City Council - Special Meeting

Thank you. I am calling this meeting to order. This is a Redmond City Council special meeting held on Tuesday, 05/12/2026 commencing at 06:31PM. Council members in attendance include council members Critzer, Parsi, Forsyth, council member Procrea is online, council vice president Nueva Camina, and myself, council president Stewart. We also have mayor Bernie online. We are missing a council member and I will announce them as they arrive. I'm just checking quickly with the clerk because this is a special meeting of the council. We don't need to vote to excuse. Would that be a correct interpretation? Thank you so much.

Okay. So, this meeting is being held for the twenty twenty two and twenty twenty three accountability audit exit conference and the twenty twenty four financial audit entrance conference. We are joined by representatives from the state auditor's office. We will have Kelly Cochran, our finance director, introduce the first item. Thank you.

Thank you very much and thanks for having us this evening. As councils aware, we've been working really hard to get caught up on our financial statements and our audits after the conclusion of the implementation of our financial system. I have Nita Hermoso here with me. She is our accounting manager, excuse me. Has been working tremendously hard with her team to not only get us moving forward with these items but also with the implementation of software that will automate a lot of our financial work in the future so team is making a tremendous amount of progress and we're really happy to bring the results of the 2022 and 2023 accountability audit as well as be able to kick off the 2024 financial statement audit.

We're looking to wrap that audit up as quickly as we can so then we can immediately launch into the 2025 audit and be all caught up, which will feel wonderful.

And I

think we won't see NEDA for a couple months perhaps. But we are going to just turn it over now to Haji Adams from the state auditor's office to walk through their information. Thank you.

Thank you for being with us, Haji. And I'll just note for the record, we've been joined by council member Sony. Thank you.

Alright. Thank you. Yes. So my name is Haji Adams. I'm the audit manager. And I'm also with Angela Funimori, who is the audit lead, and also Priscilla Wong as well, who was the supervisor on the audit. And then the presentation today is gonna be a summary of the audit results. And then to supplement the presentation, we have provided a packet of information for you all, and that includes copies of the draft audit report that'll be issued and also the exit conference agenda for today as well. Alright. So one of the most important things about audits is their role in increasing trust in your city.

So an audit lets you, staff, and others such as the public know if areas operations are working properly or if there's any improvements that can be made in the areas that we review and examine. And, also, having that third party independent audit is important and increases the public's trust, that the information presented by the city can be relied upon as well. At the season, compliance with state laws, rules, regulations, and its own policies and procedures. And the results are made available to the public and then published on our website. And then last but not least, audits are designed to help you improve operations. So if there are any audit recommendations, they are made to assist the city and continue to improve improve its efficiency and also effectiveness as well of its operations. So with that, I'm gonna go over to Angela to go over the results.

Thanks, Haji. Okay So as Haji mentioned, we conducted an accountability audit covering the period of 01/01/2022 through 12/31/2023. So the purpose of the accountability audit is to determine whether the city complied with state laws, regulations and its own policies and procedures. So we also look at whether the city has adequate controls to safeguard public funds. And so in the report under the heading results in brief, you'll find that the city complied in all material respects with applicable state laws, regulations and its own policies and provided adequate controls over safeguarding of public resources.

So this is what we would consider a clean audit and for your reference these results are detailed on page seven, specifically in the accountability report in your packet. However, we noted certain matters related to annual report filing that we communicated with the city in a letter that we will discuss in a later slide. And then one last note is in keeping with the general auditing practices, we do not examine every transaction activity, policy, internal control, or area. So as a result, no information is provided on the areas that were not examined. So for the accountability audit, we utilized a risk based approach during the planning procedures that we conducted.

And so included on the slide are the areas that we identified for further testing. And while we're prepared to discuss each area with you today, we would just like to highlight some of the main areas for you. So as I mentioned, during our planning procedures, we noted that there were some, citizen concerns over payroll, compliance with land transfer, and compliance with the Regional, Coalition of Housing or the Arch program. And so we selected these areas for further review and noted that most of the concerns were not substantiated. However, we did have some minor recommendations related to payroll and then specifically with the executive sessions and ensuring that the reason for entering the executive session is for an allowable reason.

So additionally, with, state law that requires that we review the city's self insurance program, which we are required to review every two years. So this audit, we review the city's health and welfare, unemployment compensation, and workers compensation where we reviewed the city's processes to ensure that those programs were in compliance. And then lastly you see here are the two areas that we review on an annual basis, which is the open public meetings where we review for compliance with minutes, meetings and executive session requirements, and then the financial condition where we review for any indication of financial distress. So next we'll walk you through our management letter over the annual report filing. And before we begin, please note that management letters are not included in our audit reports but are referenced.

So while this is a public document, this item will not be published on our website. So we've included a copy of the cover page followed by the first page of the management letter on the slide. And for your reference, you'll find the full version of this letter included in your exit packet on page 12. And so just as summary, state law requires the city to submit an annual report with accurate summarized financial information to the state auditor's office within one hundred and fifty days after its fiscal year end. So due to significant staff turnover, the city did not submit the required annual reports to our office timely for fiscal years, 2022 and 2023.

So the city filed its annual reports two twenty four days and three seventeen days late, respectively. So in this letter, we recommend the city establish internal controls to ensure on time financial reporting in accordance with state law. And so before we wrap up our presentation, we have some a few additional items that we'd like to share. So with our office's online financial, finance intelligence tool, or what we consider a FIT, you'll find the data you need to help your government make better business decisions and improve its financial position. You'll find that this tool takes Redmond and other cities' financial data that was submitted to us as part of the annual filing report, and it transforms that data into easy to understand measures.

It allows you to explore your city and other cities and is all located all in one place. So evaluating the financial health of your local governments is also an important audit procedure and one that you can expect your auditors to perform during each audit. So one of the ways our office reviews financial condition is through the use of this FIT tool. So while just a starting point in the audit process, our staff may inquire if there are any cautionary or concerning indicators for your government to better understand the important factors impacting your government's financial health. And so here if you'd like, feel free to scan the QR code to open up the page to save it for later or if you'd like to start exploring now.

So here on the slide are the FIT results for the City of Redmond. First, it's important to note that having a particular financial health outlook in our FIT tool does not necessarily indicate a financial stability or stress. So indicators are designed to alert viewers to potential financial health concerns by comparing the ratios to our recommended thresholds. So here you'll see the particular area for potential evaluation is related to Fund four zero two, the UPB Water Wastewater Fund. It does show as one warning indicator, which, if you dig deeper, is related to the current ratio.

However, we did communicate this, with the city, and it is actually a data entry error on the on the city's schedule. So once the data entry error has been corrected, you'll find that this warning indicator will disappear. And so next here, I'll pass it off to Priscilla for our closing remarks.

Thanks, Angela. So just a few things to bring to your attention to conclude our presentation. The cost of our engagement is expected to be within the estimate previously provided. Your next audit, which is the fiscal year twenty twenty four audit, started in January 2026 this year. That's this year.

Sorry. It covers a one year accountability financial statement and federal single audit. And we expect the city's report to be published on our website in the next one to two weeks. You can now sign up to receive email notifications on when report has been released as well as other news articles, including resources our office publishes. The sign up link is provided in the exit packet.

In addition, we'll also be sending you a customer service survey. We encourage you as well as anyone else that participated in audit to complete this survey. Your feedback helps us improve our services and better meet your needs, so please feel free to forward the survey on to others who may wish to, provide feedback as well. And now I'll turn it back to Angela to close us out with some final thanks.

Thanks, Priscilla. So here we'd really we'd like to take a moment to thank, Nita Hermoso, Stephanie Wu, is the finance supervisor and Taritha Nara, the deputy finance director, but also all of the city staff that have been part of our audit process. We really appreciate their cooperation and assistance in providing the support, But also we just really like to thank the city for its ongoing commitment to building the relationship with the state auditor's office. So this concludes our presentation to the city for the fiscal year twenty twenty two twenty twenty three accountability audit results. We just like to thank everyone for your time today and for your participation in this meeting.

At this point, we'd like to open it up for any last comments or questions.

Thank you, Angela. We really appreciate you and your team being here today. Before we go to questions, I just want to confirm, do you have additional information for us today on the twenty twenty four financial audit entrance conference or was that included in that last part of your your presentation here?

No, we should have, we will have an additional PowerPoint presentation to go over the entrance.

Okay, so in the interest of time, are there burning questions on the exit conference? I believe there are a couple. I'll start with

council member Kritzar. Thank you very much. Really appreciate the work on this. You mentioned that there was some sort of recommendation, maybe not a management finding on payroll gross wages, but I I don't see it documented further than just noting that we examined it in the information provided. Can you provide a little bit more information on that and how that was conveyed?

Yes. So, as far as the payroll area, that was also part of the one of the citizen concerns that had was submitted to our office. So we reviewed the gross wages and compared it to some of the supporting documentation, whether that was part of like the collective bargaining agreements or, anything that was part of the, payroll system, and then just to had done, like, a reperformance of that. And so, the recommendation is an additional document that we provided to city management, for their consideration of of the items. So these are our lowest level, recommendation.

They're more of like the housekeeping type recommendations. So I don't know if that that helps or not.

Just to clarify, so is that on practice around processing payroll was the recommendation, or what was the recommendation?

Yes. So it was around the the process of the city's, internal controls over, ensuring that employees are, getting paid in accordance with their either collective bargaining agreement or if it was their personnel action notice. Okay.

Thank you. So I had to do with a, yep, minor miscalculation with the personal action form and what and the amount that was in the system. Yeah.

Thank you and we can certainly circle back to more discussion. Council Member Forsyth.

Thank you. Real quick. You mentioned the land use items and we kind of went over it very quickly assuming that means that there were no findings. Can you just state for the record what what was found there if anything or that there were no findings?

Yes. To confirm there were no findings. This is also considered one of our exit items, which we consider the lowest level of recommendation. However, it is around the use of the executive session. So during our review, we had noted during the meeting minutes, it stated that the land was transferred. But in order to use the executive session, the purpose of it is to consider, for sale or of lease of of, the property. So

Thank you.

Thank you. Council Vice President?

Thank you. Technicality question. When we're taking a look at the numbers, we see a 35%, I'm sorry, 34% increase from our 2022 interview audit to 2023. It increased in 2023. And since it was a substantial increase, was that due to additional auditing around for the the land transfer? Was that because of additional auditing for payroll? Like what what drove that 34 percent increase?

So as far as the audit, course of the audit, there were no additional increases. But we but we did have, it is a two year audit. So that that typically would be split if it were on an annual, but because there was the two years, this does include '22 and '23.

Right. So, again, I didn't hear a reason for a 34% increase from year over year even if we take into consideration, increase of costs and such.

So so we do have an increase in audit costs or hourly. There was a change in that as well. And then it was a two year accountability audit as well. So factoring those two items there.

Right. I I understand that it's two years because that's why I'm quoting 2022 is at 134,000 and change, and 2023 is at $1.79.7. So collectively, we're over 300,000. However, from 2022 to 2023, that's 3434% jump. I'm just asking for why was there a 34% even if there's inflation to, increased wages? Trying to understand 34%.

Yes. So a portion of that is our hourly rate did change. I can get back to you on that to get specifics there. But Great. It's our normal budgeted hours for an accountability audit and includes two. But I can do a little bit more research there for you to get back to you on that.

Thanks, Sajid. And and just as as a just a a comment, it's wonderful to see you and Angela. Welcome, Priscilla. Feeling like staff on our rotating basis. So good to see

you both. Thank you.

Thank you. I'll go ahead and chime in with one of my questions which is just we were in the course of this presentation. I do hope that you will transmit a copy of this presentation to the council and the clerk so that we can make sure it's available for the public. You referenced a management letter with several recommendations on page 12 of our exit packet. The council does not have that packet. So wanted to flag that unless others are seeing it, we are not seeing a 12 page packet. Are you seeing a management letter in your packet, Council Member Kritzer?

I do see it. It's just a short letter, so you might have missed it. Is, or maybe it's on page 11.

Page 11 of

the On page 12, there is a management letter. In the attachment that said 2022 and twenty twenty three accountability audit exit conference packet.

Okay. I will Okay, I will take a look, but it does look like there may be additional questions. Seems like some of us have access and some of us don't, so we'll have to circle back. But we may have additional questions, Director Cochran, if we could plan to send those to you. Are there other additional questions before we move on to the twenty twenty four financial audit exit, excuse me, entrance conference.

Okay. Let's proceed.

Okay.

Okay. Give me just one moment here. I'm gonna Pull up the 2024 presentation.

Alright And then, Angela, you can go to the next slide here. Alright. Alright. So, yes, so we'll share the scope, for the, next scheduled audit here. And, yes.

So the Washington State Auditor's Office, we're tasked with being the auditor of all public funds, responsible for auditing all state and local governments, conduct over 2,300 audits spanning over more than 40 government, types as well. So our office also has about 500 employees, that specialize in governmental auditing and run state, as well. And then on this slide, you'll see the different, types of audits that we do conduct with accountability, financial, and federal, representing those that we conduct the most of. And then, we do plan to conduct an accountability audit, financial statement audit, and federal audit as stated earlier. So the purpose of the accountability audit is to determine, whether the city's complied with state laws, rules, contracts, grant agreements, and your own policies and procedures.

Then we'll also look at whether the city, has adequate procedures in place as well to ensure that the public funds are properly safeguarded. And then you'll see, the financial statement, audit there. So the purpose of the financial statement audit is to issue an opinion on whether the financial statements are free from material error and are fairly presented. So a financial statement audit's important, to users that review your financial statements. Let's know whether they can place a reliance on the information that's presented in them.

And then we'll also look at whether the city has adequate internal controls in place or procedures, to ensure that financial statements are prepared correctly and that there are procedures in place, to check errors prior than to them being submitted to us as well. And last but not least, the federal grant compliance audit. So that's required anytime the city spends $750,000 and more in federal funds. So we'll review the funding that the city's received and then also expended. Then we'll select individual grants for audit and determine whether a city has complied with those requirements of the federal funding. At the end of the audit, we'll also issue an opinion on the city's compliance with that and then share that, those results with the federal government as well. And I'll hand it over to Angela to go over, scope of the audits as well.

Thanks, Haji. Okay. So as Haji mentioned about, this first piece is that we are conducting an accountability audit that covers 01/01/2024 through 12/31/2024. For this audit, we utilized a risk based audit approach in selecting audit areas. And based on the planning procedures performed included are the following areas for further review.

So payroll. Here This is where we'll be reviewing the city's process over employee payroll increases added to the payroll system. Next, we're gonna review the city's process over tracking and monitoring of theft sensitive assets such as computers, tools, equipment. Accounts payable, where we will review the city's processes and monitoring over credit card purchases, electronic funds transfer, and employee reimbursements. And then this next one is that we'll review the city's process monitoring over restricted funds to determine whether funds were appropriately spent.

And then the next this payroll system patch management, this is where we review the city's IT controls over its payroll system. So then the next two areas we review on an annual basis, which is the open public meetings where we review the compliance for minutes, meetings, and executive session requirements, and the financial condition where we review for indications of financial distress. And so at the conclusion of our audit, we will publish a report showing the results of our review, including the areas that we examined. So for the financial statement audit, our financial audit will cover the period of 01/01/2024 through 12/31/2024, and the objective of the financial statement audit is to issue an opinion as to whether the financial statements presented for audit are fairly stated and materially correct. So our audits are conducted in accordance with government auditing standards, where those standards require that we review the city's internal controls or processes that it goes through to prepare the financial statements.

So should we become aware of any issues with your process that could or did identify misstatements to occur or identify instances of non compliance that could impact the information being presented in the statements, we are required to alert you of this during our audit. And at the end of our engagement, we will issue a financial statement audit report to the city in accordance with GAAP, which is the generally accepted accounting principles. This report will detail the opinion being issued, the results of the city's internal controls and compliance, along with a full set of audited financial statements. So for the financial grant compliance audit, or what we call a single audit, we are reviewing also the period of 01/01/2024 through 12/31/2024. So this audit is required by federal law when a local government spends $750,000 or more annually in federal financial assistance.

So our opinion will be issued in accordance with government auditing standards and uniform guidance. We will issue an opinion on the internal controls and compliance over the major federal programs. And so here on this next slide you'll see the two programs that we selected for audit. So an important part of the office is the continuous communication between our audit staff and yours. There are a number of ways that we strive to stay connected throughout the audit process, some of which we have included on the slide for you today.

However, we would like to draw your attention to two of these methods designed to keep you updated throughout the audit and ultimately share our results with you. So one of the most important tools for keeping you up to date are weekly status meetings. As their name suggests, this is a recurring meeting with the audit liaison to provide you an overview of the audit. It's a great opportunity to discuss what has been completed, what is still in process or not yet started, and discuss any questions or concerns as they arise in the audit process. And lastly, are committed to ensuring you have the opportunity to hear directly from us on the results of your audit.

So we will work with management to schedule an exit conference meeting and invite all governing body members to attend our report out. Please note that if a quorum of the city council members plans to attend, the city is responsible for ensuring the Open Public Meetings Act requirements are satisfied. So throughout the course of the audit we may find that recommendations are necessary to bring to your attention. Our office has three primary levels of audit recommendations that are used to convey the significance of the audit issues identified. So findings formally address issues in an audit report.

Findings report significant results of the audit such as significant deficiencies and material weaknesses in internal controls, misappropriation, and material abuse or non compliance with laws, regulations, or policies. So here you'll be given the opportunity to respond to a finding, and this response will be published in the audit report. Management letters communicate control deficiencies, non compliance, misappropriation, or abuse that are less significant than a finding but still important enough to be formally communicated to the governing body. Management letters are referenced but are not included in the audit report. And lastly, we have exit items which constitute our lowest level of written recommendations.

Exit items are very normal in the audit process and are considered as housekeeping items as they often address best practices or minor non compliance matters. At the end of our engagement, we will provide a full list of exit items to management for their consideration. And now I'll pass it off to Priscilla for some important information.

Priscilla, you're muted currently.

K. Can you hear me now?

Yes.

Okay. Alright.

I just confidential information, first thing is really we want to make sure we keep your information confidential especially sensitive information such as payroll records. So if there's a need of transmitting this information, please let us know and then we can make sure to use our secure site to transmit that information. The next thing is audit cost. The audit cost is provided to an engagement letter, and it's been provided to Nida, our audit liaison. And then the next one is audit dispute process.

We do have a process in place for entities to dispute any audit process and there are contact information all the way up to the state auditor that's listed in the entrance handout that you can contact. And the last thing is loss reporting. We do have a process in place for when an entity has a loss to report for any fraud or suspected loss. Sorry, the process is very easy to perform, and there's a link where you can click on it and submit your loss report. This slide talks about the on-site audit work.

We're committed to working with our state and local partners to complete audits as efficiently and effectively as possible. We do support on-site audit work because it provides a more efficient and effective audit, and it does have that in person collaboration and for us to be able to close our audit faster. For City of Redmond fiscal year '24 audits, we do come on-site once or twice a week, which has been very helpful for the audit process. Okay. So this slide talks about the FIT tool.

As Angela has mentioned earlier, this one, provides, the FIT tool is the financial intelligence tool, which provides data and information of your city and other cities across the state. It provides a clear picture of your government's overall financial health, provides indicators that highlight strengths and areas needing attention, this data that can help guide budgeting and planning decisions. There's a QR code that you can scan, to explore more. Our office receives an external peer review once every three years by the National State Auditors Association to satisfy government auditing standards We're pleased to share our most recent rating, we received in 2025 was a pass, which is the highest level of assurance that the review can provide. Beyond the regularly scheduled audit, our office also provides support services at no additional cost to you year round.

We have the local government support team that provides a wide variety of accounting, auditing, and reporting technical assistance to governments. You'll find various links to trainings available throughout the year on our website. We also have the help desk for guidance on accounting and reporting questions. And there's a QR code where you can scan to access our e learnings. There's the Center for Government Innovation.

This team helps local governments to find ways to become more efficient and transparent. So some of the services offered include cyber checkups, resource library, lean services, and, team building workshops. In addition to our local government team and the Center for Government Innovation, we also have our special investigations team that also provides resources and training to help strengthen controls and reduce fraud. The newest resource is called Follow the Money. This guide, includes helpful information on what to look for in reviewing bank statements, including warnings from case studies and what to do if you spot a red flag.

Our cyber checkups are designed to assess a government's vulnerability to common threats and provides recommendations for improvements. During a checkup, one of our cybersecurity specialists would be assigned to evaluate IT systems remotely, and they provide a confidential report of the results and recommendations if applicable. So this concludes our presentation to the city on our fiscal year twenty twenty four audit scope. Thank you again for your time and participation. And at this point, we'd like to open it up for any last comments or questions you might have.

Thank you so much. We are over time for this item. So I will entertain any burning questions that a council member has, but we'll move quickly. I also want to clarify for the listening public that we identified the associated packet materials for both of these conferences is attached to the meeting in the meeting calendar, not in the council packet. So it is available in the meeting calendar for those who would like to follow along. Any burning question on this entrance conference? Okay, seeing none, thank you so much to the team and Director Cochrane, we really appreciate it. This meeting is now adjourned. Thank you so much. Thank you.

Thank you again.

Thank you.