Board of Aldermen - Regular Meeting

June 29th, 2026 special board of Alderman meeting. Can we have a roll call please? You're still muted. There we go. Did you ask for me? I can't hear you. I'm here, though.

And then I'm here. I'm next. I'm here. And I'm here. I'm here. Present. Okay.

I'm here. Sharon Harder, Mike Myers. Everybody here? David Plufka, Sonny Sims, Michelle Goad. Is Jeff Gould?

Yeah, I'm here.

You're here. Okay. Everybody's here.

They're all present. We have all eight here. Okay. Next item is the agenda approval. Do we have any changes to the amendment or to the agenda? I'm assuming we don't. So any objection to approving? Same by acclamation. Seeing none, it's approved. Old business. We have one item and that's the fiscal year 2025 audit ending December 31st, 2024. And Michelle, are you again presenting on this?

Yeah, I'm going to take the lead. I'll start off just sort of saying that, sorry for the delay. There was one minor change between the draft, which you had seen, and then the final, which had come to be. And that would be on page 24, where we restated the beginning balance for Fund 40. And that's kind of taken place in the last two weeks. But the end result for FY 2025 is the same as it would be for 2025. So with Adam and his oversight and then the oversight committee, they had some questions in the last week or so about whether or not we would require a single audit. So that took a couple of days to continue to work itself out. And then in that, within that oversight committee, They continued to look at the grant funding that we had received and done single audits on three of them last year. And in that sort of determined that one of the entries associated with that in FY 2024 was misrepresented in 24 and needed to be corrected in 25. So that's sort of what we've been doing for like the last seven days. And why we sent the draft version on Friday and then finally sent the final version today. But those are the differences between your draft versions and your final versions. Did I explain that correctly, Adam? Are you comfortable with that?

I am. Yes.

So any immediate questions on that? I mean, there were no major changes to the general fund, to the capital improvements fund, to any of those other funding mechanisms. Like I said, there was a reinstatement to fund 40, and it had to do with the grant dollars and the allocation of grant dollars and how we accounted for those. And the end result for 25 was going to be the same. Any immediate questions?

Alderman Tice, just unmute yourself, please. Thanks.

So I guess I just want to ask, so I'll blame it on Mike because Mike's the newest one, but can you just either Michelle or Adam, just reiterate for everybody what a single audit is and when you do it, because there was a question of that in the last two weeks. And can you sort of clarify so that we're comfortable with what was decided?

Michelle, I can hop in there if that works for you.

Yes, I'll let you field that one, please.

Sure, sure. So a single audit is required for any entity that expends over a million dollars in federal funding in a given year. That was something that the city had last year and was subject to that single audit. And what that is, is our testing then of the city's compliance with federal grant requirements. So we did perform that testing last year. We did not miss anything within that testing. So even though we had a change here in terms of when certain revenue was reported, everything that was tested last year was fine. was done appropriately. There was nothing missed there in terms of that compliance testing. But we did want to make sure that we understood the cutoff of the grant revenue and expenditures just to make sure that the city did not also need another single audit meeting that million dollar threshold in the current year. And at the end of the day, it was not required for FY25. Does that help?

Yes, that helps. So then my question then, in what you just said, you said that nothing was missed in 2024. But what the material weakness that was noticed is that 2024 was overstated. So how can nothing be missed last year, but then it was... Overstated last year.

So, yep. Oh, that's a, that's an excellent question. And I should specify nothing was, I'm going to split it out into two. There's the single audit and then the financial audit. So as it relates to the single audit, which is the testing of the grant compliance, nothing was missed. It was all there. We, we performed our testing as need be. As it relates to the financial audit, this was an issue of the proper cutoff of this revenue. So as Michelle alluded to, when you get to the end of 2025, it's all fine. What happened is that there was this $1.794 million that was recognized as revenue. in 2024, but it technically should have been recognized in 2025 because of a wrinkle in governmental accounting. You wouldn't see this in a for-profit entity, but because of government accounting standards, the nature of the timing of when the money actually came in by the letter of the law, it should have been recognized in 25 as opposed to 24.

So we own it, like the city owns it. There are numbers, there are things, but is there a reason we weren't advised of this by CLA last year when we were, you know, because we over-reported last year. So there are numbers. I get that there are numbers and we definitely own them, but why did this come up now and not a year ago?

Yeah, simply put, we missed it. It's that simple. When we were performing our testing, we did not catch it last year. And when we were looking it over this year, we did catch it. And so, you know, we saw the error and we wanted to make sure it got corrected. And yeah, that's the simple answer, unfortunately.

Okay, well, great. Thanks, Adam. So just for so I'm chair of Ways and Means. So as we look to fix this going forward, I think Michelle had a suggestion in the internal control letter that laid out a procedure going forward that on grants, we would look back for an entire year as opposed to 60 days for revenue coming in the next year. Are you comfortable with that as we move forward? Or is there something else you would suggest for us to look at so that we implement the right thing so we don't have this issue going forward.

Yeah, I mean, that is certainly an option of the city, and it's really up to the city in terms of what it wants its revenue recognition policy to be for this, what we call availability of revenue, right? Is it cut off 60 days after year end? I would suggest 60 or 90 tend to be the most common that I see. However, you do see in certain circumstances that there is 180 days, you know, half a year, call it. And every so often, I don't see it as commonly, but you will see a year. And that is really maybe dependent on the nature of the funding. If there's a history of the state or the federal government that's not providing you timely the receipts that the city has earned, well, you can justify wanting to extend that availability date out to a year because realistically it is money you've already spent or incurred. So there is justification to say, well, we should be recognizing that as revenue because it covers our expenses we've already incurred. So certainly have that option.

Okay, that's great. That's helpful. Thank you. So just to sort of reconfirm that this wasn't a delay. This was just a delay. It was a timing of reporting issue. It wasn't a dollar. We got the dollar amount right. There was nothing misspent. It was just that it was recorded at the wrong time.

Correct. There was no missing money, no missing revenue as a whole. There was nothing that we came across that was non-compliant with federal grant requirements. It was a timing issue that technically it should have been in 25 and not in 24. Okay, great.

Thank you very much.

Great. Thank you. Anybody else? Any other questions? If not, we need a motion to approve or to accept the fiscal year audit report for 2025. So moved.

Second.

Any discussion? All those in favor, please indicate by saying aye.

Aye.

Any opposed? Motion carries. Thank you, everybody. Thank you for your willingness to join us so we can get this in before the end of June. There being no further business, we are adjourned. Everybody have a safe Fourth of July and hope to see you all Wednesday night down at the Brentwood Park.

Thank you. That was good. Thank you.

All right.