[ Audit & Finance Committee on March 6, 2025.]
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GOOD MORNING, EVERYBODY, AND WELCOME TO THE MARCH 6TH MEETING OF THE AUDIT AND FINANCE COMMITTEE.
LET'S GO AHEAD AND TAKE ROLL. I AS CHAIRMAN A.J.
THOMAS IS HERE. MR. VASQUEZ HERE. THANK YOU. WELCOME, MISS FRIAS HERE.
WE HAVE TWO ACTION ITEMS AND TWO REPORT ITEMS ON TODAY'S AGENDA.
IN THAT MEETING, MR. MARK SCOTT, THE DIRECTOR OF INTERNAL AUDIT HERE TO MY RIGHT, PRESENTED THE INTERNAL AUDIT ANNUAL WORK PLAN FOR FISCAL YEAR 2026 AS AN ACTION ITEM FOR RECOMMENDATION TO THE FULL BOARD FOR APPROVAL.
THE PLAN WAS VOTED FOR RECOMMENDATION TO APPROVE AFTER DISCUSSION WITH COMMITTEE MEMBERS.
MEMBERS. THE MINUTES ARE IN YOUR PACKETS. MAY I HAVE A MOTION TO APPROVE THE MINUTES FROM THE DECEMBER 11TH, 2025 AUDIT AND FINANCE COMMITTEE MEETING? I'LL MAKE A MOTION.
EXCELLENT. I HAVE A MOTION FROM MR. CONROY. SECOND.
SECOND FROM MEMBER, MISS BURRIS. ALL IN FAVOR, SAY AYE.
AYE. ANY OPPOSED? MOTION PASSES. THANK YOU. MEMBERS.
THE MOTIONS HAVE BEEN SPOKEN OUT LOUD. RIGHT.
OH, THERE YOU GO. THAT'S HELPFUL. THANK YOU, MR. CHAIRMAN. OUR NEXT ACTION ITEM FOR TODAY IS THE PRESENTATION, DISCUSSION AND POSSIBLE RECOMMENDATION FOR APPROVAL OF THE STATE AUDITOR'S OFFICE AUDIT OF THE FINANCIAL STATEMENTS 2025. MR. ALEXANDER SUMNERS AND MR. AMADOU WILL, FROM THE STATE AUDITOR'S OFFICE ARE HERE AND WILL PRESENT THIS ITEM TO US.
WITH ME IS AMADOU, WHO IS A AUDIT MANAGER. OH, I GOT THAT RIGHT.
WE ISSUED TWO UNMODIFIED OPINIONS AS PART OF THIS AUDIT.
FINANCIAL STATEMENTS FOR FISCAL YEAR 2025. WE DETERMINED THAT THESE FINANCIAL STATEMENTS WERE MATERIALLY CORRECT AND REPORTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. IN OTHER WORDS, WE DETERMINED THAT THE STATEMENTS AS ISSUED WERE NOT MISLEADING TO THE READER OF THOSE STATEMENTS.
ADDITIONALLY, WE ALSO CONCLUDED THAT THE DEPARTMENT'S HOUSING FINANCE DIVISION'S COMPUTATION OF UNENCUMBERED FUND BALANCES COMPLIES WITH TEXAS GOVERNMENT CODE SECTION 23 06.204 AND 23 06.205. WE ALSO ISSUED A REPORT ON THE DEPARTMENT'S COMPLIANCE WITH THE PUBLIC FUNDS INVESTMENT ACT FOR THE FISCAL YEAR ENDED AUGUST 31ST, 2025. THE RESULTS OF THAT WORK DISCLOSED NO ISSUES OF NONCOMPLIANCE OR OTHER MATTERS THAT ARE REQUIRED TO BE REPORTED UNDER GOVERNMENT AUDITING STANDARDS. PRIOR TO THE FISCAL YEAR 2025 FINANCIAL STATEMENT AUDIT WORK, WE ALSO ISSUED AN UNMODIFIED OR CLEAN OPINION ON THE DEPARTMENT'S FISCAL YEAR 2024 FINANCIAL DATA SCHEDULE AS IT RELATED TO THE FISCAL YEAR 2024 BASIC FINANCIAL STATEMENTS.
ADDITIONALLY, WE PERFORMED, AGREED UPON PROCEDURES AND DETERMINED THAT THE ELECTRONIC SUBMISSION OF CERTAIN INFORMATION TO THE US DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT'S REAL ESTATE ASSESSMENT CENTER AGREED WITH RELATED HARD COPY DOCUMENTS.
HUD ACCEPTED THE DEPARTMENT'S SUBMISSION IN DECEMBER.
LASTLY, I WOULD LIKE TO THANK THE FINANCIAL ADMINISTRATION AND ACCOUNTING DEPARTMENTS AND MR. SCOTT, AN INTERNAL AUDIT FOR THEIR ASSISTANCE AND COOPERATION THROUGHOUT THE AUDIT.
THAT CONCLUDES MY COMMENTS, AND I'D BE HAPPY TO ADDRESS ANY QUESTIONS THAT YOU MAY HAVE.
THANK YOU, MR. SUMNERS. MR. ANY. DO ANY OF THE COMMITTEE MEMBERS HAVE ANY QUESTIONS REGARDING THE CEO'S REPORT THIS MORNING? SOUNDS GOOD. MR. SUMMERS, JUST ONE QUESTION. IS THERE ANYTHING IN YOUR AUDIT FINDINGS THAT YOU.
EVEN THOUGH WE THE DEPARTMENT DID EXCEPTIONALLY WELL.
IT HAS A CLEAN AUDIT WHERE THERE IS ANYTHING WITH THE RULE CHANGES FEDERAL WISE OR WHAT WE'RE DOING INTERNALLY, THAT. YOU HAVE A CAUTION ABOUT THAT WE SHOULD DO.
WE CAN STRENGTHEN OUR AUDIT PROCESS. IS THERE ANYTHING THAT RAISES TO A LEVEL THAT YOU FIND LIKE,
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HEY, THESE ARE SOME THINGS YOU MIGHT WANT TO LOOK FOR FOR NEXT YEAR'S AUDIT.NOTHING OFF THE TOP OF MY HEAD. YOU KNOW, WE DO OUR PLANNING AND RISK ASSESSMENT PROCESS AND ANYTHING THAT YOU KNOW, IS IDENTIFIED IN THERE WOULD BE COMMUNICATED.
SO GREAT. THANK YOU FOR THAT EXCELLENT REPORT.
IF THERE ARE NO OTHER QUESTIONS FROM COMMITTEE MEMBERS, I WILL NOW TAKE A MOTION TO APPROVE RECOMMENDATION TO THE FULL BOARD OF THE STATE AUDITOR'S OFFICE REPORT. MR. CHAIRMAN, I MOVE THAT WE APPROVE THE COMPLETE AUDIT REPORT AND SEND IT TO THE THE MAIN MEETING FOR A VOTE. THANK YOU, MISS FARIS.
MAY I HAVE A SECOND? SECOND, SECOND BY MISS CONROY.
ALL IN FAVOR, SAY AYE. AYE. MOTION PASSES. MR. CHAIRMAN, I'D LIKE TO MAKE A COMMENT. YES, MISS.
THE FACT I MEAN, YOU ASKED, IS THERE ANYTHING WE COULD IMPROVE? DID YOU SEE ANYTHING WRONG? AND IT IS JUST GREAT TO SEE A CLEAN AUDIT.
SO I WANT TO COMMEND BOBBY. I WANT TO COMMEND ALL THE DIRECTORS AND ALL THE STAFF THAT DO ALL THE, YOU KNOW, THE AUDITS AND INSPECTIONS AND EVERYTHING.
THAT SPEAKS VERY, VERY WELL OF. AND I WOULD HOPE THAT IT SPEAKS VERY WELL OF US.
THE COMMISSIONERS, BECAUSE THEY DON'T WANT TO COME AND TELL US WHY SOMETHING DIDN'T PASS.
AND, BOBBY, YOU'RE THEIR LEADER, SO THEY RESPECT YOU.
AND I THINK SOMETIMES FEAR YOU A LITTLE BIT. SO THAT'S ALWAYS GOOD.
NO, JUST THEY TRUST YOU AND RESPECT YOU. THAT'S VERY GOOD.
AND WITH THAT, I JUST WANT TO AGAIN CONGRATULATE ALL OF YOU AND FOR A JOB VERY WELL DONE.
CONTINUE THAT. EXCELLENT WORK. THANK YOU FOR THOSE COMMENTS, MR. FARIAS. I WILL ECHO THOSE TO TO THE STAFF FOR THE FINANCIAL AND FINANCE ADMINISTRATION, AS WELL AS MR. SCOTT AND HIS AUDIT DEPARTMENT. IT'S AN EXCELLENT RESULT.
AND SO EXCELLENT JOB FROM EVERYBODY IN THE DEPARTMENT.
SO THANKS, MR. SUMNERS, FOR THAT. MOVING TO OUR REPORT ITEMS, THE FIRST REPORT ITEM IS THE PRESENTATION AND DISCUSSION OF INTERNAL AUDIT REPORT OF THE 10% TEST FUNCTION FUNCTION AT THE ASSET MANAGEMENT DIVISION.
AND THIS WILL BE PRESENTED BY MR. SCOTT, THE DIRECTOR OF INTERNAL AUDIT.
MARK THANK YOU, MR. THOMAS. YES. THE 10% FUNCTION.
THE 10% TEST FUNCTION WAS IDENTIFIED DURING THE FISCAL YEAR 2026 RISK ASSESSMENT AND RATED HIGH ON THE RISK ASSESSMENT MATRIX DUE TO ITS IMPORTANCE IN ENSURING COMPLIANCE WITH STATE AND FEDERAL RULES GOVERNING MULTIFAMILY PROGRAMS. SUBMISSION OF A 10% TEST IS REQUIRED OF ALL AWARDEES IN A COMPETITIVE HOUSING TAX CREDIT ALLOCATION.
ALL SUBMISSIONS ARE REVIEWED BY DEPARTMENT STAFF TO VERIFY COMPLIANCE WITH APPLICABLE RULES, INCLUDING RECONCILIATION OF ALL INFORMATION PROVIDED IN THE SUBMISSION WITH THE CORRESPONDING OR RELATED INFORMATION IN OTHER DOCUMENTS.
FOR THIS AUDIT, WE REVIEWED APPLICABLE TEXAS ADMINISTRATIVE CODES.
APPLICABLE U.S. TREASURY REGULATIONS. FUNCTION SPECIFIC SOPS.
INTERNAL DOCUMENTS SUCH AS POST-AWARD ACTIVITY MANUAL, AND OTHER APPLICABLE RULES AND REGULATIONS.
WE ALSO CONDUCTED INTERVIEWS WITH SEVERAL DIVISION STAFF AND PERFORMED TESTING AND ANALYSIS OF THE PROCESSES INVOLVED IN RECEIVING AND REVIEWING DEVELOPMENTS. 10% PACKETS, INCLUDING REQUESTS FOR EXTENSION.
WE REVIEWED THE DOCUMENTS FOR COMPLIANCE AND COMPLETENESS BASED ON OUR REVIEW AND TESTING.
THE 10% TEST FUNCTION WITHIN THE ASSET MANAGEMENT DIVISION APPEARS TO BE OPERATING EFFECTIVELY IN REVIEWING AND ACCEPTING DEVELOPMENT PACKETS AND REQUESTS FOR EXTENSIONS. WE IDENTIFIED SOME AREAS FOR IMPROVEMENT AND MADE RECOMMENDATIONS TO MANAGEMENT AND STAFF.
MANAGEMENT AGREED TO OUR RECOMMENDATIONS AND THEIR RESPONSES ARE INCLUDED IN THE REPORT.
I'LL BE HAPPY TO ANSWER ANY QUESTIONS MAYBE ABOUT THAT AUDIT.
THANK YOU, MR. SCOTT. MEMBERS HAVE ANY QUESTIONS ABOUT THIS REPORT ITEM? HEARING NONE, WE'LL MOVE ON. THE NEXT REPORT ITEM ON TODAY'S AGENDA IS THE REPORT ON THE STATUS OF THE INTERNAL AND EXTERNAL AUDIT ACTIVITIES.
MR. SCOTT WILL BE PRESENTING THIS REPORT TO US AS WELL.
OKAY. YEAH. SO ON THE EXTERNAL AUDITS THAT THE SAO COMPLETED, THEIR AUDIT OF THE 2025 FINANCIAL STATEMENTS, WHICH THEY JUST DISCUSSED CLIFTON LARSON ALLEN COMPLETED THE FEDERAL COMPLIANCE PORTION OF THE STATEWIDE AUDIT.
THEY HAD FINDINGS RELATED TO AN ERROR IN REPORTING OBLIGATED FUNDS UNDER LAW.
THEY ALSO HAD A CASH MANAGEMENT ISSUE RELATED TO A REQUIRED COMPUTATION OF CLEARANCE PATTERN,
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WHICH IS USED TO DETERMINE POTENTIAL INTEREST DUE BETWEEN STATE AND FEDERAL FUNDING SOURCES.THEY ALSO HAD A FINDING RELATED TO MONITORING IN THE HOME PROGRAM.
THE COMPTROLLER'S OFFICE HAS STARTED AN AUDIT OF CONTRACTING.
AND THEN THE CEO WILL NOT BE CONDUCTING THE FINANCIAL STATEMENT AUDIT NEXT YEAR.
THC IS IN THE PROCESS OF PROCURING A DIFFERENT AUDIT FIRM TO CONDUCT THE AUDIT.
THE SAO IS CONDUCTING THE EFFICIENCY AUDIT OF THC THAT IS REQUIRED BY TEXAS GOVERNMENT CODE 327 .02.
AND ALSO THE FEDERAL OFFICE OF INSPECTOR GENERAL.
AND WE'VE STARTED THE AUDITS OF THE HOUSING RESOURCE CENTER DIVISION.
AND WE'VE ALSO HIRED A NEW INTERNAL AUDITOR, MISS ERIN HALTON, AND SHE'S IN THE AUDIENCE.
SO THAT CONCLUDES MY PRESENTATION. I'LL BE HAPPY TO ANSWER ANY QUESTIONS THERE MAY BE.
GREAT. THANK YOU, MR. SCOTT. MEMBERS, HAVE ANY QUESTIONS FOR MR. SCOTT ABOUT THIS REPORT ITEM? I DO MR.. ON THE FINDINGS, WOULD YOU CHARACTERIZE THEM AS JUST ON THE 10% ON THE JUST ON THE CLA? YEAH. OKAY. ARE THEY. WELL, LIKE THE CASH MANAGEMENT.
THAT SOUNDS LIKE A BIG DEAL, BUT REALLY LIKE YOU HAVE A BIG PROGRAM.
THEY HAVE DIFFERENT DRAWDOWNS FROM THE STATE, DRAWS DOWN MONEY, AND THEN THERE'S A REQUIREMENT THAT MONEY BE SPENT WITHIN A CERTAIN TIME PERIOD. IF IT'S DRAWN DOWN, IF OTHERWISE THE STATE OWES INTEREST TO THE FEDERAL GOVERNMENT.
SO TO, TO FIGURE ALL THAT OUT, THERE'S THIS THING CALLED A CLEARANCE PATTERN.
IT'S A COMPUTATION THAT'S DONE TO ESTIMATE THE INTEREST THAT MAY BE DUE.
AND APPARENTLY THAT THAT WASN'T DONE ON THE MONTHS THAT WE'RE LOOKING AT.
SO I WOULD SAY, I MEAN, YOU HAVE TO DO IT, BUT WHETHER THAT'S A BIG DEAL, I DON'T KNOW.
ON THE DO WE WAIT TO SEE IF THEY SEND US A BILL.
RIGHT. BASICALLY. YEAH. ALL RIGHT. YEAH. SO AND THEN THE OTHER LIKE THE ONE WHERE THEY DIDN'T DO THE, THEY DIDN'T DO THE INSPECTION AND THE REQUIRED TIME PERIOD. THAT'S A MINOR DEAL.
I MEAN, BUT THEY HAVE TO WRITE IT UP ON THIS IS AND AGAIN, THESE ARE THE AUDIT FINDINGS FROM THE FEDERAL COMPLIANCE PORTION OF THE STATEWIDE AUDIT THAT'S DONE BY CLIFTON LARSON.
ALLEN. SO FAIR TO FAIR TO SAY THAT THEY'RE NOT MATERIAL.
WELL, MATERIALITY TO THEM. I MEAN, THEY'RE NOT A BIG DEAL MATERIAL.
THAT WOULD BE SOMETHING THAT THE THE AUDITORS BASED ON THEIR CRITERIA WOULD DETERMINE.
SO THEY MAY THEY MAY SAY IT'S MATERIAL, BUT THAT DOESN'T MEAN IT'S A IT'S A BIG DEAL.
YEAH. IT'S JUST BASED ON THE TECHNICAL DEFINITION OF MATERIAL.
THEY HAVE TO INCLUDE IT IN THEIR REPORT. REPORT.
YEAH. VERY GOOD. ANY OTHER QUESTIONS FOR MR. SCOTT ON THIS REPORT ITEM? JUST SO THERE'S NO REASON FOR US TO BE WORRIED ABOUT THE FINDINGS.
NO, I WOULD SAY NO, THERE'S NOT. I MEAN, THEY NEED TO BE CORRECTED.
I MEAN, OTHER THAN THE FACT THAT THEY APPEAR IN A REPORT THAT THAT GOES TO THE FEDERAL FUNDING AGENCIES, BUT THE FEDERAL FUNDING AGENCIES UNDERSTAND THAT.
WHAT I JUST SAID THAT, YOU KNOW, THIS ONE SOUNDS LIKE A TIMING MISMATCH, RIGHT? RIGHT. WITH THE FUN DRAWS, RIGHT? AND THE SECOND JUST SEEMS LIKE WE NEED TO JUST FIX IT.
YEAH. THE SECOND ONE WAS JUST IT WAS DONE EVENTUALLY, RIGHT? I MEAN, IT WASN'T RIGHT. THIS IS DAVID CERVANTES.
NOT SURE IF THIS IS ON. GOOD MORNING, MR. CERVANTES.
JUST PLEASE ANNOUNCE YOUR NAME FOR THE RECORD. YES, I'M DAVID CERVANTES.
I'M THE DIRECTOR OF ADMINISTRATION FOR THE DEPARTMENT AND CFO FOR THE DEPARTMENT.
YOU KNOW, I GUESS IN PARTICULAR, THE CASH MANAGEMENT IMPROVEMENT ACT, THAT PARTICULAR ITEM, THAT'S ONE OF THE FINDINGS IN THERE. I CAN SPEAK TO THAT FOR SURE.
AS MR. SCOTT MENTIONED, YOU KNOW, EVERY YEAR THERE'S A NEW CASH MANAGEMENT IMPROVEMENT ACT AGREEMENT THAT WE HAVE WITH THE FEDERAL GOVERNMENT AND THE, THE OVERSIGHT TAKES PLACE FOR US TO GO AND SETTLE UP WITH THEM EVERY YEAR.
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THE TIMING OF THE DRAWS. AND OF COURSE, THIS IS TO MINIMIZE ANY LAG THAT WOULD GENERATE INTEREST EITHER FROM THE STATE OR VICE VERSA OR SOMETHING TO THAT EFFECT.AND TO YOUR QUESTION OF, IS THERE A CONCERN BY THE FEDERAL GOVERNMENT OR ANYTHING OF THAT NATURE? THERE IS NOT. WE'VE WE'VE ACKNOWLEDGED THE COMMENT AND, YOU KNOW, WE'RE FULLY PREPARED TO SUBMIT THE DOCUMENTATION ASSOCIATED WITH THE CALCULATION ITSELF. AND AGAIN, THERE'S A COUPLE OF OTHER ITEMS THAT ARE ON THERE THAT ARE MORE PROGRAMMATIC THAN FISCAL.
SO OKAY. BUT THAT'S WHAT I WOULD TELL YOU ABOUT THAT ONE IN PARTICULAR.
AND BOTTOM LINE TO YOUR QUESTION, IS THERE CONCERN? I WOULD, I WOULD SAY THERE'S, THERE'S NO REASON TO BE CONCERNED.
SO AND FOR THAT MATTER, MR. SCOTT USUALLY DOES A GREAT JOB OF GOING THROUGH PRIOR YEAR FINDINGS.
SO THANK YOU. MR.. I APPRECIATE THAT EXPLANATION.
YOU'RE WELCOME. THANK YOU. THERE ARE NO OTHER QUESTIONS ON THIS REPORT ITEM.
WE'LL MOVE TO THE FINAL REPORT ITEM AND FINAL ITEM ON OUR AGENDA.
MR. SCOTT WILL PRESENT THE REPORT AND OFFER TO ANSWER ANY QUESTIONS AT THE END OF THIS PRESENTATION.
THIS WILL BE THE REPORT ITEM THAT IS ON THE STATUS OF THE INTERNAL AND EXTERNAL AUDIT ACTIVITIES.
OKAY. YEAH, ACTUALLY THOSE ACTIVITIES ARE ALL GOING VERY WELL.
WHAT I WAS JUST DESCRIBING WAS BASICALLY THE THE UPDATE ON THE EXTERNAL AUDITS, WHICH I AND MR. CERVANTES DISCUSSED AND THEN THE INTERNAL AUDIT ACTIVITIES.
WE'RE, WE'RE DOING FAIRLY WELL AS FAR AS TIMING, THE OF THE GETTING THE AUDIT PLAN COMPLETED.
THE, THE END OF THE YEAR, WE WERE ALWAYS SPENDING SOME TIME WITH THE EXTERNAL AUDITS.
SO THERE'S KIND OF A LULL IN THE INTERNAL AUDITS.
BUT NOW ESPECIALLY SINCE WE HAVE, WE HAVE NEW STAFF PERSON AND WE'RE FULLY STAFFED NOW WE SHOULD BE ABLE TO BE COMPLETE THE AUDIT PLAN WITH NO PROBLEMS. EXCELLENT. MR. SCOTT, THANK YOU FOR THOSE THREE REPORTS. I WOULD ENCOURAGE THE COMMITTEE TO ACCEPT THE REPORTS.
YOU CAN ASK QUESTIONS ON THAT ONE IF YOU HAVE ANY FOR US.
SO ANY QUESTIONS. BUT I ALSO WANT TO REITERATE, IT'S REFRESHING TO READ AUDIT REPORTS WHERE THERE'S LIKE NOTHING MAJOR, RIGHT? YOU'RE JUST LIKE, WOW, THIS IS THIS IS WONDERFUL.
YEAH. NO JAW DROPPING STUFF. AND YEAH, IT'S NICE.
YEAH. AND WHAT WE TRIED TO IF WE DON'T HAVE FINDINGS, WE TRY TO ADD VALUE BY, YOU KNOW, DESCRIBING WHAT WE DID, WHAT WE LOOKED AT, WHAT THEY'RE DOING WELL AND THAT KIND OF THING.
HOWEVER, IF YOU HAVE FINDINGS, PLEASE TELL US.
SO. BOBBY, THIS HAS BEEN A GREAT MEETING FOR YOU.
THIS IS GOOD. THIS MAY BE YOUR THIS MAY BE YOUR QUOTA FOR THE REST OF THE YEAR.
THIS IS GOOD. ALL RIGHT, WELL, IF THERE ARE ANY OTHER QUESTIONS FOR MISTER SCOTT ON THE THREE REPORT ITEMS, WE WILL REPORT OUT OF COMMITTEE AND REPORT THIS TO THE FULL BOARD HERE SHORTLY.
I WANT TO THANK EVERYBODY FOR, FOR BEING HERE TODAY AND THIS CONCLUDES TODAY'S MEETING.
OFFICIALLY THE MEETING IS NOW ADJOURNED AT 9:49 A.M.
CENTRAL. THANK YOU.
* This transcript was compiled from uncorrected Closed Captioning.