Board - Special Meeting

I don't know what those seats.

Yeah. Yeah. Okay.

All right. Good evening, folks. Uh, I've got 6:00, so I'm going to go ahead and call to order uh the special Shelby County Board meeting for March 3rd, 2026. If you would please stand for the pledge of allegiance. [clears throat] I aliance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Thank you. One item two roll call please. Teresa B present. Tim Brown here. Carol Cole here. Julie Edwards here. Chrissy Grant here. Jeff Gray here. Clay Hardy here.

Keith McCormick. Christine Matlaw here. Tad Bing here. Trisha Miller here. James Mitchell. Tim Moors here. Jean Price. Austin Pritchard. John Stroll. Larry Ciphert. Don Hay. Christy Walker here. Brent Wallace here. G Wood here. We don't. Okay. Thank you. All right. Move on to item three. Thanks, sir. Y move on to public body comments. I do have a list here. Um Trisha. Yes.

Hi. [clears throat] Do you stand up? Sure.

Well, actually, it's just something I want to say to Erica. I just had to put my husband in a nursing home. Two and a half years. I struggled on my own to get it right and I couldn't do it because physically, mentally, I couldn't I was not up to. So, I passed them on to the professional. I'm asking you, you've done your best for the county, but we know it's not quite good enough. So, please step aside and let the professionals step in. That's all I got to say. Thank you. Public body comment. Public body comment. Public body comment. Okay. I want to move on to item four, which is a presentation from the fiscal year 2023 audit um by Lockach and Aean. And with us tonight, we have Mr. Brad Porter to present um the fiscal year 22 2023 audit. So, Mr. Porter, it's all yours.

Good evening, everyone. Can you hear me loud and clear?

Excellent. I step on right. Uh my name is Brad Porter. I'm here on behalf of Water as a principal overseeing the county's financial statement audit process. Uh this evening I'll be providing a brief recap of the documents that we've issued at the conclusion of our fiscal year 2023 audit process. I'd like to start by thanking the board for the opportunity to attend virtually here tonight. Uh it's a pleasure to meet with you for the first time. And before I go any further, I'd like to give a special thank you to the county staff that have been instrumental in this audit engagement. Um, as many department heads can attest, it truly takes an army to complete an audit. Uh, especially in a year where there is a change in auditors. Um, typically we are requesting new things. U maybe things that prior auditors had on file from previous engagements. We're very appreciative of all the efforts of the county staff to give us everything that we need in a timely manner. I'd also like to give a special thank you to Anna Cadmus and her team at Sikage. um they have done a phenomenal job with their audit preparation processes and we are very grateful to have them as a partner in this equation. For those of you who may not know a little bit of background what signature is completing, they are taking care of all the necessary entries on uh the county's general ledger to ensure that some of the balances are audit ready for us on the cash basis accounting. That include things such as putting together reconciliations uh summarizing the schedule of all the grant expenditures for us and compiling any necessary documentation uh for us to complete our audit testing. So, we're very appreciative of of Anna and her efforts as well. Now, tonight there are four pieces of required communication that I plan to address. At this point, I do think it would be beneficial for me to share my screen and walk you through those files. So, bear with me as I get that ready. It

looks like I may need to have an request accepted to do that. So, let me send the request now. You need to click on that to allow him access. Yeah.

Should All right, there we go. I think I should be ready to go. So, let me get situated here. All right. Can everybody see our water and letterhead here? Not quite yet. There we go. All right. How about now?

Yes. Can you confirm that? Yes, sir. Sorry. Yeah. No, my fault. Yep, they're good. We got you. Thank you.

No worries. Um, all right. So the first piece of required communication that we have here is what we call our SAS 114 letter. Uh in accordance with a statement on auditing standard number 114, we are required to state whether or not we had any disagreements or difficulties that we encountered during our audit process for the fiscal year 2023 audit. And that's highlighted here and I'll zoom in a little bit for you. But ultimately in the SAS 114 letter, we had no such difficulties or no such disagreements with management throughout the course of our audit process. Now, SAS 115 statement auditing examiner number 115 requires us to issue a letter uh to the board ultimately outlining whether not we had any significant deficiencies [clears throat] or material weaknesses that we've identified during our audit process with material weaknesses being they're more pervasive in nature. Um, so for a little bit of background, those of you who may not may or may not know, the county had received a qualified or modified audit opinion for the fiscal year ended August 31st, 2022, which stated that the prior auditors indicated that certain balances or items within their audit were not materially correct and or that they could not obtain the sufficient audit evidence to support certain balances. So through the joint partnership obviously county sikage and one of there were a number of these items that we sought to clear up in fiscal year 2023 and successfully cleaned up in fiscal year 2023. So we have outlined in the SAS 115 letter that we did have material restatements to fund balance as a result of some of those cleanup procedures that took place in this fiscal year under audit. So, we would not expect to repeat a SAS 115 letter in fiscal year 2024, assuming there are no other additional items that need to be cleaned up. Now, we'll move into the annual

financial report. Um, there are 108 pages to this document as a PDF. So, we'll be going page by page here tonight. No, I'm only kidding. Um, we'll summarize some of the key financial areas here. um what are some of the intangible items from this audit process because we are talking about an audit that is quite outdated at this point. So I know the board is receiving more current monthly financial updates at this point. Um so again I'll focus primarily on some of the intangible components of the audit beginning with pages 1 through three. [clears throat] On pages 1 through three I find what we call our independent auditor's report. Uh this report not only outlines the opinion that we've issued on financial statements but also the responsibilities of both management and us as auditors. Management is ultimately responsible for the preparation and fair presentation of the financial statements through the internal efforts of your team as well as sikage being hired by the board in an external capacity. We certainly felt the financial statements provided to us were indeed fairly presented. Provide a little bit of additional what our responsibilities are as auditors to inform understand a few things. First, as auditors, our responsibility is to ensure that we're planning and performing an audit designed to detect material misstatements, [cough] error, or fraud. That is not to say that certain matters that are immaterial in nature don't exist or that an audit is designated to detect all areas and we cannot through the nature of our procedures. Um it is also worth noting that we perform a number of internal control related walkthroughs of your financial functions but we are not generating an opinion on the internal control environment only the financial statements themselves. any internal control related findings will be disclosed in the management letter and we'll get there uh

momentarily. Um so again I just emphasize we are focused on reassurance at the materiality level and I am happy to report that for the fiscal year ending November 30th 2023 we have issued what is known as an unmodified opinion which is the cleanest form of opinion that any governmental entity can ultimately receive and ultimately indicates that we as your auditors believe the financial statements are presented fairly in all material respects. [sighs and gasps]

Now, I'd like to scroll to page nine here, which is our statement of revenues, expenditures, and changes and funds for our governmental funds. Um, the county reports a substantial number of funds within their audit. So, for the sake of our presentation here tonight, I'm just going to kind of touch base on the general funds specifically. The third line up from the bottom there is what we call our net change in fund balance. And I'd like to highlight that for fiscal year 2023, the county had an increase in general fund fund balance of about $1.45 million, ending the year with just over 5.6 in accumulated fund balance, 5,626,000 to be specific. This change was a 35% increase over the previous fiscal year and the county as of 11:30 2023 has just over 7.5 months of operating expenses in unrestricted or unassigned fund balance. Now I alluded to the fact that the county has various funds that they report under audit. I just want to provide a resource point. So beginning on page 42 is where you can find the financial information for your other funds that are not disclosed on the the face of the financial statements here. Now we'll jump into the management letter. Um, it's important to note the primary purpose of our management letter is going to be to convey some best practices that we see across from our other county clients to communicate any internal control related matters that would warrant the board's attention or to disclose any upcoming accounting pronouncements that could have an effect on the county's financial statements. As mentioned, we have issued a clean unmodified opinion. So, these matters here are purely best practices. Um, our goal as auditors is not just to generate an opinion. It's to provide value outside the scope of the audit. And I know I have a great deal of excitement

and some of the conversations that I've had with u members of county staff that a lot of these items are easily actionable. And I know we'll be helping provide sample policies, things like that to make sure that year over year we are at least addressing a couple of these comments. So we have eight current recommendations as a result of our fiscal year 2023 audit process. The first comment is what we call the policy procedures manual. It is absolutely best practices in our industry for our clients to have a policy manual that outlines the specific procedures that should be occurring within the various key financial related functions such as cash receiving dispersements etc. And again I I just want to stress the importance having writing is really important. Um obviously doing the procedures is one thing but documenting them as another. It allows for seamless transition plans down the road. Comment number two is with regards to grant administration. Um, I know this is a little bit complicated with county engagements because of the decentralization, but I do think it is very important that the county is identifying uh a key individual or key role within the various uh grant related functions and that those individuals are tracking all grant receipts, grant expenditures, grant agreements, etc. So that come audit preparation time, those individuals can act as a cohes of the unit and work together to put together what's called the schedule of federal expenditures or the gata reports where they require to be submitted to the state is hugely beneficial when we have a cohesive unit that is preparing those schedules in advance of the audit process. Now comments three through five I'm kind of gloss over because um ultimately comment number three was with regards to outstanding check writeout policy. Comment number four was capital asset

policy and comment number five was fund balance policy. All of these are simply best practices that are recommended in our industry to uh ultimately go out of the work formal approval. And I just want to highlight that our team has countless sample policies that we can provide. Now, they are not a one-sizefits-all, unfortunately. So, there are going to be some changes that are going to be needed to tailor those policies to the uniquenesses of the county. Um, but just know that water bucket and sage internal team are all committed to assisting with providing sample policies so that we can make sure that some of these are ultimately approved by the board and put into promotion. [clears throat] Comment number six is with regards to timeliness of audit comments. No secret that obviously we are issuing the November 2023 audit here in March of 2026. So anytime one of our clients issues their audit beyond the statutory compliance date, which is 180 days after fiscal year end, plus the 60-day extension that is typically allowed by the controllers's office. We include this comment uh within our management letter. Um, I know that we are full steam ahead on starting the 2024 audit already. Um, I know Anna has provided us with everything that we need to get started on that. Um, and as mentioned to Tad earlier, a phone call today. We are full speed ahead on getting getting right into the testing for 2024. So, um, hopefully the the board feels the momentum uh sort of shifting here as we are full steam ahead. As I mentioned, [clears throat] common number seven is what we call off bailoff sheet accounts. Um there were a number of bank accounts that um we identified during the audit process and the team identified during the preparation process that are not currently recorded to the county's general ledger. From our perspective, it's essential that all accounts

associated with the county, whether it's by federal ID number or any other tying factor, need to be recorded by the treasur's office into the county's general ledger. Um, that is not to say that the treasur's office needs to be controlling the activities within those accounts, but at the very least making sure that all the activity those [clears throat] accounts is being reconciled and recorded to the city's financial software. Um because ultimately Ann and the Zikage team come in, they take all the annual bank statements for those those accounts that have been identified and they record the activity to the trial balances. We'd like to see the county be more proactive in that and have all of that activity recorded prior to the audit preparation kicking [snorts] off. Last but not least, we have funds over budget. Um, it's worth pointing out that this is the working budget that the county established for the fiscal year and we are required to disclose whether or not any of the funds reported within the audit had exceeded the working budget for the fiscal year. So we have a social security fund, the state's attorney forfeited fund, sale and air fund and drainage fund that had exceeded their budgets uh when we compare expendit actual expenditures to budgeted expenditures. So just something to board monitor there. I know this was a little bit of a nuance fiscal year having it be 15 months. So, um certainly relate to timing of expenses and things like that, but just want to highlight none of these comments affected our our unmodified opinion on the financial statements. And as noted, we're really excited to see where the county is going with all things audit and finance. That concludes my coverage of the audit documents here this evening. I'd be happy to field any questions. I know I have tried my [music] best to get responses back to board members that have inquired and been providing questions at this point. So, um hopefully my presentation here this evening did answer some of those questions.

Okay. Thank you for that. So, [clears throat] in that light, I'm going to go ahead and move on to item five to open it up for discussion and questions. So, if I could have uh a motion on item five, which is discussion of vote to approve the fiscal year 23 audit report as presented. Second motion, Miss Matt Lock. Second, Miss Bame. Okay. Um, if it's all right, I'm going to go ahead and start with a couple things that again you you alluded to that we've we've had conversations about. Uh, first and foremost, I want to thank you for for what you and your team have done at this point to get us to this point, the cooperation with Anna and her team at Sikage. Uh, as well as the department heads and their cooperation and helping us get this data together. Um, thank you for addressing item seven uh in the way that you did. We will work with those that have offbalance sheets to make sure that their information is being run through the treasurer's office so we have a record of that. Um, and if we need to create a policy for that, we will get with you on what that looks like. in on policy. You and I have talked before and again I appreciate you reiterating that you do have samples for us uh especially with some of these that look like they might be a little bit cumbersome, right? So I will be in touch in the near future for the the budget audit legislative committee to begin to work on those those products right away. So thank [clears throat] you.

Some are easier than others. there is like an outstanding check policy, the one major that seem like um pretty simple to implement and just making sure that there's no stable checks that are older than the three years outstanding reconciliations which I don't believe was an issue. It's just more of the fact that having that policy in writing is the best practice. So

yeah, thank you. And again, I I've read through this and I know the committee has as well and we will get on this in our um next opportunity to start getting some of these policies. Um the one thing that you and I have talked about quite a bit off and on which is item two um as it relates to not only the grants but also the decentralization. Uh could you do me a favor and touch a little bit more on the importance of decentralization as far as um the internal controls within the different departments uh versus having everything else in one spot? Yeah, as I mentioned, it's a little bit more complicated for a county client. Um, with some of our municipal engagements, you know, we designate the finance director is that individual, right? So, there's one individual that's responsible for working with the various department heads to put together a nice finished product for us. But I can certainly understand. I know I was looking at your grant schedule earlier today. It's a little bit of a doozy. We've got a lot of grant programs and grant activities out there affecting various departments. So, I think the key takeaway from this is we really just want a little bit more cohesion because when Anna and her team went to prep a lot of the grant schedules and you know when we went to request the grant schedules for certain programs, it was a little bit of a a you know tough to track down for lack of better terms. And I think if we have a cohesive process where the department heads are meeting prior to fiscal year end or shortly after fiscal year end to work together on a summary of the grant program, you know, the data related program ID number, the expenditures and revenues that were received in the year that will really help to streamline a preparation and audit processes. And to to that point to summarize what we've talked about is really designating somebody within each department whether whether it's grant specific or not grant specific that really does take care of the bookkeeping and that person will be responsible for co-leading the data

going forward would help shorten up these processes. Is that correct? Yeah. There's just so much sensitivity in the industry right now pertaining to grants especially after uh the grand accountability transparency act was passed by Illinois state legislation. And so it's it's a very sensitive topic and one of the one that we spend the vast majority of our audit procedures [clears throat] on rightfully so. There's obviously some large dollar amounts being awarded to the county. We need to make sure that the expenditures are being expended in accordance with the compliance requirements that that specific grant.

Okay. Thank you. That's all I had. So if it's all right, I'm going to turn to some of the board members to to get some of the questions uh answered. I think you did touch on a lot of them that I did forward to you. Um, but we may have a few others after presentation. So, sure. I just want to add I know I've only heard your microphone so far. So, um, we may have to figure out ultimately the best means of communicating those questions. But, yeah, we'll see. I fortunately I'm the only one that spoke to you so far. So, um, we do have microphones throughout the room. If it doesn't come through, you just let me know and I'll try my best to reiterate verbatim what they've asked. [clears throat] Any questions? Yes. Can you hear me, Brad? No, you can't. Here I wrote it down. You want to ask him since I wrote it down.

Okay, I've got a question from Miss Matlock. Awesome. There's been some back and forth in an email in the last few days about ARPA funds. We have a report to file in April on those funds. Is there anything we should be aware of based on what you found in grant testing that would help us produce that report without errors that you found in 2023? It follows up with, we have work to do to sort out these issues, but any guidance would help. We want to make sure that we are in compliance and we don't put future grant funding at risk.

I appreciate the question. I think it has to go back into our grant testing to provide the best answer there and make sure that um I am assessing you know any findings that we had at Brford. I will say if there was any concern from our perspective especially with regards to the fiscal year under audit we would have communicated those in the management letter or through conversations with staff and nothing is coming to mind on ARPA front. So um but I can certainly take a closer look at that and get back to you. Okay. Thank you. That answer your question? Yeah. Okay. Thank you. Any other questions, Mr. I do, but he's not going to be able to hear me. So, you want to give us either come around, step up to the mic, or

relay relay it to me. I don't think I can right there. Yeah. The green light's on. [clears throat] There's one booth up here, too. I think you up here. That's all that's all you do. Mr. Porter, can you hear me? I sure can.

Okay. Hey, just want to reiterate what Tad said about, you know, thanking you guys for I mean, we're two three years behind and it's, you know, thankful that you guys have stepped up and and we're on the right right here. So, my question is, it's kind of a two or three point question, but it all relates to the first recommendation, and it it has to do with the policy and procedure manual. And I think you kind of touched on it earlier that I would assume that you do have some examples of manuals from other counties that maybe we could use as a template uh going forward. Um along with that, you know, I I would assume that it's going to be used to establish, you know, some consistency in our accounting principles. And you know, in summary, I think what I'm reading there is is that we need some kind of standard um practices that everyone can follow, something that can make it clear for everyone to work with and and to view. I I I guess that's what I'm reading there or seeing there.

Yeah.

Yeah, it's a [clears throat] great question. Um so it's a little bit complicated the policy and procedures manual because of the you know we see a lot of variability from county to county and how they handle certain procedures and policies. So to some extent I would almost make the recommendation that the county team reach out to other surrounding counties that they may have connections or relationships with. Our client policies are obviously protected by confidentiality clauses. So, if there are county clients that we work with that are comfortable sharing that, I can certainly inquire around with some of our other counties and see if they would be comfortable sharing that. Um, but I do think the county can also take matters into their own hands as well by reaching out to some of your friends and neighbors um to see if they have such policies in place. Um, but yes, absolutely a best practice to have those policies documented in writing. Um, obviously we have turnover, we have new faces, and having that policy and procedures manual will, you know, [clears throat] save a lot of time on the training front because you've got everything documented. Um, and that policy procedures manual should be reviewed at least annually to make sure that any changes are ultimately made. Thank you. Did that answer your question? Thank you. Okay. Thank you. Any other questions? [clears throat] Yes, sir.

Uh, regarding item number seven, I would just like to uh agree with you, Mr. Chairman, that that's important. And as far as a policy, I don't know if we need an official policy, but I I believe we need to do it. I believe there should not be Shelby County accounts outside of the treasurer's um office, so to speak. Thank you, Mr. Chairman.

Yeah, to reiterate what seven says, the accounts can be elsewhere, but the documentation should run through the treasur's office. Any other comments, questions for Mr. Porter? Yeah, one comment on comment number seven is making sure that we are considering those funds from a budgetary standpoint too because I know that our team obviously if you're not recording those funds within the county's general ledger, you're not budgeting for those and it's it's important to bring the budgetary function inhouse for those accounts as well so that there is just a general understanding of the activities flowing in and out of those accounts. Those are undeniably the highest risk accounts that we have for fraud across all of our clients. That's not specific to Shelby County. That is a factual [clears throat] statement. For all clients that we audit, if you have a bank account that is not being monitored by, but it's being included in your financial statement audit, it's critical that those are going through the same chains of command and review processes and reconciliation processes as your other county funds. Okay, thank you. And again, you know, your recommendation includes internal control procedures and likely a policy that would include this. So again, you know, we'll be [clears throat] reaching out to to to work with you and see what we can track down and get written soon. So, thank you.

Excellent. All right. Last call. Any questions, comments? Okay. Appreciate you, sir. Thank you much. Take our vote. Thank you, sir. Thank you. Appreciate you. All right. Bye. Bye-bye. Okay. Any other discussion on [clears throat] item five? Okay. Seeing none follow, please. Bane, [clears throat] yes. Brown, yes. Cole, yes. Edwards, yes. Grant, yes. Greg, yes. Hardy, yes. Matwa, yes. Mayhal, yes. Miller, yes. Mors, yes. Walker, yes. Wallace,

yes. What? Yes. Okay. Thank you everybody. Again, very important um again, especially for our grant partners is to to get this uploaded and and sent through the the different portals that are required. So, I do appreciate the cooperation on all fronts to to get this taken care of. Uh with that, I'll move on to item six, public body comment. Public body comment. Public body comment. Okay. With that, I'll take a motion to adjourn. Miss Bane, Miss Wood on the second. All those in favor say I. I. Opposed. We are journ at 6:30. Thanks, folks.

Do you have any more of this spiral?

Thank you, judge.