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HomeMy WebLinkAbout01-24-23 Audit Committee Minutes ApprovedX Fo r Record ing Stamp Only Minutes of the Meeting of the Deschutes County Audit Committee Date : January 24, 2023 Facilitator: David Givans, County Internal Auditor Audit Committee Public Members (6 members) X Daryl Parrish , Chair Summer Sears X Scott Reich X Jodi Burch X Stan Turel (1 :12 p .m . arrival) X Joe Healy Audit Committee County Management Members (3 members) X Pa t ti Adair, County X Charles Fadeley, Justice of the Peace Comm i ssioner X Lee Randall, Facilitie s Director Others Present: X Aaron Kay, Performance X Ni ck Lelack , County Adm i n istrato r Auditor X Erik Kropp, Deputy County X Whitney Hale, Deputy County Admin i strator Admin istrato r X Tony DeBone , County X Robert Tintle , CFO I Treasurer Commissioner X . Phil Chang, County X Jana Cain , Accounting Manager Commissione r X Angie Powers , Adm i nistrative X Steve Dennison, County Clerk Assistant X Jodi Stacy, Court Administrator X Kathleen Hinman, Human Resources Director X Mike Shults, DCSO Captain X Joe Brundage , DCSO Business Manager AUDIT COMMITIEE MEETING January 24, 2 0 2 3 Page 1 of 10 X Kevin Mullerleile, Manager X Amanda McCleary-Moore, Partner Moss Adams LLP (via Zoom) Moss Adams LLP This HYBRID meeting was held virtually via Zoom Conference Call and in the DeArmond Room of the Deschutes Services Buiding. CALL TO ORDER: Chair Daryl Parish called the meeting to order at 12:05 p .m . AGENDA: 1. Approval of Minutes for September 8, 2022 Joe Healy moved approval of the minutes of the September 8, 2022 meeting. Patti Adair supported the motion . Votes : All yes; Daryl Parish Abstained as he was absent from the 9/8/22 meeting. Motion carried. 2. Presentation of County's Annual Comprehensive Financial Report for Fiscal Year ended June 30, 2022 Amanda McCleary-Moore, Partner, Moss Adams LLP presented the annual audit report and provided details about audit compliance standards and requirements . Moss Adams LLP provides an audit of the county's financial statements under two standards: generally accepted auditing standards and governmental auditing standards . The county applies for a GFOA Certificate of Excellence. In addition to accounting standards, an additional audit requirement was required this year which requires the opinions paragraph to be the very first paragraph of the report. The county's audit occurred according to plan. GASB 87 implementation added some additional time to the audit. No audit adjustments were necessary to issue an unmodified opinion. The significant audit areas inc l uded : cash and investments, revenue and receivables, capital assets, leases, long term liabilities, financ ial close and reporting, federal grants and Oregon minimum standards. Moss Adams LLP issued a clean unmodified opinion on the county's financial statements. The report on compliance and other matters was based on an audit of financial statements in accordance with Oregon minimum standa r ds Audit Committee Meeting January 24, 2023 Page 2 of 10 resulted in no control or compliance findings. The GAGAS Report on Internal Control over financial reporting and on compliance and other matters resulted in no control or compliance findings. The report on Compliance with Requirements that could have a direct and material effect on the major federal programs and on internal control over compliance in accordance with the uniform guidance for federal awards resulted in no control or compliance findings. Kevin Mullerleile, Manager, Moss Adams LLP (present via zoom) added that Deschutes County had the cleanest report with the fewest comments. Reports were issued on December 22, 2022. Attendees applauded Jana Cain and Robert Tintle for their superior work. Significant new accounting standards were brought to everyone's attention . Lessee and lessor transactions were covered . Many judgements and accounting estimates must be considered by management, in terms of capital assets. He listed key sensitive financial statement disclosures. No significant difficulties were encountered in performing the audit. No significant audit adjustments were considered before issuing a clean report. One small uncorrected misstatement was deemed immaterial and was related to a road capital improvement fund . This was revenue recognized in 2022 which should have been reported as unearned revenue . There was no potential effect on the financial statements of significant risks and exposures and uncertainties of note . There were no disagreements with management. Moss Adams LLP was not aware of Managements' consultation with other accountants . There was no fraud nor noncompliance with laws and regulations. Moss Adams LLP made two recommendations to Jana and Robert Tintle: • Prior custodial funds reported no taxes received for other governments . The County properly addressed this by including $5.4 million taxes receivable for other governments in its Custodial Funds as of June 30, 2022. As such, this recommendation has already been implemented. • The county's Road Capital Improvement fund recogn ized $1 million in revenue not earned as of June 30, 2022. Moss Adams LLP suggests the county search grants which have received funds as of fiscal year-end for which there are no incurred expenditures to catch these in the future. Audit Committee Meeting January 24, 2023 Page 3 of 10 Ms . McCleary-Moore summarized the new GASB accounting standards. One of note is No . 96, subscript ion -based IT arrangements effective for FY June 30, 2023. Chair Parish commented on the smooth transition to a new County external auditor. Mr. Tintle shared that during his time working for Lane County, he had worked with Moss -Adams. He thanked Jana Cain for her hard work and efforts. Mr. Kropp commented that the commissioners make up half of the budget committee and as ked for some key points for them to keep in mind . Ms . McCleary -Moore suggested looking at cut -off at year -end, taking care not to overspend the budget. Over -expenditures are one of the top issues she comes across on a regular basis . Commissioner DeBone shared that he appreciated the statistical sections in the annual financial report. Commissioner Chang commented that the county has some large capital expenditures coming up and will be taking on substantial debt. From an audit perspective, in relation to fiscal tracking, he asked Amanda for tips . She spoke of the importance of procurement per ORS standards, maintaining internal controls and following all rules and regulations when issuing bonds . Ms . McCleary-Moore spoke of the i mportance of project managers' oversight. She cited ARPA funds and disbursement as a good example of following all of the internal controls and monitoring. It is crucial to demonstrate to the community that general obligation bonds are being used for their intended purpose. 3. Audit Committee 2021/22 Annual Accomplishments Report Chair Parish summarized the highlights of the report. The committee is currently full and there are currently no vacancies . Hiring of a new External Auditor, Moss Adams LLP and an Internal Performance Auditor, Aaron Kay , has been achieved . Commissioner Adair thanked David Givans , Internal Auditor, for his leadership . David Givans presented a plaque with nameplates of all of the Audit Committee members over the last 20 years, thanking community members and county members for their service . Erik Breon, Public Information Officer, took a photo of the group with plaque, for posting to social media . 4. State of the November '22 Election Results Steve Dennison, Deschutes County Clerk, thanked the committee for asking him to speak at this meeting. Mr. Dennison has been serving as County Clerk since summer 2021 when Nancy Blankenship retired, on an interim basis until he was elected in November 2022 . Audit Comm ittee Meeting January 24, 2023 Page 4 of 10 Ballots are now processed upon r eceipt. The Clerk's Office prides themselves on fair and balanced elections, and the May and November 2022 elect ions were no different. A difference to note is that secrecy sleeves are no longer provided. It was determined that only half of all voters were using them. Mr. Dennison noted that voters are welcome to wrap their ballots in paper should they wish. The Clerk 's Offi ce has an open-door policy providing for t r ansparency, with many tours of election processes taking place during the November election . Individuals and groups were able to learn about the path of a ba l lot. 90% of the visitors were impressed by the thoroughness and preparation, and the attention given to each and every ballot. This year, Deschutes County Elections had a social media presence, thanks to Mr. Breon who held some Facebook Livestreams . The Clerk's Office partnered with Secretary of State to tackle misinformation. They had a large media presence, with interviews about the elections process . The Clerk's Office also partnered with law enforcement and shared important dates, drop site locations, what is/ is not permissible by law, to inform voters of their rights and educate law enforcement about election crimes. A new drop box was added at the Fair and Expo Center . The Redmond public library drop box receives the second largest volume of ballots, behind the main drop box located at the Deschutes Services Building at 1300 NW Wall St. Observer training was held , and this year's elections had more observers than ever . Ballot pick -up teams were given additional tools to i ncrease their visibil ity, educate voters of their rights and to keep an eye open for election crimes . Their tabulation system is tested before and after every election . Additional training for county staff was also held. Mr. Dennison thanked other county departments for their partnership. Initial voter turnout was slow but on the day prior to Election Day, 19,000 ballots were cast and on Election Day, 26,000 were cast. The election results are posted to their website. A post-election day hand-count is performed (random batches the state dictates). Both May and November elections went smoothly. They didn't quite reach their target of 75% voter turnout, with a voter turnout of nearly 70% attained for the November general election. Commissioner Chang applauded Steve Dennison and his department, for professionally run elections under intense public scrutiny. Mr. Dennison commented that they haven 't changed processes and procedures very much , noting that Oregon elections have always been run professional ly. 5. Internal Audit Report: Justice Court Cash Handling #21/22-15 Aud it Committee Meeting January 24, 2023 Page 5 of 10 Aaron Kay, Performance Auditor, presented the results of the Justice Court cash handling audit. He recognized the professional efforts by Jodi Stacy, Justice Court Administrator, and Charles Fadeley, Justice of the Peace . Budgetary changes were highlighted, going from general fund to TRT (Transient Room Tax). Efforts made by Justice Court through the pandemic paid off, in terms of revenue from collections . Internal Audit's recommendation is the performance of periodic reconc i liations could provide added control over collected monies. It is recommended for the Justice Court to periodically review the fiduciary balance to see if the accounts are clearing as designed and identify adjustments required . It is recommended for the Justice Court to identify all accounts assigned to collections and periodically reconcile the collection activities. Ms . Stacy reported having completed approximately 40% of the recommendations. Mr. Kay urged attendees to complete a survey on this report as no surveys have yet been returned to-date. 6. Internal Audit Report: Vacation and Sick Leave #21/22-17 Mr. Kay presented the results of the Vacation and Sick Leave audit, which represents his first audit outside of cash handling. NOVAtime, the county's online time management system, has reporting limitations and presented some challenges . ''Time Management Leave" includes vacation and sick time. Ten recommendations, either system or policy driven, were made . Data access was difficult in NOVAtime. The system currently operates under "maintenance mode", which makes it functional but without the development of added featu r es . NOVAtime and Munis aren't integrated, which requires additional work for staff. Mr. Kay shared that it was just learned that NOVAtime recently merged with another time management system. Kathleen Hinman, Director Human Resources, commented that HR may be recommends searching for an alternate time management system in the future . Mr. Kay noted that any data pulled from the system was point-in -time data . In April of each year, Human Resources offers employees a buy-back program, ensuring that employees only carry over a limited maximum balance of vacation/sick time. Mr. Givans and Mr. Tintle spoke about tax ramifications as it relates to the program . Providing the option of cashing out on excess leave, could accelerate employee taxable income even if the employee does not elect to do this. The County is exploring changes to the plan that will not accelerate taxation. An important recommendation is that Audit Committee Meeting January 24, 2023 Page 6 of 10 Human Resources and Payroll establish secondary review processes for employee leave balance limit calculations and adjustments . Mr. Kay shared demographic statistics on vacation and sick leave accrual and usage . A disproportionate number of men carry larger leave balances than women. The Sher iffs Office cashed out the largest proportion of their accrued leave , as compared to all othe r departments . Mr. Tintle noted that this audit was performed before Paid Leave Oregon took effect. Mr. Tu rel asked about figures relative to remote workers with the county, and usage trends for vacation/sick leave. He shared that it's become a challenge state -wide, particularly in Portland , for employees working r emotely during the pandemic to return to the office full-time. No relevant figures were available to share with Mr. Turel at this time as that topic was outside the scope of the audit. 7. Internal Audit Report: Sheriff's Office Comprehensive Cash Handling #21/22-16 M r . Kay shared the results of the report. This was a comprehensive audit, includ i ng all units and divisions of the office. There are a large number of areas within the Deschutes County Sheriffs Office (DCSO) with cash flow. This audit was a large undertaking, and Mr. Kay was pleased with the DCSO 's overall cash handling processes and procedures. Mike Shults, DCSO Captain and Joe Brundage , DCSO Business Manager, were in attendance . The five - year trend of collected external payments has slowly decreased, attributed to the pandemic, although concealed handgun licenses increased over this timespan . Three broad recommendations were made using directed guidance for improvement areas . The first recommendation involved three subject areas : Civil , Corrections and Records , and improved internal controls over collected monies. The second recommendation is that opportunity exists to improve deposit activities in business management, evidence and record. The third recommendation is that a variety of control practices could be improved in business management, CODE and Street Crimes Unit. Mr. Brundage reported that many of the audit recommendations have been implemented. They have come up with some solutions relative to CODE and Street Crimes Unit expenditures, to remedy issues related to investigative cash handling. Aud it Committee Meeting January 24, 2023 Page 7 of 10 Mr. Reich asked if there have been any cash losses, to which Mr. Kay replied that there have been no cash losses, but there are some vulnerabilities. The DCSO will follow best practices moving forward . Captain Shults thanked Mr. Kay and Mr. Givans for their recommendations . Mr. Kay commended the staff who take in concealed handgun licenses and their skills in Munis data entry. 8. Follow-Ups: a. 2022 Global Follow-Up #22/23-1 Mr. Kay presented a pie chart illustrating that 62% of internal audit recommendations are underway, 30% are completed and 8% are planned. Bar graphs showed percentage of completion in each recommendation category by follow up and department. The three - year implementation rate was shown, and decreased rates were attributed to Finance 's transition to Robert Tintle as Chief Financial Officer . b. Munis Part IV #22/23-5 Audit recommendations were 40% completed and Mr. Kay thanked Mr. Tintle for providing Finance's estimated dates of completion on recommendations . 9. Update -County Leadership Recruitment/Changes Mr. Lelack shared that they are in the process of hiring a new IT Director. The hiring of our new Health Service Director, Janice Garceau, created a vacancy for Deputy Director of Behavioral Health . Holly Harris has been selected to fill the position of Deputy Director of Behavioral Health . Ms. Harris had been serving as the Stabilization Center Director. The search for the new Public Health Director is underway and in its final stages. Steve Dennison taking over for Nancy Blankenship as County Clerk, and Steven Gunnels taking over for John Hummel as District Attorney have contributed to nearly half of the department directors turning over in recent years. Most of these were internal promotions or retirements. In response to an inquiry by Mr. Turel , Mr. Lelack shared that the top range of pay for IT Director is $172,000 per year. Ms. Hinman shared that many recruitments were accomplished internally. Internally, the county was able to offer great resources to attract quality candidates. She is pleased with the pool of quality candidates from recent Audit Committee Meeting January 24, 2023 Page 8 of 10 recruitment efforts. The quality of candidates has improved, although the quantity of applications has declined, and for that HR is grateful. Mr. Randall has recruited for 25% of his department's FTE in the past six months and thanked Human Resources for their support. Facilities will have these positions filled within the next couple of weeks. The position of Capital Improvement Manager is in its final stages of interviews. 10.lnternal Audit Program -Budget Request Mr. Givans provided an update for his department's budget request. Their budget will remain largely unchanged, with the Internal Audit department consisting of himself and Mr. Kay. Materials and Services budget will be down a bit. 11. Yellow Book Introduction Mr. Kay introduced the Yellow Book concept to the group. GAGAS Performance Audits, 2021 Technical Update, A discussion of concepts to consider when developing audit objectives. GAGAS is the acronym for "Ge nerally Accepted Government Auditing Standards", and this yellow book is Internal Audits' governing standards. Performance Auditing includes planning, conducting/documenting/supervision and reporting. The five E's of performance auditing include: Effective -Efficient -Economical -Ethical - Equitable. The fifth "E" (Equitable) was just added, to help public officials to serve, distribute and implement consistently in search of the best possible outcome. Internal Audit is considering these concepts within the context of the audit objectives and perspective audience and seeks to determine the measure to determine success. 12.0ther Business/Closing • Mr. Givans presented a brief review of the status list, a copy of which was included with the meeting agenda. He went over this list in detail. One item was providing new member training to the Audit Committee's newest member, Joe Healy. During the next quarterly Audit Committee meeting, members will be asked for suggestions on possible future audits. Mr. Givans reported having been attending BOCC meetings and the Board Retreat, to keep up to date on current events. He recently peer reviewed another audit shop in Texas. Audit shops are required to be peer reviewed every three years. Moss Adams' external contract is running smoothly. One component of the vacation and sick leave audit not addressed in today's presentation Audit Committee Meeting January 24, 2023 Page 9 of 10 was compensated time, and this is earmarked for a future audit to be possibly scheduled for the end of FY23 is to replace the risk audit in the workp lan. However, the current workload in Finance with Munis and other aud its might delay this timeline . The work plan also includes a fiscal audit of the DA that will be postponed since there was a transition report covering this . Comm issioner Adair moved modification of the current workplan to address adding a Comp Time Audit to the work plan (instead of Risk) and the DA fiscal audit postponement. Chair Parish supported the motion . Votes: All Yes Motion Carried . • The District Attorney's Office Transition Audit has commenced . • The hybrid meeting format will remain for the next quarterly meeting, to allow t hose to attend remotely if unable to attend in-person . Next Meeting is scheduled for Friday, March 10, 2023, 12 :00 -3:00 p.m. Adjournment: Being no further issues brought before the Committee the meeting was adjourned at 2:50 p.m . Respectfully submitted , Angie wers BOCC Administrative Assistant Audit Committee Meeting January 24, 2023 Page 10 of 10