IAL documents trying to build that base budget this was not there because in previous years it had come forth as a new spending request and as you know this comes up as we're dealing with this now this renewal comes up in April of each year the contract expires on March 31st so when August that budget dropped at that point in time she's about 11 months in she's like wait a minute this isn't here and she alerted County to that and the solution was to come back before you with a midyear budget request which is what we're doing okay and so just to clarify this is going to be an annual fre current request yes and we're in cont communication with um our ACM about that the best way to move forward to make sure that during this budget process that we're in that it is included that along with some other issues okay thank you can I can I ask a followup because again this is I I'm kind of confused I'm
happy you asked that question it's a licensure right you say every year March 30th I I'm not pointing fingers at anybody matter of fact let me put my hands in front of my laptop I know some of y'all sensitive um but we need email to work in this building we need email to work in every building uh I need my email to work I need my phone to work so um I don't know why this isn't in the base budget and maybe as we go in to our I don't know what y'all have to change on y'all's end but as we go into budget I would hope that we would all know that everybody's email has to work uh you all need to get evidence you all need to reach out to victims you all you know we can't have email shutting down on the 31st of every year so uh I I would be inter when you all put your budget request in I would be interested to see this baked in because I like my colleagues like it can't keep coming back every year at at the last minute when we need email to work and that's essentially what this is so uh thank you for that backstory and that history that is interesting that y'all caught this in
August and it's taking us this long but thank you for bringing it uh to our attention so this now will be another you know 20 what 50 at least a million dollar recurring fund source of you know we're going to have to that'll be Monday we're going to have to find I agree with what we do it every year I mean she just said and somebody can go let me not million I didn't say million oh sorry no F 2,000 quarter million sorry I'm with you no and I agree but I would imagine like it's the email's been working since I got here so we have done it every year like so that's where I know that we migrated the Office 360 in 2020 it's been in our budget it was came in our budget as a new spending request but it's been in our budget since fiscal year 20 I believe it's either fisal year 20 21 so that money has always been there but um the way it gets it was supposed to get into the budget for this year changed and just a spiral some things with that Unexpected death of our
finance manager some transitional things it was overlooked it did not come before you as a new spending request last year because it was supposed to have been put into the base budget but good Lord had some other things in mind when he um when Mr Hinton passed away and some other things happened and so that was overlooked but as soon as we caught it um we don't get to see the budget documents until the budget drops so when it dropped in August that's when we caught it but it has been in our budget it's not a new spinning request that 280,000 roughly take out the taxes has been in our budget for the past three four years thank you Miss l so I hear that ACM Brinson because you're the ACM right do you have any questions or comments or anything good evening Dwayne Brenson assistant County Manager the reason we're here tonight is because it's a last resort uh we got the request we got the
notification in mid January I think January the 9th that this was this was part of the mid-year budget request our first look is to reallocate uh we looked within the Department's budget we looked within the public safety functional area couldn't find funds to cover this in full so that's why we're coming tonight did the contract first we tried to look inside budgets tried to find funds any way we could before using general fund fund balance and as just not there to cover this in full so it is going to have to come from a new source next year correct this has it's been a recurring cost for the sheriff's office for a number of years but we will need to like in past years it will carry forward and we will need to find a way to pay for this going forward just don't see how we paid for it in the past and now we can't it wasn't it wasn't included in the budget for this year but it was in the budgets for previous years and I'll say it wasn't because that's that's what um attorney
love lace was trying to explain because of the transition in the finance um administrative staff it wasn't caught it was overlooked there was an oversight because of the passing of their Finance director it was an oversight and it wasn't included in the base budget whereas in previous years it had been so from what I'm hearing just to round everything out is that we're going to approve this for one time because the contract is coming up to end and then for next budget year it'll hopefully be worked into the budget so that it's not an item that's coming to us for an ad hoc funding source okay with that clarification thank you uh ACM Brinson thank you attorney L commissioner Houston did I see your hand I'd like toe motion okay yes
second move by commissioner Houston seconded by Vice chair Burns all in favor say I I any opposed 24- 0174 and 0128 are approved unanimously that concludes our consent agenda thank you to all the staff who did put in all the heavy lifting and work to bring these items to us and I'll pass it to our attorney for the boards and commissions appointments we have other business we got the audit I'm just I lump that into consent agenda well attorney Massie is missing one ballot if anyone wants to get that to for we do have the presentation of fiscal year 2023 annual Financial audit and annual comprehensive financial report uh with Miss Tiffany Murray our Chief Financial Officer and Crystal crystally
right good evening Commissioners are you ready for me to begin absolutely and we have 45 minutes allocated to this item so I'm assuming there'll probably be some questions from Commissioners so do you think 30 minutes for presentation 15 minutes I will cut my 2hour present down to 30 minutes thank well thank you for having me here uh this evening glad to be here um I know um your Finance staff is glad the audit is over um and this this this represents the the very last thing we need to do to finish the audit um we actually issued our audit report um back in January and now this is our re IR
ired communication to those charged with governance and so we have a slide deck here the slide deck has specific talking points as outlined by our Professional Standards things that we believe you should know about your audit and how things went and I will um take you through that there we go so this is our audit team um that we provided to the county uh this year uh we work hard to provide you with an audit team team that is dedicated to public sector um I myself and and by the way this is my first year on your engagement um I only do government audits um that's all I do and so um that was intentional and Jeff zner who is the second partner reviewer also only does government Audits and Jennifer Moran the engagement manager who was the manager last year also only does government Audits and so uh we believe that's important it's a priority for us um and that's the team that we provided as I mentioned before our our my my role or
my my objective with this presentation is to communicate the things that we believe are important that you need to know about these are some of the things that we will talk about we'll talk about the audit opinion um as well as some of the things that we looked out looked at throughout our audit so the purpose of an audit is to provide reasonable assurance that your financial statements are fairly stated um I comp contemplated the uh uh the proclamation you guys just made the national uh County government uh month um which I think is great and you recognized all of your County Employees I don't think anything exemplifies that more than the annual comprehensive financial report which is a very robust document approximately 300 pages long takes a lot of time and effort and that was the the primary subject matter of our audit um we plan and perform our audit in accordance with generally accepted auditing standards as well as in accordance with govern government auditing standards and the purpose is to
express a an opinion that your financial statements are reasonably stated uh which is different than providing absolute Assurance um we uh perform uh analytical procedures um tests of transactions sampling techniques in order to arrive at this level of reasonable assurance and at the end of the day um we did Express an unmodified opinion uh which is the highest level of assurance that we can provide it mean that we believe a thirdparty user of your financial statements can rely upon the information that's that's in there um we did once again Express uh issue a an opinion in accordance with government auditing standards which we call Yellow Book and I'll talk about that in a second in addition to our financial statement audit we also perform an audit in accordance with uniform guidance um that is an audit of your spending of federal and state dollars so uniform guidance in the state Implement uh single audit implementation Act um that audit entails us selecting
programs using a a risk-based approach that's dictated by uniform guidance um major programs are selected and we test for compliance with those programs and so you'll see on this slide um the list of programs that we tested both from uh the federal dollars as well as State dollars um and then at the end of of of that we express an opinion on whether or not you complied um with the the compliance requirements of of that spending and um our single audit opinion also was UNM modified uh there was one instance that was identified during our audit which we um would refer to as a non-material non-compliance um was was an error in um a monthly report um related to uh to your uh DSS across cutting provision um purpose of our uh yellow
book report or report in accordance with um government auditing standards is to describe our scope and testing your internal controls as part of audit we do look at internal controls over financial reporting and over compliance with laws rules regulations and agreements um but we do not look at those controls in an effort to opine on your internal controls um rather we look at your internal controls as a way to design our Auto procedures and so I say that in order to say that we we don't actually Express an opinion on whether or not your internal controls are are operating effectively um because that's not the the scope of that audit but if we do identify control deficiencies in the course of our audit um then we do communicate that in our yellow book report so um the types of deficiencies that we would communicate would be either a material weakness a deficiency in internal control that would prevent a material misstatement from being uh prevented or corrected um or a significant efficiency which is not as
severe as a material weakness but important enough to uh to uh communicate formally in our uh audit opinion or in our uh yellow book report and we did not identify any deficiencies um that we believed to be material weaknesses um as I mentioned before your your annual comprehensive financial report is a very robust document there's a lot to it takes a lot of effort um we as Auditors do identify from time to time errors or Corrections that um that either need to be made um because they're material enough or are not material enough that you can pass on making those adjustments but we would still communicate to you the types of adjustments that were passed on now we did identify an error in the course of our audit it actually was not material enough for us to require it to be adjusted um but management decided to go ahead and adjust it as well um you see a summary of that misstatement um it was a a fair value adjustment um that only affected governmental funds um it was um
it did not apply to your government wide financial statements now the next part of my presentation is to communicate to you some particulars about the uh qualitative aspects of accounting policies um financial statements um have uh a description of your significant accounting policies um they are listed in note a of of your your annual comprehensive financial report um we do look at those um to verify there are in accordance with gap um there was one new accounting policy this year when the county adopted gby statement 96 uh that statement required the reporting of subscription based Information Technology Arrangements um which is similar to a lease which was adopted the year before only applies to um It software um so those were that that that policy was adopted this year and there was a new asset and a new liability on your financial statements as a result of of that new
guidance as part of our audit we evaluate the County's identification and disclosure of related party transactions we did not note any related party transactions that had not been identified uh by County management um we also PID particular attention to significant unusual transactions um in order to verify that they were accounted for correctly um there were no significant unusual transactions um identified this year part of financial statements uh or completing financial statements is making certain estimates and there are several significant estimates throughout your financial statements that we take a look at and make sure that the um the methodology and the uh the basis of those estimat are sound and free of bias um and we've listed on these slides a few of the estimates that are significant that we uh paid particular attention to um we also review in your annual comprehensive financial report your
disclosures um to make sure that they are neutral consistent and clear uh one of the most important parts of our audit opinion is at the very top where it says independ auditor report so we take that very seriously um being independent um in in fact and in appearance and I I if if we weren't independent that would devalue our opinion and so some of the things that we do to ensure that we're independent is we do look at all of the nonattest services that we provide um to ensure that we're not participating in management to uh ensure that we're not auditing our own work and so for the county the only nonattest service that we provide is that we assist in the submitt of your data collection form to the federal clearing house that's the federal submittal that lists out all of your Grant spending and the results of the audit of the grant spending um so we assist in that um and we believe we have
proper safeguards in place to ensure that we uh remain independent uh these next couple of slides um are fairly standard it just lists the a few things that we would communicate to you if they occurred during the year for example example difficulties encountered with management uh during our audit um disagreements with management um if we cons consulted with um some authoritative um Source in order to resolve an an argument or disagreement or a debate um also to communicate to you that we do rely on Management's representation as part of our audit evidence um we would communicate to you if management consulted with another firm um we call that uh opinion shopping um if they if they consulted with someone else to get a different answer um we would communicate to you if there were any other issues if there was any fraud or legal Acts or if we believe that there is a reason or a doubt that there
that that there that the county has a going concern um concern um and none of those things occurred during the course of our audit um as I mentioned your annual comprehensive financial report is a very robust document um there are some things in that report that we actually do not audit um the basic financial statements the the the statements and the and the footnotes we we do audit they're covered by our audit um there are certain parts of it called required supplementary information which are not covered on our audit that would be the Management's discussion and Analysis and some of your pension schedules in the back um we do review them uh to ensure that they they are consistent but we do not express an opinion on them uh we do review and aine on your supplementary information which are some of your budget to actual schedules in the back um we we express a a in relation to opinion in so far as they relate to the financial statements
UPF front um which is the primary focus of our audit and then there are other information such as the statistical section in the back of your annual comprehensive fin finan report and your um transmittal letter which we also do not subject to our auditing procedures the last thing that I I will bring to your attention is that there are um four gby pronouncements that will have an impact on the county either next year or the or the year after um that your finance department is is well aware of and we will continue to work with with your finance department in implementing these standards um but they will have at least some impact on your financial statements moving forward uh for example compensated absences is one that will affect many government's current guidance um does not require you to record a liability for sick leave that does not vest um the new guidance no longer has vesting as a recognition
criteria and so it would require management to go through a A reasonableness or a um a probability assessment of the likelihood that that sick leave would be used and any sickly that would be used would be recorded as a liability so that's just an example of a change that's coming down um it's been issued and will be effective um in an upcoming year and that concludes my uh my my remarks on the audit um I can answer any question that you that you have regarding uh my audit and the um um presentation thank you so much Scott uh for your presentation and all of the in-depth work that went into putting this together and keeping us clean as a county um I'll see if my colleagues have any questions I saw commissioner Carter have her hand raised up in the middle so I'll let her go first thank you um I had a question on slide number 10 10 but before I ask my question I I did want to
just say um immense thanks to our team for working with you Scott so effectively thank you Tiffany and crysty for leadership around this audit I can only imagine how difficult it is to compile and assemble and pull together everything that's required I'm I I know I don't even understand what all that is and I I really respect and appreciate your leadership here for us thank you so much um and Scott thanks for the good explanation of what your audit means and that was the question that I have was on slide 10 it's kind of on uh it it's it's related to material weakness significant deficiency and then what corrected and uncorrected misstatements you did have on slide number 10 the adjustment of 2 and a half million to reflect the fair market value adjustment within the governmental funds is that considered a significant deficiency but not a
material weakness or it's even lower than significant deficiency we we evaluated it with that criteria we did not report that it as a significant efficiency um we do take the materiality of adjustment um we also take into effect um other qualitative characteristics of it um in this case your government-wide financial statements had the complete fair value of Investments of cash and Investments the difference was there was a Reconciliation between your government-wide statements and your fund statements because there's a different measurement Focus fing a basis of accounting and measurement focus in one set of statements to a different measurement focus and basis of accounting another set of statements and it's and and to be honest it's it's the result of a fresh look I was first time looking at these financial statements uh first time our quality reviewer was looking at these
financial statements and and that was one of the things that we we picked up when gotcha okay well thank you for that explanation um and I you know I I have scanned the the whole document have not read it in detail but I look forward to studying some of the things more carefully and also the all the supplemental information is always very interesting so I look forward to spending some more time with it thank you very much thank you commissioner Carter commissioner Jacobs Howton then burns the order thank you so much um and thank you Tiffany and Crystal Le and everyone who worked on this document I always uh enjoy reading through this I I really just skimmed it at this point but um I appreciate the description in the front um about the county um I also want to congratulate all of the staff on this
very good audit um but I feel like it also just really helps me as we're going into the budget um especially looking at the trends and one of the things that I I don't remember the exact wording though that is noted it kind of took me back um was that we are the county is in a position now where our liabilities exceed our assets and that really kind of jumped out at me I know that we um because of taking on this um you know this very the biggest bond that we've ever done in Durham County History um that along with seeing a a big change in our our general fund balance because we spent a lot of it I mean it's noted in the audit um that we have um spent a lot of our spent a lot of our fund balance this year um and then looking at the um noting that we have an an I think at one I saw on
one of the um pages that we're have a negative net position um so I just I'm just trying to put I mean this is not necessarily something you should be answering as our auditor but I I think it does just open up for me um questions about um as we go into the budget um are are there anything are you concerned when you look at our Trends over the past 10 years related to net position liabilities fund balance um do you see anything that you just you would have any concerns about one of the things that we look at is going concern the government's ability to continue as a going concern so that is part of the audit it's also an accounting standard that your finance department follows as well um ever since the gby issued and governments implemented uh the pension and other
post-employment benefit plan standards we've seen a lot of governments with negative net positions a lot of those plans are not fully funded and so you have a larger liability than you have an asset and that's that's that's that's really been the case now one of the great things about an annual comprehensive financial report is it does have the two different measurement Focus the governmental fund is a Current financial resources measurement focus and you mentioned that the fund balance has dipped but that's that's closer to a budgetary basis than the government wide statements and it doesn't include all of the pension and the OPB liabilities because those aren't due and payable today and so that's really the thing that I would say you pay attention to as far as as far as liquidity and and and the trend um the whole point of having all those Trends and the statistical table has those 10 years Trends and that is to to to show the the the
transparency and to make you aware and and and to ask questions that you just asked and that's the whole point of it um I I I will I will mention anecdotally we have a client in a different state who asked if they could remove that Trend information because of how it looked and I I'm I I'm glad that you asked the question um and have that discussion because that's the whole point um no we do not consider it to be a a going concern issue with the county um but it is something to be aware of yeah thank you and I think it's also interesting when we look at um in the back like on page 210 it has governmental expenditures by function again this is something to really look at over over time to see where we're decreasing our spending and where we're you know increasing and for the board to think about is this where we want to be allocating our funding things like that so um it's and then I noticed one of the
pages about the percent um I can't find it now that we are spending uh around benefits and um it it it had jumped enormously I forget the percentage was significantly higher so to your point about um the the burden of that um we've had a significant increase between last year and this year so yeah if I can just say one more thing about that the that pension liability and the other post-employment benefit liability it relies on a lot of assumptions particularly fair value of Investments and and you see that liability go up and down a lot we we notice that and that that's across the board all the all the governments in North Carolina are members of that plan and and and it does tend to fluctuate which is which is the other advantage of the governmental funds because it doesn't include those liabilities yeah it was on page
131 yeah it was um so thank you so much thank you commissioner Jacobs commissioner Howton thank you madam chair and Kudos I go along with what my colleague said and appreciating the work that you've done um and you've answered one of my questions I had the same question on page 10 but the one that um I think I kind of got lost on when you mentioned on page um what page is this page 21 you talked about the sickness could you just clarify that a little bit more sure um compensated absences yes so currently you do report a liability for compensated absences for vacation most government in North Carolina do not recognize the liability for sick leave because sick leave does
not vest meaning when an employee terminates service that sick leave they lose it right it doesn't get paid out when they leave right that in the old guidance was a recognition criteria if you don't pay it at the end then you don't recognize the liability but if someone is has accumulated sick leave today and they're going to be with the county for 20 years what's the likelihood that they're going to use that sick leave in the 20 years that they have remaining well you there's an assessment then that has to be made there is a liability if it is accumulated and it relates to past service and they are more likely than not to use it and that's that's what the new guidance says it puts a little bit of burden on your management to come up with that likelihood there is Judgment involved but that will be a change because in North Carolina most governments don't pay out sickly when employees so they've never recognized that liability okay now my my understanding that it me May
mean not us but I know at some point employees are paid for their sick leave when they leave and it may not be here but I'm it's some companies they do it doesn't happen well some some governments in other states do do pay it's whatever your policy ends up being but not for not for County government again it's whatever your policy is okay all right thank you Vice chair Burns yeah I you you stepped in it with that one friend um because people back there kind as as one of the few people well let me not say that because I know people sensitive uh I know I work and I earn my leave and I there are people in this room who've been 20 30 years and they don't see their sick leave as a liability so I'll get to my question but the the cool thing about sick leave you can give it to somebody right like I only have I got
17 years in right I have something like, 1400 hours the beauty of that is I got a sister that's sick I can give her two or 300 if she needs it when she has a surgery uh if one of my colleagues is pregnant and she runs out of her FMLA I can give it to her so we can sit here and say it's a liability but a lot of times you're off you're actually able to help your colleagues with your sick leave um and you don't get paid out for it so I am curious about the liability but for uh for the benefits of of a few stress faes in here CU I don't think some of the folks I I get that that's the term you have to use I don't think they look at their um their sick leave as a possible liability very seldom I can think a few times in the state you'll have that person who worked for 30 some years and they'll add their sick leave and their vacation together and they're like I'm taking this last year off like yeah like that has happened before um but but is it is a rarity um I did want to say crystal congrats on you as our new CFO you got through uh Tiffany gosh I'm sorry Tiffany you got through your first um audit with us um
hopefully it wasn't painless I do just want to give cat kudos to the staff but not just for like this year like this is what y'all do every year in 2022 you got an award a couple years before that and and and being able to do this at such a high level and such a high standard is not a small feat um being accountable especially with how much much money we bought in right like we bought in kak money we bought in arpa money uh we got non-competitive funding from DHHS I think I remember commissioner Al even asked one day is there a way that we could add it all up because we were always getting these announcements from R so we kept getting money in and kept getting money in and you all have just been such good Financial Steward service so I'm just really proud of that I think people think about cares as 2020 arpa is like 2021 when these are funds that we still have these are projects we still have to do and so um I'm hopeful um that we can continue on this path and um I the only I I'm I'mma touch this rattlesnake I I will see I too am
familiar with page 131 and the DraStic difference that we've made uh I'm happy my face is not on here in leadership for that drastic change so I'll ask those questions later about like um that kind of big jump um that we had with insurance but other than that thank you to the staff for doing what y'all always do and that's being good Steward to this money uh and I can say this frankly without any Pauls that is not the case for every government body in this County it's just not um it the news has been overrun with people that do not know how to Overlay algorithms about pay about long-term service about vacation about sick about what is owed to people and that is not a problem that the people in this room have had had so I know that what's been going on on TV has not made you all feel really great about your jobs but I'm just proud to say that you know this proves that we don't have the problems that they have up the street so thank
you thank you Vice chair Burns thank you so oh oh manager so has a I know I normally don't but I just want to you all have raised the point and youve thanked staff for the great work this is a voluminous amount of work and thankful for our CFO for Crystal Lee but I would like to just read out the names of the other staff members that did a lot of the work so right they they do their pictures is on the front very good but yeah kenesia Brown Stefano Claude Carrie Carrie KS Yolanda dver who is a contractor with us Elana Jones Tanya Hernandez John Kenyan Tiffany long um Jose Rivera Jamila will Davis Joseph Fatima and most of all to our Deputy County Manager Miss Claudia Hager thank you so so much for all of the great thank you all so much for the great work and if I can just um say I don't
want to take any credit for this audit I really have to thank um chrysty for her leadership um and serving as interim CFO prior to my arrival and her continuing to lead this audit um as I was getting acclimated to durm County I want to thank her I want to thank my team and um the Departments as well because truly if we did not have the partnership of our departments and everybody in this room and their support we wouldn't be able to accomplish this thank you so much again and thank you for choosing Durham County to come be our CFO and I know you're being humble with your service on this audit but I look forward to you having control we not control oversight over the full next audit that I'm sure will also be sparkling clean thank you all so much again thank you to your old teams thank you with that now we will move uh to our boards and commission appointments with
attorney Massie uh yes ma'am for the Durham County women's commission you have appointed Amanda Gordon Redmond thank you so much thank you to everyone who applied to serve on their the dur wom commission uh congratulations Amanda for being selected and to the other ladies who applied we hope you'll look at the other boards and commissions we have plenty of vacancies uh on other boards and commissions for you to serve on as well that brings us to our close session items um the board is requested to adjourn into to close session for the following reasons first to one of the reasons to discuss matters relating to the location or expansion of Industries or other businesses in the area served by the public body including agreement on tentative list of Economic
11 A4 and and the other item is to consult with an attorney employed or retained by the public body in order to preserve the attorney client privilege between the attorney and the public body which privilege is hereby acknowledged to General statute 143-30570 we are any opposed we are in close session thank you everyone who joined us for the public portion of our
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