Municipal Audit Committee Meeting - October 30, 2025

Okay, great. Well then, I will go ahead and call to order this, uh, meeting of the Municipal Audit Committee. We're meeting today, October 30th, from 11:30 AM to 12:30 PM at City Hall, room 830. And then also we have some folks meeting virtually. Thanks for easily making the pivot there.

Let's go ahead and start with introductions of committee members.

So I'll start with the folks virtually and then go to the folks in person. So Felix Rivera is here. Daniel Voland? Yep, I'm here. Great.

And then virtually we also have Philippe Brice.

Yes, I'm here. Great. And then let's go ahead and introduce folks in the room. This is Bill Paulsey. Daphne Ryan.

Joy Mariner from BDO. Kelly Mays with BDO. And then we brought two of our team with us too, so they're going to introduce themselves. Eli Seralt, BDO. Oyonakae, BDO.

Okay, that's it. Great. Wonderful. So we have two items of business today. We will get an update, if there is any, on the FY23 audit, and then we will go through the FY24 audit plan.

So let's go ahead and start with FY23. What do we have left? I'm just sharing this so you can see us a little better. Can you hear me okay?

Yeah, can hear you just fine. Okay, great. So 2023, the only thing remaining on the 2023 audit is the single audit. We have sent several updates, but really are still pending quite a bit of information. We've been getting a lot of information as well.

So we discussed on Tuesday some assistance your team is needing related to essentially just preparation of the actual schedules for the single audit, the federal schedule and the state schedule, as well as The State of Alaska budget to actual schedules, the information is there, it's just not currently in the format that can be submitted with the single audit report to the clearinghouse. So they have requested us to, to discuss that with you, but also to, to provide that additional assistance. So I think you have some options here. There is consulting time approved as part of the 2024 audit that we can, that should be more than enough for that project. Uh, we're kind of estimating around $3,000 for that type of work, $2,000 to $3,000.

It's just mostly formatting, and we can get an administrative-level person to do that work. And then the only other aspect separate from that is we're having a lot of trouble getting the details needed for FEMA expenditures. I imagine that's not really a surprise for anybody that that is a challenge, but the way FEMA is recognized is you do not Report it in the single audit until the project worksheet is approved. Um, and that's what we call obligated. So FEMA doesn't allow you to record it based on when the expenditures are incurred.

It's based on when the project worksheet is approved. So each project worksheet has attached to it, in theory, a detail of the expenditures that you're requesting under that project worksheet. So if it's a project worksheet for $250,000, there should be a detail of all the expenditures related to that project worksheet that also equals $250,000. Um, and so then we would take all the project worksheets that were recognized and add them up, um, add up all of those individual worksheets to equal your total amount that you're reporting on the federal and state schedule. Some of them have a portion that's state funded because some of it is— Okay.

Earthquake money. So anyway, all that to say, we haven't yet been able to get those details, and I think there's still some— I think, yeah, Stephanie, you're still trying to even get the details from— In Excel. Yeah, you guys want it in Excel. I think I get my PDF forms. I don't have a feel.

Well, I mean, ideally Excel, but really what we need is a detail of all the populations that got recognized this year. It sounds like your team is hoping for assistance to essentially either convert PDFs to Excel and consolidate them into one, or to— if they get the Excels, to consolidate them all into one Excel. I think there's also a challenge trying to figure out which PWs to include, although we have a FEMA reconciliation that should do that, but we're looking at a handful, probably 60 different PWs that have to be essentially consolidated for that purpose. Okay, so that— I think it's just a big lift from your team. It's something that's really from my side of things, a fairly straightforward administrative level task, which we can do if we can get our hands on the actual either PDF or Excels.

But we have not received the information to test that yet. So that's where we're at on 2023 single audit. The other areas, we had a request list that your team's been working on getting us that information, but we have not yet completed any of the 5 federal major programs, and I think we have one state, correct? Which is closer, correct? So I think it's just kind of the preference of the Audit Committee if you felt comfortable with us providing that level of assistance and whether you want to fund it out of the 2024 consulting budget or out of the— or a separate approval for additional assistance, or if you want to direct management to do it on their own.

I think that's kind of what we're looking for with guidance for the For the committee, and then we can talk really quickly also from the '23 single audit. We have 5 programs this year instead of 4. The way we've handled that in the past, because the contract has 4, is that we typically have taken that from the budget for the following year's audit. Because oftentimes in the following year, maybe you will only have 3. So over the course of a 5-year contract, hopefully that smooths out.

But we could also— it's up to you if you want to adjust the '23 contract for that fifth major program. We've been holding off confirming that because I don't have the federal and state schedules. And so until I have a federal and state schedule, I can't do a final check on whether those 5 major programs are accurate, but I know they will be. And the only risk would be if we added a 6th. I think at this point we know we have to audit the 5.

The contract has for. So that's also a decision for the audit committee to make. So I think there's 2 decisions. One is related to these additional services to get the information together for '23. Second is, how do you want to fund that FIT program?

Right now it's 5. When we get the CFM to run final numbers, it could possibly be higher, but I, I think right now there's a 5, uh, requirement. So that's what I have on the '23 single audit, Mr. Chair.

Great, thanks for walking us through that, Joy. Um, does the administration have any position on how you all want to move forward? Expeditiously, correctly. I think we are aligned that there's nothing that's surprising in the report from BDO. We are trying to get it over the goal line as soon as we can.

Okay.

Then, you know, for my part, I don't see any reason why you all shouldn't move forward and get this done as quickly as you can. What kind of— are there any— I can't remember particularly for the single audit if there are any impending deadlines that have significant impact Um, is there anything that's coming up soon for the single audit, or do we have time to get this done? So, um, you're past the deadline. It's a 9-month deadline, so that would have been last September. Um, so you passed that.

Uh, what I don't know, and maybe Philippe or Stephanie or Bill knows, whether this is impacting any grants or probationary status, or any grants are not are at risk of not being renewed because of that. I think you're in a little bit of a— I hate to call it an advantage because it's a terrible thing, but the shutdown actually prevents them from doing a whole lot right now. So from a federal government standpoint, not a whole lot of action can occur during the shutdown. But we do have several other clients that have experienced these types of delays, and after a certain time, they'll notify you On any particular program team could notify you that you're, you're due, and I think they have to give you at least 30 days notice then. But we typically see more like 90 days notice to get it submitted from their notification.

So I don't believe you receive formal notification as such yet. I'm not aware of having received that. Philippe has something he'd like to add.

Go ahead, Philippe. Thank you, Mr. Chair. At this time, I don't believe we do have any specific problem with the single audit as it stands. We don't have any concerns.

However, my concern is to make sure we do finish the single audit sooner than later to avoid being caught in a very difficult situation where we would have only 30 days or 90 days to accomplish what we need to do. So my recommendation is to keep going as fast as we can. In parallel with completing the ACFR 2024. Thank you, Chair. Got it.

That, that seems like a fair recommendation. Does the administration need anything formal from this committee, or is this sort of informal, please move as quickly as you can, good enough?

I think it is good enough, Mr. Chair.

Okay, great. Then, um, yeah, looking forward to maybe one day getting the earthquake behind us. Um, then is there any other discussion on FY23 before we move on to FY24? Uh, Mr. Chair, if I may, just for context for the committee, we have about somewhere between 400 or 500 hours remaining, we think, on the 2023 single audit.

That's out of a budget of— well, if you add FEMA in, which we have not yet done, a budget of about 900 hours, maybe 750 to 900, depending on how many programs you have. So that just gives you a context. We're just not even quite halfway through the testing. I have people who are able to do that as soon as we get the information, but it means I'm pulling from other jobs. So at this point, it's just, you know, when we get the information, we pull somebody off something else and have them work on it.

But, you know, if I could— if I can compress that, I certainly will do so. And I think we just need to know the preference of the committee for how to get the amendment for '25 for that fifth program into the contract and whether you want to pull that from '24 or '25's budget, or if you want to actually amend the contract, the overarching contract, to add that program.

Thanks. I will give my opinion, but we'll lean on the administration. I think whichever is the most flexible route to move forward seems the most wise. Does the administration have a specific, more specific opinion? I think I would defer to Felipe in the first instance.

I believe that as much as I can, I would like to offer potentially using some of my CFO budget, remaining budget, to help cover some of those expenses, more so when it relates to the single audit. And in that effect, I have requested from BDO to offer me two quotes to allow me to determine what can really be done on my side and the If I can manage it, then this is what I would propose. Great.

Thank you. Great. Thank you. All right, then we'll move on to the FY24 audit plan. Great.

And I'm going to share my screen again here.

Or attempt it.

All right. Did it? Did it? Okay. So, Now that we're through our planning procedures and our walkthroughs for the 2024 activity, so we actually go through the walkthrough procedures, internal controls that were in place in '24, different than what was in place in '23.

We then reassess where there may be significant risk or changes to the risk from the '23 audit to the '24 audit to determine what we need to do for the '24 audit. Um, and this is what comes out of that is this report for the audit committee. Timeline-wise, we've been talking with Philippe and Stephanie pretty regularly, at least weekly, and oftentimes more so than that, for our plan to try to issue the financial statements by the end of March, which is a pretty compressed timeline. Typically, your audit's more like a 7-8 month process. And we're trying to kind of compress it really into 6 months, 5 months now.

So we're doing everything we can to get through there, but we are in pretty good shape on the walkthroughs. There were just a few last things that we were waiting on, and I think maybe Stephanie even gave us yesterday. So the kind of what we call interim fieldwork is very close to being on track to complete in October. And then we start on Monday with the standalones. AWU, Solid Waste, Port, and Civic.

And we have a dedicated team ready to get those underway. So the goal is to kind of get through those in November, largely fieldwork-wise, and then pivot over to ACWR for grants, AR, airport, and lots of other things. Also in November, we'll be doing things that affect the standalones, like Hopefully cash and investments, FERS, liabilities and assets, and some of the IGC work if we can get that information. There's one other thing that affected the standalones. I told them this would be— cash investments and— oh, payroll.

Yeah. So payroll we do in November. Sorry. Kelly keeps most of the meanie brain, and I just tap into it when my brain doesn't remember. So the payroll, because it's done centralized here, We do that in November for all the entities as best we can so that the standalones really can be in a good spot by mid-December.

And then we'll be releasing the report if all goes well and we can get the information we need to audit in March. We'll be coming back to you in April. And then single audit testing, you know, the goal is to start that as soon as the financial statements are secure. So that would be single audit testing for 2024. We're working on single audit testing for 2023.

Currently. So the goal would be to get the single audit issued by June. I will say I think that's more likely to happen by July, but the goal would be by June. And then we, now that we've had, you know, once we kind of started this as our audit plan for '24, we'll start starting next week with our weekly audit communications to you as a committee. So you can find out the status of that.

I'll put in the body of the email, the status on the '23 single audit instead of doing an attachment, but at least then you can see the work plan for '24 and the status where we're at in terms of getting, getting that moving along. Questions on the timeline?

Okay, in terms of our audit strategy, a couple of quick things I like to remind people of. Is it's a risk-based approach. We don't audit everything. We're looking for things that are riskier areas. A lot of things are subject— everything in it is subject to a sample potentially, right?

So, like, for payroll, it's not really risky here, although it is somewhat complex with some of the police and fire payroll in particular. But they— it wouldn't be an area that we think would be, you know, highly subject to fraud or would be something that somebody couldn't figure out. That being said, we would select some random samples of payroll. So just because it's not a risk doesn't mean we don't look at it. It's just the way we look at it will focus procedures or do additional procedures in areas that are considered to be risky.

We're also looking for material misstatement, and so we're going to focus on things that could cause a material error on the financial statements. If, for example, we get a detail and it's, um, $12 off from the actual financial statement, we're not going to probably research that. If it's $1,200 off, we probably won't. It just depends on the account. So if the, you know, if the entry has the words, um, you know, Rod in it, I'll probably look at it even if it's $12.

But if it's $1,200 off in an area that would just be a timing difference, or it doesn't have any impact to a covenant or to a a decision that you as an assembly would want to make. We are not going to spend more time looking on it. Those are things that we would consider to be insignificant. But we also look at your risks internally. What we've had is turnover where there have been gaps in staffing, where we had issues from the prior year.

So lots of things feed into this evaluation of your risks that we will address. And then certainly just in, you know, my request is from you as a committee, if there's other areas besides the ones we talked about today, that you think are risky, that you want us specifically paying more attention to. I'd really like to have that information from you so that we can incorporate that in our testing over the coming months. We do work for you as the audit committee. It's important for me that I hear from you if there's areas that you want us to research in, as long as it's within the scope of our audit, but there's areas you want us to take— to pay particular attention.

Um, I would like to remind people that our responsibility is to form an opinion. Your team's responsibility is for the financial statements. We have assisted in the past with certain aspects of the financial statements, but not in taking ownership of those. Our assistance is limited into what we can do because we are the independent auditor on the outside looking at the books after the fact. So we do have to maintain our independence.

We're trying to be really careful about that when we're asked to do additional assistance. There's a lot of times where I'll say, Stephanie, I can do that. We can do that. You have to tell me to do that. Are you okay with it?

Do you understand it sufficiently? Do you agree with what we have recommended? And so these are all the different things we do to determine our audit strategy. I know you've had this for a bit, so hopefully you had a chance to look at it. We'll go through all of these, but I mentioned some of them.

We look at the industry, we look at your control environment, we look at your IT systems. Most of these have been done to a large degree already, including on the standalones. So we had done our plan for our audit strategy already. Again, we will pivot if there's areas besides ones we'll discuss that you want us to look at. And then if we have a change in our audit strategy because of something that we identify or you bring to our attention, we'll bring that to your attention too, in either an update or in another follow-up meeting.

And so our scope right now, we follow generally accepted accounting audit standards, what we call GAAS. We also follow government auditing standards, which we also call GAS, just to make it really fun for you. And then we have to— as part of those two standards, we have to consider your internal controls, perform tests of compliance with laws and regulations. And I'm pretty involved. Kelly is a director now, and she's very involved as well.

And so we are really making sure that there's a high level of supervision and oversight of the audit work. And we have the same team, uh, Oleana is here with us today, and Oleana served as our senior last year and is our senior again this year. So that really helps a lot, just have continuity, um, on the team this year. So let's dive into the exciting parts. This is the significant risk areas, um, summarized for you here.

So first, uh, none of these really should feel that new because these are essentially the main issues we had and we reported to you last year as findings. So when you look at it, it largely relates to kind of management override and journal entries. If you recall last year, there was an IT control that was toggled off in '23 that allowed entries to get posted without review. We'll be particularly looking at those entries that might have been posted in '24 before your team put the toggle back on. But we also look for other unusual entries or things that look like they're hitting the wrong accounts.

Grant revenue is kind of covered in 3 of these. Grants have just been a challenge and we want to make sure those adjustments are right. And we have a separate one for FEMA, which, you know, I love that our community is stepping into the Western Alaska relief, but I'm like, oh no, that's FEMA. So I had a little bit of PTSD when I read that article, but I am excited that we can step in that way and help. But that was—.

I will say, because we you have the Ghosts of Christmas Past running around. We had— I had the same level of, oh no, a little anxiety. So we eventually quarterbacked, for the Assembly's purposes, several internal meetings about how we're going to track both labor costs and non-labor costs. And I do feel like we are crashing through this in a much better shape than we were last time. So the lessons have been learned and hopefully implemented in a way that the future will not know what we did in October 2025, but someone in 2027 is going to not have a huge amount of work because of what we put together the last few weeks.

Thank you. Ideally, that might just be my— the end of my career if I want. Okay, financial statement preparation is the other— the next 3, and these really relate to kind of topside entries that we've discussed in the past, which I know your team is doing everything in their power to prevent those from even being a thing this year. Equity and acquisition rolling issues and the GASB 34, which is our full accrual entries for your financial statement purposes. Those are also kind of off-book entries, but in the SAP system, those are kind of booked.

So those are the 3 challenges mostly related to financial statements that we'll be focusing on this year. There's a few more here related to just reconciliations, communication of those, and fund classifications. I think Those continue to be a risk area, but our hope is that they'll be largely mitigated in '24. I think we're supposed to get tribal census today, maybe. So tomorrow?

Tomorrow. Couple weeks behind, but we're okay. Yeah. So, you know, that we'll see how the equity is rolling and some of these things. Hopefully we'll have a good handle on where these stand once we get that information for our next update next Friday.

Lease receivables, we did have some issues with leases not being recorded last year. So that continues to be a heightened risk. This is largely at port, but I think last year the port ended up being okay. There were some airport leases that had an issue as well because you have a lot of airport contracts at Merrill Field. But I think— I'm hoping there wasn't nearly as much activity in '24, which might just be part of the mitigation.

When we get to testing it. Interfund transfers and due to the funds and advances continued in '23 to be an issue. I don't know that— I think there's additional controls that were put into 2024, but we have that as a repeating risk that those get reconciled out.

On the standalones, but also to some degree internally, but Yeah, we look pretty closely at charges for services. This is actually not necessarily an area where there's been a problem at the Navy, but under the auditing standards, revenue is a higher risk area for certain revenue streams. So these are charges for services specifically for water, wastewater, port, and then solid waste. I think there is also, you know, types of other types of charges with the port that we look at. So, all that to say, this is really a standard risk that most entities would have because we look to make sure people are being charged the right amount and people aren't trying to write off amounts incorrectly.

It's an area that's just a higher risk of fraud, just generally in the industry. So those are our planned— our planned significant risk areas. Any questions or comments on those?

Okay, so a couple things to note. You are implementing a new standard this year. We call it 101. Basically, it requires a review of all of your PTO. It's accrued leave, but in the past you only had a narrow amount of leave that you had to book.

Now you have to book things like sick leave and some other types of leave that you might— administrative leave type things that might be applicable under the standard. And then we're also looking at some changes on internal controls, bond covenants. We always look at bond refunding. These aren't necessarily significant risks, so just other things I just want to kind of make sure that you're aware of. I think the municipal light and power stuff is all done, but we wanted to make sure that that carried through in the equity rule properly for 2024.

And then we have the potential contingent liabilities just because there were quite a few outstanding cases of these. '23, And at the time we were issuing '24 this summer. Single audit for '24, again, we'll start that probably not until March. We can start it as soon as the grant schedule is finalized. So, we'll see how long until then.

Basically, as soon as the single audit schedule is finalized, the grant schedules are finalized, but also after we issue '23, you can't start '24 until you issue '23. Federal government doesn't let us submit. I guess we could start the work, but we couldn't submit it first. And then you do have a group audit because technically speaking, the PAC is audited by other auditors. It's very minor as a whole, but we will communicate with those auditors.

I don't believe we received the PAC statements. We did? Okay, so we have the PAC statements for '24 and we have ACDAs done, right? Cool. And public transportation agency.

Yeah, so we already like 3 things out of the way. Single out of risk areas, we just look really carefully at subrecipient monitoring, procurement, equipment tracking, and timely submission of reporting. Those are the main risk areas that we have, but there's a lot more that's scoped in that the granting agencies require us to look at. These are just areas where you had exceptions in the past. And then just these are the areas I think I'd like just you as the committee to be thinking about areas where you have any concerns in any of these areas.

I'd appreciate if you reached out to me. You could certainly share them now in committee if you like, but I'm happy to meet with the chair individually if you could send your concerns up to the chair for me to discuss there, or, you know, I always tell people feel free to reach out to me specifically individually if there's something that you want to discuss in any of these areas.

In terms of just standards updates, there are some changes for the standards. 101 Is this year, 102 is next year. 102 Is technically not going to be until 2025. Yeah, next year. Forget which year we're in.

That one is actually going to be pretty straightforward. I think 103 though is for fiscal year '26, and it will be a big lift. So that's something that your team will need to get on their radar for '26, because technically speaking, you're implementing that on January 1st, '26. So then just 2 months to implement that standard. And, um, and then the disclosure of certain capital assets also will be into effect that year.

That one I think will be a, a much smaller lift, but 103 is actually changing your financial statements and the disclosures just for fun. So we can talk through and give you a little more information on that. And then I've included a link to our audit quality report for you as well.

And with that, I think that's our audit plan for '24. Just to reiterate, we will plan to release our first update next Friday since we're hopefully starting fieldwork next week and do weekly updates via email from there. And then I'm happy to hop on another audit committee call when you request it and available to meet with any of you in the meantime. I think that my contact information and Kelly's is on slide 2. So if you don't know how to reach me, that's the best place to find me and happy to entertain any questions.

Great, thanks so much, Joy, for walking us through that. Um, uh, just a couple things from me, and then happy if other committee members have anything they'd like to add. Um, the, I think, overall timeline, uh, for the FY24 audit is ambitious, but I like that. I think it's, you know, we had talked about this year being the one that we get us back on track, and so that's— I see that we're trying to do that, and I appreciate everyone's efforts to help make that happen. At this moment, I don't have anything to add in terms of any additional risk areas, but I'm happy to ponder more on that and maybe reach out to you if I have anything, Joy.

Any other thoughts that committee members want to add?

I don't see any raised hands, Felix. Okay, great. Well, I think that was the— anything else that you wanted to add, Joy?

No, Felix, we probably should just touch base for kind of required phone call, but otherwise we are, you know, full on working on the audit, trying to get as far along as we can. Great. Wonderful. Well, I think as most people in this room probably know, Happy to have one final phone call with you, Joy. I will be transitioning out of my position as chair of this committee shortly, and the Assembly chair will be choosing a new chair for this committee.

Depending on the dynamics, I may or may not continue to be a member of the committee. There may be someone else who is really burning to get on this committee, in which case I will give space for them, but otherwise look forward to continuing to engage.

Really enjoyed the work with everyone here over the years. This has been one of my more interesting committees that I've worked on over the years. Um, so, uh, with that, uh, is there anyone— I don't— is there anyone in the room, Matt, that, uh, wants to participate in audience participation? It does not look like it. If I may, I just want to thank you, Felix, for your service.

It's not been an easy few years to be an audit chair, but you've always been responsive and taking my phone calls and always made sure that the BDO was doing the right thing in every situation. So I really— I just— it's been a pleasure to work with you as well. So thank you. Thank you. Yes, absolutely.

It's been a pleasure to work with all sides, the CFO, BDO, and I don't think internal audit is there, but they've also been a pleasure to work with.

Okay. Then I don't think we have anyone on Teams, any members of the public on Teams, so with that, I will go ahead and adjourn this meeting. Thanks, everyone. Thank you. Thank you.

Thank you.