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Fitzgerald A. Barnes*, Dan W. Byers, Willie L. Gentry, Jr., Willie L. Harper, Richard A. Havasy, P.T. Spencer, Jr.* and Jack T. Wright|
* Mr. Barnes arrived at 4:26 p.m.
* Mr. Spencer arrived at 4:44 p.m.
|Others Present:||C. Lee Lintecum, County Administrator; Ernie McLeod, Deputy County Administrator; Sharon Pandak, Acting County Attorney; Dale Mullen, County Attorney; Amanda Lloyd, Administration Office Manager and Alyson Simpson, Acting Deputy Clerk|
CALL TO ORDER
Chairman Harper called the 4:00 p.m. meeting of the Louisa County Board of Supervisors to order at 4:00 p.m.
Discussion - Audit Requirements
Mr. Matt McLearen said that he last met in June for discussion regarding the new audit standards. Mr. McLearen said as mentioned earlier that this is the pre-audit meeting and it is an opportunity for those in charge of the local government to speak directly with the auditors about areas of concern or risk.
Mr. Byers asked what type of audit report was expected to be submitted as the initial report and what level of detail would it include.
Mr. McLearen said the CAFR (Comprehensive Annual Financial Report) will be presented in December and the format of that report is very standard. Mr. McLearen said the Board could request a specific or detailed report if there was a certain account in mind.
Mr. Byers asked what percentage of county transactions the auditors would look at.
Mr. McLearen said that some of the process is “sampling” because everything is risk-based now. Mr. McLearen said the auditors would look at the controls in place, assess the risk, and then draw a sample. Mr. McLearen said on the expense side, the auditors would perform a threshold test. Mr. McLearen said the auditors look at a lot of areas on the revenue side as well as property tax assessments and delinquent account balances for taxes. Mr. McLearen stated the auditors would perform a receipt test to make sure the controls communicated to the auditors are actually in place.
Mr. Byers asked when looking at revenues and expenditures, what processes are used.
Mr. McLearen said the auditors request a download from the County system in order to do a preliminary assessment to try and figure out the significant areas and thats how the audit procedure is planned. Mr. McLearen said there is also a portion where the auditors will look at a “federal funds portion” for receipts over $500,000 which requires specific audits on designated federal programs.
Mr. Robert Huff added that auditors look at areas for fraud risk to see if there are areas at risk for potential fraud.
Mr. Wright said since the County is getting more and more audits from the organizations they provide funds for, he asked if the auditors look at these audits and how deep they look into them.
Mr. McLearen said last year, he did audits for two fire companies in Louisa and those audits go into a little more detail because of the nature of the requirements that came through the request from the Board. Mr. McLearen stated that because of the small size of these organizations, it is much easier to go through a couple hundred transactions rather than a couple thousand transactions.
Mr. Wright asked if the auditors look at any of the reports from some of our other organizations besides fire and rescue.
Mr. McLearen said the auditors do look at the Water Authority. Mr. McLearen said the Water Authority is a full audit similar to that of the County.
Mr. McLeod asked Mr. Wright if he was talking about the different agencies.
Mr. Wright answered yes.
Mr. McLeod said he did not think these auditors looked at the agencies where someone else is doing their audit.
Mr. Gentry asked about the CIP money that goes to the School Board. Mr. Gentry wanted to know if the County could request an audit to show in detail how the money was spent.
Mr. McLearen said absolutely. Mr. McLearen stated if the Board wanted that done, it could be included in a comprehensive report this year or something outside of the standard audit document.
Mr. Byers asked about allocations versus expenditures. Mr. Byers asked if the auditors looked at historical data to see if certain areas were over spending on a continual basis.
Mr. McLearen said the auditors do look at comparative information which is part of the analytical procedure. Mr. McLearen said the auditors will try to explain difference and spikes. Mr. McLearen said that report is a separate report in the Comprehensive Report.
Mr. Byers asked where the information comes from that the auditors use in determining whether the expenditures are reasonable or not.
Mr. McLearen said reasonable is subject to judgment.
Mr. Huff said the first test is to determine whether or not it is a valid claim in the Commonwealth. Mr. Huff said the second thing is to determine if it is ordinary and appropriate for the appropriation of the budget.
Mr. Harper clarified that the Board could request a more detailed report on a certain area and asked Mr. McLearen at what point do those requests trigger other costs than the regular audit cost.
Mr. McLearen said they typically do not charge additional fees for specific requests from the Board. Mr. McLearen said if the requests requires a significant increase in the time, they will come to an agreement on fees.
Mr. Huff stated it is better to make the special requests early in the audit rather than later.
Mr. Harper said Mr. McLearen stated he had looked at a couple fire accounts last year. Mr. Harper said that those companies who used their own auditors, their audit reports were not looked at.
Mr. McLearen said that was correct.
Mr. Harper said Mr. McLearen helped develop the agreed upon procedures and Mr. Harper asked if the other auditors did not meet those agreed upon procedures, would that be noted.
Mr. McLearen said the audit report would include the expense going out in the audit on the county side.
Mr. Harper asked what if the other audits did not meet the agreed upon procedures.
Mr. McLearen said it would not be noted in the County report. Mr. McLearen said the individual departments are not included in the report, but the payment from the County to those departments would be included.
Mr. Huff asked if there was a lot of non-compliance.
Mr. Wright said the Board did not know.
Mr. McLeod said the first year, the agreed upon procedures were not as good of a quality as the County would have liked. Mr. McLeod said the second year, they sent a sample to those auditors to show what the County was looking for.
Mr. Huff said the internal quality of the audits is not being done.
Mr. Harper said it would be nice to have an outside opinion on what the other auditors are doing and whether or not they are meeting the agreed upon standards.
Mr. Harper stated that Mr. McLearen worked on a risk basis when looking at expenditures and wanted to know if payroll was included.
Mr. McLearen said yes, payroll is included.
Mr. Harper asked if the auditors focused on large amounts and if a thorough audit was performed on that account.
Mr. McLearen said they perform a test of controls.
Mr. Wright asked what that control consisted of.
Mr. McLearen said approval and segregation of duties.
Mr. Harper asked what triggers more detail when it comes to payroll audits.
Mr. McLearen said large spikes, changes from prior years, changes in management, errors, or changes in the way payroll is done.
Mr. Huff said auditors will perform account checks to count how many times people are being paid as well as look at control over wage rate changes.
Mr. Harper asked what a wage rate control is.
Mr. Huff said the auditors will look at who has control over the payroll master file so not everyone can simply go in and change a pay rate. Mr. Huff said the auditors will also look at how these changes are noted or pointed out.
Mr. Harper asked if these things occur, how are they noted.
Mr. Huff said the auditors will look at compliance and non-compliance. Mr. Huff said if there is not sufficient information, the auditors will test more.
Mr. Harper asked what is the purpose of the budget.
Mr. Huff said per the Code of Virginia, the budget is for fiscal planning purposes only.
Mr. Harper asked what is the purpose of appropriations.
Mr. Huff stated it is an authorization by law to spend money.
Mr. Harper asked when a flag flies up for budget versus appropriation.
Mr. Huff answered if there are chronic budget deficits that go on for long periods of time. Mr. Huff stated there is an interesting concept between budgets, appropriations, and expenditures. Mr. Huff said an appropriation is an authorization to set a level amount of money. Mr. Huff said if an appropriation is overspent, there are legal issues as to who is responsible for paying.
Mr. Harper asked if an appropriation is a lump sum or by item.
Mr. Huff stated it is by category.
Mr. McLeod added that a few years ago, the auditors asked for the County to change who could make changes to payroll and who could give out paychecks so there was a clear division. Mr. McLeod also said that when HR hires someone, there will always be an offer letter for the new employee to accept. Mr. McLeod stated that HR sets up the new employee in the system, but he has access to put the salary into the computer.
Mr. Byers asked when the auditors look at personnel and there is a migration to more overtime, does that cause a concern.
Mr. McLearen said yes, depending on the department. Mr. McLearen stated there are some departments that are more susceptible to overtime. Mr. McLearen said the auditors would look back at historical information to see if the habit is something new or check into why it changed.
Mr. Huff stated there is not a salary line and an overtime line in the audit report. Mr. Huff said both those items together denote salary.
Mr. Wright asked if the Board had a concern for a certain departments overtime habits, could they request for that to be looked into further.
Mr. McLearen said yes.
Mr. Huff said if a department has a high rate of turn over, then overtime could be a natural result whereas other times, overtime just becomes a chronic practice.
* Mr. Barnes arrived at 4:26 p.m.
Mr. Wright asked if the auditors had a formula for what the turnover ratio should be.
Mr. Huff said no.
Mr. Wright asked if the auditors did look at employee turnover, would they look at it on a 12-month basis.
Mr. Huff said it would have to be a 12-month period. Mr. Huff said his specific answer to Mr. Wrights question is if the County had a department with a lot of overtime and that department was three or four full-time equivalents short, then the other employees in the department would have to make up for that.
Mr. Wright asked if the Board requested it, would the auditors go more in to depth on the overtime issue.
Mr. Huff said yes.
On motion of Mr. Barnes, seconded by Mr. Wright, which carried by a vote of 6-0, the Board voted to enter Closed Session at 4:31 p.m. for the purpose of discussing the following:
* Mr. Spencer arrived at 4:44 p.m. and went into closed session.
On motion of Mr. Wright, seconded by Mr. Spencer, which carried by a vote of 7-0, the Board voted to return to Regular Session at 5:58 p.m.
RESOLUTION - CERTIFICATION OF CLOSED SESSION
On motion of Mr. Barnes, seconded by Mr. Gentry, which carried by a vote of 7-0, the Board voted to adopt the following resolution:
WHEREAS, the Louisa County Board of Supervisors has convened a Closed Meeting this 15th day of September 2008, pursuant to an affirmative recorded vote and in accordance with the provisions of the Virginia Freedom of Information Act; and
WHEREAS, §2.2-3712 of the Code of Virginia requires a certification by the Louisa County Board of Supervisors that such closed meeting was conducted in conformity with the Virginia Law.
NOW, THEREFORE BE IT RESOLVED on this 15th day of September 2008, that the Louisa County Board of Supervisors does hereby certify that, to the best of each member's knowledge, (i) only public business matters lawfully exempted from open meeting requirements by Virginia law were discussed in the closed meeting to which this certification resolution applies, and (ii) only such public business matters as were identified in the motion convening the closed meeting was heard, discussed or considered by the Louisa County Board of Supervisors.
It was the concensus of the Board to recess the 4:00 p.m. meeting at 5:59 p.m.
BY ORDER OF
WILLIE L. HARPER, CHAIRMAN
LOUISA COUNTY BOARD OF SUPERVISORS
LOUISA COUNTY, LOUISA, VIRGINIA