Loading...
HomeMy WebLinkAboutAudit Committee Minutes 12-05-19E S C-O�� Q � For Recordkn Stamp Only Minutes of the Meeting of the Deschutes County Audit Committee Thursday, December 5, 2019 Members consist of S Public (P), and 3 County Management (CM) Quorum =five Committee Members resent: x Facilitator: David Givans, County Internal Auditor x Daryl Parrish, Chair, (P) Retired - City Manager of Covina, CA Tom Linhares, (P), Retired - Executive Director, Multnomah County Tax Supervising and Conservation Commission (Absent, excused) x Scott Reich (P), Umpqua Bank — VP Fair Lending x Stan Turel (P), President,Columbia Pacific Tax Service LLC x Patti Adair, (CM) County Commissioner x Nancy Blankenship, (CM) County Clerk x James Lewis, (CM Deschutes County PMeqy Manager x Jodi Burch, CFO Redmond Fire and Rescue Summer Sears, Summer Sears CPA, LLC Others Present: x Phil Henderson, County Commissioner x Tony DeBone, County Commissioner x Tom Anderson, County Administrator x Erik Kropp, Deputy County Administrator x I Greg Munn, Cou!Lty Chief Financial Officer x James Wood, County Accounting Manager x Christina Partain, County Accounting Technician x Christin Holt, County Accountant x Cam Sparks, County Accountant x Kathleen Hinman, County Human Resources Director x Robin Edwards, County Human Resources Administrative Assistant x Kristin O'Connor, Manager, Eide Baill LLP x Laura Skundrick, Administrative Assistant — BOCC CALL TO ORDER: Chair Parrish called the meeting to order at 12:04pm. AGENDA: • Lunch/Introductions/Announcements. Introductions were made. AUDIT COMMITTEE MEETING Thursday, December 5, 2019 Page 2 of 6 Approval of Minutes: Motion made by Member Adair and supported by Member Turel to approve the minutes of the Audit Committee Meeting of September 13, 2019. Motion carried. CAFR — Measurement Focus and Basis of Accounting Mr. Wood presented powerpoint, "Presentation of the County's Annual Audited Financial Report", see attached for more information. Mr. Kropp asked whether capital assets in this report includes roads, and he confirmed yes. Mr. Turel asked if capital asset is net after depreciation, Mr. Woods replied yes. Mr. Kropp inquired about other local governments that do a minimal CAFR rather than the comprehensive, and Mr. Wood did not know. Mr. Turel inquired about an explanation of the "unassigned" 12 million dollars (on pg. 27), and Mr. Wood directed him to pages 85-87, which provides additional breakouts of allocations. The unassigned term means there are no restrictions, no commitments. Mr. Turel stated in private enterprise that is considered money in the bank. Mr. Wood added that there is a requirement to carry working capital, which we carry four months. Mr. Anderson agreed and added that it being unassigned in the financial report does not mean it's not budgeted, and Commissioners receive reports from Mr. Munn each month. Commissioner DeBone stated they budget conservatively and spend wisely, but need the carryover for funds since tax dollars will not come in until November. Commissioner Adair added they watch Solid Waste very closely, as it is indicative of what the real economy is doing. Mr. Turel inquired about page 34, it looks as though Solid Waste is the most efficient operation, and was proud to see their report, but inquired about the amount for the landfill closure. Mr. Wood explained it is an anticipation of future cost. Mr. Turel asked about the RV Park, if the County owns it outright, and Mr. Wood stated the County Fair & Expo operate the park. Commissioner Adair added that it is currently ahead of budget. Ms. Hinman added that they use temporary staffing for that so it would show up in the materials and services line. Mr. Turel stated he was impressed with page 73, the contributions of covered payroll. Mr. Wood offered to meet with anyone who has follow up questions as well. Mr. Turel inquired about page 77, and Mr. Wood explained this is the schedule of revenue expenditures. The top portion is the general fund itself and Mr. Munn added that they never want to outspend our appropriations. He directed the committee to the $12,426, 713 number and add the gain on investments of $31,817, and that is the unassigned ending fund balance on page 27.That is important because it is a fund that is not allocated elsewhere, and always want to make sure we can afford making payroll before the tax revenues are in. Commissioner DeBone inquired about page 17 stating the operating loss of Fair and Expo of 2 million, and Mr. Wood replied page 34 on the statement of revenues will show the reason they can run on an operating loss that size, because there are additional dollars coming into this fund, such as state grants, investment earnings, and TRT dollars. Mr. Kropp added there are also policy decisions made to hold high school graduations or sometimes high profile funerals, where they are not charging the community for those services. Presentation of Coup's Comprehensive Annual Financial Report for Fiscal year ended June 30, 2019 — Eide Bailly LLP Kristin O'Connor presented this year's external audit. She summarized the report, stating the November 14th report presented clean opinion with no material weaknesses or significant deficiencies. She added that her team also audited related service districts Black Butte and Sunriver. She stated that last year's report came back with a material weakness that had been fully corrected even before last year's audit, and they were happy to see the control that are in AUDIT COMMITTEE MEETING Thursday, December 5, 2019 Page 3 of 6 place. Due to this material weakness, the County is currently considered high risk and auditors are required to hit a coverage threshold for testing various programs. This year, the programs were Road Department, WIC Program, and the Health Services CCBHC Expansion Grant. These look at money being spent not the money coming in, and all audits went smoothly with no findings. Commissioner DeBone asked whether the testing is the same for everyone or if Deschutes County is tested for something specifically, and Ms. O'Connor replied the requirements are the same for everyone who has the same grant, although there may be differences in the audit approach. Ms. O'Connor explained her team detail tests a lot. Mr. Turel inquired about grants that filter through the State and they get a percentage of the funds, are those are properly accounted for in the audit, and Ms. O'Connor replied those pass-through contracts are common and the audit addresses on the dollars of the county, not the gross awarded amount. Ms. O'Connor noted several required communications — that the audit is performed with auditing standards generally performed in the US. The documents are set up to address the standards of what is required, but management is responsible for the financial statements. The audit done is not on 100%, the team uses materiality and various testing based on dollar amounts and different thresholds. Certain funds carry a smaller threshold so the audit digs into more transactions than others would require. The audit gains an understanding of internal controls to make sure they exist, that they have been put into place and test to show it's been properly implemented. The audit does not report on or give assurance on internal controls. If there was a specific area requested to focus on or dig into, that can be added. The financial statements have been prepared with generally accepted auditing standards. The audit would also show if there were new significant accounting policies, but there were none this year. As part of the audit, there were no disagreements with management, no difficulties encountered while performing the audit, no discussions of additional accounting treatments, no identified adjustments and no uncorrected misstatements also called past adjustments. Identifying the significant risks on a high level, Ms. O'Connor stated the largest of these risks is management override. Auditors always keep eyes open that the amounts being reported are what should be reported, and are unbiased. To do this, an inquiry is not sufficient, and documentation is required in order to back up everything that is happening. The group does a lot of testing, fraud inquiries, and journal entry testing. A new software system allows entries to be analyzed and identified for oddities that should be looked at. Commissioner Henderson asked whether this audit is done remotely or on-site, and Ms. O'Connor replied the total audit field work is about four weeks long, with two weeks off-site and two weeks on-site. The off-site requests are made through a secure portal that James and Greg have access to, then the on-site portion allows auditors to focus on items they actually need to walk through, so the group can make the most of their time while on-site. Ms. O'Connor continued that additional significant risks for the County include PERS and OPEB, both are calculations that the audit spends a lot of time on. What is the likelihood something could go wrong and how many controls are in place. Ms. O'Connor added the new standard for this year was the GASB 88, which did not change much within this CAFR. There are a couple new standards for next year which likely won't affect the CAFR either, GASB 84 and GASB 90. There is one upcoming large change, to include leases in the balance sheet, so it is important to know what leases exist and are tracking them. AUDIT COMMITTEE MEETING Thursday, December 5, 2019 Page 4 of 6 She added that their team of independent auditors were not strong-armed in any way by Deschutes County to give the opinion we did, and they have maintained their independence. Mr. Reich inquired whether the risks around pensions and the landfill are unique to Deschutes County and Ms. O'Connor replied they are not. Commissioner Adair noted on page 66, there is a large deduction for OPEB, and Ms. O'Connor replied this shows different reasons why it changes, it is really more macro market -level changes, which will be affected by other industries such as healthcare. Mr. Munn thanked Ms. O'Connor and her team, as well as his team in the Finance Department, and has appreciated having a third set of eyes. The County is responsible for a large amount of public money and it is very important we have ways of doing things that are returning these dollars to the community. Audit Committee 201.8/19 Annual Accomplishments Report Chair Parrish overviewed the Annual Accomplishments Report. He stated the Eide Bailly contract for external auditing is in its last year, and Mr. Givans added this is the first year of a two-year option, there is one more year then it will go out for RFP. The RFP effort is to get as many bids as possible for the most efficiencies for the County. Commissioner Henderson asked who the `customers' are within the "customer satisfaction survey", and Mr. Givans replied the customer is any reader of the report, and on each report there is an opportunity to take a survey. RECESS: At the time of 1:48p.m., Chair Parrish called for a short recess and reconvened the meeting at 2:00p.m. INTERNAL AUDIT REPORT: #19/20-1 Treasurer Transition Mr. Givans presented the powerpoint, "Treasurer Transition", attached. Mr. Givans explained the next election for Treasurer will occur in November 2020, and creates a new four year cycle for this position. Deschutes County is unique in having the Finance Director, Tax Collector, and Treasurer all in one role. Mr. Reich asked how that gets determined, and Mr. Givans explained it happened that way in the past and stayed that way. The State was consulted and determined it was fine to do it that way. County Clerk Blankenship stated from an election official point of view, it is worth noting there may be others who file for the Treasurer position, and can begin the discussion now about some aspects of the position, in case staff receives questions. Administrator Anderson stated there are a few other large counties in the state where Treasurer is also the Finance Director and it works well, like Jackson and Lane Counties (home rule counties). In regards to various aspects of the position such as a stipend, it makes sense to advertise to those considering running. Mr. Anderson stated he was very supportive of Mr. Givans performing this audit to ensure Mr. Munn coming in had support and a fresh slate to begin his work as Treasurer. It was advertised he would be expected to run for Treasurer, but he didn't meet the requirements, so the Board appointed him, the County Administrator, and then delegated it to Mr. Munn. Mr. Munn reports to the Board each month on the performance of the treasury function. Mr. Anderson added that he and Mr. Munn conferred on this audit report, and AUDIT COMMITTEE MEETING Thursday, December 5, 2019 Page 5 of 6 comments are included in the report. Mr. Anderson added he concurs with each of the procedural recommendations made by Mr. Givans, and expects those be done in a matter of weeks. Mr. Munn stated, as coming in new to this role, it was very helpful to have a fresh set of eyes look at the procedures, compare them to policies, State law and best practices. His goal is to take the good work Mr. Lowry has done and make sure everything is running as it is supposed to. Mr. Munn agreed with Mr. Anderson that the recommendations will be taken care of relatively quickly. Mr. Anderson added that with a new set of eyes, it could be a good idea to look at the policy itself to see if it's relevant and accurate, reflects best practices, and take a look at using that as a yardstick to implement the recommendations. Commissioner Adair asked why the banking contract changed, and Mr. Givans explained we're due for another RFP in 2021, and will have some new things to look for since the last banking RFP, such as p -cards. INTERNAL AUDIT REPORT: #19/20-4 Human Resources -- Cash Handling Mr. Givans explained the Human Resources Department went through a self-evaluation of their procedures using the Cash Handling Policy, and then Mr. Givans sat down and went through it with them to strategize how it can be improved. It was a team effort, with Robin and Trygve as the primary leads. The controls in place were fine, but he had ideas for strengthening them, additional areas where Munis could be utilized, addressing petty cash, and bolstering performance measures. Ms. Hinman thanked Mr. Givans for another set of eyes on these procedures, and providing some great advice which has been acted on already. She had asked staff to work closely with Mr. Givans and be open and transparent with everything they do. She added it was great to learn what takes place in other departments and helped focusing some items. Ms. Edwards stated some of the changes that have already been implemented are the addition of three new logs, keeping the HR Receipt Book log locked up, and the unused book in her locked cabinet. Ms. Edwards added the personnel card now has a sign -out sheet for which she is the custodian of, also has a mail log for check received in the mail, and sometimes even cash. Will now deposit checks immediately rather than end of day, the petty cash was eliminated, and copies of the receipts for retirees will now be included on the Munis receipt. Ms. Hinman added that she will go through these logs during one on one meetings with Ms. Edwards, and compare them to receipting, as well as looking at the management of retiree health payments. If several items can be implemented in Munis, that will help create some more controls as well. Mr. Reich suggested broader standards and expectations be shared more broadly, in case others would benefit from them. Mr. Givans replied there is an existing cash handling policy, but it is helpful to go through this process to have departments review it, talk about it, and bring that awareness. Commissioner Adair noted that at the transfer station, you can pay cash and they give you a receipt, but at the Deschutes County pharmacy you can only pay with a card. Follow-ups: a) 2019 Global Follow up #19/20-3 Mr. Givans explained this report captures any outstanding recommendations that have not been completed, part of this is to raise awareness of what has not been done. Chair Parrish stated those that are underway look like they will be completed. Commissioner Henderson inquired about the fleet management recommendation, which came to the Board in October 2018 and was discussed at a Board meeting. He stated that things have stopped on this, how does it get back on the agenda, and Mr. Givans replied it is the department's responsibility to bring it back. Mr. Anderson stated he made a note to discuss it with Chris, if the consensus is to bring it back for AUDIT COMMITTEE MEETING Thursday, December 5, 2019 Page 6 of 6 discussion. Commissioner Adair agreed (Commissioner DeBone no longer at the meeting).Mr. Turel stated this is a great report and he appreciates it. b) Supervisory Tonics -- Span of Control 19/20-6 Mr. Givans stated there are two recommendations, both still underway with a March 2020 expected completion date. Internal Audit Program — budget request Mr. Givans provided a handout, stating he does not have his own separate budget and is part of the Administrative Services budget. He highlighted some service line items he gives input to in terms of his role, such as a hotline for the County, peer review, and an On -Call Auditor, currently at about 35 hours a month. Ms. Birch inquired whether benefits or PERS are included in that line item, and Mr. Givans stated as an on-call employee he would not receive either, and Ms. Birch stated a change in PERS (SB 1049) effective January 1, 2020 regardless of employee's hours. The committee agrees to the recommended budget request. UPDATES/Other Items: (David): Mr. Givans provided updates and explanations regarding other items: • Audits and follow-ups in process include CCO o Also kicked off another cash handling audit for Juvenile. • Other: Whistleblower Reporting Policy o Still working through this with the Board • Audit Committee Recruitments — training o Two recruitments, Jodi and Summer were trained up before this meeting. • See Internal Audit status report September 2019 through November 2019. o Status report remains pretty consistent, may be a bit higher due to the large amount of audit work. OTHER BUSINESS/CLOSING: • None. Adjournment: Being no further issues brought before the Committee the meeting was adjourned at 2:57p.m. Respectfully submitted, J a S ck 3A. wk, Administrative Assistant - BOCC