Wayne County Commission — Audit Committee, 3/12/2025
2:28PM Mar 13, 2025
Speakers:
Keywords:
Budget adjustment
public act compliance
Department of Management and Budget
audit findings
fiscal year end
property tax collections
grant recognition
cyber attack
HCM system implementation
quarterly reports
budget deficits
chargeback model
data flow
timely postings
independent auditor.
It's been moved by Commissioner Garza, supported by Commissioner Killeen. Any discussion on the meeting minutes hearing? None. All in favor. Please say aye, aye. Anyone opposed? Anyone wish to abstain? Motion passes. Next item
D, unfinished business. There is none listed.
Next item, moving to
item one under new business discussion with the representatives from the Department of Management and Budget on Budget Adjustment number 2024, dash, 35 302, and compliance with public act two of 1968
I'm going to turn it over to our auditor general, Marcy coro.
Marcy coro, Auditor General, and if you can introduce
yourself, make sure your microphones
on. Bandy OTs, Deputy auditors general, and
invite I have guests, they could introduce themselves.
Yoga casani, Deputy Chief Financial Officer, management, budget, good morning.
Morning. Greg McIntyre, deputy budget director, Management and Budget.
Just a little history on this. At the ways and means of full board meeting that was held on February 20, there was discussion regarding budget adjustment. 2024, 35 302, and the chair of Ways and Means, asked me at that time if I could provide a memo regarding the budget adjustment, which I prepared, prepared and sent out on Friday. I'm not sure if everybody had a chance to review it, but I'll kind of go through it a little bit. Okay, publicly Act Two of 1968 section 17 one, states that the legislative body of the local unit shall amend the general Appropriations Act. As soon as it becomes apparent, then a deviation from the original general appropriate Appropriation Act is necessary, and the amount of deviation can be determined. We obtain a copy of the uniform budget manual that was prepared for the Department of Treasury for from August 22,001 and it clearly states that the Budget Act requires budget amendments before any expenditure exceeds the budget. It states that there is no authority to amend the budget after year end, appropriations made after a contract is entered into or funds spent as a violation of the Act in fiscal year ending september 30, audit by plan Moran, there was a finding there was a material weakness and a material non compliance with laws and regulation. The finding was related the county incurred costs before the end of the year, but did not amend the budget until after four. This was the finding that came to the Commission late January 2024, the recent budget adjustment came to the Commission February 20 was of the same nature, and it's also going to result in the funding for the fiscal year ending september 30. 2024 audit. This budget adjustment was over four and a half months after the end of the fiscal year, which is a violation of the public act. So we thought we needed to have a discussion so we could bring the budget division along with management, budget financial reporting today that can explain what processes are going to have in place to correct these in the future, so that we don't have the untimeliness of the budget adjustments. But I think just a little history, you know, Yogesh and I have been talking on this for some time. Years ago, there used to be orderly budget projections that would come to the commission. I think this allowed the departments and other elected officials to stay ahead of the game and monitor their budgets, along with their actual expenditures more timely while it all rolls up to the Department of Management and Budget, they can't do their function until the departments and elected officials are posting their transactions, making sure their budgets are accurate, making sure they're not going over budget. Then it comes to the department for the budget amendments. So I'll let Joey's talk a little bit about it
before we go to yoga. I just want to kind of summarize so we have. We've had two years where we've had budget adjustments, like significantly after year end, and those are in violation of the public act that says there's no authority to amend the budget after the year end. Correct? That's correct, okay. And so today we're discussing kind of why that happened, and what we're going to do to make sure that that doesn't happen again. Correct, this year. Okay?
Yogesh, good morning, commissioners and thank you. Auditor General. My name is yogis. Kisani again, Deputy Chief Financial Officer, management budget. So I'm trying to address the root cause of this for Euro two. What is a special? What is a special? Circumstances and this year, and I'll outline the reason. So as we know, you know, we start the audit, normally up to two months around November. And we have a policy in government, what we call it modified accrual. So we have a we have to take a collection of property tax for October and November. That's called a 60 days collections. And normally, I think we get almost 50, $60 million in October and November, right? That's a subsequent to an year end. And by the time we get those transactions in general ledger, that's like around 10th of December, because treasurer has to post all those transactions, really. So by the time we get those entries, it's the middle of December. Then most of the grants that we have a policy called a 90 days recognition. So as long as we get the money before December 31 we can still recognize as of 930 and this is an important because some of the grants is, you know, state of Michigan change some system, and so, like a Childcare Grant from hhvs. I mean, we are still waiting, like, 22nd December, 29 December, and say, Hey, are we going to get a payment for August? Are we going to get a payment for September? Even those billings, and before that, they were allowed us to Bill consecutively that month. But I think a year or two years before, state of Michigan changed that, unless they process April, you can't submit the month of May. Then once they process the month of May, then only you have to submit the invoices. And this is, I can have somebody from you know, HSPs talk about that. I don't have a right now, but So those are the processes change. So by the time three months goes right, we don't have an exact picture, really. I mean, we can estimate very well and say, okay, property tax 50, $60 million we are going to get in October and November. So those are circumstances like an year to year, so to speak. Now let me circle back to this year. As you know, we went live with our HCM human capital management, our HR system oracle that we probably have been trying for last three, four years. So that was great news. We went live in Villa of the year, July 1. So the last quarter was in the new system. Three quarters of an old system. And again, Oracle, cloud based system, very modern system, and we trying to run back our general ledger transaction, back to JD Edwards. So we knew those challenges. And we work hard. We had enough resources lined up. Everything were working well. And then at the top of that, we hit with the cyber attack. This is where things kind of falling apart, because now you lost the files. We were trying to recover the files, data files, and it's not only m and b or financial reporting or few elected officers, mainly treasurers office, that, you know, they do, most of the audit schedules based on those files, some of them, many of them, they lost. So we were trying to recover those files to get the historical data. So again, how those things were being kind of, you know, postpone, postpone. We don't get data. So unless there's a data in a general ledger, you know, we can come up with and say, Hey, this grant funding business unit is going to go deficit or not deficit. So those are the reasons outlined in this year's particularly system. But again, we had a control on that. And anytime, based on my experience of two system implementation or three, normally, it takes six to eight months to stabilize the system, you know. So that's what we have been working hard to that, and now we are current in like payroll posting and everything. We are current, but they took us a time even to get the last quarter of a payroll data in. So obviously, you know, we cannot know much more budget versus actually at that point. So that's particularly for this year. Reason is not going to happen next year, because now system is going to be, I would say, mature system, almost entire one year data is going to be in the Oracle, and we are obviously trying to go live with our financial system on October one. Okay, so that was the reason our the way our policy works, with the property taxes, Grant recognition. And third one I would mention is that flow of data from other offices and other department, you know, I wish I can have all the data by November, and so we can try to meet even charter deadline, right? But those data flow is a normally, is a very slow so, I mean, I have to stop at some. Point and say, Am I still keep on moving numbers, or I have to stop the numbers so auditors can audit this. So those are the things again. And I would say next year, there would not be issue with the system. Hopefully there would not be an issue with the cyber attack. So those things are gone. I guess the data flow that we have to work on that and say, How can we, you know, get a better data flow on a timely manner from other department, other offices too,
and I think that's what's timely too, on the flow of data, if departments and elected officials are closing their books monthly and making sure their postings are timely, it would help with the flow of data to m and b. I think that's where the problem is. There's a delay in posting by departments and elected officials,
yeah. So how do we make sure that that's being done? If
he has any suggestions. But also, I think was prior to COVID, and Felicia just showed me something. There used to be quarterly reporting to the commission, and I haven't seen that. I don't think since prior to COVID, maybe Mary, yeah, there hasn't been quarterly reporting to the Commission in some time. And maybe we need to go back to that, where they had compared their budget to actuals. Oh, and reported to the commission. Is there
something that is in the in our rules, or, I'm sorry, in our charter? Okay, so it is required, but we haven't, kind of been following up with that. Is that
through the chair. When John Wallace came on board, we had a Zoom meeting with him, and we told him what reports we've needed. So that was one of the reports that we've asked for, but we've not received any. Okay.
Should do those reports go to Ways and Means
through the Chair? Yes, they do. Okay. Thank you.
Do? I got Marcy, so that would be a start. But I think what's important with those quarterly reports, the quarterly reports are timely too. There was a time I think quarterly reports were coming six months after the quarter, okay,
commissioners, I'll make sure that I will communicate to the CFO and our offices.
Could I go back to something you mentioned about the grants and the 90 day recognition? I don't really understand that. Can you expand upon that a little bit more? Sure? Sure.
So you never finish the statement, right? We say that your significant accounting policy kind of says, okay, as long as we get whatever we build for the month of, I would say, July, August, September, as long as we get those money before December, we can still recognize the revenue as of 930 if we don't get it, then we have to defer the revenue. That means we just, we just cannot recognize the revenue as of 930
okay, it's clear. Yeah, so
Marcy, so then I think we're sharing with the 90 day policy. As long as the revenue is earned by september 30, you have 90 days after september 30 to actually receive it. Okay,
so could Is that something that is could possibly cause a budget adjustment at the end of fiscal year.
I would say, you know, some of the grants, maybe because some of the like bigger grants, like a state and everything, you know, again, everybody's monitoring very well to make sure. But again, if state system is not working, status system is slow at that point, we just have to make sure that are we going to run into a deficit or not, right? So one, I would say, 90 days grant policies, well, because at least we don't have to subsidize some of the grand business you need from a general fund side, right, as long as we receive it. But again, everybody has to be very proactive in billing to their grants, too,
and to that, I would think the department or business unit that is submitting for the grant, they should have a pretty good idea of how much that grant revenue should be that they're receiving, if they're staying on top of what their submissions are,
right? So in this submit, right? This, most of the guards on a reimbursement basis. So then they should, they should book this revenue. But if, like, you know conditions right now, what's going on federal government too, you know, if you don't get reimbursement in a time. Fast and at that point from an auditing standards, right from this is different from an auditing standards. If you don't get it within 90 days, then we have to defer the revenue that might put it your business unit into a deficit.
Are there any reports that should be or are submitted to ways and means about grants that haven't been recognized yet. Or what would that help in this situation at all?
I think just audition General mentioned, maybe the quarterly projection. I think quarterly budget versus actual and projection might help, I think, because that's what, that gives you a true picture, right? If I have a $1 million budget, if I haven't collected $100,000 then obviously, you know, that triggers the question, and
I think, too, what's important is the accurate and timely postings. I think sometimes that's not happening, right?
Yeah.
So again, it's, you know, I'm sitting at the tail end finance reporting, right? We look at this data, but if data is not there, that's then sometimes, you know, it makes an issue. And, you know, we try to contact everybody and just make sure, you know, billing is there. Everybody sometimes have their own competing priorities. Each and every offices have their own functions. Sometimes it's more important than this one. So thank
thank you, Madam Chair, Madam moderator, General, with you cited the public act. I assume that's a Michigan act. Does that act speak at all to the 90 days of recognizing revenue that goes beyond the end of the fiscal year? Does it speak to that at all in terms of, or is it just absolutely under the law, no budget adjustments after the close of the year.
Uniform budget measures, no budget adjustments after the close of the year. The 98 day policy is a county policy, correct? Yeah,
right. Yeah.
But again, anticipating what your revenue is going to be and putting the accrual in for that revenue is what's important. But then, as Joey says, If you recognize the revenue as a cruel that you're going to receive, say, $5 million in your past 90 days, and it can't be recognized, and that's when you run into a problem. So if we need to make sure that we're submitting our revenue reimbursement to whatever the granting agency timely, so that we receive it timely,
and with the quarterly reports, the charter speaks to common ways and means About 10 years ago, in conjunction with those, the Commission passed a a budget deficit ordinance to when those quarterly reports come around that deficits get Correct. This is a bad old days of oh 708, and we had a lot of funds running deficits and that. And the point of that ordinance was to make sure that we, on that quarterly basis, address the deficits as we go through the year, to your knowledge, Madam auditor general, is that ordinance being applied, not
that I'm aware of. Mary may be able to add more to it from this bill side, but I haven't seen it.
I have the distinct feeling that's kind of been forgotten about. What are the chance i i know what you're facing upstairs, right? We don't have enough people. How many people in MMB these days?
Sorry, Greg, do you know? I'm not for sure. We have to count it, but I think overall m and b, if I'm not forgetting, I think overall in MMB, not the financial reporting or budget, must be around 90 and above. I just have to check that number. And
how many would we have seen a decade ago or so? How many positions have you lost
through some transitions? You know, like after, we all know, after 2015 we have last lost most of them, or I would say, institutional knowledge too, and then we started hiring there. But I commissioners. I don't have a number yet, but I can certainly provide
those that institutional knowledge is crucial. Do you have the ability? With the staff that you have to produce quarterly budget reports?
Well, I can assure you that we should be able to give you a quarterly report. I just need to talk with you know, budget division about that, but I think we are planning to get that out now, because I think we have hired some of the more resources on that side, actually, so we should be able to give you that yeah,
because I think those I really appreciate the our independent auditor general for raising this. This is an important function of government, whether they're independent inspector generals or Auditor Generals, these are the eyeballs of the citizens on what's going on in our government. So I really appreciate the Auditor General bringing this to our attention. Did does the Auditor Generals? What do you think? What do you think guard rails? Do we have the guard rails to ferment this and to comply with the charter?
I think the core of the law, the quarterly reports will be helpful, but again, the quarter reports are only going to be as useful as the information that's in the core of the report. So if we're still not having timely posting the quarter reports, are not going to provide the information that's needed. So I think there needs to be somehow something out to the departments and elected officials that more timelier recording of transactions, and
with that, would that be sufficient? The timeliness is the real big issue here.
Yeah, if again commissioners, yes, if data is there then. And as you know right now, we are in all systems, but obviously, when we get into an Oracle which has a more analytics, you know, we will be able to build even this more, right? So obviously there'll be in a bright future, definitely, you know, if data is in, and I think we are going to await a lot of manual work that we have now on our side, too, general entry, or, I'm sure, other offices too, but having this, you know, new systems and online visibility, that everybody can do a lot of things on there. I'm sure there will be a lot less manual work, and we might be able to produce some much better analytics, so to speak. That's my hope.
Yeah, and I will say, with the new system, two things about that. One is the training of people to use a system they have not used before, and that would be across the county, touching all departments, correct, all your That's correct. MMB, folks in all of the different departments. And I agree with you on the hope, but installing this new system has had its starts and stops, shall we say? So from my chair where I sit, I'm like, Yeah, okay, October 1, so that that may or may not happen. We hope it does, but it may or not be, you know, as we go through testing and everything so we may have this issue. So
Commissioner Killeen, at this point, we are targeting October one. Yeah, we want to make sure that we have a clear cut off of fiscal year,
and I hope you're successful in that. Thank you. Yeah,
we need blessings from everywhere.
Thank you, Madam Chair. I think to add that too, and I think you always can add on to this one. I think the good chargeback model is what's important so the chargebacks are accurate and are reflected into each business unit monthly. So it helps the business unit stay on top of what their actual costs are, including chargebacks. And as soon as a fund sees that it's going into deficit, that's when a budget adjustment needs to take place, whether it's transferred to the general fund or whatever it is to eliminate that deficit before we come to your rent,
and that's what the ordinance did, or attempted to do,
that that is correct. So with this system implementers, and again, I would qualify that it's not going to fix all of them right. Or chargeback model is again, 1520, years old that we need to revisit. You know, economy has changed. Everything has changed in 20 years, right? So we just need to revisit that chargeback model, and that's what our plan is. With this new system, there's a lot of allocations, a lot of functionalities. Are there that we're trying to explore and say, how can we use this system much better efficient way than doing a manual. Will charge back. So again, those things out there, and Commissioner, let me address about training. I think we have a change management as part of our Oracle team that does very active, you know. And obviously lot of trainings train the trainers, and lot of other training strategies are out going to be there. So we'll make sure each and every person is not training, but retraining, and constant training is going on.
Any other Commissioner, questions, discussion?
Just one last comment regarding Yogi rather working with yogish now for 1015, 20 years, I think Yogesh has a good hand on everything in the county, whether it's the treasurer's office, whether it's m and b, I think he's a great asset to the MMB. I just wanted to say that, yes,
thank you. Thank you. Thank you very much, Auditor General, and thank you very much commissioners. Appreciate
it. Great. That concludes our discussion on item number one. So let's move on, Madam Clerk, if
such other matters as may be properly submitted before the committee. I
don't have any Marcy. Did you have any other okay? Next item, G, public comments. Is there anyone here wishes to make public comments, coming on audit. Is there anyone on the phone or on Zoom? Any emails? No emails are received. Anyone here to make a public comment, if you're in person or on Zoom or on the phone, can unmute yourself last call for public comments. Hearing none. Next item, adjournment. Is there a motion to adjourn? Okay, there's a motion. And.
