Audit Advisory Committee - Regular Meeting

But I did find out some sort of questions that

So we know that Chris is out and who else is out?

Oh, well, yeah. And then

Well, I'm happy to be sitting next

to Montana. Oh, so then

I think we got a new one. How long have

you been on the island?

Twenty fifteen originally, and we moved her full time time during or right after COVID Presentation, though.

Oh, okay. So we're gonna love that.

We are live now. We are

here since 2015. So it's been all right

Hot mics.

We were

Good morning, everybody. I'd like to call the the meeting, the Audit Advisory Committee meeting, to order. It's Wednesday, February 25, 2026. I appreciate everybody being here. And those who are able, stand, for the pledge of allegiance.

Could we do a roll call roll call if you would, Jill?

Member Fontana?

I believe he's not not here. President, but now I saw him on the screen. Okay.

Member Casholm?

Here.

Member Scherzinger?

Here.

Vice chair McPham?

Here.

Member Ritchie? Member Sommerfeld? Here. And chair Siegel?

Here. So we have two members of the committee missing, and we could take a vote to allow them to participate via video. Both Chris Risi and member Fontana. Does anyone want to make a motion to allow them to participate via video?

Motion.

Second. All in favor signify by saying aye. Aye. All opposed like sign. So they're allowed to participate via video. I appreciate that. First order of business is to approve the agenda of today's meeting. Has everyone had a chance to look at the agenda? And if so, I would entertain a motion to approve the agenda. So moved.

Second.

It's been moved and second. All in favor signify by saying aye. Aye. All opposed like sign. So the agenda as presented is approved. I would like to entertain a motion if everyone had a chance to look at the minutes from our 12/04/2025 meeting. If there's any corrections or additions to those minutes, you might bring it forward. If not, I'd entertain a motion to approve those minutes, if I could have a motion.

I move to approve. Second.

It's been moved and seconded to approve the audit advisory minutes of the 12/04/2025 meeting. All in favor signify by saying aye.

Aye.

All opposed, the like sign. So those those minutes are are approved.

Chair Siegel, could I suggest that we introduce our new committee member?

Absolutely. I was remiss in doing that. So thank you for alerting me. We're very pleased that we have a new committee member, Chris Scherzinger. And those of you who know Chris or have had a chance to read his resume know that in addition to the other talent that we have on this committee, he's gonna be a very welcome addition. So thank you for being here. Chris, do you wanna introduce yourself or say something? Don't wanna put you on the spot.

Sure. Could be brief, but thank you for having me. And thank you for to Councillor Henry for dominating me. I'm happy to be here. I've worked in business and not the public sector my whole career, like several of the other members of the committee. But I've been through an awful lot of audits. So I know my way around an audit, and I'm a big believer in creating a culture of transparency and a culture of financial savvy within organizations. And so I'm hoping that my participation here can help raise that with the city and, keep driving us forward because I feel like there's lot of great progress going on. So I'm happy to join.

Thank you. Welcome, Chris. And, I also wanna say, in addition to the committee members, we're honored to have some city council members attending the meeting with with us. Deborah Henry, got have Councillor Champagne, Chancellor Goeler, Stephen Gray, And we have two committee chairs here, Dolores Siegel and Elliot. So thank you all for attending this meeting, and we appreciate your attendance.

And any input you give us will be appreciated. I guess the most important old business that we can go into is talk about and update the progress of our audit because that's probably the most important issue facing us for the moment. And I'm very pleased that Chris Kessler from CLA has joined us today. And the audit, as everyone will be aware of, has been a challenge for us. We inherited some challenges, and Carol is working through that. And if Chris, if you would update us on where you're at with the audit, we appreciate that.

All right. Yes, good morning everyone. Happy to be here to give a report out on where we are from the 2025 financial statement audit. Overall, are, I'll just say night and day different from last year. Everyone is working well, everyone is working towards completion, everything is going very, very well from that standpoint.

Great collaboration between city staff and our audit team when we're finding questions, when we're finding things that need to be dug into and need to be looked into, we're getting immediate responses, we're getting good feedback, everything is transparent. When there's things that we're finding that maybe aren't correct, they're being dealt with very quickly. And we're being told, yes, that needs to be fixed, don't work on that, we'll get back to you on that and we'll fix this and move forward. We are finding some audit adjustments and I'll talk into that in a little bit. But those are being worked through quickly and efficiently so that it doesn't hold up the audit as we go through these things.

Generally, everyone at the city has been very, very responsive, real pleasure to work with. And we greatly appreciate the working relationship that we've built with Carol and her team throughout the process. So it's just overall things are going well from a day to day perspective on what we're doing. Now from timing perspective, things are going slower than we had originally talked about in the fall when we kind of laid out the initial timeline of where the audit is going to go. And I believe that those conversations back in the fall, if not then, at least in one on one conversations we had, we did think there was probably a reality that that was an aggressive timeline.

And given what the city was going through and given the staffing levels, some of that timeline may have been a challenge. That is showing to be true in what we're going through. So there's still some open items in what we are working through, a couple of areas that still need to be closed. Close of some of the books and the records were a little slower, I think, than everybody hoped or planned for to get the audit going. But everyone at the city is working hard to get that caught up and to get that on time.

But it is, I think, just a reality of where you all are given the scheme of things. So last week, we did talk with Carol and rest of management on submitting an extension with GFOA from threethirty one to April 30 just to give everybody ample amount of time to get things done correctly. And given all of the things on finance department's plate, having things done accurately becomes as important or more important than having things done quickly. You don't want to have things done and just find them to be wrong and then have more audit issues and more audit adjustments. So that is critical, is just making sure that there's ample time to work through these open areas, to work through the questions and to get everything reconciled and all the audit support to us so that we can do our work and complete what we're doing.

And with that timeline, and just as a reminder for everybody in here, the statutory deadline with the State of Florida, as everybody in every municipality, must be filed by June 30. The GFOA deadline, which is the Government Finance Officers Association, is six months after fiscal year end. So that's March 31 for our Florida governments. And you all are able to extend that month to month. And over the last couple of years, you have done that.

Last few years, have done that. Last year, that extended back through June. I think the year before, you filed in May and so on. So that is a common thing to get extended. Now, GFOA, part of the certificate of achievement that they are wanting you to accomplish in receiving that certificate is timely reporting.

But in your case, so when you file for that extension, they'll ask questions of why are you filing for this extension. And there's a variety of dropdowns and there's another that you can put in there. But one of the most common ones that we see is staff levels, turnover, things along those lines. GFOA is okay with that. What they don't want to happen is for you all to say, We have staffing issues or turnover for ten years, and then them say, Well, why are you not addressing this?

Then they may start questioning that long term. But there shouldn't be a risk, and that's why it's important that when you go and file that extension, you're doing it not on March 30. For March 31, you're doing it today. So there's ample amount of time to talk through GFOA if they do ask questions on that. So there shouldn't be any concern given everything going on from that standpoint.

But as long as the June 30 deadline is met, that is the critical deadline to not end up on any sort of list at the state level. So you all are in good shape there. The main reason for things, and I kind of alluded to this, I mean, the finance department is short staffed and needs some help at the end of the day. And there's open positions that are working to be filled. But there's a lot on particularly Carol's plate on getting things done.

As we look through processes and we look through procedures, you're missing a controller. So one thing that we see during the audit process is we're looking at the narratives and we're looking at internal controls and there are so many things that the controller would normally be doing and the reality is you can't do those things. So you're having to do things outside of your policies and procedures. You're having to be nimble in getting the transactions reviewed, approved, and the accounting records updated. But ultimately, what it's also creating is one person having a lot of responsibility for a lot of things.

So I know no one wants that situation, but that also is a reality that you all are faced with by having some of those gaps in the headcount that could create future problems for you down the line. Because that ultimately, when you look back at some of the findings last year, that was a lot of the root cause was that there was a single individual that was responsible for preparation and review of key transactions or key processes. And so you're the difference then and now is that that was, I'd say, I don't want say it was intentional, but there was a no one was trying to change that in prior. Now the environment is, hey, we have to do this because we have no other choices. But from your standpoint as an audit committee, I think that's one thing for you all to continue monitoring is just making sure that there's progress on that and that continues to be alleviated going forward.

And so as we've gone through these things, we have also spent a lot of time in, I'd say, just helping and answering questions. That's what we're here to do, right? There's never a point where we just say, go figure it out and come back to us when this is done. We are here to help and we're here to answer those questions. And everyone in the finance department has been wonderful at asking those questions, whether it's on specific audit requests or how to do a transaction or how to document things in accordance with GAAP or to figure out why something was a certain way last year.

Everyone has been great in doing that because a lot of what we've seen and the team at Citi here will probably share some of these insights as well. There were corrections that were made during the audit process last year that probably didn't get updated correctly within your own internal documents. We may have gotten those things got into the financial statements, whether it was a topside adjustment to the Excel and the financial statements or something that was done in a spreadsheet, but then it wasn't booked into the ledger or vice versa. Maybe it was booked in the ledger and then the supporting spreadsheets and reconciliations weren't updated as things were going through. So there are a lot of gaps and there are lot of holes and a lot of questions kind of trying to follow the breadcrumbs from last year and those things.

Now the good news is we have all that, right? In our audit file, we can answer a lot of those questions and say, Well, this is what we got and fill some of those holes. But that's also a reality too that the finance department is playing with part of a deck in some of these things, I would say, as you kind of go through these things. So we have been doing a lot of that. We have talked with management on some of that time that we've been incurring in doing those things.

And so there is going to be some excess time that comes out of this from what we'll call consulting time that we are putting in here of just helping and advising and being available to answer questions and guide them as we go through. So we're putting that together and we're working through that with management on what that looks like. There's a fine line from our perspective of what is just answering day to day questions as an audit process versus digging in and really spending a lot of significant time. So we're trying not to just, I'll call it nickel and dime on every single phone call that we get. But there are some things where we are spending some heavy time on and getting through and helping the city on those things.

So we are going to be putting that together in probably about a week or so and getting some of those numbers preliminarily put together. From an estimate standpoint, it's probably going be somewhere around 5,000 to $7,005 right now $5,000 to $7,500 of time right now as we go through some of these things. So again, just estimates right now, but we'll talk through. I don't want to commit to a final number, but I want to have everybody aware of kind of where that is with things at this point. As we talk through some of the things we've found and really what goes in the report, so we have noted a couple audit adjustments that are material.

And these are things related to, right now, I'll call them paper adjustments. It's not cash went out the door incorrectly or something is missing or something was accounted for incorrectly on a day to day basis. A lot of these are year end adjustments to get your financial statements on accordance with GAAP. So we talk about accounts payable of expenses that were incurred related to twenty twenty five services or goods paid in 2026 because you got the invoice after September 30. They have to go back and accrue an accounts payable amount for.

And they're related a lot of times. We see these in capital projects. And unfortunately, projects sometimes have very large dollar amounts. It's not just a small cell phone bill or something along those lines that come through. So they do end up being material. And so we do have to, when we make these audit adjustments, assess what's the materiality level even though they're fixed, right? These are audit adjustments that are in your numbers, in the financial statements. But because we find them as auditors, it's an audit adjustment and it's a deficiency in internal control, so it ends up as audit finding, if you will. And when it's material, it has to be a material weakness. So we are going to have that.

There are some other adjustments. So when we talk about our findings, unless there's something, I'd say, that's unique or something very, very specific, when we're making these adjustments to payables and receivables and various other cutoff items and we have a lot of these adjustments, we'll put it under one finding for audit adjustments. So we talk about the accounts payable. There may be other things that we note and get corrected as we walk through, finish the rest of our procedures that may end up in that bucket too as we correct things. But those are some of the things that we see today.

Those are really easy for us to make a determination on because it's black and white. It's material. It's an audit adjustment I can say with pretty 100% certainty. This is a finding. So we have that going on. Some of the other things we do is we talk about the status of prior year findings and really what's been done on putting corrective action in place and really what that looks like. And so you all did spend a lot of time going through processes, procedures, updating policies and things along those lines. But you did that when you had a controller and then your controller left. And so it kind of comes back to what we were saying before is that you do have some things in place that are not being followed as your policy is saying. It's not an intent of anyone at the end of the day to circumvent a process.

You just don't have the right personnel in the seats to do these roles. So you're having to pivot and do things differently. Best case scenario, you're updating your policies and procedures to reflect what is happening in the moment. I understand that that can be challenging when there's 1,000 things on your plates that you're dealing with on a day to day basis that updating policy can be the bottom of the priority list. But from an audit perspective, those are still some things we're seeing.

And it does what I mentioned before, it does result in a segregation of duties issue where you don't have enough separation of preparation and review and approval on all these things that can cause problems down the line. I tell you that with perspective that there are a lot of clients out there that just operate with segregations of duties issues. Now we will comment on it every year, results in a higher risk in what we are looking at. But there are some organizations out there that just say, we are limited in the personnel that we can hire and this is just the decision that we've made and we're going to live with this. That's obviously the choice for the city to make in what they do.

But there is I don't want say it's common, but there are instances where those things do happen within governmental organizations just due to the nature of the structure and budget levels, headcount levels, things along those lines. The other piece as it relates to some of those processes and controls that Carol and her team are seeing, when you look at a finance department and year end close, I mean you can get down to monthly close, quarter close, whatever level, but at a minimum year end close where we're looking at this, every balance sheet account, every account should be reconciled just to to a degree. Right? You should know what is in those accounts and and be clearing clearing up things that that maybe are old, you know, no longer valid or just you don't know what they are. You know, they've been sitting accounts for years.

And so that is one thing that I know we've heard it from the team at the city and we are seeing it as well, that that's not happening. And so that creates we talk about the audit timeline and we talk about some of these things that we're finding. That does create, I'll call it delays. Right? Because when you're going through and we may ask a question and say, what is this? And then you got to dig in and figure it out because it's not being reconciled. Or we find adjustments. And we talk about materiality and things along those lines. But we may see something and say this doesn't impact the audit because it's not material. But we're typically going to work with the team to say, hey, this doesn't look like it makes sense.

You don't need to fix this right now, but we don't think this is valid. And so you're going to want to flag this or you're just going to want to write it off and just put it through the current year revenue and expenses. It's not material. It won't impact your financial statement. So a lot of that is also happening at the same time. And I know Carol and her team are also working on those things in the background. But you are where you are for this year, right? This is not a we're not going to stop the audit and say reconcile everything. Like we're working through all these things together. But that's something as start talking about priorities for once the audit is complete.

I would put that on some sort of action item list to say, hey, this is something that needs to start being worked through. What's our process on these things? And kind of determine what's the what does success look like? Is it everything next year? Is it 50%? Is it 75%? Really making sure that you're gauging what that continual improvement looks like from that perspective. So those are the of the run through of where we are. But I do want to stress just things have been going much, much smoother than last year. I know we talked through some challenges.

I know we talked through some timing concerns, not concerns, just delays from where we were. But you all are not in a position where things are getting close to any sort of regulatory deadline, where there should be a concern at this point or any of these findings and issues being something that pops on anybody's radar and says, hey, we need to from a state level or federal level that says we're going start digging in on these things. The audit adjustments, just as some additional context, I'd say maybe 50% of our clients have something like that on any given year. It's just the nature of accounts payable coming in from a lot of decentralized departments and different groups and things just getting missed in the process. So not to say you want these, but just if it's any solace.

They do happen more often than not. It's usually pretty explainable into what 's going on. So with that said, that was the conclusion of my prepared comments and rundown. But I'd love to answer questions, talk through anything, dialogue on anything else the committee has.

Thank you, Chris, that presentation. Does anyone have any questions for I say, Elena, light is on? I

am going to bet that Terry.

Terry, you want to? My light is on. Both of your lights are on.

You want

Terry, you wanna go first? Yeah.

You go first, Terry.

Question about the controller. Where are we with the controller, Carol?

We did have a candidate. The candidate is no longer in in the process. Okay. We are working with CLA, not with Chris, but we're going to be speaking with somebody. They have a recruiting arm to see if we can get somebody in, but we also did we took the posting down. We're looking for a strong senior accountant too that maybe could grow into the controller role. So we're trying to get somebody in house that has some more expertise Yeah. So we can address the what we call I call it dual control, segregation of duties, have the preparation and review, and start working on some of the cleanup. So short order, we're trying to get another strong accountant in, and we're continuing the search for the controller. But we're looking through other avenues.

So Chris has coordinated with people in his company to help us, but we have to be very careful. Have to keep it at arm's length. So I'll be working

Well, and that was was going to be a suggestion is looking at a recruiter to do some finding because we've how long have we been without?

About a week and a half after I started. So

Has nothing to do with you,

I'm sure. Well, I don't know. I took it personally. No. I I did not.

But yeah. How how many FTEs are you down aside from the controller?

The it's The FTE for the existing staffing model, when I came in, it would have been the controller. But we do need, given the volume that comes through, my proposal was going to bring in another accountant because we do need to fill the gap for some of the specialized accounting related to grants, related to we're looking at anything we do with any bonds, what we do with the STRP financing and some of the new leasing. So we need more of a technical accountant to come in and work with the controller. So we were going to increase by one. We're down one based on the static head count, which I and we want to increase by one for an accountant.

Okay. Well, we, I think, had one probably about three years ago that was cut. So I don't think it's would be too surprising that you need that person. I have a question for Chris. You made comment about finding some deficiencies, And you said, we won't dig in we won't be digging into those. We'll them. So the dig in part, is there anything that the audit committee can do? And I guess the question is to Carol, but maybe to you too, to be able to assist with the dig in, to look at some things more in-depth, to be able to help move this forward?

What what they're finding is not material, and most of it is balance sheet cleanup. So it just is getting a strong accountant in that can really just go through, trace a transaction through and determine the appropriate treatment. Should it have Was there a transaction that didn't clear properly? So it's really getting somebody to come in and really dig into the transaction detail to determine what the fix is. And you have to balance it with the cost of doing that versus, you know, do you do you just write it off? Right now, it's been pretty easy to trace the things through. It's just finding the time. So just getting the talent in to do it.

Sounds tedious. Those are all my questions.

Why don't you your lights on?

Yeah. Just so from a mechanical or from a tactical perspective from a calendar So now we're aiming for April 30, which means that the March the anticipated March meeting, without putting words in your mouth, might not be as productive since that was our we had anticipated reviewing like a a draft of the audit report. So does that mean that we should plan to move that out by approximately thirty days? Because I think we had

Yeah. To do to for that tactical purpose of review preliminary drafts of our reports and preliminary audit results, yes. Now where we sit here today, it's going to depend on how quickly some of these things do get to us to see where we are by mid March, March standpoint. But I would just assume we're not going to be to that point yet by mid to late March to be able to say here are our draft reports even if we're at that point.

All right. I'll wrap up then, I am with just the the notation then that I think Martin will have to look at April dates very quickly while we're still here in session to since we'll shift some things. And we do wanna be productive, but also set the expectation that if you see something, you know, if something develops in early March, I guess sort of reiterating how we've evolved the culture here. I guess at that point, Chairman Siegel would likely be part of the process of saying, okay, let's assess if we need to reconvene the committee earlier to dig into any details at that point.

Thank you, Elena. My thought is that

What would you like to

We we we probably we probably not gonna have a draft copy till the April, which is gonna make the May meeting much more productive. But I do believe that it would not hurt if we did meet anyway. Just on the seventeenth. Just meet anyway. Just for even though it might be a very short meeting, just to update

Great idea.

Exactly where where we're at with it. So we keep the process going forward.

And we have another arm and that is looking at financials. Mhmm.

So maybe the important

part of that meeting is reviewing financials. I think that's a good catch.

But we probably won't have a draft copy at least until the May meeting. So but I don't think we can have enough meetings to make sure that the process goes forward. I would stay with the March 17 if it's okay with the committee.

Question for Carol. On finance reports, I know you recently submitted and presented to the council a first quarter report. Are you anticipating doing monthly reports to the council? I know that's a loaded question when you don't have staff.

Right. No, was anticipating doing a quarterly report and update. So we finish in March. So we would be doing something late April, May depending upon where what time how much time the audit takes of my time. So it's we're still on a quarterly cadence.

Is it pretty similar to the of the report that we got this quarter? Is it prior to you where they're providing that to the city council, something similar or

is financial update?

Yes.

This this is new. We used to be it is a the one pager that I I gave you when I first started was the quarterly update that went out to the council, which just highlighted the general fund and some of the larger funds within water and

sewer.

So this is a new report that you created?

It's a new report. I wouldn't call it a report. It's it's it was a compilation of, you know, what's going on with fund balances, where we stand versus the budget on the p and l side. But yes, that's the first time in a while I believe that a financial update was provided to the council.

Okay. Yes, very complete. I have a couple of questions for Chris. Go While we have you, thanks for being here. So you say it's night and day in terms of, I don't know, maybe just cooperation in that.

But when we some of the comments that you have here, it sounds like there's not a dramatic improvement and primarily it's because of lack of control or etcetera. So when you're saying, you know, I remember having our conversation when we first met, they had about a 140 audit adjustments and you said, it's a lot, there's no reconciliation. Is that still gonna are we are are we gonna see a lot of the same things that we saw last year in terms of still having issues?

Yes. I am not expecting 140 audit adjustments because the team at the city had that list as part of what they were chipping down on and saying, Okay, we know these things needed to get done and corrected. But there will still be things like that that we are seeing along the way. I guess where say that the night and day difference is that when we are finding these things, we're finding them together in a lot of situations as opposed to us thinking something's wrong, asking the question. And then two months later, we say, hey, this is hair on fire kind of event that if you're going to hit your deadline, you need to answer this question.

And then it becomes a scramble to figure out. That's the kind of thing that's not happening this year. It's being addressed in the moment and figured out together so we can get to the right answer on these things.

Okay. And then in terms of the consulting and it's basically you're saying that some of the work and reconciliations that were done by you were not embedded into the book, financial statement or into the general ledger. Is that correct? You said we're playing like not a full deck.

Some of that is I'd put that more on that or some of the challenges that Carol and her team are dealing with right now in getting things done. So it's feeding into a lot of questions on our team of how do we account for this or what do we do, how do we navigate some of these things. One great example on this, there's a various particular accounting standard, GASB 96, which you all have to record liabilities for long term subscriptions in licensing and subscription arrangements. And that was one of our comments last year that we had made was that you all don't have a process on those things. You all are not documenting anything in your assessment of this.

And so we had to do a lot of test work because when there's nothing documented, we have to get comfortable with it. Well, we have these conversations this year and the city has, you know, realized and acknowledged, oh, we weren't doing anything on this after all. There is no documentation even though it may have been verbally communicated to us that it was done but just not documented. We're finding out that it's not really done.

Now how material is that in terms of what types of transactions would those be?

Well, we're figuring that out possibly right now. Generally speaking, those don't end up being a lot of material liabilities, but you have to assess for it. You talk about completeness of something. You look at a liability, it's maybe what's not there that should be there. Think of something like your ERP if you are licensing it and you're in a five year agreement on that.

Think of the Microsoft three sixty five suite, Something along those lines where it is an information technology subscription or license that you are in a long term agreement on that represents an obligation that needs to be a liability. So some of those things could be large. Generally across governments, we're finding that there may be things out there that maybe in aggregate it's material, but individually you may have a two year subscription to some sort of GIS modeling software or something along those lines at $10,000 a year. Those don't add up to be material software transactions, but the assessments have to be done. So a lot of those conversations that are happening of just help us understand the right way to do these things because that's where the gaps are being found.

And and we have started the assessment. So we once we realized that so it's documented. So we've gone through. It's out with the people, the teams that have these contracts to review them so that we can understand what's a short term versus long term and get the impact to the liabilities on the balance sheet.

Great. Daniel, is that the end of your questions?

Think I appreciate that and it's great to see that we're working well with our auditor and with the city that you're playing nice. And but I mean, for the city council members that are here, it sounds like when you do get it, there's still gonna be some issues, obviously. So it's a work I guess the the best way so there's no surprises, it sounds like you're going to get some improvement but not dramatic. It's not going to be new daylight.

Yes. And at one of the presentations last year and at least a handful of conversations, we also talked about what findings mean and what it takes to resolve corrective action. And the reality is when you are getting a finding and a material weakness in an audit report that's issued in June, you're already nine months into the next fiscal year. Your ability to put corrective action in place is you're talking about, you know, that point, the next year after that before things maybe even clear up. So generally speaking, when there's audit findings outside of just a common mistake in, like, an accounts payable or some of these things, you're going to have at least a two year runway for these things to get cleared up.

There's not a yes, if you put all your energy and everything into fixing it, maybe you could get there. But the reality is you still had nine months of transactions that were potentially under the deficient internal controls that are in there. So the thing for the committee and for counsel to really look at on these, it's not do the findings completely disappear, it's that is there improvement and the posture different in trying to make sure these things are resolved with an actual plan to get these off of the audit eventually on some sort of runway period. So when I say it's better, is much, much better. But there's a reality that the findings will continue as you all continue to work through these things.

And when you get those findings, management puts a corrective action in there. That's a required response in the state of Florida, required response in our government auditing standards. That's the critical piece of that for that to be fully transparent and acknowledging what is happening and what is being done. So when you have that corrective action, if you go in there and you say, we're going to fix this tomorrow, February 26, okay, that's not going to happen and that's not realistic. Your regulatory agencies, your granting agencies, everyone that's looking at that is going say, There's not care and effort being put into these findings.

If you respond to that and say, we're going to have these addressed by September 30, I don't know, 2026, 2027, whatever that realistically looks like, and you're building a plan to do it, that's the critical piece on that. And that's what's more important than the finding itself.

One last one last thing. One more thing. Columbo. How about the grant? That was a big big part of it. The the grant accounting is that what is the process or the progress that we've made there?

We're still working through that in the audit right now. So we're not at a point where we've gone through that or anything. I mean there are some things that we are working through with the team. So there may still be some audit adjustments and things like that that are coming out of that. We haven't gone too far down the line of getting into the compliance and some of those things yet because we are still trying to get a good population number of what it looks like, things along those lines before we start detail testing any of that.

So I think you're going to see that there's some improvement because just some of the basic accounting under GASB 33 is now embedded in what the city is doing. But there are still some things that I think we're going to be working through as we go through this. But and I'll keep the committee updated as we continue down that line because I know that's a hot topic.

Chris, thank you.

Just a couple of quick ones. One is you mentioned the extension from threethirty one to April 30. Has that extension been filed for already? It seemed like there was a component of that where the timeliness of the filing impacted how that would be perceived by GFOA. And I'm not sure who has to approve that, but has it been done yet? And what is required to be done to get that executed?

That's something that management files on that. So I can't speak for if it's

been done.

Just met with Chris on Friday, so we'll be doing that shortly.

Okay. And the staff is empowered to do that on your own without any engagement from the council, etcetera?

No, will discuss it with the city manager, but she is aligned with Great. The

And then second question, just coming back to the material audit adjustments that we're trending toward around payables. Chris, would you view this as largely timing issues, timing of transactions and when we're realizing a payables transaction? Or are there more fundamental accounting issues around the accuracy of the accounting or the understanding of the accounting standards that have to be applied in an instance? Do you have a point of view on that yet? Is it too early?

I would say it's not timing. In government, when you all have the number of vendors that you do, some vendors are just late in submitting, especially in the capital side on those Now construction you can improve that. You can put some policies in place within your departments to say, hey, you know what's coming, you know what projects are out there, bird dog them for the bills so that we can get these in by December 1 so we can have it in our close. But the reality is there's always those stragglers that come through. So the key on that is building policies and procedures of what you're going to do.

Most governments, most of our clients put some sort of process in place to say, okay, we're going to close the books for audit on December 1. So we can start the audit on January 1. But we are going to keep a spreadsheet of what comes in beyond that close so that if we have to book a journal entry after the fact, we're tracking it and knowing it. And that's not an audit adjustment on our end. It's the management's tracking it, management's determining it. And that's usually a collaborative process where we get to a point and we say, here's what we've accumulated. Is it material or not? Because then we'll say, no, you don't need to book it. Let's not open up the books. Or yes, that is material.

We need to get that reflected in the financial statement. So that process is critical to getting that That in kind of thing is one of those areas where we talk about improving processes and procedures. That's something that needs to get built in. But it also is from what we've seen in some of the conversations, some of it's just an error due to a lack of time to go through these things with the diligence necessary on some of these things. So things do get missed when you're pulled in a lot of different directions and people are kind of handling multiple roles on stuff.

So the general practice now, maybe this is more of a question for you Carol. The general practice now is that we would use the invoice coming in from a supplier to trigger the accounting work as opposed to an estimate from that department manager saying, there's a charge coming, but we haven't been invoiced yet.

So the stated process for invoices received after our cutoff date is that we are supposed to be notified that it's coming in so that we can keep a scorecard.

Keep Right.

Used to keeping a score sheet so that we can determine whether we should accrue because we go to a modified accrual basis at the end of the year. This one got missed. There were a few that came in before we actually closed the book and started the audit where, you know, we did pay them in '26, but we did accrue them. They may not have been material, but we saw them. They were dated for September, so we decided we hadn't closed the books yet to to book the accrual. So the process has been communicated to the directors. We sat in the meetings and said, hey. This is the cutoff. It was closer to the October. Anything coming in after that, if you know about it, let us know so that we can make the determination. It'll get paid with 26 funds, but we need to make the determination. This invoice just it did not did not get caught.

Okay.

So there is a process, but there was it it just did not this one did not get caught. So in the last director's meeting, we went through the process again. It'll be reiterated at year end, and we will continue to keep a scorecard. And given that the testing volume that they did, finding one, I'm not surprised. Coming from a past life, it's just unfortunate that it was material.

Understood. And then just very last one, last quick one is on staffing issue for the controller or possibly changing course to a senior accountant, that tactic. The first part of my question is, have you contemplated going to find a temporary solution? So someone a contract finance professional, I've used them a million times in my past, you probably have the budget for it because you have an open headcount. Is that useful at all, even if only for some of the small cleanup activities and not for the big process oriented activities?

Correct. That is is one thing we'll be talking to Chris's colleague this week, actually probably early next week, about is that I'm open to attempt perm.

Yeah.

That works out well on both sides to bring somebody in. They can try us out. We can take them for a test run, see how it goes. But, yes, we are open to bringing in temporary help while we try to source the full temp

be a a retired controller somewhere on the island.

I would hope so. Would hope so.

Thank you very much.

Terry, you had your light on?

Yes. I wanted to make a statement. I think that the audit is being conducted on fiscal year twenty five And we all knew that there wasn't much change in process in fiscal year twenty five. And we really didn't understand or find out all of these problems until the fiscal year was over. So I don't think that anyone's surprised that we're seeing the same kind of behaviors.

The hope is, as you mentioned, improvement and that fiscal year twenty six is going to be significantly better. The question I have along with that though, Chris, you mentioned long term agreements and not having evidence of assessment. Are you seeing other things with other contracts? Are you looking very deeply at the contractual process?

I guess as it relates to that, not particularly. We do, do some walk throughs of the internal control processes of procurement of making sure that bids are bid in accordance with the policy, competitive bids are reviewed, approved, scored, communications go out. We do, do walkthroughs over that, but we're not doing any sort of assessment on should this have been a five year term or a three year term or efficiencies or things like that.

I think of that as I think of grants and the some of the deficiencies we had there. There are a lot of similarities in contracting with vendors and it may be something that the audit committee can look at given that you're not looking at it as a part of the audit in any depth. So just a suggestion.

And wait on one last question.

One statement, one question. Terry, as usual, was in my head. And that's okay under Sunshine Laws because we it's not because we've talked. But I started drawing out a timeline here on the back of a sheet of paper. And I think what that did is it really did. And maybe that's something when we talk about the presentation for on 03/16 to city council is where where are we? Right? We're here. This is not that it's not an excuse, but I think it gives visibility to it's really a two year recovery process, but it isn't like people wake up and start recovering on two year. There's a we're making progress.

We need to keep making progress. The hard work's underway. We got a lot of work ahead of us. And so that it puts it into important perspective because people forget. We all move on to other things. So there and then IT systems controls. Obviously, we're very sensitive to the public nature of our discussion here. Is there anything we should be aware of on that?

So that is still in process

Okay.

In the side of things. I will tell you that we did get very thorough updates on some of the things that we noted last year as potential gaps and that gets fed into our process of what our team is doing. But our IT group is still work through that and has not concluded their

work. Right.

Thank you. So thank you everybody for the questions. My night and day comment is the fact that in the previous year, we didn't have a meeting like this. And the audit results came out and it was a big surprise. So I think what we're doing today and the meetings that we're scheduling to have to walk through this the audit is being as transparent as we possibly can.

So there's no big surprise at the end the audits. And so I'm very pleased with what we're doing today and scheduled meeting going forward. And also, Chris, I I really appreciate the work that you and your staff, Rob and Grace, have been doing and not only doing the audit, but acting somewhat as an adviser and in an advisory capacity to Carol, and it's above and beyond. So I appreciate you doing that. I'm glad to have you as part of working with us.

So thank you very much for coming today and doing that. And, just to expand on Carol, she's got she's wear Carol's like wearing two or three hats, which is not an ideal thing. So, we desperately do need to have a good accountant come join us, and we definitely need to find and replace the position that's been open for several months for the controller. So appreciate the hard work you're doing, Carol. It's really great to to have you with us here today. So

Chairman Siegel, could I ask a question?

Certainly. Certainly.

This is Tom Fontana. I don't know if you see me on the monitor or not. Okay. Question for Chris. Can you all hear me?

Yes. Yeah. Sure. Go ahead.

So it's a question for Chris. You mentioned accrual when you look at accruals. And the and the audit states that we accrue for items over their expected life so that we have funds available when they are fully depreciated. Any any criticism on us? I mean, I I'm looking at, you know, major infrastructure issues like bridges and roadways and water plants. And it seems like we're coming up short. So are we not accruing enough? Is that something that you look at?

So with with with the accruals in the in the accounting, you're accruing for potential future expenditures that you either estimate or would potentially need to make. In the accounting rules, you're only accruing for things that are expenditures in the fiscal year. So the goods or the service had to occur in 2025 for it to represent a liability. Now there could be potential loss contingencies and things like that if there's litigation or things like that that you may be subsequently accruing for. But in the accounting, for something like a future capital commitment or some sort of future capital expenditure that you're planning for, you wouldn't accrue for that in your liabilities because it hasn't been incurred or obligated at that point in time because no work has been done.

What you would do in that case though, if you do so let's say you said, hey, we're at the end of the year, we're gonna put $10,000,000 towards capital renewal replacement, whatever that look like. That would be something that you would do within your fund balance as opposed to a liability, and you would commit or assign your fund balance to capital projects or infrastructure or whatever that would be. So it wouldn't sit as a liability, but you would be earmarking kind of similar functionality, you'd be earmarking those funds within your reserves to say, this is where we have, say, planned and and, you know, committed down the line to spend those dollars on capital information. So that's something that, you know, really has to be done. You know, management has an ability to assign things, and I'm getting way into the weeds on the accounting rules, so apologies.

But management has an ability to assign things. What assignment means, it's a very low level of commitment. Right? When you go through it, has the ability to do that, but they also have the ability to pull it out if they wanted to. Commitment, when you look at the financial statements, commitment is an act of counsel where it is being committed and much harder to pull that commitment of funds out of that purpose.

That is the highest level of earmarking that you can do with your fund balance and that commitment level beyond restriction. And restriction can only be done by an external party or law or statute. So sorry to have a long winded answer to that question, but you wouldn't have that as a balance sheet liability. But if you were to do something like that, it would typically go down in your fund balance at the end of the year.

Very good. So moving on to the agenda and corrective action plan is something that we've already just about talked about as you're going through the audit process. So I don't know that you need to expand any more on that unless you want to Carol.

I I just wanna say that every effort is being made to follow the corrective action plan. We have a few, as I would say, headwinds in in moving things forward. We are you know, we're following the the plan, and we're actually leveraging this audit to help see sort of a a of a bellwether to see how much more how we can improve improve the what's going on in the department. So it's front and center in everything that we do because it's it's what we're it's our primary focus right now because it does tie into the health of the financials, not the health not the financial health of the city, but the health of the financials and the results of the audit.

And would you kind of tell us briefly how how you're handling the grant accounting process?

Well, we lost our grant accountant this year. The a of the activity recently has been in the FEMA grants process. And as I mentioned in a prior audit committee meeting, we've enlisted Chief Byrne because he used to be the FEMA grant coordinator for the city, and he's very well in tune in keeping us and keeping me informed of what I need to do to hit some of the deadlines and the requests. And, we actually have a person on his team, Kelly, who is, a big help in in keeping us in compliance and moving things along with the request from FEMA. I am so grateful we didn't have any disasters or emergencies this season for that.

So it's allowing me to get my feet wet on this and keep things moving. So it's really baby steps from my side, but having chief Byrne here has just been phenomenal with Kelly.

Thank you very much. Tom, Montana, are you still with us online?

I am. Yes.

And you you were going to give us some sort of update on IT. I'm not sure what you had in mind.

Yeah. Sure. I I had said at the last meeting that I would meet with with Jose Duran, and I did. And we spent a few hours together. Hopefully, the cybersecurity issues raised in the audit will no longer exist. I spent some time particularly looking at the disaster recovery plan. It wasn't done, I guess, at the time of the last audit, but it had been done. And I I thought it was pretty credible plan. And I also looked at the soccer reports, the system and organizational internal controls reports submitted to us from Tyler Munis, which did not exist. We didn't have in our presence.

I think they existed. We just didn't have them. And I know Tyler Munis is a pretty credible organization, and I think everything I reviewed with everything I was looking for was there. And so that was, I thought it was positive. I thought Jose, did a really good job, and and I was impressed. Great. Okay. So that would be the it on that. If you want, I can just give some observations on my review of the the the Doge submission.

Sure. Sure. Go go ahead.

So I I I looked at it, you know, and I'm not an analyst. I'm not a municipality analyst on the the private side. Nothing came strikingly out of line. I I did note that we provided Collier County population as opposed to Marco Island population. And and while the tran trends are similar, the populations are very different.

You know, both peaked in 2020. I assume that's because of COVID, and people were permitted to work remotely, and so more people came down south because it's more pleasant to be here, of course. Both then declined in 2021 as people had to get back to work. The difference was that Marco declined in 2021 eleven point six percent, where Collier County was only down 0.6%. Collier County also rebounded strongly and is up 6.1% since 2020, and Marco Island is up just 2.9% since 2020.

And we've yet to recover where we were in 2020. And if I look at the audit report, Marco Island population is down from ten years ago. Not a lot. Marco Island population is down 2.4% from where it was ten years ago. So our population is anemic growth, but still growing, but still hasn't come back to where it was.

And then if I look at the budget, the budget is up 25% over four years. So while nothing looks material year over year, if you look at it relative to population, budget is growing at a much rapid rate. And and I just question, it's four year 25% over the last four years, what will it be over the next four years and over the next four years after that? The other thing I noticed is that those requested unreserved or under reserved fund balance deficits. And I'm assuming that in one of these fund balances, we would have critical infrastructure, bridges, roadways, water plants.

I would think that would be included, but I could not find any men any mention of it. That's why I'd asked Chris about accruals, but his accruals are different than the long term accruals for, you know, critical infrastructure needs that we'll have in five, ten, fifteen years. So those are my observations of those. I think, again, nothing pops out population, budget, and then our own needs for bridges and funding and funding for roadways and funding for the water plant, we know about. Right?

These things will all have an expected life. And now that we that some of them are coming there, we're needing to borrow to meet those needs.

You for that, Tom. That's very interesting and very helpful. Appreciate you taking the time to do that. Anybody, we'll just move forward. At the last council meeting, Carol, gave the council an update on our first quarter financial results. And, I asked her if she would just give us not go into such depth that she did with the city council, but just a overall brief analysis of the first quarter financial results.

So if you have the presentation in front of you, I think the best page really to start on would be Page four, which just highlights gives a financial update, and it focuses on the revenue. And one of the topics of conversation, which was an education for me in the council meeting, was the ad valorem and where we stand with that. And, Seth, if you're out there listening, I believe your last name is Seth. I can't pronounce your last if I make a mistake pronouncing your last name, please, Golub, thank you very much because he got me to a great resource so that we can track it and see where it is. So it's such a pleasure.

So if you look, our budget for the year for the ad valorem is about $22,600,000 To date, we've received 21,600,000.0 and we have unpaid of about $1.5 So that's a total, if we 100% collect on everything, $23,100,000 scheduled to come in, which is slightly higher, about 400,000,000 and some change over the budget. So that's good news. And so I think we're on target. And as a result of that conversation, too, how we report and show the ad valorem because we estimate when we do the first quarter, I think we should just show the budget and do the analysis of where we stand on that so we don't create confusion. So we're tracking very well with that.

We also have a lot lot of things, and it's small dollars, but it adds up. And it's just nice to know what the revenue that's being brought in by other departments in the city and where it stands. So we went through that, and we just felt that, you know, it's it's pretty healthy. One area of interest was interest revenue. And, you know, when the budget was built, the rates were at a a certain level.

We've seen rates drop so that the anticipated budgeted revenue for the year for interest income will probably come in slightly lower if we see continued drop in the rates. If you look at our average balances in, let's say, the the DDAs and some of the investments, the balances are pretty much the same. But any interest that we receive from them is coming in at a slightly lower lower rate. So we'll be looking at that. One of the things I would and a wish and a hope and a prayer as we move through the year is that I'm used to seeing, okay, more of a here's the rates that we've earned versus the rates that we're paying.

I know we don't necessarily have an average balance sheet, but we can work through that. And not that it's a material line item, but as we go through and determine how we're going to finance things in the city, it's very important to understand the cost of those funds versus what we're generating on some of the assets we have, either sitting in investments or in the cash account, in the operating account. So we are looking pretty well against the budget right now. As I said, it's very hard though early in the year where our budget is straight lined or it's we have to straight line the budget for analysis. So I look like to look year over year and see trends, which is something that was requested as part of the meeting, maybe help to see the trends so that we can say we're on target, we see anomalies and adjust for onetime items.

But there wasn't anything really unusual in the results for Q1. But I'm open to any questions because it's very hard to know at what level of detail to go in for them. And as far as expenses, we are pretty much on target with the expenses, too. So we're hoping to not hoping, where everybody in the city is doing their best to meet the budget and understand what's coming through. Is a topic of conversation at the directors' meetings and where we stand.

Thank you, Carol. Yes, I have to comment that looking at these reports that you gave us first quarter, we look very healthy financially. Revenues exceeding plan and expenditures are below budget. So I think we're doing financially doing very well.

I just want to caution on the revenues exceeding plan. A lot of it is our revenues front loaded and our expenses come in. So a lot of people will say, look, we liquidity. There's a lot we're going to end up with cash at the end of the year. We're going to have more money going into the fund balance, and then you have your expenses come through later in the year. So watching the liquidity is important to make sure that we understand that the expenses can be met. And they will. I mean we're pretty healthy. We're hitting on all cylinders with the Adval Arm.

Chris, you have a question?

I have one question. Sorry, Terry. It's maybe more of a comment than a question. One of the things that has come up in prior meetings as I reviewed coming on board and Carol, you brought it up yourself early on in your tenure is the ability to build a budget on a twelve month projection versus a full year divided by 12 flat line budget process, I think would be really useful and would give us more insights this time of year every year into how we're tracking, whether on the revenue side or the expense side, but it would bring to life exactly what you're talking. So my question, I'm going frame this very carefully is, what would have to be true in particular relative to the staffing conversations we've had for you to be able to tackle that for the next fiscal year?

It would require a change across, not only the finance team, but the across the city because we're we plan the budget, we look at it, we say where we're to be from a year. Taking into account seasonality and looking at the baseline, which I would bring in my actuals and see how they trend, would be the way I would start. But we actually need the capability, the capacity, more the capacity to get that done in order to show that. And I also want to caution is that we are on a cash basis as we move through the year. So some of the things that I noticed that we were running underwriting budget this year versus last year could have been timing of an invoice coming in with some of the festivals.

But I still think you can get a better trend than taking and dividing by 12. You can get a feel for seasonality. You can see how it goes from an expense basis. My preference would be to budget by month. My ability to do that right now, we just don't have it with the team.

Yes. I think that's so just to soapbox briefly, as the new guy. I think if we are doing our job as a committee and then supporting the council and how they do their jobs, being able to staff Carol's department with the type of talent and resources that can tackle these things would enable us to be in a substantially better position, let's say, a year from now than we are today. If I think about the month of April, you're going to do a second quarter close, now you're going to be finishing the audit. It's a lot of work for a team that's understaffed. And so to do anything proactive for the future is very difficult to get ahead of the ball.

I would agree. And one of the things that I think that is is lacking because of that is that you don't you're so happy to get the number on a piece of paper, you don't do the analytics. You just don't have Right. That. So everything that's in here, sometimes they can go down deep. Sometimes it's at at a a higher level. And I think if you have continuity in the results and you can look at it over time and see the trending, it helps with the analysis versus having everything sort of just divided by 12.

Yes, you want to flash

you mentioned this before, you want a flash report that says the why, not just the observation of what happened, right? Yes. That's great.

Carrie, you're up.

Maybe feeding on to what Chris was talking about. When you create your report, do the department managers have a role in providing you with information regarding variances?

If we don't understand the variance, we do reach out to the directors. So especially with water sewer, I mentioned in the conversation with the council is that I rely on Jeff to, provide input as to what's going on.

But but I I think I'm looking at it a little bit differently that you were proactively going to the department when you see something that looks odd to you. What I'm proposing is that your reports go to the department managers. They review them as just a part of the process, and they proactively say, this is a this is why this looks funny.

When I was hired, that was a that is a goal. Okay. It's the timing of being able to get them the report and also to meet the timing of when the reports have to be submitted for the council. So it so if you keep backing it up, if you get the team in and, you know, I would actually align an accountant with a business line so that there's a constant conversation. And that way, you were not waiting till the report is published to send it out to them.

So that if you're looking at things on a monthly basis and you're trending, you should have that information as you move through the year so that when it comes time to produce the report, you have 95% of the explanation and you understand what's going on in the business. So I think it's very important that we have the staff to align with the directors and their team, the people that work for them to, yes, provide that and be more forward looking rather than

reactive.

But I I just have a sense that it's more time for you to chase the information from them rather than them being proactively looking at their own report since and trying to explain to you why they look the way they do.

Right. And in fairness to them, I mean, they're managing their business day to day, and we have not been able to put reporting in front of them.

Sure. Right. Then I have an an educational question probably for me. When when we have the budget and then we have the transfer of funds, and that obviously increases our budget number. Where is that transfer in dollars? Where are those transfer dollars coming from, And what triggers them to go into that particular line?

Are you talking about the transfer lines down below when we're looking at the budget document?

Well, the report that I'm looking at is general fund miscellaneous, for example. The budget was $170,000 The transfer in was 221,000 and some. And so the revised budget with transfers is 391,000. Where did the transfer money of 221,000 come from, and what triggered it to be put to raise that that budget?

So they come it's they're interfund transfers. So they come from fund to fund, and they as you go through the budget and I haven't been through a budget process here yet, so I'm I'm probably gonna misspeak on this one. Is that there is there is a schedule that shows what's driving the transfers and what's make what's funding them. I can send that to you so you can see the components of what makes up the transfer and where it's moving from and to for for that funding.

I I don't know how the rest of the committee feels, but maybe that's something that we all need a a little

it it's different each year. I mean, there are some that are standard, but the amounts may change, but there are some that I've noticed that rolled off over prior years. But I can give you the detail on the interfund transfers. But it is fund to fund.

Elena, final question? I

was just going to add on to the transfer. So unlike water and sewer, you get 47% of the revenues are transferred. Is that from the general fund to the water and sewer?

I honestly cannot speak to that right now. I'll be very blunt. I cannot speak to that unless I have it in front of me and have time to dig into it. I'm actually looking forward to going through this budget process so that I can be grounded in the numbers.

Well, I'll tell you which page it's on. It's on Page nine. There's like 47% of first quarter twenty six operating expense for water and sewer and is $4,000,000 are transfers or is that from water and sewer to the general fund? I don't know. Anyway.

I can I can definitely get you that detail? It's and it's all it should always be on budget unless there's a material change in in the assumptions. But I can I can provide you that detail?

Okay.

Oh, wait a minute. Go ahead.

So what I was gonna ask is in the spirit of collaboration, that we're trying to do daily act activities of daily living and participate in the in the audit on through your team. Is there anything that we can do as the committee to dig into areas in, like, for example, as Tom mentioned, around, you know, 25% increase in the budget, which we I believe we've all known about because I believe we've talked about that in in other settings, like the main the big drivers of that year over year over year so that we can help identify areas like so that you don't have to answer every single question. We might be able to help dig in and identify areas.

From a budget perspective, I think we should let the process start with the directors and what they put through, look at their baseline, see what they we need to look at there are several steps. But one thing we need to do is look at the capacity in the system for the city and what capacity we have in the budget next year, which means we need to understand what headwinds we have coming in from prior year commitments, what's rolling off from prior year commitments, how that looks in relation to the spending cap, what the priorities are as defined by the council for the city so that we can then see what we have capacity for growth in other areas and where we have the opportunity to shrink in areas. So I think that analysis has to be done by the city with the departments to start the budget process. If you're concerned about year over year growth, that would be a conversation I believe we'd have with the council once everything's been identified as to the direction of the plan, the capacity in the plan, and the priorities of the plan. But I start digging in until we have those foundational pieces done on it.

I But do want to go back to the transfer question. I'm sorry. Didn't realize you're looking at my schedule. I thought you were looking at the budget schedule. I can tell you they're identified. What drives them is the debt service transfer between the general fund and utilities on page 10. They're outlined there, but I can get you the detail behind those transfers.

Well, thank you everybody. I I I appreciate all the wonderful comments and questions. Very productive. Let let's move on to the the meeting schedule. We we talked about the March 17 as being our next meeting. And if if if everyone is agreeable to that, I would entertain a motion to approve that date to meet on March 17 at eleven a. M. Motion. And a All in favor of meeting on that date signify by saying aye. Aye.

All opposed, a like sign. So we'll meet again on March 17 for sure. And we we I guess the main topic of the on the agenda would be an update again on the on the audit. I think that's the most important thing we got going forward right right now. Chris, I don't expect you to travel over here again again for that meeting.

But if you're open on that date, if you can, you know, pop in on the telephone or, you know, video, if if you got that on your schedule, we'd appreciate that. Just I don't think that's gonna be a very long meeting, but I think we do need just touch base for that if that's if that's okay with everybody. And April, I we don't have anything scheduled for April. If chair seat. Okay. Yeah. Go ahead.

Go was gonna suggest explicitly that we, for right now, we that we insert a meeting for April under the presumption that the that we'll get approved for the g a f o GFAO GFOA, I'm gonna butcher that, filing at the April, which means that we would likely have something to react to in mid April, assuming everything continues as is?

Yes. And think it's worth playing out all the scenarios on this. When we start talking about just some of these things that we're talking through, we're all optimistic that we're going to be in great shape come mid April, but there might be a reality that we're rushing quickly towards the end given that there's just uncertainty as we sit here at the February. The only caution that I'll give is that if we we don't want to hold up the April 30 filing. So that might just be something that I don't know how you all navigate that to be nimble in that situation.

But if we're sitting here and we don't have everything closed down until mid April and then we're pushing those last two weeks to get it through, there may be a reality that things are going to have to move very, very, very quickly on that standpoint. Now could you extend it to May and just say, hey, we're just going to extend until we get approvals? I wouldn't recommend that. Example, GFOA is watching this meeting right now. They may not approve your April extension if you're just doing it just for approval to get it out the door.

So that's just something that as we figure this out, given that where we are and given that things are moving just in different schedule than was planned, it it is going to be potentially chaotic at the end. And so we don't wanna have a meeting being a a holdup. So

Good point. Yep. In that spirit, though, could we put one on the calendar? Yeah. And then in mid March, we'll know how we're how we're working on that.

Also, then it would be ideal that we're not filing something with GFOA, the people. So that deadline. It would be ideal that we don't file in a situation where where we don't have awareness of what's being filed. So that in March, we should be able to calibrate how we're looking, how quickly do we need to move to get to hit the deadline so that we are not hold up. So that means that we have to we'll work through the the requirements of the city of how many of us need to be sitting here, panties in chairs versus on the video.

I think I think you'd have our commitment that we'd move very quickly. We read fast. We do.

So I'm looking at the calendar. April 15. We have to check with Martin because some he seems to have control over the the meeting space and the and the timing. Is Martin still around?

He's in the room.

Or maybe a week later.

We can do the fifteenth or the twenty second. I'm just looking at Wednesday since today's a Wednesday. Martin,

we need to what's the avail The

'20

The twenty first? First. What time is available on the twenty first? Eleven. Eleven on the April 21. He has time open. This is a very popular room.

So Great. Would that be agreeable to everyone if we pencil in 11AM on on April 22? That's a Tuesday.

April 21.

Twenty

first. April 21. That's a that's a Tuesday.

I will have to be virtual because I'll be on the other side of an island stepping out of a meeting, but I can do it. Okay.

Everybody Right. Everyone else okay with that? And, basically, that is really just going to be a touch base to see see where where we're at. And I guess the most important meeting is gonna be the the May meeting that's already scheduled for May 19 because that's hopefully when we'll see a good draft copy of the audit.

And Gene, just on the twenty first, I will be at another city council meeting that morning. I may by eleven I should be free, but I just may be dialing in from my car or wherever I can find a quiet.

Whatever you can do. I think the April 21, we're playing it by ear and we'll see how we're going. And everybody okay with that? We need to make a motion on that or just to say we're okay?

I think for sanity's sake, we need a motion, I think. I'm not a governor.

Take the motion.

I moved it. Second.

Motion and second. I'll approve. Say aye. Aye. All opposed. Aye. Aye. Aye. So okay. So we're we're set for March and April, and Amaze already on the schedule for the nineteenth. And

I think have to have a motion on that. I think Jill

You do?

Educated me that we have to do motion and approve.

Okay. So we need a motion for Tuesday, May 19 at 10AM. Do I hear a motion?

I move May 19, 10AM.

Moved and seconded. All in favor, say aye. Aye. Aye. How about August, eighteenth at 10AM? That's on the meeting schedule also.

Can we can we wait till May? Okay. We're

flexible on this. So what happens is We can always

change it?

We can always change it. But that seems to be the meeting I'm always for the August 18. Okay. So all in favor of Tuesday, August 18 at 10AM? Signify. Okay. So we're set on those meeting dates, but we're flexible. We need to make adjustments, there's no problem with that. One last thing on the agenda is that we've been asked by council to make a presentation to the city council at a meeting on March 16 at the city council meeting. Elena and myself were going to make some sort of an update to the city council.

However, I haven't thought that And the case. Think maybe even have a very brief come up to the podium and introduce yourself and let the consul and the whole city know that we've got this kind of talent living in our city and willing to serve on committees. And so I think it's just fantastic. So on the March 16, if you could all and if you can What

time are those?

It's well, the meeting starts at 05:30, and I'm not sure what were on the agenda we would be. But it's city council meeting on March 16.

Unfortunately, I teach it finance class at the FGCU on

on Monday. We'll we'll pinch it for you.

Okay. Alright. Otherwise, I don't know.

But I would

love to attend, but unfortunately,

I Well, we'll we'll mention your name and your talent. Oh, thank you. Okay.

Chair to Segal, if if I may. I I just wanna it's Carol. I just wanna caution you that are there will be some time box. So they're expecting just a five minute conversation from the audit committee and then allowing the council about ten to fifteen minutes of Q and A. So we just have to make sure that it fits the Thank you,

Carol, that. Yes, Consul Chair only is giving us five minutes, which but then ten minutes of questions. So we might eat into some of the question time, but I don't know how many questions we'll really have. But we'll do our best to stay within the timeframe that's allotted to us. Staff communication. Well, staff has been communicating all morning, I don't think we have to do that. But I'd be interested in any city council communication, any of you city councilors that are here. I'd love to hear from you.

Thank you. Steven Gray. I'll I'll be brief. We have now left denial in the parking lot in terms of our financial conversation. And I just want to reinforce the incredible power and the chemistry that's going on here because we're on a path towards financial enlightenment, financial understanding. And there's a lot of frustration with everybody likes to get to the end zone. But we are pointed in the right direction, the right way, with the right thinking, and it's just wonderful that we've accurately identified our challenges and we're starting to work through them. So I can't thank you enough. Second point, it's easy to stop one person. It's hard to stop a 100.

And what we're starting to see in this conversation reinforces it. We've got people coming up out of the community that now that that we've opened up this discussion differently, they wanna come and help. This is a different it's much more cohesive. We can leverage that energy, and it really gives us more just power in trying to drive the better solutions. Just as a point of interest, and I'm looking at other municipalities, and those municipalities that are in a coastal community, Barrier Island, generally are facing a higher expense trend line than other types of communities.

So I think what Tom brought up is really just an interesting insight. The better we understand what we are and how to deal with it, the more effective we are. My biggest point, I've been haunted looking at the type of operations in municipality versus other businesses. And what I mean by that is most businesses, they they scramble the cash for receivables or collect the receivables so they can cover the payables. They can they can cover payroll, etcetera.

As as Carol pointed out, most of our revenues are front end loaded. They never have to worry about collecting receivable in the general fund because, it just flows in from the taxes, and we're front end loaded. So that, I think, has distracted us from thinking about how you best manage working capital. And what do I mean by that? For all of your future learning and insight, our working capital is tied up in the grant funds.

And there's an argument, for example, if you were to buy a bridge, fund the next bridge fully, then you get the the recovery from some of the grants. You leave that money and you say, wanna recycle that working capital into my next investment. And you can start building what I would call a a core framework for that working capital management. I think part of the conversation we've been having on grant funding, which was something that concerned me, was we were really focused on how do we most effectively manage this working capital, channel this money, and deploy it most effectively because we have a lot of money in there. So, I just I love what's going on here. I couldn't be more encouraged and more grateful to all of you. Thank you.

Thank you very much for your comment. Yeah. Consulate Champagne. Thank you.

Thank you. Hi, Rainey Champagne. Thank you all, by the way. Excellent questions this morning. Thank you, Chris, for the presentation and Carol, doing a good job, making a tough choice with shorthanded talent is always a challenge. I'm impressed by this audit committee. Quite frankly, you have more talent than we've ever had on an audit committee. And I just want to caution you as politely as I can. There's a fine line between providing advice and getting into operations. You are not operations, you are advice oriented.

I'll ask you please going forward, keep testing yourself. Are we staying in our lane or we're beginning to get into the operations? There is a big difference and you need to be very cautious in that regard. So far, everything I've heard and seen on your meetings have gone very well. You're in your lane. But I know when talented people see issues, sometimes they want to take action. Action is over here. Provide the advice, let her do the action part, you provide the questions and input from that point of view. Thank you.

A point well taken. Appreciate the comment. Councillor Golar. Thank you.

I don't have much to say just to put up after what two councilors just said. First of all, thank you all. I think this is one of the most talented group I have ever seen And, just says a lot about our community, how strong our community is. Welcome, Chris. This is the first time I met you and congratulations. Thank you for your service. And I feel incredibly blessed to be part of this community and there's so many volunteers. And I know you guys have thankless jobs, and I just wanna, from the bottom of my heart, be very great. And thank you. And, Chris, thank you so much for being here.

This is so much better than what we had the last time, and, I still feel bad about it. And Carol, you are a you are a superstar, and we are so grateful for what you're doing. I know you have a lot of work to do, and we are here if anything we can help you with. And I think you need to stay on top of them and make sure that the, department directors are working well with you and you have a lot of work to do. And, I know we have a great team, but you still have more work to do than anybody else right now on our staff. And I'm very grateful and thank you.

Thank you, consular Gohler. And I appreciate having four consulars attend the meeting. So that's that's that's a that's an honor for us to have you here. Public comment. Any public comment? We got one public.

Dennis Bartolucci. And and I'll be quick and just a few things. First of all, I don't know that any of us appreciated the black hole that we were in a year ago and perhaps longer than that, but we're not in it now. Chris, thank God, right? Because I've been in your shoes and I wouldn't wanna have to do that twice.

Carol, you are definitely a ray of sunshine here and you're making very good efforts to improve things. And I think we all feel good about that and it's all relative to where we've been. But let me maybe change the focus a little bit to where I think we should go. Because right now, we're still in a tactical kind of a responsive mode. So we're trying to do some things that frankly are basic blocking and tackling and we don't have all the players to do that.

But I hope where we want to go, and it's good that there are four counselors here to hear this, I hope where we want to go is to a model where we're not operating at such a low level, but we're operating at a more strategic level with planning, forecasting, projections, and the ability to think ahead of the curve a little bit. And I think that we've got to set that as the goal. And someone, and I'm not sure who in our municipal government that is, Carol, certainly, you play a role in this, has to set the vision for what will the department be and how will we create that department, what will that cost us, how will we benefit from it, and when will we achieve that goal. I think we need to talk in those terms and sooner rather than later because we're already almost halfway through this year. And so things will change very slowly unless we set a vision and we see ourselves wanting to be at the ideal condition of what happens in municipal government, not at the well, you guys are like all the others that, you know, have all this messy stuff.

I don't think it's a good idea for this city to be in that condition. Last year, when we got into the budget process, the spending cap came up quite a lot. I noticed quite a lot of confusion, I mean, an inordinate amount of confusion around how a simple idea like a spending cap works, what goes in the calculation. Carol, I would strongly suggest that you enlist Chris's team to look at that and give you guidance on that so that we have an expert suggesting the way to carry out what the charter says we should do. It blew my mind last year that we struggled with that.

There are way too many versions of how it ought to work. There's only one version of how it ought to work. Let's get to that. Let's have expert advice around that. And let's do that, and let's not have the spending cap be something that trips us up through various workshops, meetings, and so on and so forth.

The water and sewer business is a very, you know, significant component of our overall operations here. My feeling is that it gets very little attention. We actually spend, I think, more money there than we do in the general fund. We certainly spend more capital there than we do in the general fund. And, it's a real business.

And so I think the audit needs to probably focus a little bit more than what might be the basic requirements on the water and sewer business. And it would be nice if if in the future Chris you're in a position to tell us more about the water and sewer business and your testing in that area. Last point and this is just a question more than anything else. If the city does issue bonds, what would be the role of CLA in providing assurances to the prospective bondholders? Are you in a position to issue that kind of assurance given the kind of reporting you had to do last year and what you may have to do this year?

I think it would be good for our counsel to know that answer sooner rather than later, because it's it's almost impossible to remedy the situation later. Okay. That's it. Thanks.

Oh, thank thank you, Dennis. Appreciate that. We're think we're all on the same page. So I thank you for your comments.

Mayor Siegel, you have one more public comment.

Oh, Elliot, come on up. My

name is Elliot Mascoop, 1306th Ave, Marco Island, Florida, 34145. One correction, I am the ex chair of the Waterways Advisory Committee. And don't worry, it's a good thing. I enjoyed it. It was a valuable experience.

We were able to do a lot of really positive things. But being just, just a committee member is going to give me a lot more freedom and a lot more ability to do a lot of the work that I wasn't able to do as chair. So what I wanted to just briefly mention was, while my background is in horticulture, weather forecasting, and radio and television, I do have a little bit of a background as having been a trustee for six years with the NALC Postal Service. And what I wanted to say was, coming from a background there, that we had to balance every meeting. Every single time that we met, which was monthly, we had to balance to the penny.

I realized this doesn't work that way. However, having been watching very carefully the city council meetings and now your audit advisory committee meetings, I'm extraordinarily impressed with what this committee brings, the talent, the knowledge, the expertise. It's very, very clear to the public that we are finally going in the right track. I know I'm echoing what's already been said, and I just wanted to you know, last year, we were told we were one of our counselors exposed the level 10 material weaknesses. And we were being told by the management of the city of Marco Island that the audit was clean.

I don't know how many times I heard the term clean. Things have turned around. This committee and what we have now in charge is making the difference so that we're not going to be in the situation that we were. And I know that we spent a lot of money, and we're spending a lot to clean it up and to get to where we need to be. A lot of that money coming from the Waterways Advisory Committee could have been used for cleaning up our waters, could have been used for a lot of good things.

We're cleaning up the problems that we've had that were allowed to happen. But now, I think the most important point I want to make briefly, we have a committee here that is making the difference so that that doesn't happen anymore and that we have, going forward, a very professional and knowledgeable committee, audit advisory committee that is going to make sure that we go in a direction that the city of Marco Island will benefit from in so many ways and we can be proud of. And I just wanna thank all of you. Thank you.

Thank you, Elliot. And you did a great job as chairing your waterways committee. And does a guy with all of your skills and talent be one of the best mail carriers that I've ever seen? That's what I wanna know. Yeah. You wanna tell us about that?

Let me

tell you just briefly, it was the customers. The customers made the job. That is why being a letter carrier is rewarding. Yes, there's pay. Yes, there's all of that. But the customers, you miss the customers and you miss them forever. And that's why. I make

personally miss seeing you on that truck. Well, thank you. I

don't miss it as much as you miss seeing me. Thank you.

So I think we've I think we've come to the end. You have a a comment. Terry's got a comment. You got a comment?

I do have a comment. Listening to the audience, and this is not the first time that the audience has come and made some very complimentary statements towards this committee. You're setting some very high expectations for us. I'm sensitive to counselor Champagne's comment about staying in our lane. But at the same time, as an advisory person, I need to understand the operations.

And so I ask things like, where did this transfer come from? And I think that a lot of what we need is to be educated on operations, what's happening in operations to be able to give some reasonable input. We're I I think many of us are operational people, but we haven't worked in municipal government, and and we recognize there are differences. But I think our real value is that we have managed operations in different businesses and can bring a lot of value to the table on that. So just to clarify how how much I can stay in my lane.

I know it's your business, and you'll have to figure out what's the best way to do it, And we will advise you as we see opportunities.

And I do appreciate the input and the feedback and the questions because I'm learning too. There are things that I bring that are different from a different background. It's mostly financial services. So I welcome the questions and I will follow-up when I don't have the answers because it only helps me improve in my role too. So thank you. You.

Elena?

I was gonna ask a question about the famous receivable. Is it Irma or Ian? One of the i's. One of the i's that is still showing on accounts receivable. So it's that would be a current asset. If if I understand and I just wanted to test something here. If that were to be moved to a long term asset I mean, there's the whole process of we gotta get the money. Right? I mean, we went after it because we thought it it was the right thing to do. We got a city up the up the street that's getting a whole pier replaced, and we're sitting here wanting our receivable.

If that happened to be moved to, like, a long term asset or something like that, is the issue that it would change our working capital and other metrics? Mean, would that have implications for us from a credit risk? I'm sure this is I got really good finance professor people here too. But is there an implication there that we should be thinking about? I don't know. I'm just asking.

Mean, general answer, I would say no. That is a FEMA is notorious for taking a very, very long time to clear out claims. It's just the nature of it. I mean, we had some municipalities that were still clearing out. Gosh, I think it was Charlie.

And some of these things were sitting on the books four years ago on some of this stuff. Like it just takes a while. Sooner or later, of our clients do look at some of the stuff that's dragging out there where FEMA's and the state is questioning a $50 payroll support on a time sheet and that's the hang up. And eventually you get to a point where you say forget the $50 we'll take the rest of it and just move on. From a financial position standpoint, when you get into your and this is going into the depths of governmental accounting.

In your governmental fund balance sheet, there really is no short term, long term classification on those assets. But when you have a receivable that has not been collected within what is called the period of availability, so typically sixty days after fiscal year end, you're not even recording revenue for that. It is sitting in essentially like a deferred revenue, an unearned revenue on your balance sheet. So it's an asset and then the deferred unearned revenue sitting there. So there's no revenue impact or anything along those lines.

The bond rating agencies and all the various regulators understand what that is. Now, could there ever be a point where maybe your working capital and things are impacted by that because you had a major storm with a direct impact and they're working it's taking years to clear that out? Sure. But that's not a situation you are with that balance. And even to help that, the state has created various vehicles of financing to get cash into the municipalities and the counties in an emergency situation so that you're not in a cash flow concern situation.

So it is normal for that to sit on your balance sheet, and it really won't have a major impact. Sooner or later, though, if they're telling you it's not going to be valid, then you will wanna write that off at some point.

Or does it become so follow-up question. So then is it a business decision about how assertively at the city we work with we, the city, as people who pay taxes. We work we we pursue that receivable. Again, in the spirit of we got a whole pier getting redone up the street, and it would be nice to get some cash in.

I mean, you should be working with your FEMA partners at all levels to get that collected until it reaches the point where they say no when they close it down. I mean, it's from an audit perspective, we've looked at that claim generally if it's material and say, you have expenditures, you have filed the application. FEMA has already obligated the project. Now it's the process of sitting at the state where they're essentially serving as a claims adjuster in de facto and going through all your records and support. So it's usually that's the process of they're just trying to get every dollar accounted for and sign off on it.

And then connecting the dots and Carol, is that something that chief Byrne is helping with? I'm just trying to Yes. Connect back to the other

So we get requests daily in from FDEM, Florida the Department of Emergency Management related to right now, Ian Irma. There's a lot of activity and a lot of questions on what's been submitted, which is good. So they can keep moving it through the process. So it is it's time consuming, but they do want to account for every dollar that's going to come back to us. And even if we put a claim in and it's an estimate based on a FEMA estimate and we actually spend less, there's paperwork to do with that too so that the funds go back. So it's time consuming, but it is right now, it's almost a daily process that we're in contact with our coordinators.

That's very helpful. Thank you for helping me sort of round that out because I felt like I was missing something. Thank you. Well,

I think we've gone through the agenda. Thank you very much. Pleased with our meeting today and I would entertain a motion to adjourn. And second. Moved and seconded. All in favor of adjourning say aye. Meeting is adjourned.