Oct 29, 2024 Audit Committee Meeting

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I MEAN, SO WE'RE SO WE'RE LIVE. IT WAS CALLED TO ORDER THE CITY OF DUNCANVILLE AUDIT COMMITTEE

[CALL TO ORDER]

ANYWAY, IT'S. RECEIVED PUBLIC COMMENTS AS AUTHORIZED BY SECTION 5.1.071 OF THE TEXAS GOVERNMENT CODE. THIS MEETING SHALL BE CONVENED IN CLOSED EXECUTIVE SESSION FOR THE PURPOSE OF SEEKING CONFIDENTIAL LEGAL ADVICE FROM THE CITY ATTORNEY ON ANY ITEM ON THE AGENDA AT ANY TIME DURING THE MEETING. PURSUANT TO TEXAS CODE 551.127, ONE OR MORE MEMBERS OF THE GOVERNING BODY MAY APPEAR VIA VIDEO CONFERENCE CALL PRESIDING OFFICER AND QUORUM OF THE CITY COUNCIL MUST BE PHYSICALLY PRESENT AT THE ABOVE STATED LOCATION. THE CITY COUNCIL, THE CITY OF DUNCANVILLE, RESERVES THE RIGHT TO RECONVENE, RECESS, OR ALIGN THE REGULAR SESSION OR CALLED EXECUTIVE SESSION, OR ANY TIME PRIOR TO ADJOURNMENT OF DIRECTION. AGREEMENT OF MAYOR. THIS IS AN OPEN MEETING CONDUCTED IN PERSON AND VIRTUALLY TO SUBMIT A COMMENT VIA EMAIL. THE FOLLOWING INFORMATION IS REQUIRED. SEND A COMMENT BY 12 P.M. ON TUESDAY, OCTOBER 20TH. EMAIL THE CITY SECRETARY, CITY SECRETARY OF DUNCANVILLE, TEXAS.COM EMAIL PUBLIC COMMENT AUDIT COMMITTEE. TUESDAY, OCTOBER 29TH FIRST LAST NAME AND THE ADDRESS AND CITY SECRETARY DO WE HAVE ANY PUBLIC COMMENTS OR OR. WELL THERE HE IS. THERE'S JERRY FRANKEL. OKAY. WELCOME, JERRY. Y'ALL STARTED ON TIME. YES, SIR. AND IF YOU. AND IF LIONS CLUB. IF YOU WILL, IF YOU WILL INTRODUCE YOURSELF. EVERYBODY. EVERYBODY. I'M JERRY FRAZIER I'M A CPA HERE IN DUNCANVILLE. I'M ABOUT READY TO QUIT BECAUSE I'M GETTING GRAY HAIRED. OKAY. AND CITY SECRETARY, DO WE HAVE ANY PUBLIC COMMENTS? NO PUBLIC COMMENTS.

OKAY. AND ANYBODY. MISS HABER, DO YOU HAVE A PUBLIC COMMENT? NO. THANK YOU. THANK YOU. OKAY,

[A. Consider the minutes of the July 9, 2024, Audit Committee Meeting]

RIGHT? BECAUSE YOU WEREN'T HERE, RIGHT? YEAH. OKAY. ITEM NUMBER B, REVIEW AND DISCUSS THE AUDIT

[B. Review and discuss the audit of the financial statements for the year ending September 30, 2023, with the auditor from Pattillo, Brown & Hill, LLP.]

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YOU'RE NOT GOING TO GET IT OUT ON TIME AND YOU DON'T FINISH THE PREVIOUS ONE UNTIL MARCH OR APRIL OR WHATEVER IT WAS, BUT IT WAS BY THE TIME THE RECORDS WERE GIVEN TO US, EVERYTHING WAS IN REALLY GOOD SHAPE AND WE APPRECIATE THEIR EFFORTS. THERE SHOULD HAVE. EVERYONE SHOULD HAVE THREE DOCUMENTS YOU'VE GOT THE BIG ONE, WHICH IS THE CITY'S DRAFT ANNUAL COMPREHENSIVE FINANCIAL REPORT, AND IT SAYS DRAFT. BUT IT'S IN THE FORMAT THAT WE BELIEVE COULD BE FINAL.

AS SOON AS THE AUDIT COMMITTEE IS READY TO APPROVE IT, WE COULD SIGN IT AND SEND IT ON OUT. YOU ALSO HAVE A THINNER BOUND DOCUMENT, WHICH IS THE SINGLE AUDIT REPORT. YOU MIGHT REMEMBER IN ANY LOCAL GOVERNMENT IN THE COUNTRY THAT SPENDS OVER $750,000 OF FEDERAL GRANTS IN A YEAR, HAS TO UNDERGO THE SINGLE AUDIT AND A SINGLE AUDIT. WHAT YOU'RE DOING IS YOU'RE IN ADDITION TO YOUR FINANCIAL STATEMENT AUDIT THAT YOU ALWAYS HAVE, YOU'RE ADDING A COMPLIANCE AUDIT OF YOUR FEDERAL GRANT AWARDS. AND IN RECENT YEARS, WITH ALL THE COVID MONEY FLYING AROUND, PRETTY MUCH ALL OF THE CITIES THAT I WORK ON ARE REACHING THE SINGLE AUDIT THRESHOLD. AND THEN LASTLY, YOU'VE GOT A STAPLE DOCUMENT, AND THIS CONTAINS ALL OF THE COMMUNICATIONS THAT ARE REQUIRED TO BE MADE FROM THE INDEPENDENT AUDITOR TO AN AUDIT COMMITTEE.

ANYTIME YOU UNDERGO THE AUDIT PROCESS. SO WHAT I'D LIKE TO DO TODAY IS TO JUST GO OVER THE RESULTS OF OUR AUDIT, WHICH ARE CONTAINED IN SEVERAL DIFFERENT REPORTS. AND THEN IF ANYBODY HAS ANY QUESTIONS AT THE END OR EVEN IN THE MIDDLE, I'D BE HAPPY TO ADDRESS ANY QUESTIONS YOU MIGHT HAVE. I GUESS A GOOD PLACE TO START WOULD BE THE INDEPENDENT AUDITOR'S REPORT IN YOUR ANNUAL COMPREHENSIVE FINANCIAL REPORTS. YOU'RE LOOKING AT THAT REPORT. THE FIRST SECTION IS THE INTRODUCTORY SECTION. YOU'LL NOTICE IT'S A NUMBERED WITH ROMAN NUMERALS. IF YOU SKIP PAST THAT SECTION THAT'S AN UNAUDITED SECTION. SO WE WON'T SPEND ANY TIME ON IT. THE FIRST PAGE OF THE FINANCIAL SECTION, HOWEVER YOU READ THAT AN OVERVIEW OF THE INTRODUCTION SECTION. IS THAT CORRECT? I'M SORRY. YOU'VE ALREADY READ OVER IT. AND THERE'S NO. YES. WE'VE RAN OVER.

WE RAN OVER THE ENTIRE DOCUMENT. IF YOU'RE LOOKING AT THE TABLE OF CONTENTS, THE INTRODUCTORY SECTION AND THE STATISTICAL SECTION, WHICH STARTS ON PAGE 83, THOSE SECTIONS ARE BOTH UNAUDITED. SO WE'RE NOT OPINING ON THEM. WE'RE NOT EXPRESSING AN OPINION ON THEM. BUT WE GO THROUGH EVERY PAGE IN THE DOCUMENT AND MAKE SURE THAT IT AGREES TO WHERE IT'S SUPPOSED TO AGREE THAT THE CONTAINS THE INFORMATION THAT'S REQUIRED TO BE IN THAT SECTION. SO EVERY PAGE IN HERE HAS BEEN LOOKED AT. BUT THE OPINION THAT WE EXPRESS IS ONLY ON THE FINANCIAL SECTIO.

AND IF YOU LOOK AT THE INDEPENDENT AUDITOR'S REPORT ON PAGE ONE OF THE FINANCIAL SECTION, WHAT THIS REPORT BASICALLY SAYS IS THAT THE PREPARATION OF THESE FINANCIAL STATEMENTS IS THE RESPONSIBILITY OF THE CITY. WE CAN ASSIST WITH THE PREPARATION OF THE FINANCIAL STATEMENTS, AND WE DO AS LONG AS CERTAIN SAFEGUARDS ARE PUT IN PLACE. AND THEY WERE. AND WE'LL TALK ABOUT THAT A LITTLE BIT LATER. BUT ULTIMATELY, THE PREPARATION OF THE FINANCIAL STATEMENTS IS THE RESPONSIBILITY OF THE CITY. IT'S OUR RESPONSIBILITY AS YOUR AUDITOR TO EXPRESS AN OPINION ON THE FINANCIAL STATEMENTS. YOU SEE OUR OPINION THERE IN THE SECOND PARAGRAPH. HAPPY TO REPORT. WE'VE ISSUED WHAT'S CALLED AN UNQUALIFIED OPINION. YOU'LL OFTEN HEAR PEOPLE CALL IT A CLEAN OPINION, AND IT'S THE HIGHEST FORM OF OPINION THAT YOU CAN RECEIVE. WHAT IT REALLY MEANS TO YOU AS A USER OF THESE FINANCIAL STATEMENTS IS THAT THE FINANCIAL STATEMENTS THAT YOU HAVE HERE IN THE FINANCIAL SECTION, THEY HAVE BEEN AUDITED BY OUR FIRM AND IN OUR OPINION, FREE OF ANY MATERIAL MISSTATEMENTS. AND THEY'RE ALSO PRESENTED FAIRLY IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. AGAIN, WE'RE NOT GIVING ASSURANCE THAT THEY'RE CORRECT TO THE DOLLAR. THERE'S A MATERIALITY THRESHOLD THAT'S USED, BUT IN OUR OPINION THEY'RE FREE OF ANY MATERIAL MISSTATEMENTS. YOU WILL ALSO NOTE IN THE VERY LAST PARAGRAPH ON PAGE THREE THAT OUR AUDIT WAS PERFORMED IN ACCORDANCE WITH

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BASICALLY THERE WERE A NUMBER OF FINDINGS IN YOUR PRIOR YEAR'S REPORT THAT YOU COULD SEE ON PAGE TEN THERE. A NUMBER OF INTERNAL CONTROL FINDINGS THAT DEALT WITH PRODUCING TIMELY FINANCIAL STATEMENTS. THERE WERE INORDINATE NUMBER OF MATERIAL AUDIT ADJUSTMENTS THAT WERE NEEDED TO BE MADE. SOME OF THE BANK RECONCILIATIONS, I THINK, HAD NOT BEEN DONE. ET CETERA. ET CETERA. THIS YEAR FOR THE CURRENT YEAR, THE ONLY FINDING THAT YOU HAVE THAT APPLIES TO THE CURRENT YEAR IS THE TIMELINESS OF THE ISSUANCE. IN ORDER TO ISSUE FINANCIAL STATEMENTS THAT ARE REALLY USABLE TO THE READERS, YOU REALLY SHOULD BE ISSUING THEM, PROBABLY SAY BY THE END OF MARCH. AND HERE WE ARE, ALMOST HALLOWEEN. SO IT'S JUST TOO LATE. IN ADDITION TO THAT MARCH OF 2024, YOU SEE, CORRECT? YES. AND NORMALLY I KNOW WHEN WE WHEN I USED TO WORK WITH THE CITY BEFORE, WE GENERALLY PRESENTED, I THINK, TO THE AUDIT COMMITTEE, EITHER IN FEBRUARY OR AT THE LATEST MARCH, YOU HAVE TO ISSUE IT BY THE END OF MARCH IN ORDER TO RECEIVE THE GFOA AWARD. SO THAT'S KIND OF A GOAL. AND IN ADDITION TO THAT, WE WE'LL TALK ABOUT THIS A LITTLE BIT WITH THE SINGLE AUDIT. ANYTIME YOU HAVE TO UNDERGO THE SINGLE AUDIT PROCESS, THAT REPORTING PACKAGE IS DUE WITHIN NINE MONTHS OF YEAR END, WHICH WOULD HAVE BEEN JUNE 30TH. SO THEN THAT'S THE SECOND PART OF THE FINDING THAT WE HAVE HERE. IF YOU GO BACK TO THE GOVERNMENT AUDITING STANDARDS REPORT, THE FIRST SECTION DEALS WITH INTERNAL CONTROLS OVER FINANCIAL REPORTING. THE SECOND PART OF THAT DEALS WITH COMPLIANCE WITH CONTRACTS, LAWS, REGULATIONS AND GRANTS. YOU WERE OUT OF COMPLIANCE WITH THE SINGLE AUDIT REPORTING REQUIREMENTS AND THAT YOU DIDN'T COMPLETE YOUR AUDIT WITHIN NINE MONTHS AFTER HE AGREED. THEORETICALLY, THAT COULD CAUSE PROBLEMS WITH RECEIVING YOUR FEDERAL FUNDING.

I DON'T EXPECT YOU WOULD HAVE ANY ISSUES LIKE THAT. I MEAN, CERTAINLY FOR JUST BEING THIS LATE NOT SEEM TO BE A LOT LATER THAN THIS IN THE PAST. BUT THAT BEING SAID, THAT'S, YOU KNOW, AS A PRACTICE, YOU DON'T WANT TO MAKE A PRACTICE OUT OF THAT. YOU NEED TO GET IT DONE. YOU KNOW, IDEALLY YOU WOULD COMPLETE FINANCIAL STATEMENT AUDIT AND SINGLE AUDIT BY THE END OF MARCH. WOULD IT BE APPROPRIATE TO ASK THE QUESTION IN LIGHT OF THIS, WE KNOW THAT THIS IS OVER, BUT LOOKING AT THE NEXT YEAR, WE THINK WE'RE GOING TO BE PRETTY MUCH ON TIME. I DON'T WANT TO

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AND THIS SCHEDULE LISTS ALL OF THE DIFFERENT GRANTS THAT THE CITY EXPENDED FUNDS DURING FISCAL YEAR 23 UNDER FEDERAL GRANT AWARDS. AND THE WAY THE COMPLIANCE AUDIT WORKS FOR YOUR AUDIT OF FEDERAL GRANTS, YOUR AUDITOR DOESN'T SELECT EVERY PROGRAM TO TEST. THEY PERFORM A RISK ASSESSMENT, AND THERE'S A CERTAIN PROCESS THAT YOU GO THROUGH TO DETERMINE WHICH PROGRAMS THAT YOU'RE GOING TO TEST. AND ULTIMATELY, YOU HAVE TO GET A CERTAIN PERCENTAGE OF COVERAGE OF EXPENDITURES. IT WAS VERY EASY IN THIS CASE BECAUSE YOU COULD SEE YOU HAD THE ONE VERY LARGE COVID 19 GRANT, $4.6 MILLION. SO THAT'S THE PROGRAM THAT WE SELECTED FOR TESTING.

WHAT THIS REPORT BASICALLY MEANS IS THIS REPORT ONLY REFERS TO YOUR MAJOR FEDERAL PROGRAMS, AND THAT MAJOR FEDERAL PROGRAM, IN THIS SENSE, IS NOTHING MORE THAN A PROGRAM THAT WE SELECTED FOR TESTING. SO THIS REPORT COVERS OUR AUDIT OVER YOUR COVID 19 PROGRAM. THE FIRST PART OF IT, WE ACTUALLY HAVE TO ISSUE AN OPINION AS TO WHETHER OR NOT WE BELIEVE THAT YOU COMPLIED IN ALL MATERIAL RESPECTS WITH THE VARIOUS REQUIREMENTS OF THE PROGRAM. WE'RE TESTING THINGS LIKE, DID YOU SPEND THE MONEY ON ALLOWABLE COSTS THAT YOU'RE ALLOWED TO SPEND THE MONEY ON? THERE'S USUALLY REPORTING REQUIREMENTS THAT HAVE TO BE DONE. WE TEST TO SEE THAT THOSE WERE MADE TIMELY AND ACCURATELY. THERE'S UP TO 13 DIFFERENT COMPLIANCE REQUIREMENTS THAT WE COULD POSSIBLY HAVE TO TEST FOR. YOU CAN SEE OUR OPINION THERE IN THE SECOND PARAGRAPH. AND WE'VE ISSUED AN UNMODIFIED OPINION OR A CLEAN OPINION, WHICH AGAIN, THAT BASICALLY JUST MEANS THAT IN OUR OPINION, YOU DID COMPLY WITH THE REQUIREMENTS OF THAT PROGRAM. THE SECOND PART OF THAT REPORT DEALS WITH YOUR INTERNAL CONTROLS OVER COMPLIANCE AND WHAT THAT REALLY MEANS IS THAT WE'RE LOOKING AT ALL OF THE POLICIES AND PROCEDURES THAT YOU HAVE SET UP IN ORDER TO MAKE

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NINE 3023 I'M NOT SURE IF Y'ALL ARE ALL THE WAY CAUGHT UP NOW OR WHAT. I'M JUST WHAT I'M REFERRING TO. I KNOW YOU CAN'T COMMENT OUTSIDE OF OH YES, YES, IT IS NOW. CASH WAS RECONCILED ALL THE WAY UP THROUGH THE END OF SEPTEMBER, AND I UNDERSTAND THEY WERE REALLY FAR BEHIND ON THE BANK RECONCILIATIONS. BUT AGAIN, I WASN'T INVOLVED IN THE IN THE PRIOR YEAR'S AUDIT. BUT YES, IT WAS RECONCILED AS OF 930, 23. VERY GOOD. ANY COMMENT FROM ANYBODY ELSE? NOT THAT YOU GOT A COMMENT. I'M JUST CURIOUS ABOUT THE NO. BECAUSE THAT WAS A THAT WAS A BIG HOT POTATO BEFORE. I AGREE. I MEAN THAT'S AND I WAS CONCERNED MY EXPERIENCE IS USUALLY IF YOU CAN'T IF YOU'RE NOT RECONCILING CASH YOU'RE NOT DOING ANYTHING ELSE. SO I'M NOT CONCERNED.

THAT'S A BIG CONCERN OF MINE. HAVE A QUESTION, MR. CONTRERAS. MR. MAYOR, ON PAGE NINE, UNDER CAUSE AND EXCUSE ME, I'M STEPPING OUT OF THE LINE HERE, BUT I GOT A QUESTION. SURE. YOU DON'T HAVE TO ANSWER IT. IF IT'S PUTTING YOU IN A BAD LIGHT, SAID THE FINDINGS. DUE TO STAFF TURNOVER. THAT APPEARS TO ME THAT A LOT OF DISCUSSIONS IT WAS MORE THAN JUST STAFF TURNOVER.

THERE WERE SOME PRETTY CRITICAL MISTAKES THAT WERE MAKING MADE, AND THAT THERE WERE ALSO UNNECESSARY DELAYS IN TAKING STEPS THAT THEY SHOULD HAVE. SO IS THIS JUST A PROFESSIONAL NICETY THAT WE'RE SUMMARIZE IT AS THERE WAS TURNOVER, IT WAS ACTUALLY LIFTED OUT OF THE PRIOR YEAR. THAT'S A REFERENCE TO YOUR PRIOR YEAR FINDING. AND IF YOU NOTE THE PRIOR YEAR FINDINGS SAID, I THINK THE WAY IT WAS WORDED WAS DUE TO STAFF TURNOVER. BUT AND I WASN'T INVOLVED IN THE IN THE PREVIOUS AUDIT, BUT YES, MY UNDERSTANDING WAS THAT THERE WERE A LOT OF ERRORS. IT WASN'T JUST TURNOVER, THAT THERE WERE A LOT OF ERRORS MADE. I KNOW THERE WERE A LOT OF ERRORS IN YOUR AUDITED FINANCIAL STATEMENTS FOR 22 THAT WERE ISSUED. I MEAN, THERE WERE AND WE'LL GO OVER THAT IN A SECOND. BUT THERE WERE SOME SIGNIFICANT ERRORS IN YOUR. YEAH. WELL, I DON'T WANT TO DRAG YOU BACK TO THE PAST BECAUSE YOU WEREN'T PART OF OUR PAST. RIGHT. BUT I WANT TO FOR TRANSPARENCY SAKE, IT IT DIDN'T APPEAR TO ME THAT IT WAS SOLELY EVEN MOSTLY STAFF TURNOVER AS MUCH AS THOSE ERRORS. AND THAT WAS I GUESS, AGAIN, I CAN'T PROBABLY SHOULDN'T SPEAK TO THAT BECAUSE I WASN'T HERE, BUT THAT WAS MY UNDERSTANDING AS WELL, WAS THAT THERE WERE JUST A LOT OF ERRORS BEING MADE BEFOREHAND. I THINK THEY I THINK RICHARD GERE PROBABLY WALKED INTO A BIG MESS WHEN THEY GOT HERE. I KNOW I'M I'VE BEEN ON THIS COMMITTEE NOW FOR A LONG TIME. I WAS HERE WHEN YOU WERE HERE BEFORE, RIGHT. AND MY HEART IS OVERJOYED TO HAVE

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PROBABLY THE MOST SIGNIFICANT BENEFIT THAT YOUR AUDITOR PROVIDES IS THAT THEY'RE INDEPENDENT. GIVING AN INDEPENDENT OPINION ON YOUR FINANCIAL STATEMENTS. SO WE HAVE TO MEET CERTAIN INDEPENDENCE REQUIREMENTS. ONE OF WHICH IS YOU HAVE TO CONSIDER ANY THREATS TO YOUR INDEPENDENCE AT ANY TIME THAT YOU ARE ASSISTING WITH THE PREPARATION OF THE FINANCIAL STATEMENTS. THAT IS A THREAT THAT YOU HAVE TO CONSIDER. BUT WE'VE MET ALL OF THE REQUIREMENTS THAT WE NEED TO PUT IN PLACE WHEN WE DO THAT. IT'S REALLY CONSISTS PRIMARILY OF HAVING ANOTHER PARTNER AT THE FIRM DO A CONCURRING REVIEW OF OUR WORK PAPERS AND FINANCIAL STATEMENTS. WE DO THAT ON EVERY AUDIT WHERE WE ASSIST WITH THE PREPARATION OF THE FINANCIAL STATEMENTS, WHICH IS BASICALLY ALMOST EVERY AUDIT THAT WE DO. SIGNIFICANT RISKS IDENTIFIED THERE IN THE MIDDLE OF PAGE TWO, WE SHOULD PROBABLY TALK ABOUT THAT, BECAUSE THAT'S TRUE, AT LEAST FROM THE LAST TIME THAT I WORKED WITH THE CITY. BUT SIGNIFICANT RISKS ARE NOTHING MORE THAN RISKS THAT ARE IDENTIFIED AT THE BEGINNING OF AN AUDIT BY YOUR AUDITOR, WHICH MIGHT REQUIRE SPECIAL AUDITING CONSIDERATION. THE NEW PART SIGNIFICANT RISKS HAVE ALWAYS BEEN AROUND. THE NEW PART IS PROBABLY 2 OR 3 YEARS AGO, YOUR AUDITOR HAD TO START LISTING SIGNIFICANT RISKS IN THIS LETTER, AND THAT PART WAS NEW. SO SOME PEOPLE I THINK WERE CONCERNED WITH SOME OF THE ITEMS, LIKE FOR EXAMPLE, THE FIRST ONE, MANAGEMENT OVERRIDE OF CONTROLS THAT COMMENT IS ACTUALLY NOT SPECIFIC TO THIS CITY. IT'S IN THE STANDARDS THAT EVERY AUDIT YOU DO, YOU HAVE TO CONSIDER THE POSSIBILITY THAT MANAGEMENT'S OVERRIDING CONTROLS. SO THAT'S GOING TO BE A SIGNIFICANT RISK SHOULD BE A SIGNIFICANT RISK FOR THE CITY EVERY YEAR, NO MATTER WHO'S DOING YOUR AUDIT. THAT'S THAT'S ACTUALLY IN THE STANDARDS. AND THEN THE OTHER TWO LEASES AND SUBSCRIPTIONS, THOSE WERE JUST TWO RECENT STANDARDS THAT WERE

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AND WE WERE LATE LATER THAN WE EXPECTED TO BE. BUT ALL THINGS CONSIDERED, I THINK WE HAD A LOT LESS DIFFICULTIES DURING THE AUDIT THAN I WAS EXPECTING ABOUT LAST DECEMBER WHEN I HAD THE FIRST MEETING WITH THE CITY UNCORRECTED AND CORRECTED MISSTATEMENTS. HAD WE HAD MATERIAL AUDIT ADJUSTMENTS AND WE WOULD BE GOING OVER THOSE WITH YOU ALL. BUT THERE WERE NO MATERIAL AUDIT ADJUSTMENTS THAT WERE IDENTIFIED DURING THE AUDI. MR. PRUITT, I HAVE A QUICK QUESTION. SURE. LETTERS ALWAYS GO OUT, LIKE TO COUNCIL MEMBERS AND SUCH THAT THAT ASK OPINIONS OR STATEMENTS OR ANYTHING LIKE THAT. DID DID YOU GET A GOOD PARTICIPATION FROM OUR. WE DIDN'T HAVE A LOT OF FEEDBACK ON THE LETTERS, BUT THERE WERE SOME COMMENTS MADE, BUT WE DID NOT HAVE A WE DIDN'T HAVE A LOT OF FEEDBACK REALLY ON THOSE LETTERS. OKAY. KIND OF THOUGHT I MIGHT SEE MORE. BUT YOU DON'T ALWAYS SOMETIMES THOSE THINGS WITH THE WAY THEY'RE WORDED, THOSE RELATED PARTY CONFIRMATIONS THAT WE SEND AREN'T ACTUALLY REQUIRED TO BE SENT. WE ALWAYS LIKE TO SEND THEM JUST AS A STANDARD AUDIT PRACTICE. AND A LOT OF TIMES WE DON'T GET A LOT OF GREAT FEEDBACK ON IT. AND SOMETIMES WE GET A LOT OF KIND OF WILD GOOSE CHASE ITEMS ON THERE AS WELL. BUT WE DIDN'T HAVE A LOT OF COMMENTS. BUT THERE WERE SOME THINGS TO LOOK AT WHEN PEOPLE RESPONDED TO THANK YOU. REQUESTED FROM MANAGEMENT. EVERY TIME YOU UNDERGO AN AUDIT, THERE'S CERTAIN REPRESENTATIONS THAT YOU HAVE TO SIGN OFF ON AND WE HAVE RECEIVED THAT LETTER TO OUR KNOWLEDGE, THERE WERE NO CONSULTATIONS WITH OTHER ACCOUNTANTS OTHER THAN OURSELVES ABOUT ANY MATTERS. AND THEN LASTLY, I GUESS ON ABOUT THE MIDDLE OF PAGE FOUR, YOU'LL SEE A LIST OF DIFFERENT GASB STATEMENTS THAT HAVE BEEN ISSUED AS OF NOW BUT ARE NOT YET IN EFFECT. AND THERE'S ALREADY FOUR, FIVE, FIVE STATEMENTS THAT HAVE BEEN ISSUED. NOW THE GATSBY JUST CHURNS OUT THESE STATEMENTS NONSTOP. BUT I THINK REALLY

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I DON'T THINK WOULD BE DIFFICULT TO IMPLEMENT EITHER, REALLY. I DON'T SEE ANY OF THESE THAT WOULD BE ANYWHERE NEAR THE AMOUNT OF WORK THAT THAT 87 AND 96 WERE, AND ALL OF THESE BE INCORPORATED INTO THE NEXT AUDI. DIFFERENT YEARS. I THINK WE'LL SEE. GASB 100 IS NEXT YEAR. 101 IS EFFECTIVE FOR REPORTING PERIODS BEGINNING AFTER DECEMBER 15TH, 23. SO IT'S 100 AT A TIME ON THAT. OH I'M SORRY, THAT'S 101 COMPENSATED ABSENCES. BUT EACH ONE OF THESE WILL HAVE THE I THINK THE LAST STATEMENT WILL BE WHEN IT BECOMES EFFECTIVE. SO I DON'T THINK WE HAVE ANY ANY BIG ONES COMING UP NEXT YEAR. OF COURSE, YOU RECEIVED A LETTER BACK FROM A LEGAL COUNSEL REGARDING ANY KIND OF PENDING. WE DID. WE GOT THAT BACK LAST WEEK AND THAT WAS INCORPORATED.

IT'S BEEN INCORPORATED. I THINK IT WAS MAYBE EVEN FRIDAY OF LAST WEEK THAT HAD NOTHING THERE TO BE CONCERNED ABOUT, RIGHT? NOTHING THAT REQUIRED DISCLOSURE OR ANYTHING LIKE THAT. THERE ARE A COUPLE OF ITEMS I WOULD LIKE TO POINT OUT IN THE FINANCIAL STATEMENTS. AND THEN IF ANYBODY WANTS TO ASK ANY QUESTIONS ABOUT THE AUDIT OR THE FINANCIAL STATEMENTS, I'D BE HAPPY TO GO OVER THOSE. AND THEN WE CAN GO OVER THE FINANCIALS IN AS MUCH DETAIL AS YOU WOULD LIKE. BUT I WOULD LIKE TO POINT OUT, ANYTIME WE HAVE A PRIOR PERIOD ADJUSTMENT, I'D LIKE TO POINT THAT OUT. SO IF YOU LOOK AT PAGES 15 AND 16. YOU WILL SEE THIS IS THE STATEMENT OF ACTIVITIES, WHICH IS THE OPERATING STATEMENT OR THE INCOME STATEMENT. AND YOUR GOVERNMENT WIDE FINANCIAL STATEMENTS. AND YOU CAN SEE IN THE GOVERNMENTAL ACTIVITIES ON PAGE 16, THE THIRD LINE FROM THE BOTTOM THAT THERE WAS A PRIOR PERIOD ADJUSTMENT OF APPROXIMATELY $2.5 MILLION FROM THE PREVIOUS YEAR. WE ACTUALLY INCREASED YOUR NET POSITION APPROXIMATELY $2.5 MILLION FROM WHAT WAS REPORTED IN YOUR PRIOR YEAR'S FINANCIAL STATEMENTS, AND THAT IS ACTUALLY A NET NUMBER OF SOME EVEN LARGER NUMBERS. BUT IN THE PREVIOUS YEAR, YOUR NET PENSION ASSET, YOU HAD A NET PENSION ASSET INSTEAD OF A LIABILITY AT THE END OF 22, IT WAS MISSTATED IN YOUR GOVERNMENT WIDE FINANCIAL STATEMENTS BY SEVERAL MILLION DOLLARS. YOUR MISSTATED. YES, IT WAS UNDERSTATED BY APPROXIMATELY $6 MILLION. AND THEN YOUR INTERNAL BALANCES WAS OVERSTATED BY ABOUT $3 MILLION. THERE ARE ALSO SOME ERRORS IN THE I BELIEVE IT WAS WERE THE BONDS AND THE OPEB. BUT THERE WERE SEVERAL ERRORS IN LAST YEAR'S REPORT THAT ALL NETTED OUT TO A $2.5 MILLION ADJUSTMENT TO INCREASE YOUR YOUR BEGINNING NET POSITION IN YOUR GOVERNMENT WIDE FINANCIAL STATEMENTS AND LIKE I SAID, I WASN'T INVOLVED IN THE PREVIOUS YEAR'S AUDIT. I KNOW THAT FROM SPEAKING WITH THE FIRM, I SPOKE TO A PARTNER THAT WAS IN THEIR CHICAGO OFFICE, THAT THERE WERE A LOT OF DIFFERENT PEOPLE THAT WORKED ON THEIR AUDIT. FROM THE AUDITOR'S STANDPOINT, I THINK THERE WERE MAYBE A LOT OF DIFFERENT PEOPLE EVEN WORKED ON IT AT THE CITY. I'M NOT SURE IF THERE WAS A LOT OF TURNOVER, WHAT WENT ON DURING THAT PROCESS, BUT ULTIMATELY, I GUESS IT WAS A VERY LIGHT AUDIT AND THERE WERE SOME ERRORS THAT HAD TO BE CORRECTED IN IT. AS WELL. BUT THOSE HAVE BEEN CORRECTED AND I THINK MOVING FORWARD, I THINK THE CITY IS ON THE RIGHT TRACK AS FAR AS IMPLEMENTING TIMELY AND ACCURATE FINANCIAL STATEMENTS. BACK ON THE SCHEDULE THAT YOU WERE USED TO. BACK WHEN I DID THE AUDIT BEFORE, I'M NOT SURE. WAS THERE MORE THAN ONE AUDIT THAT WAS LATE OR MAYBE TWO? YES. THIS IS THE THIRD, THIRD, YES. I MEAN 21, 22 AND 23. BUT THESE FINANCIAL STATEMENTS AND THAT ADJUSTMENT JUST CORRECTS SOME ERRORS THAT WERE MADE IN THE PREVIOUS YEAR. BUT LIKE I SAID, I THINK MOVING

[00:40:03]

BUT I THINK IT IS GOOD NEWS THAT YOU'RE YOU'RE ON THE RIGHT PATH NOW. AND THAT EVERYTHING I THINK IS GETTING CLEANED UP. AND I THINK YOU'LL BE ISSUING YOUR 24 AUDIT ON TIME AGAIN. WOULD THAT GET US OUR GATSBY AWARD BACK? THAT IS WHAT WE'RE SHOOTING FOR. ABSOLUTELY. WE'LL BE A LITTLE BIT. I THINK IT WAS OVER 20 YEARS PREVIOUSLY CONSECUTIVELY? YES. PRIOR TO HOW MANY YEARS DID THE CITY NOT WAS IT JUST WAS THERE MORE THAN JUST 22? THERE WAS A ONE YEAR THAT SOMEONE DROPPED THE BALL AND ACTUALLY SENDING IT. BUT I THINK OVERALL IT MAY HAVE BEEN 30 YEARS TOTAL.

THEY HAD PARTICIPATED IN THE PROGRAM AND JUST HAD THAT ONE YEAR, SO I KNOW IT WAS JUST CONSECUTIVELY. IT WAS OVER 20 YEARS. NOT 20 MORE TO GO. RIGHT? RIGHT. RESTART IT. START OVER, RESTART YEAR ONE TEAM WILL BE HERE OR TWO WILL BE HERE FOR SURE. NOT. THAT'S DEFINITELY THE GOAL. SO ANY ANY QUESTIONS ANY DISCUSSION. IT WAS A GREAT SUMMARY. I KEPT IT AT MY LEVEL.

AND WE CAN TALK ABOUT THIS ALL DAY LONG. BUT I THINK FOR EVERYBODY TO TEARS PRETTY QUICK I'M VERY PLEASED. AND. APPRECIATIVE AGAIN EVERYONE. IT'S HARD WORK. MR. PRUITT, WOULD YOU TALK ABOUT PATILLO BROWN HILL JUST A LITTLE BIT AND THE HISTORY OF THEIR COMPANY AS WELL, THE HISTORY OF OUR FIRM? YES, SIR. SURE. WE ACTUALLY JUST CELEBRATED LAST YEAR, OUR 100 YEAR ANNIVERSARY. SO WE'RE IN OUR 100. WE WERE FOUNDED IN 1923, IN WACO, AND WE NOW HAVE OFFICES WITH THREE OFFICES IN TEXAS AND ONE IN ALBUQUERQUE, NEW MEXICO. AND WE HAVE A WE'RE A LITTLE BIT DIFFERENT IN THAT OUR LARGEST DEPARTMENT. I MEAN, WE'RE A FULL SERVICE PUBLIC ACCOUNTING FIRM. WE HAVE A TAX DEPARTMENT AND AN IT DEPARTMENT AND A CORPORATE AUDIT DEPARTMENT AND ALL THE DIFFERENT DEPARTMENTS THAT YOU SEE IN, IN YOUR AVERAGE CPA FIRM. BUT WE'RE A LITTLE BIT DIFFERENT IN THAT OUR LARGEST DEPARTMENT IS ACTUALLY OUR LOCAL GOVERNMENT AUDITS AND LOCAL GOVERNMENT. SO IT'S THE BIGGEST AREA THAT WE HAVE AT THE FIRM. AND WE'VE GOT A STAFF IN WACO OF WE HAVE FIVE PARTNERS AND ABOUT EIGHT MANAGERS AND SUPERVISORS AND PROBABLY 40 STAFF. AND THAT'S ALL WE WORK ON IS AUDITS OF LOCAL GOVERNMENTS, CITIES, COUNTIES, SCHOOL DISTRICTS, COGS, JUST ABOUT ANY TYPE OF GOVERNMENT, NOT JUST IN TEXAS, BUT ALL OF TEXAS AND NEW MEXICO. OKAY. SO THAT'S THAT'S KIND OF ALL WE DO. WHEN I STARTED AT THE FIRM. HOW LONG IS THAT? IN 1994, WE HAD JUST THE WACO OFFICE AND ABOUT 30 EMPLOYEES. I THINK NOW WE'VE GOT THE FOUR OFFICES IN ABOUT 170 EMPLOYEES. IT'S CHANGED A LOT OVER THE YEARS.

I'M SURE IT'S A DIFFERENT AUDITING IN GENERAL HAS I MEAN, EVERYTHING NOW IS. SO I STARTED THEY GAVE YOU A PENCIL AND PAPE. YOU DIDN'T EVEN GET A COMPUTER. DIDN'T DO. IT WAS A DIFFERENT WORLD BACK THEN. YEAH. AND I IMAGINE WE'LL SEE A LOT OF CHANGES IN THE NEXT TEN YEARS OR SO WITH THE ADVANCEMENTS THAT ARE MAKING IN TECHNOLOGY. I MEAN, IT'S GETTING CRAZY OUT THERE, BUT AND YOUR HISTORY WITH THE CITY OF DUNCANVILLE, TELL US A LITTLE BIT ABOUT THAT. AND I WAS TRYING TO THINK, I CAN'T REMEMBER THE THIS IS AT LEAST THE THIRD, NOT THE FOURTH. IS IT THE THIRD TIME IN FIVE YEARS I KNOW WHEN I FIRST STARTED, THE FIRST YEAR, I DID A FIVE YEARS WITH THE CITY, THE FINANCE DIRECTOR WAS FRANK TURANO. YES. AND THAT WAS PROBABLY IN THE 90S. I WOULD SAY PROBABLY THE 90S. WE FOLLOWED DELOITTE WAS THE CITY'S PREVIOUS AUDITOR, AND THEN WE WORKED WITH RICHARD SUMMERLIN, AND I THINK RICHARD WAS THERE ALL THE WAY TO THE END OF OUR LAST TIME. YES. SO I THINK, I THINK MAYBE I'VE DONE TWO DIFFERENT FIVE YEAR STINTS, AND THIS WOULD BE THE BEGINNING OF THE THIRD. MAYBE THAT ALL STARTS TO RUN TOGETHER. I HAVE A LOT OF CLIENTS BECAUSE A LOT OF LOCAL GOVERNMENTS ROTATE AUDITORS, WHICH IS A BEST

[00:45:05]

THERE'S JUST A LOT OF KIND OF OUR TARGET MARKET FOR CITIES OR I GUESS CITIES WITH POPULATION.

I'D SAY 30,000 TO 200,000. IT'S JUST A LOT OF THOSE IN THE METROPLEX. SO THEY HAVE A LOT IN THERE, AND THEY HAVE A LOT IN HOUSTON, BUT THERE'S REALLY NOT NEARLY AS MANY THERE. THEY'RE GETTING A LOT MORE NOW IN AUSTIN. BUT EVEN SAN ANTONIO, THEY DON'T HAVE THE SAME.

THERE'S NOT A BUNCH OF CITIES AROUND SAN ANTONIO THAT ARE, YOU KNOW, 80,000 PEOPLE NOT NEARLY LIKE YOU DO HAVE IN THE DALLAS NORTH AREA. SO LOTS OF CLIENTS IN THE DFW AREA. WE DO JUST THE ONES THAT I DO NOW. I'M DOING NORTH CENTRAL TEXAS COG. THEY'RE IN ARLINGTON OVER THERE BY SIX FLAGS AND I'VE DONE WE USED TO DO DESOTO GRAPEVINE BEDFORD. THERE'S JUST DOZENS PROBABLY THAT WE DO CITIES AND COUNTIES AND DO SIMILARLY TO DUNCANVILLE THAT YOU ROTATE BACK TO SOME OF THEM. LOTS OF THEM. WE ROTATE BACK TO I HAVE SEE, I STARTED IN 1994 AND I HAVE ONE CLIENT THAT I'VE WORKED ON EVERY YEAR SINCE I STARTED, AND THAT'S IT. MOST OF MOST OF THE GOVERNMENTS ROTATE AUDITORS AND WE GENERALLY ROTATE. WE HAVE A LOT THAT I ROTATE OFF JUST FOR ONE PERIOD.

AND THEN WE GET IT BACK. SO I'LL DO THEM, I'LL DO THEM FIVE YEARS AND THEN ROTATE OFF FIVE YEARS AND THEN GET THEM BACK FOR FIVE YEARS. WE HAVE A LOT OF THOSE, WHICH IS HOW WE END UP. AND THERE'S NOT REALLY THAT MANY FIRMS IN THE STATE THAT DO A LOT OF THESE MAYBE, MAYBE TEN OR SO THAT DO A LOT OF GOVERNMENTS THAT AREN'T THAT DO AS MANY GOVERNMENTS AS WE DO. SO THAT'S HOW WE END UP KNOWING A LOT OF THE PEOPLE AT THE OTHER FIRMS, BECAUSE WE'RE ALWAYS FOLLOWING THEM OR THEY'RE FOLLOWING US. SO WE GET FAMILIAR WITH THE SAME FIRMS. WHICH IS WHY I WAS SURPRISED THAT WE'RE LOOKING AT THE REPORT LAST YEAR, BECAUSE THAT'S NOT INDICATIVE OF WHAT I USUALLY SEE FROM THEM. I'VE NEVER SEEN THEM THAT THAT MANY ERRORS IN A REPORT THAT THEY ISSUED. SO I'M PRETTY SURE IT WAS KIND OF A NONSTANDARD AUDIT PROCESS THAT YOU'RE NOT TO MAKE EXCUSES OR ANYTHING. BUT I HAVEN'T RUN INTO THAT ISSUE WITH THEM EVER BEFORE. WE'RE GLAD TO HAVE YOU BACK. I'M GLAD TO BE BACK. THIS IS THIS IS ONE I'VE HAD. I DON'T HAVE A LOT THAT I'VE DOING. MY THIRD TIME ON MAYBE JUST A HANDFUL. OKAY. ANY MORE QUESTIONS OR DISCUSSION? I GOT A FUN ONE. YES, SIR. WHAT IS THE EFFECT OF PEOPLE WORKING FROM HOME HAD ON YOUR WORK AS CONSULTANTS? I'M JUST CURIOUS. IT'S JUST AS FAR AS DOING OUR AUDITS. WELL, THERE'S A THERE'S A LOT. IT ACTUALLY BENEFITS US IN A LOT OF WAYS IN THAT. FOR ONE. WELL, JUST FOR STARTERS, WE WOULDN'T HAVE ENOUGH ROOM IN OUR OFFICE FOR EVERYBODY THAT WE HAVE NOW. IF THEY ALL CAME IN ON THE SAME DAY, I WOULDN'T HAVE A PLACE TO PUT THEM. BUT OUR BIGGEST FOR YEARS, OUR BIGGEST CAUSE OF TURNOVER WAS TRAVEL. AND BECAUSE YOU CAN ONLY DO SO MANY LOCAL GOVERNMENTS IN THE WACO AREA, I MEAN, YOU'VE GOT TO GO ALL OVER THE STATE AND WE WENT DOWN TO BROWNSVILLE, EL PASO, TO TEXARKANA AND WENT ALL OVER THE STATE AND SO PEOPLE COULDN'T DO THAT FOR VERY LONG.

THEY WOULD QUIT. WE HAD A LOT OF TURNOVER FROM IT. SO WHEN THE PEOPLE STARTED WORKING FROM HOME AND DOING A LOT OF THE AUDIT WORK REMOTELY, IT REALLY CUT DOWN ON OUR TURNOVER. I MEAN, IT'S NIGHT AND DAY AT OUR FIRMS AND YOU DO A LOT OF REMOTE WORK. WE DO A LOT OF REMOTE WORK NOW.

WE STILL GO OUT IN THE FIELD SOME, BUT DEFINITELY LESS THAN BEFORE COVID. WE HAVE THE ABILITY TO DO IT EVEN BEFOREHAND BECAUSE MOST PEOPLE HAVE MOST OF THEIR INFORMATION ELECTRONICALLY. NOW. WE PROBABLY DO MORE OUT IN THE FIELD IN THE FIRST YEAR BECAUSE I THINK IT'S EASIER TO REALLY GAIN AN UNDERSTANDING OF WHAT THEY'RE DOING. IF YOU'RE THERE, THAT'S HARD TO DO TO ME. I KNOW I'M OL, BUT THAT'S HARDER TO DO THROUGH A COMPUTER. I THINK. BUT ONCE

[00:50:04]

THAT'S ALL RIGHT. ALL RIGHT. MEETING ADJOURNED. THANK YOU, THANK YOU, THANK YOU, THANK YOU

* This transcript was compiled from uncorrected Closed Captioning.