones under the single audit where reimbursement requests have been submitted

rather late after the fiscal year.

That did create a little bit of an issue on our end as far as being able to prepare for it and test those in an efficient amount of time, but also that can lead to revenue recognition and some concerns about how the budget might be prepared regarding those programs or internal information that could be

shared regarding the status of those balances.

So for us, it's just recommending that there's a little bit more oversight or timeliness in getting those prepared monthly, quarterly, just so that those numbers are not as focused on all at one point of the year.

We also had some capital asset reporting comments that we'll have in there related to the process and review of determining capital assets and projects, especially the larger ones that might have more people involved and trying to bring more people into the pool, if you will, on reviewing those.

Are things being picked up appropriately?

and then just trying to stay on top of timeliness as far as being able to do that as the projects are being incurred instead of all at your end.

There's also going to be looking at projects as far as when they're finalized and are certain components of them able to be capitalized quicker than others?

So that would be your larger capital projects that are more building related where maybe parts of it go in service quicker than others and getting them out of CIP and then beginning the use of them as a depreciable asset.

So that would be our second comment there.

The third one is fiduciary fund reporting.

This is relating to funds in which the county could be considered a custodian of those assets or is maintaining some level of control or oversight or maintenance of those assets.

So this is just kind of on the act for presentation side, pulling in a few entities

that are gonna be considered custodial funds such as the Emergency Communication Center where those assets are kind of within pooled cash or the county has fiduciary responsibility over those.

We also have a few comments that we consider verbal comments.

They're ones that aren't as immediate of a concern, if you will, or that carry something that we think could be addressed in a more appropriate or faster timeline.

I do want to briefly cover them, but we won't really have them written in our response.

One of those is related to taxes receivable that are being shown as outstanding within the financial reporting, specifically on property and real estate and then determining an allowance over that and applying that method consistently.

and making sure the allowance is appropriately addressing the outstanding balances of those taxes receivable.

We've worked a lot with different departments to determine the nature of what's considered uncollectable.

We expect that there's going to be some reviews and changes over that process.

and then the other one is census data that's getting reported to actuaries in this instance it was a really minor thing with just a couple dates not quite lining up and we just like to include that in there as a verbal comment especially when we know that the county might be progressing towards other systems implementation changes so that there's always some extra awareness over just the little things that can go on that maybe not people aren't picking up or thinking of right away

So that's going to cover the management letter comments for us.

You guys are new, so you might not know this, but it seems like I heard the issue about the school grant reimbursements being submitted late.

Seems like I heard about that last year.

So I'll add some comments to that and help with some of the things that happened last year and this year and Shandra, feel free to jump in here as well.

I know in 22 we went through

Payroll Clarity Project.

So we updated ADP on the payroll side.

And then on this fiscal year in 23, we updated the Human Resource Information System, the HR, as a component for ADP.

Both of those core data elements feed into what ultimately is on the grant reporting information.

So as both of those systems have stabilized and continue to stabilize, there is an initial period after you go live with those systems where you're working through, make sure you get the reports out.

The data has been cleaned properly and is being reported properly.

So I think we had, unfortunately, yes, it's a similar item from last year, but it's very much system related.

I also agree with the comments that Jacob made in addition to we've created additional tools and resources to help us get to the exact reporting that we need so that we can submit our reimbursements in a more timely fashion.

Any other questions on the management letter, the internal control stuff?

We do also do state compliance work.

And that is for the auditor public accounts.

The state of Virginia says here are the things auditors that you must look for.

They actually give us an audit program and steps we have to do.

Super helpful actually.

And we did have a few findings.

The compliance stuff is a little bit more black and white, right?

It's a little less room for auditor judgment.

We're doing these procedures for the APA.

So there was two items related to social services.

One, not a huge deal.

Again, it's compliance that said their co-op plan has to be, which is like their plan of how things work, has to be updated annually.

And the last time it had been updated was in 2021.

They actually did go ahead and update it after we brought it to their attention.

But for

I do not expect that one to continue.

The other social services finding was related to security.

There are two items, one of which is every time an employee is hired, they have to sign a security policy and then also security request forms when everybody

and those have to be updated every year.

But both of those forms, obviously, as you can imagine, information and personally identifiable information has to be protected and held at a very high regard.

And so the State Department of Social Services requires these forms to be done upon hiring and then again annually.

And we just couldn't get all of the forms for all.

We did a sample of just three people

We did not have the security policies for any of those three, but then the security access form, there was just one of the three that they couldn't locate.

And I think there's also been turnover at the social services for that.

The third APA item is just the annual school report.

It's required to be filed by September 15th, and it has not been filed.

you know a ripple effect if you will of the federal reimbursement information.

It is a very small feat to complete an annual school report and it takes a lot of legwork and all the information.

You want to make sure the inputs are correct and so the schools are working on that now to make sure that

of the ACFR and the compliance section.

The compliance section has Yellow Book, federal and state compliance, so those items will all be there in the back.

The other item I was gonna tell you guys about is GASB's calming down, we hope, knock on wood, because we've had so many new standards to implement the last five,

with pensions, and then we did OPEB, and then we did leases, and now we're doing the SPEDIS.

So the only new standard coming out next year that'll not really even hopefully be significant is compensated absences standard.

And it just clarifies, which is what GASB does, right?

They're like, hey, I think everybody's doing this any which way they want because we don't have a specific standard for it.

and compensated absences is that way.

It kind of defines what it is, what qualifies, you know, has people earned it?

If they've earned it and can use it later, you should record it as a liability.

So we're not really expecting much impact on our clients.

Most of them are already recording compensated absences as a liability.

So hopefully that is how it's going to actually

Any questions?

I did have a quick question.

So we are coming back on December 13th to present to the board of supervisors.

And you mentioned presenting a draft.

Would you mind walking through the committee?

What your process is to go from

Addison's already started preparation of the ACPER, which as you guys know is pretty huge.

And so there are some open items related like capital assets, obviously that no disclosure is not complete.

So that's where we are in the process.

as far as report prep.

So once Addison completes it, I will do first review of it.

I've also done first review of the binder already, which is where we keep all of our audit work papers.

We'll need a second review of the binder and the report.

And these things, probably a second review is probably 15 hours of a partner or director's time.

and then it'll go on to, we do just because we prepare the report and that is considered an independence thing, right?

As far as YoloBook goes.

So in order our safeguard is that another partner or reviewer who is not at all connected to the audit is going to review the report.

So there's a cold review on just the report.

And being is that it is our first year, I fully expect a lot more questions.

from both levels of review.

But once we get through that cold review, it has to go through our checking process whereby the entire report is read for grammar, make sure everything makes sense, make sure all numbers tie, make sure everything fits for all 200 plus pages of your report.

So that process is also fairly bulky.

But then once we get that, we will send a draft to Shenandra, to Jacob,

to Jackson to review, make sure, because again we're coming in, we're swooping in, we're doing an audit, and we're doing a report, but we're not living Albemarle County and schools day to day.

We are right now, but we're not doing it 365 like the directors of finance are.

And so they're going to review it, you know, make sure that everything that's in there is appropriate and correct.

And we'll also send a rep letter at that time to be signed by several folks.

The rep letter being about seven pages of everything that we've asked over the course of the audit saying, yes, we told you everything.

to note, to the best of our ability, we were honest.

And then there's literally two pages that are strictly compliance related representations about how federal funds are recorded and spent.

So once we get the signed rep letter back, we will issue the final report.

In addition to the report, though, we also have to turn in transmittals to the state of Virginia, which is a massive Excel spreadsheet.

and that's probably, to be fair, a 60-hour, Addison's really a, he'll be doing it.

Addison is the transmittal expert.

The Excel spreadsheet is a 60-hour process, right?

So, and that'll also need to go through review.

That transmittal is actually what is due to the state of Virginia on December 15th.

You have to submit your ACFR with it.

but that transmittal is really what the state is looking for because on the transmittal form it's where they take data and information from all localities across the state, put them into a format that they can combine the information and do all their reporting on the state level.

So that's due December 15th.

Let me make sure I understand this.

There is one hard deadline?

Yep.

It can be a draft.

which is also I think one of the reasons why it'll more likely be that draft and and Megan thank you for going through the details you know as far as the process what we anticipate on December December 13th where will the honors will be in the process is really probably in that quality control review and not in written in

preparing the financial statements or compiling together the notes and the statistical tables and things like that.

But it'd be pretty much in a complete format, but not with the final seal of approval on it.

I think that's a legal question as to what the state code says.

But yeah, I think if we present a draft, I think with numbers that aren't changing, I wouldn't present a draft if I expected numbers to change.

I would not feel comfortable doing that.

So our goal is that these are good numbers.

and Supervisor Andrews, I think the request of the board would be to accept the report or to receive the information.

Any other questions?

All right.

Thank you all.

Thanks, Alex.

Thanks, Megan.

Really appreciate that.

The next item is our annual report for fraud, waste, and abuse program.

Thank you.

Good morning.

Thank you for allowing me this time to share with you all of our hard work over the past year.

And I'd like to especially thank the shared services team, the Department of Social Services, and the Office of Procurement.

the office unit of accounting and the controller's office for their help in several items that came up over the past year.

Just for background, this is a new program that started in January of this year.

The Board of Supervisors established this program and asked for an annual audit, annual update during the fall audit committee meeting.

And so I'm here to present that to you today.

We've established a process and procedure in conjunction with the school's HR and leadership along with the county HR leadership to make sure that if there's any disciplinary actions that come up as a result of an investigation that we would turn that over to HR.

And so there is a definite discrete fine line between risk management and disciplinary action for staff if that were to arise.

I did want to report that there were only three reports this year, which is we expected a small outcome this year because it's a new program and people are getting used to it.

There was one for this complaint about a employee reimbursement form.

There was a change that apparently someone felt

I'm obliged to report that change through the system.

Since it is an anonymous system, we were not able to circle back and make sure that it was a training issue or to clarify that form.

There was one report via our website, Ethical Advocate, that the board approved.

There was an alleged misuse of purchasing cards for a Department of Social Services benefits recipient.

We thoroughly reported

Thoroughly investigated this report and determined that it was unfounded.

The report's been closed with no further action.

The process for that was documented and available on request.

There was one report via phone.

A member of the public reported abusive SNAP benefits by a neighbor.

And so that is currently being actively investigated by the Department of Social Services fraud team.

So at this time, we are monitoring all the open reports.

Currently, we're expecting this last one to be closed with no further action from the risk management team.

Yes, anonymous or identified reports can be made via phone, email at reportfraud at Albemarle.org or online through Ethical Advocate.

This is an anonymous Broadway Center of Use reporting system that is monitored if a person reports.

Any item of concern, it will be investigated and responded to within one business day.

and if someone were to leave their name and contact information we would contact them with the findings.

We have not included at this point, Tom, in the draft executive summary for the audit results.

One other question.

It is.

It's for any part of Albemarle County.

And so that would be schools, any of our partner agencies,

and so what we do is we determine the source of the report is if it's a, the category of it, if it's financial in nature, if it's an employee grievance in nature or if it's retaliatory, we do an assessment of that.

If it is a HR issue, noncompliance with rules, policies, procedures, we investigate

Thank you.

Anything else?

All right.

Well, that's all we have on the agenda for today.

This is the formal committee.