FY24 Audit Committee Organizational Meeting   5/29/2024

All right.

Good afternoon, everyone.

It is May 29th, 2024.

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

First I wanna start by welcoming everybody that's joining us today.

With our charter, we are to meet at least two times a year, one to begin the audit season and one as a wrap up to the audit season.

So this is the first of our scheduled two meetings for the year.

And we have on our agenda today, we're gonna be going over the audit work plan for 2024.

We're gonna receive an update on our fraud, waste and abuse program.

and then we'll adjourn afterwards.

The first thing I wanted to do is go ahead and start with a roll call and I'll call those as we go through and then the next item will be to elect a chairperson for the audit committee.

And so I want to work my way through the list.

As we know, I know of a few folks that are continuing to join us on the Zoom platform.

Rosalyn Schmidt representing schools and the school superintendent Rosalyn's here, see you waving.

Supervisor Galloway, I do not see on the screen at the moment.

Jeff Richardson was on here momentarily.

I'm sure he'll be joining us back in a minute, so I will make sure that we have his name recorded once he joins us.

My name is Jacob Sumner.

I'm the chief financial officer of the county, and I'm helping run the meeting for the moment.

I believe we have, let's see,

We have four out of the six, so I believe that constitutes quorum, so I believe we can go ahead and get started.

The first item is to elect or re-elect the chairperson for the Audit Committee.

Our practice has been, the CFO has been, chairing the Audit Committee.

Since we are going to follow our formal rules, we'll just call for all of those in favor, assume by saying aye.

All right.

Well, thank you all.

I'm honored to be the chairperson for the Audit Committee once again.

Thank you so much.

I know Rosalyn really had her eye on that position, but I appreciate the nomination.

All right.

So the two main things on the agenda for today is the audit plan and then the fraud, waste and abuse update.

We have joining us today from Brown Edwards our auditors, Megan Argenbright and Addison Roeschley.

Megan is the managing partner on our account and Addison is the senior associate and he does a lot of the day-to-day work on the audit.

Hello.

As you said, my name is Addison.

I tend to handle most of the day-to-day running of the audit.

So most people on the call are probably familiar with me.

At some point, probably have an email or asking maybe one too many questions.

As far as the audit this year, so we're really excited that we're going into year two and we're a little bit more familiar with everybody this time around.

We'll be on site starting June 17th for preliminary work.

Most of our preliminary work revolves around APA requirements, BRS procedures, starting to get a little bit of insight as to single audit programs we might be testing.

And then we'll kind of dip out for a little bit and we'll be back the week of September 29th is gonna be our first week of final field work where we start financial statement balances.

That's gonna be for county schools, all entities all involved.

and then we'll be back on.

I know we just changed it.

I'm going to butcher the day if I screw it up.

That's October 21st is going to be our return for field work the second time around.

That'll give us about six weeks to get drafts prepared for the county's financial statements.

And then we'll be reconvening back in December with you guys for presenting the audited act for as far as some other stuff in between then.

So

There's an engagement letter and a planning communication letter that we'll be providing.

I'll be sending it probably today.

That's going to outline our scope of the engagement for FY24.

And then it's also going to have some legal requirements and the engagement letter, things that we have to reference.

The planning communication letter is a letter to the board, which can be provided and just kind of outlines the scope of our engagement, some risks that we might've identified.

and then it's also gonna provide Megan's email as contact if anybody wants to reach out to her directly, if they have concerns of fraud, if they just have to, you know, questions that they might want answered but on a more private basis.

So I am gonna talk about new standards.

First is that there are no new GASB standards

for local governments for FY24, which is the one we're getting ready to audit.

I do want to point out that the county did not implement

and the SPEDA standard, the subscription based information technology arrangement standard last year.

So that will still be new to you guys.

We've done a couple meetings with the team and figured out a plan, a plan.

We started the plan already.

And so

That standard, which what it does is it essentially duplicated the lease standard meaning that these agreements for softwares are now going to be recorded on your balance sheets.

The liabilities were already there, right?

These agreements have already been signed historically.

you're using the softwares and you may have committed to be you know using them for three five however many years and so therefore like you have an asset there's a benefit you're using the software and then you also have a liability because you owe on that contract you've already signed it and that's the gist of the standard the net balance sheet impact is

Historically for a lot of our other clients has been not much.

The catch with you guys is that when you do a software implementation, that difference between your asset and liability can become bigger.

It can become pretty big if you prepay for any of the software arrangements.

which a lot of them do, right, require down payments and so your asset and liability may not in that case offset each other.

As far as budgeting goes, what you guys are paying is still what you're budgeting on the payment side.

There is this amortization piece now of the asset that would be taken into consideration.

So

I made it sound when I started talking like it wasn't a big deal, but it is a very big standard because it's wide reaching and schools and social services and the county and every department has softwares that they're using and

A lot of them may be annual contracts which don't fall within this standard but they could if they are multi-year and the idea is that we really do have to get a grasp on what's out there and does it need to be recorded.

So speed of standard is the one that we will be working with you guys to implement for FY24.

There is another standard for FY25 that I'm

This is something that everybody already records a liability for.

It kind of just clarifies when to record a liability, how much it should be.

Not unlike other standards, it tells you to use historical information.

When does it count as being earned?

That's when you should record the liability.

Things like that.

We don't, we have to look into it more.

But we still have a whole other year, but we're not envisioning this being like a drastic change to your compensated absences calculations.

So all that to say is speedist will be a bigger deal than compensated absences, we hope.

So any questions on any of those standards?

I hesitate to open that up.

OK. And I think that's all we had to go over, right, Addison?

Did I miss anything in our plans?

I don't think so.

If you guys, like Addison said, you can reach out to us if you ever have questions or concerns, especially if you have concerns, you know, we're kind of this, we're an independent third party can help in some matters.

All right.

Thank you, Megan.

Thank you, Addison.

I do want to recognize Shenandra Usher, our assistant CFO, and Jen Lynn, our controller, who will be leading the effort from a staff perspective on the audit for this year.

I know they've been a part of the planning process and also the part of the continual work throughout the year to make sure that we're in good shape to start the audit and take it through its fruition until we come back at the end of November, December.

Is there any questions from the committee for Addison or Megan or for Shenandra or Jim?

All right, seeing none.

Before we go to the next item, I will recognize Jeff Richardson, county executive, has joined us as well.

So I'll report him, his attendance in our meeting.

Although I was tempted to nominate Mr. Richardson for chair of this committee,

Supervisor Andrews came in with a nomination beforehand.

So, Ms. Richardson, it's your lucky day.

Next item on the agenda is an update on our fraud, waste, and abuse program.

And that will be presented by Ms. Laura Andrake.

She's within the Department of Finance and Budget.

She is the Chief of Enterprise Management and Shared Services.

Thank you very much.

Thank you for allowing me to present today.

This will be the second report to this committee about the fraud, waste, and abuse program that the Board of Supervisors implemented last year.

And so I look forward to sharing this information with you and answering any questions in just a few minutes.

So I think I will share the screen.

I have a bit of a presentation, but it's only three slides.

It won't take too long here.

Thank you.

So we have had a little bit of activity.

The timeframe that I'm reporting on right now is November 2023 through May 24.

This is the information

that is after the fall committee last year and so just wanted to kind of go through these and discuss what they mean and answer any questions that you may have about them.

These

Seven items were reported through our fraud, waste, and abuse program.

There was one reported potential food stamp fraud.

We turned that report over to the Department of Social Services for their own investigation.

That was reported anonymously through our website, Ethical Advocate.

We did have one report of a PCARD misuse or abuse.

We researched that.

That was also reported through Ethical Advocate, our online reporting system.

We researched it thoroughly, reviewed it, and closed the

closed it and it was unfounded.

We had five complaints that were general in nature.

And so those that I mean general in nature means that they were complaints that were not necessarily about the county, they were individual residents complaining about other businesses or other residents.

And so they weren't necessarily within the scope of the Broadway Civil Abuse Program.

We had five of those.

I do want to take some time to thank our Office of Procurement and our Office of Treasury, our Controller's Office, and our individual departments that have helped with our research and review of these claims.

They're very instrumental in helping us to quickly assess the situation to see if there were any issues.

Thankfully, there were no issues and no fraud that was detected in these incidents.

Any questions about these incidents?

Okay, the second slide shows intercepted fraudulent activities.

These were not necessarily reported through the fraud, waste and abuse program, but they were fraudulent activities that we intercepted, staff intercepted.

And so just to break these down, we had four attempts of fraud, three fraudulent checks and one fraudulent purchase order.

We are still waiting to close the third check but essentially I'll walk through these.

The fraudulent purchase order, a vendor presented a purchase order that had been manufactured that was outside of our system for payment and due to the quick thinking of the staff and the

County Attorney's Office, the procurement team, and myself, we worked through that to determine that we saved, avoided paying $22,750 out for a fraudulent purchase order.

We had three checks that we had issued that were assuming in the mail.

One of them was intercepted at the bank, and so the bank did not honor the check.

And two of them were actually cashed.

and we were able to recover $84,442.46 from one of the checks and we're pending recovery of $35,255.65.

The last check that's pending was a intrastate situation and so we are working with police department in another state to

filed charges against that individual.

But at this moment, we have got that as an insurance claim, and we're awaiting that return.

Any questions on these?

Okay, that's all I have for you.

Thank you, Laura.

I really appreciate that.

And I just wanted to add some commentary on what you presented.

It's good to see that we have the report on the progress and abuse program.

But as we are continually before the audit committee with that update, I appreciate, Laura, your efforts in bringing these other activities so that we're talking about this.

You know, a lot of these, particularly these four items that were intercepted, they were actors that were outside of the organization.

And so as part of our internal controls and part of our internal control process, one of those aspects is to detect these type of things.

And so it's good to see that those controls are working.

So thank you for that.

I appreciate it.

I think our intent is to bring the report back again in the fall, and so we'll do this update on a semi-regular basis, semi-annual basis, excuse me, and we'll have another update at the fall meeting.

Well, we,

Since our program is new and the way we report it is new, we have learned that from our investigations of these checks in particular that we're not the only organization that has had checks intercepted in the mail.

that have been altered.

Now, I would add that this fraudulent activity is also very similar to cybersecurity and cyber crimes where we put in controls and we put in safeguards and measures, but the bad actors are always trying to find new ways to work around our safeguards.

I will add that we have added additional safeguards to our banking activity and our bank accounts to help prevent some more

from the situation having in particular the fraudulent checks.

Those, particularly those that are mailed are high risk because they're outside of our control once they're shipped.

And so we have some additional controls in place with our bank to do some additional verification on what that check should say.

So it's not just the right dollar amount, but it's also to the right vendor.

And that's what we saw in this case that it was the dollar amount was correct, but the vendor had been altered.

We put additional controls in place.

Any other questions on this topic?

All right.

Well, we'll see none.

This is all we have on the agenda for today.

Our next Audit Committee meeting is not on the calendar yet.

That will be dictated really when we are moving towards the end of the audit process.

And we are having either near finalized draft documents or hopefully the final act for ready to review with the Audit Committee.

So I would anticipate that would be later in the in the fall, early winter.

So moving into

November into December would be the next time.

But we'll send out notifications to the public and notifications to those that are on the committee and those that'll be participating so that there's plenty of time to prepare.

Jacob, I just wanted to take a second and again welcome our new auditors and how much the county appreciates Addison and your team.

Thank you.

It's hard to change auditors and it's hard for the audit team.

It's also hard for the staff.

And on that note, I wanted to thank Rosalyn and her team for their continued collaboration and

Last but not least, Jacob's team, all your hard work to get us ready for today.

We really appreciate everything you're doing, your responsiveness to the board, asking for the fraud, waste and abuse work that's going on and all the things you do every day.

You do it the right way and it just goes unnoticed because it's all going well, but we appreciate it very much.

Thank you.

All right.

Well, thank you much.